CBIO 10-Q
Crescent Biopharma, Inc. (CBIO)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark one)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
Commission File Number
(Exact name of registrant as specified in its charter)
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) |
(Address of principal executive offices) | (Zip Code) |
(
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large Accelerated Filer ☐ Accelerated Filer ☐Smaller Reporting Company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes
The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of the close of business on October 29, 2021 was
GLYCOMIMETICS, INC.
INDEX TO FORM 10-Q
Part I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GLYCOMIMETICS, INC.
Balance Sheets
September 30, | December 31, | |||||
2021 | 2020 | |||||
(Unaudited) | ||||||
Assets |
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Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
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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Prepaid research and development expenses |
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Deposits | |
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Operating lease right-of-use asset | | | ||||
Total assets | $ | | $ | | ||
Liabilities & stockholders’ equity | ||||||
Current liabilities: | ||||||
Accounts payable | $ | | $ | | ||
Accrued expenses |
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Lease liabilities |
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Total current liabilities |
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Noncurrent accrued expenses | | | ||||
Lease liabilities, net of current portion | | | ||||
Total liabilities |
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Stockholders’ equity: | ||||||
Preferred stock; $ |
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Common stock; $ |
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Additional paid-in capital |
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Accumulated deficit |
| ( |
| ( | ||
Total stockholders’ equity |
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Total liabilities and stockholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of the unaudited financial statements.
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GLYCOMIMETICS, INC.
Unaudited Statements of Operations and Comprehensive Loss
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||
Revenue from collaboration and license agreements |
| $ | |
| $ | |
| $ | |
| $ | |
Costs and expenses: | ||||||||||||
Research and development expense |
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General and administrative expense |
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Total costs and expenses |
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Loss from operations |
| ( |
| ( |
| ( |
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Interest income |
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Net loss and comprehensive loss | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic and diluted net loss per common share | $ | ( | $ | ( | $ | ( | $ | ( | ||||
Basic and diluted weighted-average number of common shares outstanding |
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The accompanying notes are an integral part of the unaudited financial statements.
4
GLYCOMIMETICS, INC.
Unaudited Statements of Stockholders’ Equity
Additional | Total | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance at December 31, 2020 |
| | $ | | $ | | $ | ( | $ | | ||||
Issuance of common stock, net of issuance costs | | | | — | | |||||||||
Exercise of options |
| | | | — | | ||||||||
Stock-based compensation |
| — | — | | — | | ||||||||
Net loss |
| — | — | — | ( | ( | ||||||||
Balance at March 31, 2021 |
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Stock-based compensation |
| — |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at June 30, 2021 |
| | $ | | $ | | $ | ( | $ | | ||||
Exercise of options and vesting of restricted stock units |
| |
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| |
| — |
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Stock-based compensation |
| — |
| — |
| |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at September 30, 2021 |
| | $ | | $ | | $ | ( | $ | | ||||
Additional | Total | |||||||||||||
Common Stock | Paid-In | Accumulated | Stockholders’ | |||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | |||||
Balance at December 31, 2019 |
| | $ | | $ | | $ | ( | $ | | ||||
Exercise of options |
| | | | — | | ||||||||
Stock-based compensation |
| — | — | | — | | ||||||||
Net loss |
| — | — | — | ( | ( | ||||||||
Balance at March 31, 2020 |
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| | ( |
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Issuance of common stock, net of issuance costs | | | | — |
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Exercise of options |
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| — |
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Stock-based compensation |
| — |
| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at June 30, 2020 |
| | $ | | $ | | $ | ( | $ | | ||||
Issuance of common stock, net of issuance costs | | | | — |
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Exercise of options and vesting of restricted stock units |
| |
| |
| ( |
| — |
| — | ||||
Stock-based compensation |
| — |
| — |
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| — |
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Net loss |
| — |
| — |
| — |
| ( |
| ( | ||||
Balance at September 30, 2020 |
| | $ | | $ | | $ | ( | $ | | ||||
The accompanying notes are an integral part of the unaudited financial statements.
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GLYCOMIMETICS, INC.
Unaudited Statements of Cash Flows
Nine Months Ended September 30, | ||||||
| 2021 |
| 2020 | |||
Operating activities | ||||||
Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||
Depreciation |
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Loss on disposal of assets | | — | ||||
Non-cash lease expense | | | ||||
Stock-based compensation |
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Changes in assets and liabilities: |
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Prepaid expenses and other current assets |
| ( |
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Accounts payable |
| ( |
| ( | ||
Accrued expenses |
| ( |
| ( | ||
Noncurrent accrued expenses | | | ||||
Lease liabilities | ( | ( | ||||
Net cash used in operating activities |
| ( |
| ( | ||
Investing activities | ||||||
Purchases of property and equipment |
| ( |
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Net cash used in investing activities |
| ( |
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Financing activities | ||||||
Proceeds from issuance of common stock, net of issuance costs |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net change in cash and cash equivalents |
| ( |
| ( | ||
Cash and cash equivalents, beginning of period |
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Cash and cash equivalents, end of period | $ | | $ | | ||
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Non-cash investing and financing activities | ||||||
Property acquisition costs included in accounts payable | $ | — | $ | | ||
The accompanying notes are an integral part of the unaudited financial statements.
6
GLYCOMIMETICS, INC.
Notes to Unaudited Financial Statements
1. Description of the Business
GlycoMimetics, Inc. (the Company), a Delaware corporation headquartered in Rockville, Maryland, was incorporated in April 2003. The Company is a clinical-stage biotechnology company focused on the discovery and development of novel glycomimetic drugs to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. Glycomimetics are molecules that mimic the structure of carbohydrates involved in important biological processes. Using its expertise in carbohydrate chemistry and knowledge of carbohydrate biology, the Company is developing a pipeline of proprietary glycomimetics that inhibit disease-related functions of carbohydrates, such as the roles they play in inflammation, cancer and infection.
The Company’s executive personnel have devoted substantially all of their time to date to the planning and organization of the Company, the process of hiring scientists and other personnel, initiating and overseeing research and development programs, including planned and ongoing clinical trials, and securing adequate capital for anticipated growth and operations. The Company has not commercialized any of its drug candidates or commenced commercial operations. The Company is subject to a number of risks similar to those of other companies in similar development stages, including dependence on key individuals, the need to develop commercially viable drugs, the need to successfully compete with other companies, many of whom are larger and better capitalized, and the need to obtain adequate additional financing to fund the development of its drug candidates. The Company has incurred significant operating losses since inception and has relied on its ability to fund its operations through private and public equity financings, and management expects operating losses and negative operating cash flows to continue for the foreseeable future. As the Company continues to incur losses, profitability will be dependent upon the successful development, approval and commercialization of its drug candidates and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. The Company believes that its currently available funds will be sufficient to fund the Company’s operations through at least 12 months from the date of the filing of this Quarterly Report. Management intends to fund future operations through additional public or private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other sources.
2. Significant Accounting Policies
There have been no material changes to the significant accounting policies previously disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020.
Basis of Accounting
The accompanying financial statements were prepared based on the accrual method of accounting in accordance with U.S. generally accepted accounting principles (GAAP).
Unaudited Financial Statements
The accompanying balance sheet as of September 30, 2021, statements of operations and comprehensive loss and stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and statements of cash flows for the nine months ended September 30, 2021 and 2020 are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes for the year ended December 31, 2020 contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 2, 2021. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and in the opinion of management reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial
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position as of September 30, 2021 and its results of operations and changes in its stockholders’ equity for the three and nine months ended September 30, 2021 and 2020 and its cash flows for the nine months ended September 30, 2021 and 2020. The December 31, 2020 balance sheet included herein was derived from audited financial statements, but does not include all disclosures including notes required by GAAP for complete annual financial statements. The financial data and other information disclosed in these notes to the financial statements related to the three and nine months ended September 30, 2021 and 2020 are unaudited. Interim results are not necessarily indicative of results for an entire year or for any future period.
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 assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Although actual results could differ from those estimates, management does not believe that such differences would be material.
Fair Value Measurements
The Company had
Concentration of Credit Risk
Credit risk represents the risk that the Company would incur a loss if counterparties failed to perform pursuant to the terms of their agreements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents consist of money market funds with major financial institutions in the United States. These funds may be redeemed upon demand and, therefore, bear minimal risk. The Company does not anticipate any losses on such balances.
Revenue Recognition
The Company applies Accounting Standards Codification, or ASC, Topic 606, Revenue from Contracts with Customers (Topic 606), to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services in an amount that reflects the consideration which the entity expects to receive in exchange for those goods and services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps: (i) identify the contract(s) with the customer(s); (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods and services it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract that falls under the scope of Topic 606, determines those that are performance obligations and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
The Company enters into licensing agreements which are within the scope of Topic 606, under which it licenses certain of its drug candidates’ rights to third parties. The terms of these arrangements typically include payment of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone payments; and royalties on net sales of the licensed product, if and when earned. See Note 9 for additional information regarding the Company’s license agreement.
8
In determining the appropriate amount of revenue to be recognized as it fulfills its obligation under each of its agreements, the Company performs the five steps under Topic 606 described above. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement of personnel costs, discount rates and probabilities of technical and regulatory success.
Licensing of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period, and, if necessary, adjusts the measure of performance and related revenue recognition.
Milestone Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal will not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration and other revenues and earnings in their period of adjustment.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue from its license agreements.
Manufacturing and Supply: The promises under the Company’s agreements may include clinical and/or commercial manufacturing products to be provided by the Company to the counterparty. The services are generally determined to be distinct from the other promises or performance obligations identified in the arrangement. The Company recognizes the transaction price allocated to these services as revenue at a point in time when transfer of control of the related products to the customer occurs.
Accruals for Clinical Trial Expenses
Clinical trial costs primarily consist of expenses incurred under agreements with contract research organizations (CROs), investigative sites, laboratory testing expenses, data management and consultants that conduct the Company's clinical trials. Clinical trial expenses are a significant component of research and development expenses, and the Company outsources a significant portion of these clinical trial activities to third parties. The accrual for site and patient costs includes inputs such as estimates of patient enrollment, patient cycles incurred, clinical site activations, estimated project duration and other pass-through costs. These inputs are required to be estimated due to a lag in receiving the actual clinical information from third parties. 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 on the balance sheets as a prepaid asset or accrued expenses. These third-party agreements are generally cancellable, and related costs are recorded as research and development expenses as incurred. Except for payments made in advance of services, clinical trial costs are expensed as incurred. Non-refundable advance clinical payments for goods or services that will be used or rendered for future research and development activities are recorded as a prepaid asset and recognized as expense as the related goods are delivered or the related services are performed. When evaluating the adequacy of the accrued expenses, management assessments include: (i) an evaluation by the project manager of the work that has been completed during the period; (ii) measurement of progress prepared internally and/or provided by the third-party service provider; (iii) analyses of data
9
that justify the progress; and (iv) the Company’s judgment. Significant judgments and estimates may be made in determining the accrued balances at the end of any reporting period. Actual results could differ from the estimates made. The Company’s historical clinical accrual estimates have not been materially different from the actual costs. Clinical trial accruals that are due longer than one year are classified as noncurrent accrued expenses.
Stock-Based Compensation
Stock-based payments are accounted for in accordance with the provisions of ASC 718, Compensation—Stock Compensation. The fair value of stock-based payments is estimated, on the date of grant, using the Black-Scholes-Merton model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the option. The Company accounts for forfeitures as they occur and does not make an estimate of expected forfeitures at the time of grant.
The Company has elected to use the Black-Scholes-Merton option pricing model to value any options granted. The Company will reconsider use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that prevent their value from being reasonably estimated using this model.
A discussion of management’s methodology for developing some of the assumptions used in the valuation model follows:
Expected Dividend Yield—The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.
Expected Volatility—Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The Company bases the expected volatility on the historical volatility of the Company’s publicly traded common stock.
Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resembles the expected life of the option.
Expected Term—This is a period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of
Net Loss Per Common Share
Basic net loss per common share is determined by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock options and restricted stock units (RSUs).
The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted-average common shares outstanding, as they would be anti-dilutive:
Nine Months Ended September 30, | ||||
| 2021 |
| 2020 | |
Stock options and restricted stock units |
| |
| |
10
Comprehensive Loss
Comprehensive loss comprises net loss and other changes in equity that are excluded from net loss. For the three and nine months ended September 30, 2021 and 2020, the Company’s net loss equaled comprehensive net loss and, accordingly, no additional disclosure is presented.
Recently Issued Accounting Standards
Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12. ASU 2019-12 removes certain exceptions for recognizing deferred taxes for investments, performing intra-period allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including deferred taxes for goodwill and allocating taxes for members of a consolidated group. ASU 2019-12 was effective for all entities for fiscal years beginning after December 15, 2020. As of January 1, 2021, the Company adopted the standard, which did not have a material impact on the Company's financial statements.
Accounting Standards Not Yet Adopted
With the exception of the new standard discussed above, there have been no new accounting pronouncements that have significance, or potential significance, to the Company’s financial statements.
3. Prepaid Expenses and Other Current Assets
The following is a summary of the Company’s prepaid expenses and other current assets:
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Prepaid research and development expenses | $ | | $ | | ||
Other prepaid expenses | | | ||||
Other receivables |
| |
| | ||
Prepaid expenses and other current assets | $ | | $ | | ||
4. Property and Equipment
Property and equipment, net consists of the following:
September 30, | December 31, | |||||
| 2021 |
| 2020 | |||
Furniture and fixtures | $ | | $ | | ||
Laboratory equipment |
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Office equipment |
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Computer equipment |
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Leasehold improvements | | | ||||
Property and equipment |
| |
| |||
Less accumulated depreciation |
| ( |
| ( | ||
Property and equipment, net | $ | | $ | | ||
Depreciation expense was $
11
5. Accrued Expenses
The following is a summary of the Company’s accrued expenses:
| September 30, | December 31, | ||||
2021 | 2020 | |||||
Accrued research and development expenses | $ | | $ | | ||
Accrued bonuses | | | ||||
Accrued consulting and other professional fees |
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Accrued employee benefits |
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Other accrued expenses |
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Accrued expenses | $ | | $ | | ||
6. Leases
At the inception of an arrangement, the Company determines whether the arrangement is or contains a lease based on the circumstances present. The Company determines a lease exists if the contract conveys the right to control an identified asset for a period of time in exchange for consideration. Control is considered to exist when the lessee has the right to obtain substantially all of the economic benefits from the use of an identified asset as well as direct the right to use of that asset. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected not to recognize on the balance sheet leases with terms of one year or less on the lease commencement date. If a contract is considered to be a lease, the Company recognizes a lease liability based on the present value of the future lease payments over the expected lease term, with an offsetting entry to recognize a right-of-use asset.
The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company utilizes the appropriate incremental borrowing rate, which is the rate incurred to borrow on a collateralized basis over a term similar to the term of the lease for which the rate is estimated. Certain adjustments to the right-of-use asset may be required for items such as initial direct costs paid or incentives received.
The Company leases office and research space in Rockville, Maryland under an operating lease with a term from June 15, 2015 through October 31, 2023 (the Lease) that is subject to annual rent increases. The Company has the right to sublease or assign all or a portion of the premises, subject to the conditions set forth in the Lease. The Lease may be terminated early by either the landlord or the Company in certain circumstances. In connection with the Lease, the Company received rent abatement as a lease incentive in the initial year of the Lease.
In March 2016, the Company amended the Lease (the Lease Amendment) to lease additional space as of June 1, 2016. In May 2016, the Company also paid a security deposit of $
The Company identified and applied the following significant assumptions in recognizing the right-of-use asset and corresponding liability for the Lease and Lease Amendment:
| ● | Lease term – The lease term includes both the noncancelable period and, when applicable, cancelable option periods where failure to exercise such option would result in an economic penalty. The Company’s renewal option to extend was not reasonably certain of being exercised as of September 30, 2021. |
| ● | Incremental borrowing rate – As the Company’s lease does not provide an implicit rate, the Company used an incremental borrowing rate, or IBR, which is the rate incurred to borrow on a collateralized basis over a term similar to the term of the lease for which the rate is estimated. The Company determined the IBR to be |
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As of September 30, 2021, the weighted-average remaining lease term was
The components of lease expense and related cash flows were as follows:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2021 |
| 2020 |
| 2021 |
| 2020 | |||||
Operating lease cost | $ | | $ | | $ | | $ | | ||||
Variable lease cost | | | | | ||||||||
Total operating lease cost | $ | | $ | | $ | | $ | | ||||
| ||||||||||||
Cash paid for amounts included in the measurement of lease liabilities: | ||||||||||||
Operating cash outflows for operating leases | $ | | $ | | $ | | $ | | ||||
Maturities of lease liability due under these lease agreements as of September 30, 2021 were as follows:
Operating Lease | |||
| Obligation | ||
October 1, 2021 - December 31, 2021 | $ | | |
2022 | | ||
2023 | | ||
2024 | — | ||
2025 | — | ||
Thereafter | |||
Total | | ||
Present value adjustment | ( | ||
Present value of lease payments | $ | | |
7. Stockholders’ Equity
At-The-Market Sales Facility
On September 28, 2017, the Company entered into an at-the-market sales agreement (the 2017 Sales Agreement) with Cowen and Company, LLC (Cowen) to sell up to $
On October 7, 2020, the Company filed a prospectus supplement to a shelf registration statement that it filed in May 2019 and entered into a new at-the-market sales agreement (the 2020 Sales Agreement) with Cowen. Under the 2020 Sales Agreement, the Company may sell up to $
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2003 Stock Incentive Plan
The 2003 Stock Incentive Plan (the 2003 Plan) provided for the grant of incentives and nonqualified stock options and restricted stock awards. The exercise price for incentive stock options must be at least equal to the fair value of the common stock on the grant date. Unless otherwise stated in a stock option agreement,
A summary of the Company’s stock option activity under the 2003 Plan for the nine months ended September 30, 2021 is as follows:
| WEIGHTED- | AGGREGATE | ||||||||
| WEIGHTED- | AVERAGE | INTRINSIC | |||||||
| AVERAGE | REMAINING | VALUE | |||||||
| OUTSTANDING | EXERCISE | CONTRACTUAL | (IN | ||||||
OPTIONS |
| PRICE |
| TERM (YEARS) |
| THOUSANDS) | ||||
Outstanding as of December 31, 2020 | | $ | |
|
| |||||
Options exercised | ( |
| | |||||||
Options forfeited | — |
| — | |||||||
Outstanding, Vested and Exercisable as of September 30, 2021 | |
| |
| $ | | ||||
As of September 30, 2021, outstanding options under the 2003 Plan were fully expensed and all shares underlying outstanding options were fully vested. Total intrinsic value of the options exercised during the nine months ended September 30, 2021 and 2020 was $
2013 Equity Incentive Plan
The Company’s board of directors adopted, and its stockholders approved, its 2013 Equity Incentive Plan (the 2013 Plan) effective on January 9, 2014. The 2013 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to the Company’s employees and its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock awards, RSU awards, stock appreciation rights, performance stock awards and other forms of stock compensation to its employees, including officers, consultants and directors. The 2013 Plan also provides for the grant of performance cash awards to the Company’s employees, consultants and directors. Unless otherwise stated in a stock option agreement,
Authorized Shares
The maximum number of shares of common stock that initially could be issued under the 2013 Plan was
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Shares issued under the 2013 Plan may be authorized but unissued or reacquired shares of common stock. Shares subject to stock awards granted under the 2013 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2013 Plan. Additionally, shares issued pursuant to stock awards under the 2013 Plan that the Company repurchases or that are forfeited, as well as shares reacquired by the Company as consideration for the exercise or purchase price of a stock award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under the 2013 Plan.
A summary of the Company’s stock option activity under the 2013 Plan for the nine months ended September 30, 2021 is as follows:
WEIGHTED- | AGGREGATE | |||||||||
| WEIGHTED- | AVERAGE | INTRINSIC | |||||||
| AVERAGE | REMAINING | VALUE | |||||||
| OUTSTANDING | EXERCISE | CONTRACTUAL | (IN | ||||||
| OPTIONS |
| PRICE |
| TERM (YEARS) |
| THOUSANDS) | |||
Outstanding as of December 31, 2020 | | $ | |
|
| |||||
Options granted | | | ||||||||
Options exercised | — | — | ||||||||
Options forfeited | ( | | ||||||||
Outstanding as of September 30, 2021 | | | $ | — | ||||||
Vested or expected to vest as of September 30, 2021 | | |
| — | ||||||
Exercisable as of September 30, 2021 | | |
| — | ||||||
As of September 30, 2021, there was $
An RSU is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s common stock on the date of grant. During the nine months ended September 30, 2021, the Company awarded RSUs under the 2013 Plan to all of its employees. The RSUs granted vest over
The following is a summary of RSU activity under the 2013 Plan for the nine months ended September 30, 2021:
| Weighted-Average |
| ||||
Number of Shares | Grant Date |
| ||||
Underlying RSUs |
| Fair Value |
| |||
Unvested at December 31, 2020 | | $ | | |||
Granted | |
| | |||
Forfeited | ( |
| | |||
Vested | ( |
| | |||
Unvested at September 30, 2021 | |
| | |||
Inducement Plan
In January 2020, the Company’s board of directors adopted the GlycoMimetics, Inc. Inducement Plan (the Inducement Plan). The Inducement Plan provides for the grant of nonstatutory stock options, restricted stock awards, RSU awards, stock appreciation rights and other forms of stock awards to individuals not previously an employee or director of the Company as an inducement for such individuals to join the Company. Unless otherwise stated in an applicable stock option agreement, -fourth of the shares subject to an option grant under the Inducement Plan will
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typically vest upon the first anniversary of the vesting start date, with the balance of the shares vesting in a series of
A summary of the Company’s stock option activity under the Inducement Plan for the nine months ended September 30, 2021 is as follows:
WEIGHTED- | AGGREGATE | |||||||||
| WEIGHTED- | AVERAGE | INTRINSIC | |||||||
| AVERAGE | REMAINING | VALUE | |||||||
| OUTSTANDING | EXERCISE | CONTRACTUAL | (IN | ||||||
| OPTIONS |
| PRICE |
| TERM (YEARS) |
| THOUSANDS) | |||
Outstanding as of December 31, 2020 | | $ | |
|
| |||||
Options granted | | | ||||||||
Options exercised | ( | | ||||||||
Options forfeited | ( | | ||||||||
Outstanding as of September 30, 2021 | | | $ | | ||||||
Vested or expected to vest as of September 30, 2021 | | |
| | ||||||
Exercisable as of September 30, 2021 | | |
| — | ||||||
As of September 30, 2021, there was $
The total fair value of shares underlying options which vested in the nine months ended September 30, 2021 was $
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The weighted-average fair value of the options granted under the 2013 Plan and Inducement Plan during the nine months ended September 30, 2021 and 2020 was $
Nine Months Ended September 30, | ||||
| 2021 | 2020 | ||
Expected term |
| |||
Expected volatility |
| |||
Risk-free interest rate |
| |||
Expected dividend yield |
| |||
Stock-based compensation expense was classified on the statements of operations as follows for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||
| 2021 | 2020 |
| 2021 | 2020 | |||||||
Research and development expense | $ | | $ | | $ | | $ | | ||||
General and administrative expense |
| |
| |
| |
| | ||||
Total stock-based compensation expense | $ | | $ | | $ | | $ | | ||||
8. Income Taxes
The Company has not recorded any tax provision or benefit for the nine months ended September 30, 2021 and 2020. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, net operating loss carryforwards and research and development credits is not more-likely-than-not to be realized at September 30, 2021 and December 31, 2020.
9. License and Collaboration Agreements
Apollomics
In January 2020, the Company entered into a collaboration and license agreement (the Agreement) with Apollomics (Hong Kong), Limited (Apollomics) for the development, manufacture and commercialization of products derived from two of the Company’s compounds, GMI-1271 and GMI-1687 (the Products) for therapeutic and prophylactic uses (the Field) in China, Taiwan, Hong Kong and Macau (the Territory). Under the terms of the Agreement, the Company granted Apollomics:
| ● | an exclusive license, with the right to sublicense, to develop, manufacture and have manufactured, distribute, market, promote, sell, have sold, offer for sale, import, label, package and otherwise the Products in the Field in the Territory; and |
| ● | a non-exclusive license to conduct preclinical research with respect to Products in the Field outside of the Territory for the purposes of developing such Products for use in the Territory. |
The Company evaluated the Agreement under the provisions of ASC 606 and identified two performance obligations under this revenue arrangement: the (i) delivery of functional licenses and (ii) manufacture and supply of the Products. The initial transaction price consists of a $
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consideration using the most likely amount method and will recognize that revenue when it is probable that recognition of revenue related to the milestone will not result in a significant reversal in amounts recognized in future periods, and as such have been excluded from the transaction price. In September 2020, the Company received a non-refundable $
In June 2020, the Company and Apollomics entered into a clinical supply agreement pursuant to which the Company will manufacture and supply the Products at agreed upon prices. Apollomics has the option to begin manufacture of the Products after appropriate material transfer requirements are met. During the nine months ended September 30, 2021, the Company recognized $
10. Risks and Uncertainties
COVID-19
In March 2020, the World Health Organization declared the novel coronavirus disease 2019, or COVID-19, outbreak a pandemic. In order to mitigate the spread of COVID-19, governments have imposed unprecedented restrictions on business operations, travel and gatherings, resulting in a global economic downturn and other adverse economic and societal impacts. The COVID-19 pandemic has also overwhelmed or otherwise led to changes in the operations of many healthcare facilities.
The impact of the COVID-19 pandemic on the Company’s business and financial performance is uncertain and depends on various factors, including the duration of the pandemic, government restrictions and other actions, including relief measures and mass vaccination efforts, implemented to address the impact of the pandemic, and resulting impacts on the financial markets and overall economy. The imposition of “lockdown,” “social distancing” and “shelter in place” directives by state and federal governments in the United States as well as governments in other regions of the world in response to the COVID-19 pandemic, including in locations in which its Phase 3 clinical trial of uproleselan is being conducted, resulted in slowed clinical site initiation, patient recruitment and enrollment rates early in the pandemic. Enrollment rates have returned to forecasted levels since the lockdowns. However, COVID-19 infection rates continue to fluctuate, particularly with the emergence of variants, which could negatively affect completion of the trial. The Company is unable to determine the extent of the impact of the pandemic on its operations and financial condition going forward. These developments are highly uncertain and unpredictable, and may materially adversely affect the Company’s financial position and results of operations. The Company continues to closely monitor the COVID-19 situation and any potential impact to its planned activities.
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ITEM 2. | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, particularly in Part I – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission. Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2020, which are included in our Annual Report on Form 10-K filed with the SEC on March 2, 2021.
Overview
We are a clinical-stage biotechnology company focused on the discovery and development of novel glycomimetic drugs to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. We are developing a pipeline of proprietary glycomimetics, which are small molecules that mimic the structure of carbohydrates involved in important biological processes, to inhibit disease-related functions of carbohydrates such as the roles they play in inflammation, cancer and infection. We believe this represents an innovative approach to drug discovery to treat a wide range of diseases. We are focusing our efforts on drug candidates for diseases that we believe will qualify for orphan drug designation.
Our proprietary glycomimetics platform is based on our expertise in carbohydrate chemistry and our understanding of the role carbohydrates play in key biological processes. Most human proteins are modified by the addition of complex carbohydrate structures to the surface of such proteins, which affects the functions of the proteins and their interactions with other molecules. Our initial research and development efforts have focused on drug candidates targeting selectins, which are proteins that serve as adhesion molecules and bind to carbohydrates that are involved in the inflammatory component and progression of a wide range of diseases, including hematologic disorders, cancer and cardiovascular disease. For example, we believe that members of the selectin family play a key role in tumor metastasis and resistance to chemotherapy. Inhibiting specific carbohydrates from binding to selectins has long been viewed as a potentially attractive approach for therapeutic intervention. The ability to successfully develop drug-like carbohydrate compounds that inhibit binding with selectins, known as selectin antagonists, has historically been limited by their potency and the complexities of carbohydrate chemistry. We believe our expertise in the rational design of potent glycomimetic antagonists with drug-like properties and in carbohydrate chemistry enable us to design highly effective selectin antagonists and other glycomimetics that may inhibit the disease-related functions of certain carbohydrates in order to develop novel drug candidates to address orphan diseases with high unmet medical need.
Our lead glycomimetic drug candidate, uproleselan, is a specific E-selectin inhibitor that we are developing to be used in combination with chemotherapy to treat patients with acute myeloid leukemia, or AML, a life-threatening hematologic cancer, and potentially other hematologic cancers. In 2018, we commenced a randomized, double-blind, placebo-controlled Phase 3 pivotal clinical trial to evaluate uproleselan in individuals with relapsed/refractory AML, the design of which was based on guidance received from the U.S. Food and Drug Administration, or FDA. We intend to enroll approximately 380 adult patients with relapsed or refractory AML at centers in the United States, Canada, Europe and Australia. We expect to complete enrollment of the trial by year-end 2021. Assuming completion of enrollment by
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the end of 2021, based on discussions with our external statisticians, we expect to report preliminary data from the trial after year end 2022.
In 2018, we also signed a Cooperative Research and Development Agreement, or CRADA, with the National Cancer Institute, or NCI, part of the National Institutes of Health, to conduct a Phase 2/3 randomized, controlled clinical trial testing the addition of uproleselan to a standard chemotherapy regimen. The trial opened for enrollment in early 2019 and enrolled the first patient in April 2019 and we expect enrollment of the Phase 2 portion to be completed in the fourth quarter 2021.
Uproleselan is also being studied in multiple investigator-sponsored trials (ISTs). In May 2021, clinicians at the Washington University School of Medicine in St. Louis dosed the first patient in an IST evaluating uproleselan as a prophylactic agent to reduce gastrointestinal (GI) toxicities and improve clinical outcomes in patients receiving high-dose melphalan in autologous hematopoietic cell transplantation (auto-HCT) for multiple myeloma. We anticipate a data readout from the trial in 2022.
In July 2021, clinicians at the University of California (UC) Davis Comprehensive Cancer Center initiated dosing of the first patient in a clinical study of uproleselan combined with venetoclax and azacitidine for the treatment of older or unfit patients with treatment-naïve AML. The goal of the two-part IST is first to determine a recommended Phase 2 dose, and then to explore efficacy in a dose expansion cohort. We are providing uproleselan for the IST. Up to 31 patients will be enrolled, and a preliminary/interim readout is expected in 2022.
In July 2021, clinicians at the University of Texas MD Anderson Cancer Center treated the first patient in a Phase 1b/2 study evaluating uproleselan, added to cladribine plus low dose cytarabine in patients with treated secondary AML (ts-AML). We are providing uproleselan for the IST. The Phase 1b/2 single-arm trial is enrolling patients 18 years or older, with a diagnosis of ts-AML who have not received therapy for their AML. Considered a distinct high-risk subset of AML with an adverse prognosis, ts-AML is defined as AML arising from a previously treated antecedent myeloid neoplasm (myelodysplastic syndrome or myeloproliferative neoplasm). Clinicians plan to enroll approximately 25 patients in the trial and a preliminary/interim readout is expected in 2022.
We have rationally designed an innovative antagonist of E-selectin, GMI-1687, that could be a subcutaneously administered treatment. Initially developed as a potential life-cycle extension to uproleselan, we believe that GMI-1687 could be developed to broaden the clinical usefulness of an E-selectin antagonist to conditions where outpatient treatment is preferred or required. We are currently conducting preclinical activities and studies with GMI-1687 to support our planned submission of an investigational new drug application, or IND, to the FDA.
We are also developing a drug candidate, GMI-1359, that simultaneously targets both E-selectin and a chemokine receptor known as CXCR4. In the fourth quarter of 2019, we initiated a Phase 1b trial of GMI-1359 in hormone receptor positive breast cancer patients whose tumors have spread to bone, and the first patient was dosed in January 2020. We are also advancing other preclinical-stage programs, including small-molecule glycomimetic compounds that inhibit the protein galectin-3, which we believe may have potential to be used for the treatment of fibrosis, cancer and cardiovascular disease.
We have financed our operations primarily through private placements of our securities, up-front and milestone payments under our license and collaboration agreements and the net proceeds from public offerings of common stock, including sales of common stock under at-the-market sales facilities with Cowen and Company LLC, or Cowen. We have no approved drugs currently available for sale, and substantially all of our revenue to date has been revenue from up-front and milestone payments under license and collaboration agreements.
Since inception, we have incurred significant operating losses. We had an accumulated deficit of $355.5 million as of September 30, 2021 and we expect to continue to incur significant expenses and operating losses over at least the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials and our expenditures on other research and development activities. We anticipate that our expenses will increase substantially as we:
| ● | initiate and conduct our planned clinical trials of uproleselan, GMI-1359 and GMI-1687, including fulfilling our funding and supply commitments related to the clinical trial of uproleselan being conducted in collaboration with NCI and in relation to other ISTs; |
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| ● | conduct NDA-enabling activities related to manufacture, toxicology and clinical pharmacology for our product candidates; |
| ● | manufacture additional uproleselan drug supplies for validation and prepare for commercialization; |
| ● | seek to discover and develop additional drug candidates; |
| ● | seek regulatory approvals for any drug candidates that successfully complete clinical trials; |
| ● | ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any drug candidates for which we may obtain regulatory approval; |
| ● | maintain, expand and protect our intellectual property portfolio; |
| ● | hire additional clinical, quality control, regulatory and scientific personnel; |
| ● | maintain sufficient level of insurance including product liability and directors, officers and corporate liability insurance policies; and |
| ● | add operational, financial and management information systems and personnel, including personnel to support our drug development and potential future commercialization efforts. |
To fund further operations, we will need to raise capital. We may obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings, potentially including the use of our at-the-market sales facility with Cowen, or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. For example, the current global COVID-19 pandemic presents material uncertainty and its disruption of the capital markets may have a material adverse impact on our ability to raise additional capital if we decide to do so. Although it is difficult to predict future liquidity requirements, we believe that our existing cash and cash equivalents will be sufficient to fund our operations into the first half of 2023 without giving effect to potential business development opportunities, such as upfront or milestone payments under license and collaboration agreements, or additional financing activities including the potential sale of common stock under our 2020 Sales Agreement with Cowen described below. However, our ability to successfully transition to profitability will be dependent upon achieving a level of revenues adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Impact of COVID-19 on Our Business
The imposition of “lockdown,” “social distancing” and “shelter in place” directives by state and federal governments in the United States as well as governments in other regions of the world in response to the COVID-19 pandemic, including in locations in which our Phase 3 clinical trial of uproleselan is being conducted, resulted in slowed clinical site initiation, patient recruitment and enrollment rates early in the pandemic. Enrollment rates have returned to forecasted rates since the beginning of the lockdowns. However, we cannot at this time fully assess the effect of the COVID-19 pandemic on our completion of the clinical trial. We continue to closely monitor the COVID-19 situation and any potential impact to our planned activities.
We have also implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. While to date we have experienced limited impacts beyond the earlier delays in recruitment in our ongoing uproleselan Phase 3 clinical trial, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects could be materially adversely affected. We continue to closely monitor the COVID-19 situation as we evolve our business continuity plans and response strategy. In March 2020, our workforce transitioned to working remotely in accordance with federal and state declarations. We have reopened our offices pursuant to a hybrid return to office policy with a focus on employee safety and optimal work environment.
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Our Collaboration and License Agreements
Apollomics
In January 2020, we entered into an exclusive collaboration and license agreement with Apollomics (Hong Kong) Limited, or Apollomics, for the development and commercialization of uproleselan and GMI-1687 in Mainland China, Hong Kong, Macau and Taiwan, also known as Greater China. Under the terms of the agreement, Apollomics will be responsible for clinical development and commercialization in Greater China. We will also collaborate with Apollomics to advance the preclinical and clinical development of GMI-1687. We received an upfront cash payment of $9.0 million and in September 2020 received a $1.0 million development milestone payment. Subject to the terms of the agreement, we will be eligible to receive potential further milestone payments totaling approximately $179.0 million, as well as tiered royalties ranging from the high single digits to 15%, as a percentage of net sales. Apollomics will be responsible for all costs related to development, regulatory approvals, and commercialization activities for uproleselan and GMI-1687 in Greater China, and we and Apollomics expect to enter into clinical and commercial supply agreements with respect to our provision of uproleselan and GMI-1687 to Apollomics. We retain all rights for both compounds in the rest of the world.
In September 2020, the China National Medical Products Administration (NMPA) Center for Drug Evaluation (CDE) granted IND approval for uproleselan (APL-106) enabling the initiation of a Phase 1 pharmacokinetics and tolerability study and includes acceptance of a Phase 3 bridging study of APL-106 in combination with chemotherapy in relapsed/refractory AML. In January 2021, APL-106 was granted Breakthrough Therapy Designation from the China NMPA CDE for the treatment of relapsed/refractory AML. In March 2021, Apollomics enrolled the first patient in the Phase 1 study.
In June 2020, we entered into a clinical supply agreement with Apollomics under which we will manufacture and supply uproleselan product to Apollomics at agreed upon prices. Apollomics has the option to begin manufacture after appropriate material transfer requirements are met. During the nine months ended September 30, 2021, we recognized $1.1 million in revenue from the sale of clinical supplies to Apollomics under the clinical supply agreement.
Critical Accounting Policies and Significant Judgments 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 in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to our revenue recognition, accrued research and development expenses, stock-based compensation expense and income taxes. We base our estimates on historical experience, known trends and events and various other factors that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other resources. Actual results may differ from these estimates and judgments under different assumptions or conditions. We periodically review our estimates in light of changes in circumstances, facts and experience. The effects of material revisions in estimates are reflected in our financial statements prospectively from the date of the change in estimate.
We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. For a description of our critical accounting policies, please see the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2020. There have not been any material changes to our critical accounting policies since December 31, 2020.
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Components of Operating Results
Revenue
To date, we have not generated any revenue from the sale of our drug candidates and do not expect to generate any revenue from the sale of drugs in the near future. Substantially all of our historical revenue consisted of upfront and milestone payments under license and collaboration agreements.
Research and Development
Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, facilities expenses, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, fees paid to CROs and other consultants and other outside expenses. Other preclinical research and platform programs include activities related to exploratory efforts, target validation, lead optimization for our earlier programs and our proprietary glycomimetics platform. Our research and development expenses have related primarily to the development of rivipansel, uproleselan and our other drug candidates.
We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we are organized and record expense by functional department and our employees may allocate time to more than one development project. Accordingly, we only allocate a portion of our research and development expenses by functional area and by drug candidate.
Research and development costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
Research and development activities are central to our business model. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials. We expect our research and development expenses to increase over the next several years as we seek to progress uproleselan, GMI-1359 and our other drug candidates into and through clinical development. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical studies and clinical trials of our drug candidates, or if, when or to what extent we will generate revenues from the commercialization and sale of any of our drug candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our drug candidates.
The duration, costs and timing of clinical trials and development of our drug candidates will depend on a variety of factors that include:
| ● | per patient trial costs; |
| ● | the number of patients that participate in the trials; |
| ● | the number of sites included in the trials; |
| ● | the countries in which the trial is conducted; |
| ● | the length of time required to enroll eligible patients, which could be lengthened as a result of the ongoing COVID-19 pandemic; |
| ● | the number of doses that patients receive; |
| ● | the drop-out or discontinuation rates of patients; |
| ● | potential additional safety monitoring or other studies requested by regulatory agencies; |
| ● | the duration of patient follow-up; and |
| ● | the safety and efficacy profile of the drug candidate. |
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In addition, the probability of success for each drug candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.
General and Administrative
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters, fees for accounting and consulting services and corporate insurance premiums. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities.
Interest Income
Interest income consists of interest income earned on our cash and cash equivalents.
Results of Operations for the Three and Nine Months Ended September 30, 2021 and 2020
The following tables set forth our results of operations for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
|
| ||||||
Revenue | $ | 87 | $ | 1,000 | $ | (913) | (91) | % | ||||
Costs and expenses: |
| |||||||||||
Research and development expense |
| 13,282 |
| 10,670 |
| 2,612 | 24 | % | ||||
General and administrative expense |
| 4,142 |
| 4,058 |
| 84 | 2 | % | ||||
Total costs and expenses |
| 17,424 |
| 14,728 |
| 2,696 | 18 | % | ||||
Loss from operations |
| (17,337) |
| (13,728) |
| (3,609) | 26 | % | ||||
Interest income |
| 5 |
| 5 |
| — | NA |
| ||||
Net loss and comprehensive loss | $ | (17,332) | $ | (13,723) | $ | (3,609) | 26 | % | ||||
Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
|
| ||||||
Revenue | $ | 1,142 | $ | 10,000 | $ | (8,858) | (89) | % | ||||
Costs and expenses: |
| |||||||||||
Research and development expense |
| 34,596 |
| 33,209 |
| 1,387 | 4 | % | ||||
General and administrative expense |
| 12,567 |
| 12,732 |
| (165) | (1) | % | ||||
Total costs and expenses |
| 47,163 |
| 45,941 |
| 1,222 | 3 | % | ||||
Loss from operations |
| (46,021) |
| (35,941) |
| (10,080) | 28 | % | ||||
Interest income |
| 15 |
| 477 |
| (462) | (97) | % | ||||
Net loss and comprehensive loss | $ | (46,006) | $ | (35,464) | $ | (10,542) | 30 | % | ||||
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Revenue
During the nine months ended September 30, 2021 and 2020, revenue was $1.1 million and $10.0 million, respectively, all of which was the result of payments received under the Apollomics Agreement for the development and commercialization of uproleselan and GMI-1687 in Greater China. During the nine months ended September 30, 2021, we recognized $1.1 million in revenue from the sale of clinical supplies to Apollomics under the clinical supply agreement. In January 2020, we recognized $9.0 million in revenue from an upfront milestone payment, and in September 2020, we recognized a $1.0 million clinical development milestone payment.
Research and Development Expense
The following tables summarize our research and development expense by functional area for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
| |||||||
Clinical development | $ | 5,105 | $ | 3,885 | $ | 1,220 | 31 | % | ||||
Manufacturing and formulation |
| 4,106 |
| 2,160 |
| 1,946 | 90 | % | ||||
Contract research services, consulting and other costs |
| 583 |
| 474 |
| 109 | 23 | % | ||||
Laboratory costs |
| 566 |
| 563 |
| 3 | 1 | % | ||||
Personnel-related |
| 2,336 |
| 2,825 |
| (489) | (17) | % | ||||
Stock-based compensation | 586 | 763 | (177) | (23) | % | |||||||
Research and development expense | $ | 13,282 | $ | 10,670 | $ | 2,612 | 24 | % | ||||
Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
| |||||||
Clinical development | $ | 14,227 | $ | 12,486 | $ | 1,741 | 14 | % | ||||
Manufacturing and formulation |
| 7,981 |
| 7,387 |
| 594 | 8 | % | ||||
Contract research services, consulting and other costs |
| 1,821 |
| 1,480 |
| 341 | 23 | % | ||||
Laboratory costs |
| 1,571 |
| 1,573 |
| (2) | (0) | % | ||||
Personnel-related |
| 7,112 |
| 8,037 |
| (925) | (12) | % | ||||
Stock-based compensation | 1,884 | 2,246 | (362) | (16) | % | |||||||
Research and development expense | $ | 34,596 | $ | 33,209 | $ | 1,387 | 4 | % | ||||
The following tables summarize our research and development expense by drug candidate for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 | ||||||||
Uproleselan | $ | 8,572 | $ | 6,070 | $ | 2,502 | 41 | % | ||||
GMI-1359 | 95 | 92 |
| 3 | 3 | % | ||||||
Other research and development |
| 1,693 |
| 920 |
| 773 | 84 | % | ||||
Personnel-related and stock-based compensation |
| 2,922 |
| 3,588 |
| (666) | (19) | % | ||||
Research and development expense | $ | 13,282 | $ | 10,670 | $ | 2,612 | 24 | % | ||||
Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
| |||||||
Uproleselan | $ | 21,064 | $ | 19,939 | $ | 1,125 | 6 | % | ||||
GMI-1359 | 509 | 264 |
| 245 | 93 | % | ||||||
Other research and development |
| 4,026 |
| 2,723 |
| 1,303 | 48 | % | ||||
Personnel-related and stock-based compensation |
| 8,997 |
| 10,283 |
| (1,286) | (13) | % | ||||
Research and development expense | $ | 34,596 | $ | 33,209 | $ | 1,387 | 4 | % | ||||
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Our research and development expense for the three and nine months ended September 30, 2021 increased by $2.6 million and $1.4 million, respectively, compared to the same periods ended September 30, 2020 primarily due to:
| ● | increased clinical trial and development costs related to our ongoing global Phase 3 clinical trial of uproleselan in individuals with relapsed/refractory AML; |
| ● | increased manufacturing costs for the uproleselan validation batches; and |
| ● | increased costs for toxicity studies of GMI-1687. |
These increases were partially offset by:
| ● | decreased personnel-related and stock-based compensation due to a lower number of research and development employees. |
General and Administrative Expense
The following tables summarize the components of our general and administrative expense for the three and nine months ended September 30, 2021 and 2020:
Three Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
|
| ||||||
Personnel-related | $ | 1,257 | $ | 1,578 | $ | (321) | (20) | % | ||||
Stock-based compensation |
| 1,005 |
| 927 | 78 | 8 | % | |||||
Legal, consulting and other professional expenses |
| 1,705 |
| 1,390 |
| 315 | 23 | % | ||||
Other |
| 175 |
| 163 |
| 12 | 7 | % | ||||
General and administrative expense | $ | 4,142 | $ | 4,058 | $ | 84 | 2 | % | ||||
Nine Months Ended September 30, | Increase/(Decrease) | |||||||||||
(dollars in thousands) |
| 2021 |
| 2020 |
|
| ||||||
Personnel-related | $ | 4,364 | $ | 4,788 | $ | (424) | (9) | % | ||||
Stock-based compensation |
| 2,883 |
| 3,028 | (145) | (5) | % | |||||
Legal, consulting and other professional expenses |
| 4,822 |
| 4,368 |
| 454 | 10 | % | ||||
Other |
| 498 |
| 548 |
| (50) | (9) | % | ||||
General and administrative expense | $ | 12,567 | $ | 12,732 | $ | (165) | (1) | % | ||||
General and administrative expenses remained consistent for the three and nine months ended September 30, 2021 as compared to the same periods in 2020. Personnel-related expenses decreased due to a reversal of accruals for performance and retention bonuses that our prior Chief Executive Officer was eligible to receive but which were forfeited upon her cessation of service in that role. These decreases were offset by recruiting and legal expenses incurred relating to the Chief Executive Officer transition in 2021.
Interest Income
During the three and nine months ended September 30, 2021 interest income decreased due to lower average cash balances and lower interest rates on those balances.
Liquidity and Capital Resources
Sources of Liquidity
We have historically financed our operations primarily through public offerings and private placements of our capital stock, including sales agreements with Cowen, and upfront and milestone payments from our license and collaboration agreements. As of September 30, 2021, we had $101.9 million in cash and cash equivalents.
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In October 2020, we filed a prospectus supplement to a shelf registration statement that we filed in May 2019 and entered into a new at-the-market sales agreement, or the 2020 Sales Agreement, with Cowen. Under the 2020 Sales Agreement, we may sell up to $100.0 million of our common stock registered under the shelf registration statement that we filed in May 2019. During the year ended December 31, 2020, we sold 1,024,760 shares of common stock under the 2020 Sales Agreement at a weighted average price of $3.74 per share, for aggregate net proceeds of $3.7 million, after deducting commissions and offering expenses. During the nine months ended September 30, 2021, we sold an additional 2,517,603 shares of common stock under the 2020 Sales Agreement at a weighted average price of $3.92 per share, for aggregate net proceeds of $9.6 million, after deducting commissions and offering expenses. As of September 30, 2021, we have approximately $86.3 million remaining available to be sold under the terms of the 2020 Sales Agreement. Subsequent to September 30, 2021, there have been no additional sales under the 2020 Sales Agreement.
We entered into a collaboration and license agreement with Apollomics in January 2020 and are potentially eligible to earn milestone payments and royalties under that agreement. In January 2020, Apollomics made an upfront payment to us of $9.0 million. We also received a non-refundable payment of $1.0 million in September 2020 as a clinical development milestone payment. Our ability to earn additional milestone payments and potential royalty payments and their timing will be dependent upon the outcome of Apollomics’ activities and is therefore uncertain at this time.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.
The successful development of any of our drug candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the remainder of the development of uproleselan or our other drug candidates. We are also unable to predict when, if ever, material net cash inflows will commence from uproleselan or our other drug candidates. This is due to the numerous risks and uncertainties associated with developing drugs, including the uncertainty of:
| ● | successful enrollment in, and completion of, clinical trials; |
| ● | receipt of marketing approvals from applicable regulatory authorities; |
| ● | establishing commercial manufacturing capabilities or making arrangements with third-party manufacturers; |
| ● | obtaining and maintaining patent and trade secret protection and regulatory exclusivity for drug candidates; |
| ● | launching commercial sales of drugs, if and when approved, whether alone or in collaboration with others; and |
| ● | obtaining and maintaining healthcare coverage and adequate reimbursement. |
A change in the outcome of any of these variables with respect to the development of any of our drug candidates would significantly change the costs and timing associated with the development of that drug candidate. Because our drug candidates are in various stages of clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of our drug candidates or whether, or when, we may achieve profitability. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements, including our existing license agreement with Apollomics. Except for Apollomics’ conditional obligations to make milestone and royalty payments to us under our license agreement, we do not have any committed external source of liquidity.
To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely
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affect the rights of our existing common stockholders. If we raise additional funds through the issuance of convertible debt securities, these securities could contain covenants that would restrict our operations.
We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all. If we raise additional funds through collaboration arrangements in the future, we may have to relinquish valuable rights to our drug candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our drug development or future commercialization efforts or grant rights to develop and market drug candidates that we would otherwise prefer to develop and market ourselves.
Outlook
Based on our research and development plans and our timing expectations related to the progress of our programs, we expect that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into the first half of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing drug candidates in clinical trials is costly, and the timing of progress in these trials is uncertain.
Cash Flows
The following is a summary of our cash flows for the nine months ended September 30, 2021 and 2020:
Nine Months Ended September 30, | ||||||
(dollars in thousands) | 2021 | 2020 | ||||
Net cash provided by (used in): |
|
| ||||
Operating activities | $ | (44,683) | $ | (29,556) | ||
Investing activities |
| (13) |
| (30) | ||
Financing activities |
| 9,585 |
| 14,255 | ||
Net change in cash and cash equivalents | $ | (35,111) | $ | (15,331) | ||
Operating Activities
Net cash used in operating activities for the nine months ended September 30, 2021 and 2020 was primarily the result of ongoing clinical and manufacturing costs associated with our uproleselan clinical development programs. These cash expenses were offset by non-cash expenses for stock-based compensation, lease expense and depreciation, and for the nine months ended September 30, 2020, the upfront and clinical development milestone payments of $10.0 million received from Apollomics.
Investing Activities
Net cash used in investing activities for the nine months ended September 30, 2021 and 2020 was for computer, office and laboratory equipment.
Financing Activities
Net cash provided by financing activities during the nine months ended September 30, 2021 primarily consisted of the net proceeds received from sales of our common stock under our at-the-market facility with Cowen of $9.6 million. Net cash provided by financing activities of $14.3 million during the nine months ended September 30, 2020 consisted of the net proceeds received from sales of our common stock under our prior at-the-market facility with Cowen of $14.1 million and $136,000 in proceeds from stock option exercises.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under the rules and regulations of the SEC.
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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The market risk inherent in our financial instruments and in our financial position represents the potential loss arising from adverse changes in interest rates. As of September 30, 2021 and December 31, 2020, we had cash and cash equivalents of $101.9 million and $137.0 million, respectively. We generally hold our cash in interest-bearing money market accounts. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the short-term maturities of our cash equivalents and the low risk profile of our investments, an immediate 100 basis point change in interest rates would not have a material effect on the fair market value of our cash equivalents.
ITEM 4. CONTROLS AND PROCEDURES
(a) Evaluation of Disclosure Controls and Procedures
The term “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, refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits 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 such information is accumulated and communicated to a company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure.
In designing and evaluating our disclosure controls and procedures, management recognizes that disclosure controls and procedures, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the disclosure controls and procedures are met. Additionally, in designing disclosure controls and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefit relationship of possible disclosure controls and procedures. 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 policies or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may occur and not be detected.
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2021, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and our Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of such date at the reasonable assurance level.
(b) Changes in Internal Controls Over Financial Reporting
There have not been any changes in our internal controls over financial reporting during our fiscal quarter ended September 30, 2021 that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, cash flows or financial condition.
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ITEM 1A. RISK FACTORS
Our business is subject to risks and events that, if they occur, could adversely affect our financial condition and results of operations and the trading price of our securities. Our risk factors as of the date of this quarterly report on Form 10-Q have not changed materially from those described in “Part I, Item 1A. Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2020, filed with the SEC on March 2, 2021.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 6. EXHIBITS
Exhibit | Document | |
|---|---|---|
3.1 | ||
3.2 | ||
4.1 | ||
10.1+* | ||
31.1* | Certification of Principal Executive Officer under Section 302 of the Sarbanes-Oxley Act. | |
31.2* | Certification of Principal Financial Officer under Section 302 of the Sarbanes-Oxley Act. | |
32.1** | ||
101.INS | XBRL Instance Document (the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the inline XBRL document) | |
101.SCH | Inline XBRL Taxonomy Extension Schema Document | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase Document | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase Document | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase Document | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase Document | |
104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
+ Indicates management contract or compensatory plan.
* Filed herewith.
** These certifications are being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, and are not being filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and are not to be incorporated by reference into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language in such filing.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
GLYCOMIMETICS, INC. | |||
Date: November 2, 2021 | By: | /s/ Brian M. Hahn | |
Brian M. Hahn | |||
Senior Vice President and Chief Financial Officer | |||
(On behalf of the Registrant and as Principal Financial Officer) | |||
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