Item 1.
|
Financial Statements
|
Chiasma, Inc.
Condensed Consolidated Balance Sheets
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
Unaudited
|
|
|
|
|
Assets
|
|
(in thousands except share data)
|
|
Current assets
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
15,248
|
|
|
$
|
14,603
|
|
Marketable securities
|
|
|
45,250
|
|
|
|
52,336
|
|
Prepaid expenses and other current assets
|
|
|
1,688
|
|
|
|
1,768
|
|
|
|
|
|
|
|
|
|
|
Total current assets
|
|
|
62,186
|
|
|
|
68,707
|
|
Property and equipment, net
|
|
|
175
|
|
|
|
193
|
|
Other assets
|
|
|
986
|
|
|
|
983
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
63,347
|
|
|
$
|
69,883
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Stockholders Equity
|
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,295
|
|
|
$
|
1,017
|
|
Accrued expenses
|
|
|
4,409
|
|
|
|
4,033
|
|
Other current liabilities
|
|
|
|
|
|
|
1,695
|
|
|
|
|
|
|
|
|
|
|
Total current liabilities
|
|
|
6,704
|
|
|
|
6,745
|
|
Long-term liabilities
|
|
|
586
|
|
|
|
664
|
|
|
|
|
|
|
|
|
|
|
Total liabilities
|
|
|
7,290
|
|
|
|
7,409
|
|
|
|
|
|
|
|
|
|
|
Commitments and contingencies (Note 9)
|
|
|
|
|
|
|
|
|
Stockholders equity:
|
|
|
|
|
|
|
|
|
Common stock, $0.01 par value; authorized 125,000,000 shares at March 31, 2018 and
December 31, 2017; issued and outstanding 24,383,994 shares at March 31, 2018 and 24,381,605 shares at December 31, 2017
|
|
|
244
|
|
|
|
244
|
|
Preferred stock, $0.01 par value; authorized 5,000,000 shares; none outstanding
|
|
|
|
|
|
|
|
|
Additional
paid-in
capital
|
|
|
268,304
|
|
|
|
267,642
|
|
Accumulated other comprehensive loss
|
|
|
(95
|
)
|
|
|
(59
|
)
|
Accumulated deficit
|
|
|
(212,396
|
)
|
|
|
(205,353
|
)
|
|
|
|
|
|
|
|
|
|
Total stockholders equity
|
|
|
56,057
|
|
|
|
62,474
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and stockholders equity
|
|
$
|
63,347
|
|
|
$
|
69,883
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
5
Chiasma, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in thousands except share and
per share data)
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
General and administrative
|
|
$
|
2,434
|
|
|
$
|
2,460
|
|
Research and development
|
|
|
4,863
|
|
|
|
4,655
|
|
|
|
|
|
|
|
|
|
|
Total operating expenses
|
|
|
7,297
|
|
|
|
7,115
|
|
|
|
|
|
|
|
|
|
|
Loss from operations
|
|
|
(7,297
|
)
|
|
|
(7,115
|
)
|
Other income, net
|
|
|
(230
|
)
|
|
|
(160
|
)
|
|
|
|
|
|
|
|
|
|
Loss before income taxes
|
|
|
(7,067
|
)
|
|
|
(6,955
|
)
|
Provision (benefit) for income taxes
|
|
|
(24
|
)
|
|
|
65
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
|
(7,043
|
)
|
|
|
(7,020
|
)
|
|
|
|
|
|
|
|
|
|
Earnings per share attributable to common stockholders
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.29
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
$
|
(0.29
|
)
|
|
$
|
(0.29
|
)
|
|
|
|
|
|
|
|
|
|
Weighted-average shares outstanding:
|
|
|
|
|
|
|
|
|
Basic
|
|
|
24,381,924
|
|
|
|
24,359,584
|
|
|
|
|
|
|
|
|
|
|
Diluted
|
|
|
24,381,924
|
|
|
|
24,359,584
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
6
Chiasma, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
For the Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in thousands)
|
|
Net loss
|
|
$
|
(7,043
|
)
|
|
$
|
(7,020
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrealized losses on available for sale securities, net
|
|
|
(36
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
Total other comprehensive loss
|
|
|
(36
|
)
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
|
|
Comprehensive loss
|
|
$
|
(7,079
|
)
|
|
$
|
(7,042
|
)
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
7
Chiasma, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
(in thousands)
|
|
Operating Activities:
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(7,043
|
)
|
|
$
|
(7,020
|
)
|
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
|
|
|
|
|
|
|
|
|
Depreciation
|
|
|
23
|
|
|
|
40
|
|
Stock-based compensation
|
|
|
637
|
|
|
|
719
|
|
Amortization of discount on marketable securities, net
|
|
|
(54
|
)
|
|
|
(73
|
)
|
Provision for deferred income taxes
|
|
|
|
|
|
|
5
|
|
Non-cash
interest expense
|
|
|
5
|
|
|
|
36
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Prepaid expenses and other current assets
|
|
|
80
|
|
|
|
341
|
|
Accounts payable and accrued expenses
|
|
|
1,654
|
|
|
|
(457
|
)
|
Other assets
|
|
|
(3
|
)
|
|
|
(7
|
)
|
Other current and long-term liabilities
|
|
|
(53
|
)
|
|
|
102
|
|
|
|
|
|
|
|
|
|
|
Net cash used in operating activities
|
|
|
(4,754
|
)
|
|
|
(6,314
|
)
|
Investing Activities:
|
|
|
|
|
|
|
|
|
Purchase of marketable securities
|
|
|
(7,673
|
)
|
|
|
(40,779
|
)
|
Maturities of marketable securities
|
|
|
14,777
|
|
|
|
30,772
|
|
Purchases of property and equipment
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in) investing activities
|
|
|
7,099
|
|
|
|
(10,010
|
)
|
Financing Activities:
|
|
|
|
|
|
|
|
|
Payment under license termination agreement
|
|
|
(1,700
|
)
|
|
|
(1,700
|
)
|
|
|
|
|
|
|
|
|
|
Net cash used in financing activities
|
|
|
(1,700
|
)
|
|
|
(1,700
|
)
|
|
|
|
|
|
|
|
|
|
Net increase (decrease) in cash and cash equivalents
|
|
|
645
|
|
|
|
(18,024
|
)
|
Cash and cash equivalents, beginning of period
|
|
|
14,603
|
|
|
|
37,013
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, end of period
|
|
$
|
15,248
|
|
|
$
|
18,989
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to these unaudited condensed consolidated financial statements.
8
CHIASMA, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
March 31, 2018
1. Description of
Business and Summary of Significant Accounting Policies
Chiasma, Inc. is a clinical-stage biopharmaceutical company incorporated
in 2001 under the laws of the State of Delaware. Chiasma, Inc. is headquartered in Massachusetts and has two wholly owned subsidiaries; Chiasma (Israel) Ltd., and Chiasma Securities Corp, collectively referred to as the Company,
we, us, our or Chiasma. We are a clinical-stage biopharmaceutical company focused on improving the lives of patients who face challenges associated with their existing treatments for rare and serious
chronic disease. Employing our proprietary Transient Permeability Enhancer (TPE) technology platform, we seek to develop oral medications that are currently available only as injections. We are currently developing oral octreotide
capsules, conditionally trade-named MYCAPSSA, our sole TPE platform-based clinical product candidate, in two Phase 3 clinical trials in adult patients for the treatment of acromegaly to potentially support regulatory approval in the
United States and European Union. Acromegaly is a rare and debilitating condition that results in the bodys production of excess growth hormone. Octreotide is an analog of somatostatin, a natural inhibitor of growth hormone secretion.
Octreotide capsules have been granted orphan designation in the United States and the European Union for the treatment of acromegaly. We retain worldwide rights to develop and commercialize octreotide capsules with no royalty obligations to third
parties.
In September 2017, we initiated a third Phase 3 clinical trial for oral octreotide capsules for the maintenance therapy of adult
patients with acromegaly following our agreement with the United States Food and Drug Administration (FDA) on the design of the trial, reached through a Special Protocol Assessment in August 2017. The trial, referred to as CHIASMA
OPTIMAL, is a randomized, double-blind, placebo-controlled, nine-month trial expected to enroll 50 adult acromegaly patients designed to support regulatory approval of octreotide capsules in the United States. We are also currently conducting an
international Phase 3 clinical trial, referred to as MPOWERED, of oral octreotide capsules for the maintenance treatment of adult patients with acromegaly to support regulatory approval in the European Union. The MPOWERED trial is a global,
randomized, open-label and active-controlled
15-month
trial expected to enroll approximately 130 adult acromegaly patients, of which we expect to randomize at least 80 patients who are responders to octreotide
capsules following a
six-month
run-in
to either octreotide capsules or injectable somatostatin receptor ligands (octreotide or lanreotide), and then followed for an
additional nine months.
Liquidity
We have incurred significant losses from operations since our inception and expect losses to continue for at least the next several years. We
are heavily dependent on the regulatory approval and subsequent commercial success of our product candidate, octreotide capsules for the treatment of acromegaly in the United States and European Union, both of which may never occur.
We expect to continue with our ongoing international Phase 3 CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly to support
potential regulatory approval in the United States and ongoing international Phase 3 MPOWERED clinical trial of octreotide capsules in acromegaly to support potential regulatory approval in the European Union. In June and August 2016, we announced
two separate corporate restructuring plans, which were completed in 2017, intended to focus our resources on the continued development of octreotide capsules for the maintenance treatment of adult acromegaly patients. We currently expect our
existing cash, cash equivalents and marketable securities to fund our operations for at least one year after the date these condensed consolidated financial statements are issued. We expect to continue to incur significant operating losses for the
foreseeable future.
Successful transition to attaining profitable operations is dependent upon achieving a level of revenues adequate to
support our cost structure. We plan to continue to fund our losses from operations and capital funding needs from existing balances of cash, cash equivalents and marketable securities and potentially through the issuance of debt and/or equity or
through collaborations or license agreements with other companies. Debt or equity financing may not be available on a timely basis on terms acceptable to us, or at all. If we are not able to secure adequate additional funding, we may be forced to
make further reductions in spending, extend payment terms with suppliers, liquidate assets where possible, or suspend or curtail our planned development of octreotide capsules. Any of these actions could materially harm our business, results of
operations and future prospects. Failure to obtain regulatory approval of octreotide capsules in acromegaly will prevent us from commercializing the product candidate, which could raise significant concerns about our continued viability as a
business.
9
Basis of Presentation
We have prepared the accompanying unaudited condensed consolidated financial statements pursuant to the rules and regulations of the U.S.
Securities and Exchange Commission (SEC) regarding interim financial reporting. Accordingly, certain information and footnote disclosures required by accounting principles generally accepted in the United States (U.S. GAAP)
for annual financial statements have been condensed or omitted. The information included in this quarterly report on Form
10-Q
should be read in conjunction with our Annual Report on Form
10-K
for the year ended December 31, 2017. The
year-end
condensed consolidated balance sheet data presented for comparative purposes was derived from our audited
financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, we have prepared the accompanying unaudited condensed consolidated financial statements on the same basis as our audited financial
statements, and these financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of the interim periods presented. The results of operations for the three months
ended March 31, 2018 are not necessarily indicative of the operating results for the full year or for any other subsequent interim period.
Cash Equivalents
Cash equivalents
consist of highly liquid instruments purchased with an original maturity of three months or less at the date of purchase.
Marketable Securities
Our investments primarily consist of commercial paper and corporate and government debt securities. These marketable securities
are classified as
available-for-sale,
and as such, are reported at fair value on our condensed consolidated balance sheets. Unrealized holding gains and losses are
reported within accumulated other comprehensive income as a separate component of stockholders equity. The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity. Such amortization,
together with interest on securities, are included in other income, net, on our condensed consolidated statements of operations.
If a
decline in the fair value of a marketable security below our cost basis is determined to be other than temporary, such marketable security is written down to its estimated fair value as a new cost basis and the amount of the write-down is included
in earnings as an impairment charge. The cost of securities sold is based on the specific identification method.
Concentrations of credit risk
Financial instruments that potentially subject us to significant concentration of credit risk consist primarily of cash, cash
equivalents and marketable securities. We routinely maintain deposits in financial institutions in excess of government insured limits. Management believes that we are not exposed to significant credit risk as our deposits are held at financial
institutions that management believes to be of high credit quality and we have not experienced any significant losses in these deposits. We regularly invest excess operating cash in deposits with major financial institutions and money market funds
and in notes issued by the U.S. government, as well as in fixed income investments and U.S. bond funds, both of which can be readily purchased and sold using established markets. We believe that the market risk arising from our holdings of these
financial instruments is mitigated based on the fact that many of these securities are either government backed or of high credit rating.
Use of
Estimates
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses, and the disclosure of contingent assets and liabilities as of and during the reporting period. We base these estimates and assumptions on
historical experience when available, and on various factors that we believe to be reasonable under the specific circumstances. Significant estimates relied upon in preparing the accompanying condensed consolidated financial statements include, but
are not limited to, accounting for stock-based compensation, present value of long-term purchase obligation, income taxes, and accounting for certain accruals. We assess the above estimates on an ongoing basis; however, actual results could
materially differ from those estimates.
10
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board issued new guidance which establishes a
right-of-use
model that requires a lessee to record an asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement. The new standard is effective for annual periods beginning after December 15, 2018, including interim periods within those annual reporting
periods. A modified retrospective transition approach, which includes a number of optional practical expedients that we may elect to apply, is required for lessees for capital and operating leases existing at, or entered into after, the beginning of
the earliest comparative period presented in the financial statements. We are currently evaluating the impact the standard may have on our consolidated condensed financial statements and we currently expect that most of our operating lease
commitments will be subject to the new standard and recognized as operating lease liabilities and
right-of-use
assets upon adoption.
2. Investments
Our investments consisted
of the following as of March 31, 2018 and December 31, 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018
|
|
|
|
Amortized Cost
|
|
|
Gross Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Estimated Fair
Value
|
|
|
|
($ in thousands)
|
|
Money market funds
|
|
$
|
13,275
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
13,275
|
|
Corporate notes
|
|
|
24,481
|
|
|
|
|
|
|
|
(60
|
)
|
|
|
24,421
|
|
Commercial paper
|
|
|
20,864
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
20,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
58,620
|
|
|
$
|
|
|
|
$
|
(95
|
)
|
|
$
|
58,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of December 31, 2017
|
|
|
|
Amortized Cost
|
|
|
Gross Unrealized
Gains
|
|
|
Gross Unrealized
Losses
|
|
|
Estimated Fair
Value
|
|
|
|
($ in thousands)
|
|
Money market funds
|
|
$
|
12,399
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,399
|
|
Corporate notes
|
|
|
29,788
|
|
|
|
|
|
|
|
(35
|
)
|
|
|
29,753
|
|
Commercial paper
|
|
|
22,607
|
|
|
|
1
|
|
|
|
(25
|
)
|
|
|
22,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
64,794
|
|
|
$
|
1
|
|
|
$
|
(60
|
)
|
|
$
|
64,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2018, we do not consider those securities that are in an unrealized loss position to be
other-than-temporarily impaired, as we have the ability to hold such investments until recovery of the fair value. We utilize the specific identification method in computing realized gains and losses. We had no realized gains and losses on our
available-for-sale
securities for the three months ended March 31, 2018 or 2017.
The fair values of our investments by classification in our condensed consolidated balance sheets as of March 31, 2018 and
December 31, 2017 were as follows:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
($ in thousands)
|
|
Cash and cash equivalents
|
|
$
|
13,275
|
|
|
$
|
12,399
|
|
Marketable securities
|
|
|
45,250
|
|
|
|
52,336
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
58,525
|
|
|
$
|
64,735
|
|
|
|
|
|
|
|
|
|
|
11
Cash and cash equivalents in the table above exclude cash of $2.0 million and
$2.2 million as of March 31, 2018 and December 31, 2017, respectively. The contractual maturity dates of all of our investments are less than one year.
3. Fair Value Measurements of Financial Instruments
Certain assets and liabilities are reported at fair value on a recurring basis. Fair value is defined as the exchange price that would be
received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. The fair value accounting
guidance requires that assets and liabilities carried at fair value be classified and disclosed in one of the following three categories:
|
|
|
Level 1
Quoted prices in active markets for identical assets or liabilities that we have the ability to access at the measurement date.
|
|
|
|
Level 2
Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.
|
|
|
|
Level 3
Inputs that are unobservable for the asset or liability.
|
To the extent
that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by us in determining fair value is
greatest for instruments categorized in Level 3. A financial instruments level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.
The fair value measurements of our financial instruments are summarized in the table below:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at March 31, 2018
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
Total
|
|
|
|
($ in thousands)
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
13,275
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
13,275
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents
|
|
$
|
13,275
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
13,275
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
|
$
|
|
|
|
$
|
24,421
|
|
|
$
|
|
|
|
$
|
24,421
|
|
Commercial paper
|
|
|
|
|
|
|
20,829
|
|
|
|
|
|
|
|
20,829
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
|
|
|
|
|
45,250
|
|
|
|
|
|
|
|
45,250
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
13,275
|
|
|
$
|
45,250
|
|
|
$
|
|
|
|
$
|
58,525
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fair Value Measurements at December 31, 2017
|
|
|
|
Quoted Prices in
Active Markets for
Identical Assets
(Level 1)
|
|
|
Significant Other
Observable Inputs
(Level 2)
|
|
|
Significant
Unobservable
Inputs (Level 3)
|
|
|
Total
|
|
|
|
($ in thousands)
|
|
Cash equivalents:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Money market funds
|
|
$
|
12,399
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,399
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total cash equivalents
|
|
$
|
12,399
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
12,399
|
|
Marketable securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Corporate notes
|
|
$
|
|
|
|
$
|
29,753
|
|
|
$
|
|
|
|
$
|
29,753
|
|
Commercial paper
|
|
|
|
|
|
|
22,583
|
|
|
|
|
|
|
|
22,583
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total marketable securities
|
|
|
|
|
|
|
52,336
|
|
|
|
|
|
|
|
52,336
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
12,399
|
|
|
$
|
52,336
|
|
|
$
|
|
|
|
$
|
64,735
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Our cash equivalents are classified as Level 1 assets under the fair value hierarchy as these assets have
been valued using quoted market prices in active markets and do not have any restrictions on redemption. Our marketable securities are classified as Level 2 assets under the fair value hierarchy as these assets were primarily determined from
independent pricing services, which normally derive security prices from recently reported trades for identical or similar securities, making adjustments based upon other significant observable market transactions. At the end of each reporting
period, we perform quantitative and qualitative analysis of prices received from third parties to determine whether prices are reasonable estimates of fair value. After completing our analysis, we did not adjust or override any fair value
measurements provided by our pricing services as of March 31, 2018 or December 31, 2017. We did not have any Level 3 assets being measured at fair value on a recurring basis as of March 31, 2018 and December 31, 2017.
4. Earnings per Share of Common Stock
All common stock warrants and stock options have been excluded from the computation of diluted weighted-average shares outstanding because such
securities would have an anti-dilutive impact due to net losses reported during the three months ended March 31, 2018 and 2017.
5. Accrued
Expenses
As of March 31, 2018 and December 31, 2017, accrued expenses consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
March 31, 2018
|
|
|
December 31, 2017
|
|
|
|
($ in thousands)
|
|
Accrued general and administrative expenses
|
|
$
|
1,315
|
|
|
$
|
752
|
|
Accrued research and development expenses
|
|
|
2,590
|
|
|
|
2,501
|
|
Accrued payroll and employee benefits
|
|
|
504
|
|
|
|
780
|
|
|
|
|
|
|
|
|
|
|
Total accrued expenses
|
|
$
|
4,409
|
|
|
$
|
4,033
|
|
|
|
|
|
|
|
|
|
|
6. License Agreement
In December 2012, we signed a license agreement with F.
Hoffmann-La
Roche Ltd. and
Hoffmann-La
Roche Inc. (collectively Roche), which was effective in January 2013, and granted Roche an exclusive,
non-transferable
license to our intellectual
property related to octreotide capsules.
In July 2014, Roche terminated the license agreement. Upon termination, Roche returned all
rights and documentation granted under the agreement to us. Following the termination of the license agreement, we are not entitled to further payments from Roche, Roche has no remaining rights to octreotide capsules and we retain all rights to
octreotide capsules and all related intellectual property. Subsequent to the termination, we purchased from Roche active pharmaceutical ingredient (API) supplies to continue the development and manufacturing of octreotide capsules as
well as Roches
13
proposed trade name for octreotide capsules for an aggregate amount of $5.1 million payable in three equal annual installments of $1.7 million beginning in 2016. We made the
$1.7 million annual payments in March of 2018, 2017, and 2016. The difference between the aggregate purchase price and the present value of the installment payments represented the interest component of the financing arrangement and was
recorded as interest expense over the payment term. We have no further financial or operational obligations to Roche.
7. Warrants
As of December 31, 2017, there were 3,567,015 common stock warrants outstanding with exercise prices ranging from $0.09 per share to $9.13
per share. The warrants were issued at various points between October 2012 and February 2015 with expiration dates ranging from October 2022 through February 2025. There were no warrants exercised during the three months ended March 31, 2018.
There were 3,567,015 outstanding warrants as of March 31, 2018.
8. Stock Incentive Plans
In 2008, our board of directors adopted the 2008 Stock Incentive Plan (the 2008 Plan), which provided for the grant of incentive
stock options, nonqualified stock options, and restricted stock to employees, directors, and nonemployees of the Company up to 3,547,741 shares of common stock. Option awards expire 10 years from the grant date and generally vest over
four years, but vesting conditions can vary at the discretion of our board of directors.
In July 2015, the Company approved the 2015
Stock Option and Incentive Plan (the 2015 Plan), which became effective upon our initial public offering (IPO). The 2015 Plan allows the grant of incentive stock options, nonqualified stock options, and restricted stock to
employees, directors, and nonemployees of the Company up to 3,566,296 shares of common stock. In connection with the adoption of the 2015 Plan, no further option grants are permitted under the 2008 Plan and any expirations, cancellations, or
terminations under the previous plan are available for issuance under the 2015 Plan. On January 1, 2016, the number of shares reserved and available for issuance under the 2015 Stock Plan increased by 960,504 shares of common stock pursuant to
a provision in the 2015 Stock Plan that provides that the number of shares reserved and available for issuance will automatically increase each January 1, beginning on January 1, 2016, by 4% of the number of shares of common stock issued
and outstanding on the immediately preceding December 31 or such lesser number as determined by the compensation committee of the board of directors. The compensation committee of the Board of Directors determined there would be no increase to
the shares reserved and available under the 2015 Stock Plan on January 1, 2018 and 2017. As of March 31, 2018, the total number of shares authorized for stock award plans is 7,114,037 of which 2,448,616 remain available for grant. There
are 4,348,776 stock options outstanding as of March 31, 2018.
Stock-based compensation for the three months ended March 31,
2018 and 2017 consisted of the following:
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
($ in thousands)
|
|
General and administrative
|
|
$
|
323
|
|
|
$
|
355
|
|
Research and development
|
|
|
314
|
|
|
|
364
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
$
|
637
|
|
|
$
|
719
|
|
|
|
|
|
|
|
|
|
|
We issued approximately 2,000 shares of common stock following the exercise of underlying stock options in the
three months ended March 31, 2018. There were no exercises of stock options in the three months ended March 31, 2017.
The fair
value of each stock option issued was estimated at the date of grant using the Black-Scholes option model with the following weighted-average assumptions:
14
|
|
|
|
|
|
|
Three Months Ended
March 31, 2018
|
|
Expected volatility
|
|
|
76.5
|
%
|
Expected term (years)
|
|
|
6.28
|
|
Risk-free interest rate
|
|
|
2.71
|
%
|
Expected dividend yield
|
|
|
0
|
%
|
We issued approximately 749,000 stock option grants in the three months ended March 31, 2018. The
weighted-average grant date fair value per share of stock options granted during the three months ended March 31, 2018 was $1.05. We did not issue stock option grants in the three months ended March 31, 2017.
9. Commitments and Contingencies
We
conduct certain of our operations in leased facilities, which are accounted for as operating leases. Certain leases include renewal options. In addition, we lease automobiles and equipment under operating leases. There were no assets held under
capital leases at March 31, 2018 and December 31, 2017. At March 31, 2018, the minimum rental commitments under all
non-cancelable
operating leases with initial or remaining terms of more than
one year was approximately $0.3 million through 2020.
Legal Proceedings
On June 9, 2016, Chiasma, Inc. and certain of our current and former officers were named as defendants in a federal securities class
action lawsuit filed in the United States District Court for the District of Massachusetts, styled
Gerneth v. Chiasma, Inc., et al
. This lawsuit challenges our public statements regarding our Phase 3 clinical trial methodology for octreotide
capsules and our ability to obtain FDA approval for the marketing and sale of octreotide capsules. In December 2016, a lead plaintiff was appointed in the case. An amended complaint was filed by the lead plaintiff on February 10, 2017 similarly
challenging our statements regarding the Phase 3 clinical trial methodology and results, and our ability to obtain FDA approval for octreotide capsules, purportedly in violation of Sections 11 and 15 of the Securities Act of 1933. The amended
complaint adds as defendants current and former members of our board of directors, as well as the investment banks that underwrote our initial public offering (IPO) on July 15, 2015. The lead plaintiff seeks to represent a class of
all purchasers of our stock in our IPO. The plaintiff is seeking an unspecified amount of compensatory damages on behalf of himself and members of a putative shareholder class, including interest and reasonable costs and expenses incurred in
litigating the action, and any other relief the court determines is appropriate. The defendants filed a motion to dismiss the amended complaint on March 27, 2017 and on February 15, 2018, the court denied defendants motion to
dismiss. The defendants filed an answer to the amended complaint on March 30, 2018. We believe this lawsuit is meritless and intend to vigorously defend against it. At this time, no assessment can be made as to the likely outcome of this
lawsuit or whether the outcome will be material to us.
15
Item 2.
|
Managements 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 consolidated financial statements and the accompanying notes thereto included elsewhere in this
Quarterly Report on Form
10-Q
and the audited financial information and the notes thereto included in our Annual Report on
Form 10-K
for the year ended
December 31, 2017. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on
Form 10-Q, including
information with respect to our plans
and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the Risk Factors section of this Quarterly
Report on
Form 10-Q
and our prior filings with the SEC, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the
following discussion and analysis.
Overview
We
are a clinical-stage biopharmaceutical company focused on improving the lives of patients who face challenges associated with their existing treatments for rare and serious chronic disease. Employing our proprietary Transient Permeability Enhancer,
or TPE, technology platform, we seek to develop oral medications that are currently available only as injections. We are currently developing oral octreotide capsules, conditionally trade-named MYCAPSSA, our sole TPE platform-based
clinical product candidate, in two Phase 3 clinical trials in adult patients for the treatment of acromegaly to potentially support regulatory approval in the United States and European Union. Acromegaly is a rare and debilitating condition that
results in the bodys production of excess growth hormone. Octreotide is an analog of somatostatin, a natural inhibitor of growth hormone secretion. We believe that octreotide capsules, if approved by regulatory authorities, will be the first
somatostatin analog available for oral administration. Octreotide capsules have been granted orphan designation in the United States and the European Union for the treatment of acromegaly. The worldwide market for injectable somatostatin analogs is
approximately $2.5 billion annually, of which we estimate approximately $775 million represents annual sales for the treatment of acromegaly. We retain worldwide rights to develop and commercialize octreotide capsules with no royalty
obligations to third parties.
In September 2017, we initiated a third Phase 3 clinical trial for oral octreotide capsules for the maintenance therapy of
adult patients with acromegaly following our agreement with the United States Food and Drug Administration, or the FDA, on the design of the trial, reached through a Special Protocol Assessment, or SPA, in August 2017. The trial, referred to as
CHIASMA OPTIMAL, is a randomized, double-blind, placebo-controlled, nine-month trial expected to enroll 50 adult acromegaly patients designed to support regulatory approval of octreotide capsules in the United States. We expect to release
top-line
data from this trial by the end of 2019. We are also currently conducting an international Phase 3 clinical trial, referred to as MPOWERED, of oral octreotide capsules for the maintenance treatment of adult
patients with acromegaly to support regulatory approval in the European Union. The MPOWERED trial is a global, randomized, open-label and active-controlled
15-month
trial expected to enroll approximately 130
adult acromegaly patients, of which we expect to randomize at least 80 patients who are responders to octreotide capsules following a
six-month
run-in
to either
octreotide capsules or injectable somatostatin receptor ligands (octreotide or lanreotide), and then followed for an additional nine months. We currently expect to release
top-line
data from the MPOWERED trial
in 2020.
We were incorporated in 2001 and commenced active operations in the same year. Our operations to date have been limited to organizing and
staffing our company, business planning, raising capital, developing our TPE technology, identifying potential drug candidates, undertaking nonclinical studies and, beginning in 2010, conducting clinical trials and preparing for regulatory
submissions. To date, we have financed our operations primarily through private placements, funding received from a licensing agreement, a loan agreement and our initial public offering. We have no products approved for sale and all of our
historical revenue has been related to one license agreement, which was terminated in 2014. Since our inception and through March 31, 2018, we have raised an aggregate of $366.2 million to fund our operations, of which
$86.3 million was through our license agreement with
F. Hoffmann-La
Roche Ltd. and
Hoffmann-La
Roche Inc., collectively Roche, $106.5 million was from
issuing shares of common stock in our initial public offering, or IPO, $161.4 million was from the issuance of private securities and $12.0 million was from borrowings under a loan agreement. In 2013, using proceeds from the Roche license
agreement, we repaid all outstanding borrowings under our loan agreement and paid an aggregate of $55.0 million in cash as partial consideration for the redemption of certain shares of our redeemable preferred stock. As of March 31, 2018,
our consolidated cash, cash equivalents and marketable securities were $60.5 million, of which $0.3 million was held by Chiasma (Israel) Ltd., our wholly owned Israeli subsidiary.
16
We have incurred significant operating losses since our inception. Our net loss was $7.0 million for the
three months ended March 31, 2018 and $26.8 million for the year ended December 31, 2017. As of March 31, 2018, we had an accumulated deficit of $212.4 million. We expect to incur significant operating losses over the next
several years. These losses, combined with prior losses, will continue to have an adverse effect on our cash resources, stockholders equity and working capital. We expect to continue to conduct the international Phase 3 MPOWERED clinical trial
of octreotide capsules in acromegaly that we initiated in March 2016 to support potential regulatory approval in the European Union and plan to continue our Phase 3 CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly that we
initiated in September 2017 to support potential regulatory approval in the United States. We expect the release of
top-line
CHIASMA OPTIMAL data by the end of 2019 and we expect the release of
top-line
MPOWERED data in 2020. Clinical development timelines, the probability of success and development costs can differ materially from expectations.
In June and August 2016, we announced two separate corporate restructuring plans intended to focus our resources on the continued development of octreotide
capsules for the maintenance treatment of adult acromegaly patients. As a result of the August 2016 reduction in workforce, we eliminated our research and discovery functions and are currently not investing in those areas. Because of the numerous
risks and uncertainties facing our company and associated with developing and commercializing pharmaceutical products generally, we are unable to predict the extent of any future losses or when we will become profitable, if at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings and
debt financings, and we may also opportunistically consider license and collaboration agreements with potential partners. We may be unable to raise capital when needed or on attractive terms, or to enter into collaboration agreements, which could
force us to delay, limit, reduce or terminate our product development or future commercialization efforts. We will need to generate significant revenues to achieve profitability, which we may not be able to achieve.
Roche License Agreement
In December 2012, we signed a
license agreement with Roche, which went into effect on January 2013. Pursuant to the license agreement, we granted Roche an exclusive,
non-transferable
license to all intellectual property related to
octreotide capsules. Under the terms of the license, Roche obtained worldwide rights to research, develop, make, import, export, sell, market or distribute the commercial product. We retained certain responsibilities for research and development
activities under a joint development plan.
In July 2014, Roche terminated the license agreement. Pursuant to the termination of the license agreement, we
are not entitled to further payments from Roche, Roche has no remaining rights to octreotide capsules and we retain all rights to octreotide capsules and all related intellectual property. Subsequent to the termination, we purchased from Roche
active pharmaceutical ingredient, or API, supplies to continue the development and manufacturing of octreotide capsules, together with Roches proposed trade name, MYCAPSSA for octreotide capsules, for an aggregate amount of
$5.1 million, payable in three annual installments of $1.7 million beginning in 2016. We made the $1.7 million annual payments in March of 2018, 2017, and 2016. We have no further financial or operational obligations to Roche.
Financial Overview
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, an allocation of facilities expenses, overhead expenses, nonclinical pharmacology studies, manufacturing process-development and
scale-up
activities,
clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations, or CROs, investigative sites, and other external expenses. In the early phases of development, our research and development costs included
expanding our technology platform as well as early development of specific product candidates. The majority of our research and development expenses has been spent on the development of octreotide capsules, including the manufacturing of clinical
trial material, manufacturing process development and validation, regulatory and clinical activities, and our TPE platform. We expense research and development costs as incurred.
17
As a result of the August 2016 reduction in workforce, we eliminated our research and discovery functions and are
currently not investing in those areas. We continue to invest in the clinical development of octreotide capsules. Product candidates in late stages of development generally have higher development costs than those in earlier stages of development,
primarily due to the increased size and duration of late-stage clinical trials. We plan to continue our international Phase 3 CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly that we initiated in September 2017 to support
potential regulatory approval in the United States. We also expect to continue to conduct our international Phase 3 MPOWERED clinical trial of octreotide capsules in acromegaly that we initiated in March 2016 to support potential regulatory approval
in the European Union. The successful development of octreotide capsules is highly uncertain.
General and Administrative
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation, related to our executive, finance,
and support functions. Other general and administrative expenses include facility-related costs not otherwise allocated to research and development expenses, travel expenses for our general and administrative personnel and professional fees for
auditing, tax, and corporate and intellectual property legal services.
Our marketing expenses in the three months ended March 31, 2018 and the year
ended December 31, 2017 were immaterial and are expected to continue to be immaterial while our primary business activity involves the conduct of clinical trials.
Restructuring Charges
Restructuring charges
consist of employee severance benefits and related costs, contract termination fees, asset write-offs resulting from restructuring plans, suspension fees associated with commercial manufacturing agreements, and other expenses associated with
restructuring our operations.
Other Income, Net
Other income, net consists mainly of interest income earned on our investments, net of interest incurred on our obligation related to the acquisition of API
and trade name MYCAPSSA from Roche.
Provision for Income Taxes
We are subject to federal and state income taxes for earnings generated in the United States, and foreign taxes on earnings of our wholly-owned Israeli
subsidiary. Our consolidated tax expense is primarily affected by the mix of our foreign subsidiary permanent items, discrete items, and unrecognized tax benefits and to a lesser extent our taxable income (loss) in the United States.
Critical Accounting Policies and Use of Estimates
We
have adopted various accounting policies to prepare our consolidated financial statements in accordance with accounting principles generally accepted in the United States, or U.S. GAAP. Our most significant accounting policies are described in Note
1 to our consolidated financial statements included in our Annual Report on
Form 10-K
for the fiscal year ended December 31, 2017. There have been no material changes in our critical accounting
policies during the three months ended March 31, 2018. The preparation of our consolidated financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the amounts reported in our consolidated
financial statements and accompanying notes. Our estimates and assumptions, include those related to the accounting for stock-based compensation, present value of long-term purchase obligation, income taxes, and accounting for certain accruals. We
assess the above estimates on an ongoing basis; however, actual results could materially differ from those estimates.
18
Results of Operations for the Three Months ended March 31, 2018 and 2017
Research and Development
The following is a
comparison of research and development expenses for the three months ended March 31, 2018 and 2017:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
$ Change
|
|
|
% Change
|
|
|
|
($ in thousands)
|
|
Research and development
|
|
$
|
4,863
|
|
|
$
|
4,655
|
|
|
$
|
208
|
|
|
|
4%
|
|
|
|
|
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For the three months ended March 31, 2018, our total research and development expenses increased by $0.2 million to
$4.9 million, primarily due to costs related to the CHIASMA OPTIMAL clinical trial which initiated in September 2017 and was partially offset by reduced personnel costs associated with the transition of our former Chief Development Officer from
a full-time employee to board of director member of both our company and our Israeli subsidiary.
General and Administrative
The following is a comparison of general and administrative expenses for the three months ended March 31, 2018 and 2017:
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Three Months Ended March 31,
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2018
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2017
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$ Change
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% Change
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($ in thousands)
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General and administrative
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$
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2,434
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$
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2,460
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$
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(26
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(1%
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For the three months ended March 31, 2018, our general and administrative expenses decreased by $26,000 to
$2.4 million, primarily due to the reduction in costs following the November 2017 termination of our office facility lease in Waltham, MA and was partially offset by increased legal fees.
Other Income, net
Other income totaled
$0.2 million for the three months ended March 31, 2018 compared to other income of $0.2 million for the same period in 2017, an increase of approximately $70,000. The increase was driven by interest income generated from increased
yields on our cash equivalents and marketable securities and a decrease in the imputed interest expense associated with the obligation related to the acquisition of API and trade name MYCAPSSA from Roche.
Provision (Benefit) for Income Taxes
Our total
tax benefit was approximately $24,000 for the three months ended March 31, 2018, representing an effective tax rate of 0.3%, as compared to a tax provision of $0.1 million for the three months ended March 31, 2017, representing an
effective tax rate of (0.9%).
Our effective tax rate differs from the statutory rate each year mainly due to a full valuation allowance maintained
against U.S. deferred tax assets and due to lower tax rates applied to income of our Israeli subsidiary.
Liquidity and Capital Resources
Since our inception and through March 31, 2018, we have raised an aggregate of $366.2 million to fund our operations, of which $86.3 million was
through our license agreement with Roche, approximately $106.5 million was from selling shares of common stock in our IPO, $161.4 million was from the issuance of private securities, and $12.0 million was from borrowings under a loan
agreement. In March 2013, using proceeds from the Roche license agreement, we repaid all outstanding borrowings under our loan agreement and paid an aggregate of $55.0 million in cash as partial consideration for the redemption of certain
shares of our preferred stock.
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As of March 31, 2018, our cash and cash equivalents were $15.2 million, of which $0.3 million was
held by our Israeli subsidiary. In addition, as of March 31, 2018, we have $45.3 million invested in short-term marketable securities.
Plan of Operations and Future Funding Requirements
We expect that our primary uses of capital will be associated with seeking regulatory approval of octreotide capsules in the United States and European Union,
including clinical trial costs (including our international Phase 3 CHIASMA OPTIMAL clinical trial that we initiated in September 2017 to support regulatory approval of octreotide capsules in the United States and our international Phase 3
MPOWERED clinical trial that we initiated in March 2016 to support regulatory approval of octreotide capsules in the European Union), manufacturing of octreotide capsules for market consumption, if approved, legal and regulatory expenses related to
seeking regulatory approval of octreotide capsules in the United States and European Union, compensation and related expenses, third-party clinical development services, legal and other regulatory expenses, and other general operating costs.
We currently expect our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations through the anticipated release of
top-line
data from our Phase 3 CHIASMA OPTIMAL trial by the end of 2019 while supporting our Phase 3 MPOWERED trial in parallel. We cannot estimate the actual amounts necessary to successfully complete
the development and commercialization of octreotide capsules, if at all, or whether, or when, we may achieve profitability. Our future capital requirements will depend on many factors, including, but not limited to:
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the costs, timing and outcome of the development and regulatory review of octreotide capsules;
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the progress and results of our ongoing clinical trials of octreotide capsules or any future clinical trials or studies we may conduct;
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the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution, for octreotide capsules and any other future product candidates for which we receive
marketing approval;
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proceeds, if any, received from commercial sales of octreotide capsules and any future product candidates for which we receive marketing approval;
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the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending any intellectual property-related claims; and
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the extent to which we develop, acquire or
in-license
other product candidates and technologies or explore or consummate other strategic transactions.
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Until such time, if ever, as we can generate substantial product sales, we expect to finance our cash needs through a combination of equity offerings and debt
financings and we may opportunistically consider license and collaboration arrangements. We believe that shelf registration statements can contribute, when used, to greater financial flexibility. To that end, we filed a shelf registration statement
on Form
S-3
with the Securities and Exchange Commission in March 2018. To the extent that we raise additional capital through future issuance 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 affect the rights of our existing common stockholders. If we raise additional funds through collaboration arrangements, we may have to
relinquish valuable rights to our current or future product candidates, exploratory programs, technologies or future revenue streams 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 product development or future commercialization efforts of octreotide capsules or grant rights to develop and market future potential product candidates that we
would otherwise prefer to develop and market ourselves.
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Cash Flows
The following is a summary of cash flows for the three months ended March 31, 2018 and 2017:
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Three Months Ended
March 31,
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2018
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2017
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($ in thousands)
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Cash flows provided by (used in):
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Operating activities
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$
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(4,754
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)
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$
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(6,314
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)
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Investing activities
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7,099
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(10,010
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)
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Financing activities
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(1,700
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)
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(1,700
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)
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Operating Activities
Net cash used in operating activities was $4.8 million for the three months ended March 31, 2018, and primarily consisted of $7.0 million in net
loss, adjusted for
non-cash
items of $0.6 million (primarily stock-based compensation) and working capital increases of $1.7 million (primarily due to the increase in accounts payable and accrued
expenses). Net cash used in operating activities was $6.3 million for the three months ended March 31, 2017, and primarily consisted of $7.0 million in net loss, adjusted for
non-cash
items of
$0.7 million (primarily stock-based compensation). The primary driver for the decrease in our operating spending during the three months ended March 31, 2018 compared to the three months ended March 31, 2017 was the timing of clinical
trial related payments driving our net working capital increases in 2018 and employee severance payments made in the three months ended March 31, 2017.
Investing Activities
Net cash provided by
investing activities was $7.1 million for the three months ended March 31, 2018, primarily related to the net maturities of marketable securities, compared to $10.0 million in cash used in investing activities for the three months
ended March 31, 2017, primarily related to the net purchases of marketable securities.
Financing Activities
Net cash used in financing activities was $1.7 million during the three months ended March 31, 2018, primarily related to the final $1.7 million
installment payment related to the termination of the Roche license agreement. For the three months ended March 31, 2017, net cash used in financing activities was $1.7 million, related to the second $1.7 million installment payment
related to the termination of the Roche license agreement.
Contractual Obligations
We conduct our operations in leased facilities, which are accounted for as operating leases. Certain leases include renewal options. In addition, we lease
automobiles and equipment under operating leases. There were no assets held under capital leases at March 31, 2018 or December 31, 2017. At March 31, 2018, the minimum rental commitments under all
non-cancelable
operating leases with initial or remaining terms of more than one year was approximately $0.3 million through 2020.
Off-Balance
Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance
sheet arrangements, as
defined in the rules and regulations of the SEC.
JOBS Act
In April 2012, the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, was enacted. Section 107 of the JOBS Act provides that an emerging
growth company can take advantage of an extended transition period for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would
otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period, and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such
standards is required for public companies.
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