UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
(Mark One)
For the quarterly period ended
OR
For the transition period from to
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Securities Registered pursuant to Section 12(b) of the Act:
Title of each class |
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☒ | Smaller reporting company | |||
Emerging growth company |
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TABLE OF CONTENTS
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA
This Quarterly Report on Form 10-Q contains forward-looking statements , which reflect our current views with respect to, among other things, our operations and financial performance, strategy, future financial condition and clinical development programs. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, clinical development programs, regulatory filings and expected market growth are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
These forward-looking statements include, among other things, statements about:
| ● | our expectations regarding the timing of our planned filing of an investigational new drug application for STAR-0215, and the timing, plans, goals and results of our planned Phase 1a and Phase 1b/2 clinical trials of STAR-0215, including that favorable results from such trials could establish proof of concept for the differentiation of STAR-0215 as a potential treatment for hereditary angioedema (“HAE”); |
| ● | our expectations about the unmet medical need for HAE, the potential differentiating attributes of STAR-0215 as a potential treatment for HAE, along with the potential market impact of such differentiation, the potential of STAR-0215 to be a best-in-class and the most patient friendly treatment for HAE, and the nature and anticipated growth of the global HAE market and HAE therapies; |
| ● | our expectations that we have identified a stable cell line for STAR-0215 and the ability of such cell line to generate sufficient material of suitable and appropriate quality for our planned STAR-0215 preclinical and clinical studies in a timely manner; |
| ● | our expectations regarding our ability to expand our pipeline; |
| ● | the potential benefits of any future acquisition, in-license, collaboration or preclinical development activities; |
| ● | our manufacturing plans, capabilities and strategy; |
| ● | our intellectual property position and strategy; |
| ● | our estimates regarding our cash runway, expenses, future revenues, capital requirements and needs for additional financing, including additional financing to fund our long-term operations; |
| ● | developments relating to our competitors and our industry; and |
| ● | the impact of government laws and regulations. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, particularly in the sections entitled “Summary of the Material Risks Associated with Our Business” and “Risk Factors”, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments that we may make or enter into.
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PART I- FINANCIAL INFORMATION
Item 1. Financial Statements
Astria Therapeutics, Inc.
Condensed Consolidated Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | | $ | | ||
Short-term investments | | | ||||
Prepaid expenses and other current assets |
| |
| | ||
Total current assets |
| |
| | ||
Right-of-use asset | | | ||||
Other assets | | | ||||
Total assets | $ | | $ | | ||
Liabilities and stockholders’ equity |
| |||||
Current liabilities: |
| |||||
Accounts payable | $ | | $ | | ||
Accrued expenses |
| |
| | ||
Current portion of operating lease liabilities | | | ||||
Total current liabilities |
| |
| | ||
Total liabilities | | | ||||
Commitments (Note 7) | ||||||
Stockholders’ equity: | ||||||
Preferred stock, $ | ||||||
Series X redeemable convertible preferred stock, $ | | | ||||
Common stock, $ |
| |
| | ||
Additional paid-in capital |
| |
| | ||
Accumulated other comprehensive loss | ( | — | ||||
Accumulated deficit | ( | ( | ||||
Total stockholders’ equity |
| |
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Total liabilities and stockholders’ equity | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Astria Therapeutics, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Operating expenses: | ||||||
Research and development | $ | | $ | | ||
General and administrative |
| |
| | ||
Acquired in-process research and development | — | | ||||
Total operating expenses |
| |
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Loss from operations |
| ( |
| ( | ||
Other income (expense): |
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Interest and investment income | | | ||||
Other expense, net | ( | ( | ||||
Total other income, net |
| |
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Net loss | ( | ( | ||||
Net loss per share - basic and diluted | ( | ( | ||||
Weighted-average common shares outstanding used in net loss per share - basic and diluted |
| |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
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Astria Therapeutics, Inc.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Net loss | $ | ( | $ | ( | ||
Other comprehensive income: | ||||||
Unrealized loss on short-term investments, net of tax of $ |
| ( |
| — | ||
Total other comprehensive loss |
| ( |
| — | ||
Comprehensive loss | $ | ( | $ | ( | ||
The accompanying notes are an integral part of these condensed consolidated financial statements
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Astria Therapeutics, Inc.
Condensed Consolidated Statements of Redeemable Convertible Preferred Stock and Stockholders’ Equity
(In thousands, except shares)
(Unaudited)
| ||||||||||||||||||||||||||||
Series X | Series X | Series X |
| Series X | ||||||||||||||||||||||||
redeemable | redeemable | redeemable | redeemable | Accumulated | Total | |||||||||||||||||||||||
convertible | convertible | convertible | convertible | Common | Common | Additional | other | stockholders’ | ||||||||||||||||||||
preferred | preferred | preferred | preferred | stock, | stock, par | paid-in | Accumulated | comprehensive | equity | |||||||||||||||||||
| stock, shares |
| stock, value |
|
| stock, shares |
| stock, value |
| shares |
| value |
| capital |
| deficit |
| loss |
| (deficit) | ||||||||
Balance at December 31, 2020 | | $ | | — | $ | — | | $ | | $ | | $ | ( | $ | — | $ | | |||||||||||
Issuance of preferred stock in a private offering of public equity, net of issuance costs | | | — | — | — | — | | — | — | | ||||||||||||||||||
Issuance of preferred stock and common stock upon acquisition of Quellis | | | — | — | | — | | — | — | | ||||||||||||||||||
Expense related to warrants inherited in acquisiton of Quellis | — | — | — | — | — | — | | — | — | | ||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | | — | — | | ||||||||||||||||||
Net loss | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||
Balance at March 31, 2021 | | $ | | — | $ | — | | $ | | $ | | $ | ( | $ | — | $ | ( | |||||||||||
Series X | Series X | Series X | Series X | |||||||||||||||||||||||||
redeemable | redeemable | redeemable | redeemable | Accumulated | Total | |||||||||||||||||||||||
convertible | convertible | convertible | convertible | Common | Common | Additional | other | stockholders’ | ||||||||||||||||||||
preferred | preferred | preferred | preferred | stock, | stock, par | paid-in | Accumulated | comprehensive | equity | |||||||||||||||||||
| stock, shares |
| stock, value |
|
| stock, shares |
| stock, value |
| shares |
| value |
| capital |
| deficit |
| loss |
| (deficit) | ||||||||
Balance at December 31, 2021 | — | $ | — | | $ | | | $ | | $ | | $ | ( | $ | | $ | | |||||||||||
Expense related to warrants inherited in acquisiton of Quellis | — | — | — | — | — | — | | — | — | | ||||||||||||||||||
Stock-based compensation expense | — | — | — | — | — | — | | — | — | | ||||||||||||||||||
Unrealized loss on short-term investments | — | — | — | — | — | — | — | — | ( | ( | ||||||||||||||||||
Net loss | — | — | — | — | — | — | — | ( | — | ( | ||||||||||||||||||
Balance at March 31, 2022 | — | $ | — | | $ | | | $ | | $ | | $ | ( | $ | ( | $ | | |||||||||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Astria Therapeutics, Inc.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended March 31, | ||||||
| 2022 |
| 2021 | |||
Operating activities | ||||||
Net loss | $ | ( | $ | ( | ||
Reconciliation of net loss to net cash used in operating activities: | ||||||
Non-cash portion of acquired in-process research and development | — | | ||||
Stock-based compensation expense | | | ||||
Expense for warrants inherited in acquisiton of Quellis | | | ||||
Other non-cash items | ( | | ||||
Changes in assets and liabilities: | ||||||
Prepaid expenses and other assets |
| |
| | ||
Right-of-use asset- operating | ( | ( | ||||
Accounts payable |
| ( |
| ( | ||
Accrued expenses |
| |
| ( | ||
Net cash used in operating activities |
| ( |
| ( | ||
Investing activities | ||||||
Purchases of short-term investments | ( | — | ||||
Sales and maturities of short-term investments | | | ||||
Cash acquired in acquisition of Quellis | — | | ||||
Purchases of property and equipment | — | ( | ||||
Net cash (used in) provided by investing activities |
| ( |
| | ||
Financing activities | ||||||
Proceeds from private offering of public equity, net of issuance costs | — | | ||||
Net cash provided by financing activities |
| — |
| | ||
Net (decrease) increase in cash, cash equivalents and restricted cash |
| ( |
| | ||
Cash, cash equivalents and restricted cash, beginning of period | | | ||||
Cash, cash equivalents and restricted cash, end of period | $ | | $ | | ||
The accompanying notes are an integral part of these condensed consolidated financial statements.
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Astria Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Operations
The Company
Astria Therapeutics, Inc. (the “Company”), formerly known as Catabasis Pharmaceuticals, Inc., is a biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics. Its mission is to bring hope with life-changing therapies to patients and families that are affected by rare and niche allergic and immunological diseases. On October 26, 2020, the Company announced that the Phase 3 PolarisDMD trial of the Company’s previous lead product candidate, edasalonexent, for the treatment of Duchenne Muscular Dystrophy (“DMD”) did not meet its primary and secondary endpoints. Based on these results, the Company announced that it was stopping activities related to the development of edasalonexent, including the Company’s ongoing open-label extension trial. On January 28, 2021, the Company acquired Quellis Biosciences, Inc. (“Quellis”). The Company’s lead product candidate, which was acquired in the Quellis acquisition, is STAR-0215, a monoclonal antibody inhibitor of plasma kallikrein in preclinical development for the treatment of hereditary angioedema (“HAE”), a rare, debilitating and potentially life-threatening disease. The Company was incorporated in the State of Delaware on June 26, 2008.
Reverse Stock Split
On August 19, 2021, the Company effected a reverse stock split of its outstanding shares of common stock at a ratio of -for-six (1:6) pursuant to a Certificate of Amendment to its Restated Certificate of Incorporation filed with the Secretary of State of the State of Delaware. Pursuant to the reverse stock split, every six shares of the Company’s issued and outstanding shares of common stock were automatically combined into one issued and outstanding share of common stock, without any change in the par value per share of the common stock. Amounts of common stock resulting from the reverse stock split were rounded down to the nearest whole share and any resulting fractional shares were cancelled for cash. The number of authorized shares of the Company’s common stock remained unchanged. The reverse stock split affected all issued and outstanding shares of the Company’s common stock, and the respective numbers of shares of common stock underlying the Company’s outstanding Series X Preferred Stock (as defined below), outstanding stock options, outstanding warrants and the Company’s equity incentive plans were proportionately adjusted. All share and per share amounts of the common stock included in the accompanying unaudited condensed consolidated financial statements have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital.
Agreement and Plan of Merger
On January 28, 2021, the Company acquired Quellis (the “Quellis Acquisition”). Under the terms of that certain agreement and plan of merger, dated January 28, 2021 (the “Merger Agreement”), the Company issued to the stockholders of Quellis
Stock Purchase Agreement and Series X Preferred Stock
Concurrent with the Quellis Acquisition, the Company entered into a Stock Purchase Agreement (the “Purchase Agreement”) with certain institutional and accredited investors. Pursuant to the Purchase Agreement, the Company sold an aggregate of
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total was treated as a discount to the value of Series X Preferred Stock, see Note 2 , “Summary of Significant Accounting Policies” for further discussion.
As a result of the Quellis Acquisition and the February 2021 Financing, the Company issued the following Series X Preferred Stock and assumed the following warrant:
Series X |
| Common Stock | ||
Preferred |
| Issuable Upon | ||
Stock at | Conversion at | |||
Transaction | Transaction | |||
| Date |
| Date | |
Shares issued in merger | | | ||
Shares issued in February 2021 Financing |
| | | |
Warrant assumed in merger |
| | | |
Total |
| | |
At its Annual Meeting of Stockholders on June 2, 2021, the Company’s stockholders approved the conversion of the Company’s Series X Preferred Stock into shares of the Company’s common stock in accordance with Nasdaq Listing Rule 5635(a) (the “Conversion Proposal”). Following stockholder approval of the Conversion Proposal, each share of Series X Preferred Stock then outstanding automatically converted into
Holders of Series X Preferred Stock are entitled to receive dividends, subject to certain beneficial ownership limitations, on shares of Series X Preferred Stock equal, on an as-if-converted-to-common-stock basis, and in the same form as dividends actually paid on shares of the Company’s common stock. Except as otherwise required by law, the Series X Preferred Stock does not have voting rights. However, as long as any shares of Series X Preferred Stock are outstanding, the Company may not, without the affirmative vote of the holders of a majority of the then outstanding shares of the Series X Preferred Stock, (i) alter or change adversely the powers, preferences or rights given to the Series X Preferred Stock or alter or amend the Certificate of Designation that authorized the Series X Preferred Stock, amend or repeal any provision of, or add any provision to, the Company’s Restated Certificate of Incorporation or bylaws, or file any articles of amendment, certificate of designations, preferences, limitations and relative rights of any series of preferred stock, if such action would adversely alter or change the preferences, rights, privileges or powers of, or restrictions provided for the benefit of the Series X Preferred Stock, (ii) issue further shares of Series X Preferred Stock or increase or decrease (other than by conversion) the number of authorized shares of Series X Preferred Stock, or (iii) enter into any agreement with respect to any of the foregoing.
Liquidity
The Company had entered into various sales agreements with Cowen and Company LLC (“Cowen”), pursuant to which the Company could issue and sell shares of common stock under at-the-market offering programs. On May 20, 2021, the Company terminated its sales agreement with Cowen. On June 30, 2021, the Company entered into an Open Market Sale AgreementSM with Jefferies LLC (“Jefferies”), pursuant to which the Company can issue and sell shares of common stock of up to $
The Company is subject to a number of risks similar to other life science companies, including, but not limited to, successful discovery and development of its drug candidates, raising additional capital, development by its competitors of new technological innovations, protection of proprietary technology and regulatory approval and market acceptance of the Company’s products. The
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Company has been primarily involved with research and development activities and has incurred operating losses and negative cash flows from operations since its inception. The Company anticipates that it will continue to incur significant operating losses and negative cash flows for the next several years as it continues to develop its product candidates.
As of March 31, 2022, the Company had an accumulated deficit of $
2. Summary of Significant Accounting Policies
Basis of Presentation and Principles of Consolidation
The accompanying financial statements and the related disclosures are unaudited and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Additionally, certain information and footnote disclosures normally included in the Company’s annual financial statements have been condensed or omitted from this report. Accordingly, these unaudited condensed consolidated financial statements should be read in conjunction with the financial statements as of and for the year ended December 31, 2021 and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2021 (the “2021 Annual Report on Form 10-K”).
The unaudited condensed consolidated financial statements have been prepared on the same basis as the audited financial statements. In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, including those adjustments that are of a normal and recurring nature, which are necessary to fairly present the Company’s results for the interim periods presented. The results for the three months ended March 31, 2022 are not necessarily indicative of the results for the year ending December 31, 2022 or for any future period.
The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Astria Securities Corporation and Quellis Biosciences, LLC, successor in interest to Quellis. All intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of the Company’s unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Actual results could differ from such estimates.
The Company utilizes certain estimates to record expenses relating to research and development contracts. These contract estimates, which are primarily related to the length of service of each contract and the amount of service provided as of each measurement date, are determined by the Company based on input from internal project management, as well as from the Company’s service providers.
Net Loss Per Share
Basic net loss per share is calculated by dividing net loss attributable by the weighted average shares outstanding during the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by adjusting weighted average shares outstanding for the dilutive effect of common stock equivalents outstanding for the period, determined using the treasury-stock method. For purposes of the Company’s dilutive net loss per share calculation, preferred stock, stock options and warrants to purchase common stock and preferred stock were considered to be common stock equivalents but were excluded from the calculation of diluted net loss per share, as their effect would be anti-dilutive; therefore, basic and diluted net loss per share were the same for all periods presented.
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The following common stock equivalents, including Series X Preferred Stock shown as common stock equivalents, were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:
Three Months Ended March 31, | ||||
| 2022 |
| 2021 | |
Series X Preferred Stock | | | ||
Stock options |
| |
| |
Common stock warrants |
| |
| |
Preferred stock warrants |
| — | | |
| | |||
Cash, Cash Equivalents and Restricted Cash
Cash equivalents are short-term, highly liquid investments that are readily convertible into cash, with original maturities of three months or less. Cash equivalents are mainly comprised of money market accounts invested in U.S. Treasury securities, corporate debt securities, commercial paper and reverse repurchase agreements.
Restricted cash is comprised of deposits with a financial institution used to collateralize letters of credit related to the Company’s lease arrangements. Restricted cash is presented as a component of prepaid expenses and other current assets and other long-term assets at March 31, 2022 and other long-term assets at March 31, 2021.
The reconciliation of cash, cash equivalents and restricted cash reported within the applicable condensed consolidated balance sheet that sum to the total of the same such amount shown in the condensed consolidated statement of cash flows is as follows (in thousands):
March 31, | ||||||
| 2022 |
| 2021 | |||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash | | | ||||
Total | $ | | $ | | ||
Acquired In-Process Research and Development
The Company measures and recognizes asset acquisitions that are not deemed to be business combinations based on the cost to acquire the assets, which includes transaction costs. Goodwill is not recognized in asset acquisitions. In an asset acquisition, the cost allocated to acquire in-process research and development (“IPR&D”) with no alternative future use is charged to expense at the acquisition date. Refer to Note 3, “Acquisition of Quellis” for a more detailed description of the accounting policy utilized for the recent asset acquisition.
Preferred Stock Discount
As discussed above, in February 2021, the Company issued Series X Preferred Stock in a private placement transaction. It was determined that this transaction resulted in recognition of a beneficial conversion feature, which was valued based on the difference between the price of the shares of common stock on the date of commitment and the conversion price on the closing date, resulting in a total value of $
Recent Accounting Pronouncements - Not Yet Adopted
From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board (“FASB”) or other standard setting bodies and adopted by the Company as of the specified effective date.
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In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments-Credit Losses (Topic 326). This standard requires a financial asset to be presented at amortized cost basis at the net amount expected to be collected. It also requires that credit losses relating to available-for-sale debt securities should be recorded through an allowance for credit losses. In November 2019, the FASB issued an amendment making this standard effective for annual reporting periods beginning after December 15, 2022 for smaller reporting companies. Early adoption is permitted. The Company is currently evaluating the impact that this standard will have on its consolidated financial statements as well as the timing of when this standard will be adopted.
Summary of Significant Accounting Policies
The Company’s significant accounting policies are described in Note 2, “Summary of Significant Accounting Policies” in the 2021 Annual Report on Form 10-K, and there were no significant changes to such policies in the three months ended March 31, 2022 that had a material impact on the Company’s results of operations or financial position.
3. Acquisition of Quellis
On January 28, 2021, the Company completed the Quellis Acquisition in accordance with the terms of the Merger Agreement as discussed in Note 1, “Organization and Operations”. Under the terms of the Merger Agreement, the Company issued
The Company concluded that the Quellis Acquisition was not the acquisition of a business, as substantially all of the fair value of the non-monetary assets acquired was concentrated in a single identifiable asset, STAR-0215.
The Company determined that the cost to acquire the Quellis assets was $
Acquired IPR&D |
| $ | |
Cash and cash equivalents |
| | |
Prepaid expenses and other assets |
| | |
Accounts payable |
| ( | |
Accrued liabilities |
| ( | |
Net acquired tangible assets | $ | |
In the estimation of fair value of the asset purchase consideration, the Company used the carrying value of the cash and cash equivalents, prepaid expenses, accounts payable and accrued liabilities as the most reliable indicator of fair value based on the associated short-term nature of the balances. The remaining fair value was attributable to the acquired IPR&D. As STAR-0215 had not, at the time of the Quellis Acquisition, received regulatory approval in any territory, the cost attributable to the IPR&D was expensed in the Company’s unaudited condensed consolidated statements of operations and comprehensive loss for the three months ended March 31, 2021 as the acquired IPR&D had no alternative future use, as determined by the Company in accordance with U.S. GAAP.
4. Financial Instruments
The tables below present information about the Company’s assets and liabilities that are measured at fair value on a recurring basis as of March 31, 2022 and December 31, 2021 and indicate the fair value hierarchy of the valuation techniques the Company utilized to determine such fair value. In general, fair values determined by Level 1 inputs utilize observable inputs such as quoted prices in active markets for identical assets or liabilities. Fair values determined by Level 2 inputs utilize data points that are either directly or indirectly observable, such as quoted prices, interest rates and yield curves. Fair values determined by Level 3 inputs utilize unobservable data points for which there is little or no market data, which require the Company to develop its own assumptions for the asset or liability. There were no transfers between fair value measurement levels during the three months ended March 31, 2022 and 2021.
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The Company’s investment portfolio may include fixed income securities that do not always trade on a daily basis. As a result, the pricing services used by the Company apply other available information as applicable through processes such as benchmark yields, benchmarking of like securities, sector groupings and matrix pricing to prepare valuations. The Company validates the prices provided by its third party pricing services by obtaining market values from other pricing sources and analyzing pricing data in certain instances. The Company also invests in certain reverse repurchase agreements which are collateralized by deposits in the form of U.S. Government Securities and Obligations for an amount no less than
The Company accounted for warrants to purchase its stock pursuant to Accounting Standards Codification (“ASC”) Topic 470, Debt, and ASC Topic 480, Distinguishing Liabilities from Equity, and classifies warrants for common stock and preferred stock as liabilities or equity. The warrants classified as liabilities are reported at their estimated fair value and any changes in fair value are reflected in research and development expense. The warrants classified as equity are reported at their estimated fair value with no subsequent remeasurement.
Below is a summary of assets and liabilities measured at fair value on a recurring basis (in thousands):
As of March 31, 2022 | ||||||||||||
Quoted | ||||||||||||
Prices | Significant | Significant | ||||||||||
in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | ||||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | |||||
Assets: | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Corporate debt securities | — | | — | | ||||||||
Commercial paper | — | | — | | ||||||||
Reverse repurchase agreements | — | | — | | ||||||||
Short term investments | ||||||||||||
Corporate debt securities | — | | — | | ||||||||
Commercial paper | — | | — | | ||||||||
Yankee securities | — | | — | | ||||||||
Treasury bills | | — | — | | ||||||||
Reverse repurchase agreements | — | | — | | ||||||||
Total | $ | | $ | | $ | — | $ | | ||||
As of December 31, 2021 | ||||||||||||
Quoted | ||||||||||||
Prices | Significant | Significant | ||||||||||
in Active | Observable | Unobservable | ||||||||||
Markets | Inputs | Inputs | ||||||||||
| (Level 1) |
| (Level 2) |
| (Level 3) |
| Total | |||||
Assets: | ||||||||||||
Cash equivalents: | ||||||||||||
Money market funds | $ | | $ | — | $ | — | $ | | ||||
Short-term investments: | ||||||||||||
Reverse repurchase agreements | — | | — | | ||||||||
Total | $ | | $ | | $ | — | $ | | ||||
The carrying amounts reflected in the unaudited condensed consolidated balance sheets for cash, prepaid expenses and other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities. Items measured at fair value on a recurring basis include cash equivalents and short-term investments as of March 31, 2022 and December 31, 2021.
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5. Short-Term Investments
The following table summarizes the short-term investments held at March 31, 2022 and December 31, 2021 (in thousands):
|
| Gross Unrealized |
| Gross Unrealized |
| |||||||
Amortized Cost | Gains | Losses | Fair Value | |||||||||
March 31, 2022 | ||||||||||||
Corporate debt securities | $ | | $ | — | $ | ( | $ | | ||||
Commercial paper | | — | ( | | ||||||||
Yankee securities | | — | ( | | ||||||||
Treasury bills | | — | — | | ||||||||
Reverse repurchase agreements | | — | — | | ||||||||
Total | $ | | $ | — | $ | ( | $ | | ||||
Gross Unrealized | Gross Unrealized | |||||||||||
| Amortized Cost |
| Gains |
| Losses |
| Fair Value | |||||
December 31, 2021 | ||||||||||||
Reverse repurchase agreements | $ | | $ | — | $ | — | $ | | ||||
Total | $ | | $ | — | $ | — | $ | | ||||
The contractual maturities of all short-term investments held at March 31, 2022 and December 31, 2021 were one year or less. There were
Gross realized gains and losses on the sales of short-term investments are included in other income, net. Unrealized holding gains or losses for the period that have been included in accumulated other comprehensive income, as well as gains and losses reclassified out of accumulated other comprehensive income into other income, net were not material to the Company’s condensed consolidated results of operations. The cost of investments sold or the amount reclassified out of the accumulated other comprehensive income into other income, net is based on the specific identification method for purposes of recording realized gains and losses. All proceeds in the three-month periods ended March 31, 2022 and 2021 related to maturities of underlying investments. The gains on proceeds from maturities of short-term investments were not material to the Company’s condensed consolidated results of operations for the three months ended March 31, 2022 and 2021.
6. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
March 31, | December 31, | |||||
| 2022 |
| 2021 | |||
Accrued contracted costs | $ | | $ | | ||
Accrued compensation | | | ||||
Accrued professional fees | | | ||||
Accrued other | | | ||||
Total | $ | | $ | | ||
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7. Commitments
Future minimum payments required under the Company’s non-cancelable operating lease as of March 31, 2022 are summarized as follows (in thousands):
Period Ending December 31, |
| Amount | |
2022 | $ | | |
Total lease payments | $ | | |
Less: imputed interest |
| ( | |
Total operating lease liabilities | $ | | |
Rent expense was $
On January 28, 2022, the Company entered into a sublease agreement (the “Sublease”) with Grant Thornton LLP (the “Sublandlord”), for new office space to replace its existing office space. The Sublease commenced on May 1, 2022 and will end on July 31, 2024 (or on such earlier date as the term may cease or expire as set forth in the Sublease ). The Sublease will increase the future minimum payments in the table above from approximately $
8. Stockholders’ Equity
Preferred Stock
Under the Company’s Restated Certificate of Incorporation, the Company has
Outstanding Warrants
The following table presents information about warrants that are issued and outstanding at March 31, 2022:
Year Issued |
| Equity Instrument |
| Warrants Outstanding |
| Exercise Price |
| Date of Expiration | |
2018 |
| Common Stock | | $ | |
| 6/21/2023 | ||
2019 |
| Common Stock | | $ | |
| 2/7/2024 | ||
2021 | Common Stock | | $ | | 12/14/2030 | ||||
Total |
| |
|
| |||||
Weighted average exercise price | $ | |
|
| |||||
Weighted average life in years |
|
|
| ||||||
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9. Reserved for Future Issuance
The Company has reserved for future issuance the following shares of common stock:
| March 31, | December 31, | ||
| 2022 |
| 2021 | |
Series X Preferred Stock | | | ||
Warrants for the purchase of common stock |
| |
| |
Options outstanding to purchase common stock |
| |
| |
Options available for future issuance to purchase common stock | | | ||
Shares reserved for the employee stock purchase plan |
| | | |
Total |
| |
| |
10. Stock Incentive Plans
A summary of the Company’s stock option activity and related information follows:
Weighted | ||||||||||
Average | Aggregate | |||||||||
Weighted- | Remaining | Intrinsic | ||||||||
Average | Contractual | Value | ||||||||
| Shares |
| Exercise Price |
| Term (years) |
| (in thousands) | |||
Outstanding at December 31, 2021 |
| | $ | |
| $ | | |||
Granted |
| | $ | | ||||||
Cancelled or forfeited |
| ( | $ | |
|
| ||||
Outstanding at March 31, 2022 | | $ | | $ | | |||||
Vested and exercisable at March 31, 2022 |
| | $ | | $ | | ||||
There were
At March 31, 2022, the total unrecognized compensation expense related to unvested stock option awards was $
On February 17, 2022, the Company’s Board of Directors adopted the 2022 Inducement Stock Incentive Plan (the “Inducement Plan”). The Inducement Plan provides for the grant of nonstatutory stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards (collectively, the “stock awards”) with respect to an aggregate of
11. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the financial statements to provide additional evidence for certain estimates and to identify matters that require additional disclosure. Subsequent events have been evaluated as required.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes and other financial information included elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2021 , or the 2021 Annual Report on Form 10-K. 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, includes forward-looking statements that involve risks and uncertainties. You should review the sections entitled “Risk Factors” and “Summary of the Material Risks Associated with Our Business” in our 2021 Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. This section provides additional information regarding our business, current developments, results of operations, cash flows, financial condition, contractual commitments and critical accounting policies and estimates that require significant judgement and have the most potential impact on our unaudited condensed consolidated financial statements. This discussion and analysis is intended to better allow investors to view the Company from management’s perspective.
Overview
We are a biopharmaceutical company focused on the discovery, development and commercialization of novel therapeutics. Our mission is to bring hope with life-changing therapies to patients and families that are affected by rare and niche allergic and immunological diseases. Our lead product candidate is STAR-0215, a potential best-in-class monoclonal antibody inhibitor of plasma kallikrein in preclinical development for the treatment of hereditary angioedema, or HAE, a rare, debilitating and potentially life-threatening disease. STAR-0215 has the potential to be the most patient-friendly chronic treatment option for HAE, based on the preclinical data generated to date and the existing HAE treatment landscape.
In January 2021, we acquired Quellis Biosciences, Inc., or Quellis, including the STAR-0215 program, and announced a private placement that, upon closing in February 2021, resulted in gross proceeds to us of approximately $110.0 million before deducting placement agent and other offering expenses, which we refer to as the February 2021 Financing. In November 2020, after we stopped the development of our edasalonexent program as a potential treatment for Duchenne Muscular Dystrophy, or DMD,we decided to explore and evaluate strategic options. The acquisition of Quellis was the result of our evaluation of strategic options.
In September 2021, we formally changed our name to Astria Therapeutics, Inc. from Catabasis Pharmaceuticals, Inc. The name “Astria” originates from the Greek word for star, demonstrating our commitment to patients who serve as our guiding stars.
HAE is a rare, debilitating and potentially life-threatening disease. The treatment options for patients with HAE have improved, however, there is remaining unmet medical need and the global market for HAE therapy is strong and growing. The vision for our lead program, STAR-0215, is to develop a best-in-class monoclonal antibody inhibitor of plasma kallikrein able to provide long-acting, effective attack prevention for HAE with dosing once every three months or longer. Targeted plasma kallikrein inhibition can prevent HAE attacks by suppressing the pathway that generates bradykinin and causes excessive swelling. STAR-0215 is currently in preclinical development and we expect to submit an Investigational New Drug application, or IND, for STAR-0215 in mid-2022 and plan to initiate a Phase 1a clinical trial shortly thereafter with initial results anticipated by year end 2022. We believe that this clinical trial has the opportunity to establish proof of concept for the differentiated profile of STAR-0215. We expect the Phase 1a clinical trial to be conducted in a single center with healthy volunteers and evaluate several single escalating dose cohorts with subcutaneous administration. Our goals for this trial with STAR-0215 are to demonstrate safety and tolerability, establish the prolonged half-life, demonstrate the duration of inhibition of plasma kallikrein activity and to refine dose and dosing regimen for studies in HAE patients. Assuming positive data from the Phase 1a trial, we plan to initiate a Phase 1b/2 trial in patients with HAE in 2023. We expect the Phase 1b/2 trial, if initiated, would be a randomized, placebo-controlled, global multi-center trial in HAE patients, and that the primary goals for the trial would be to demonstrate safety and tolerability, establish prolonged half-life, demonstrate inhibition of plasma kallikrein activity, and provide an initial assessment of the impact of STAR-0215 on HAE attack rate.
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Our vision for STAR-0215 is supported by preclinical data showing potent inhibition of the production of bradykinin by plasma kallikrein and a long plasma half-life that could potentially enable patients to dose less frequently. Multiple experiments have confirmed that STAR-0215 is approximately 10-fold more potent than lanadelumab, a monoclonal antibody inhibitor of plasma kallikrein commercialized under the name TAKHZYRO and an approved preventative treatment for HAE, in inhibiting bradykinin production. In cynomolgus monkey studies, lanadelumab was observed to have a half-life of approximately 10 days, which is consistent with what has been reported in U.S. Food and Drug Administration, or FDA, review documents and publications for lanadelumab in non-human primates. STAR-0215 was administered at the same dose as lanadelumab and the observed half-life was approximately 34 days, which is about a three to four-fold longer half-life than observed for lanadelumab. We believe this could translate to a half-life of several months for STAR-0215 in humans. If this longer half-life is demonstrated in clinical trials, it has the potential to enable dosing once every three months or longer.
We presented preclinical data from the STAR-0215 program at the American College of Allergy, Asthma and Immunology, or ACAAI, Annual Scientific Meeting in November 2021, demonstrating the high potency of STAR-0215 for binding to and inhibition of plasma kallikrein on a different site than lanadelumab and supporting the ability of YTE technology to extend half-life. YTE modifications in STAR-0215 are designed to enable a longer duration of action. In cynomolgus monkeys dosed with STAR-0215, the YTE modifications protected STAR-0215 from antibody clearance leading to a more than three-fold increase in plasma half-life compared to an antibody without the YTE modifications. Additional preclinical data presented at the American Academy of Allergy, Asthma, and Immunology, or AAAAI, Annual Meeting in February 2022 demonstrated how STAR-0215 binds to plasma kallikrein. At the Fc Receptor and IgG Targeted Therapies Conference in April 2022, we presented pharmacokinetic modeling data supporting that STAR-0215 has the potential to effectively inhibit plasma kallikrein and prevent HAE attacks with subcutaneous dosing volumes appropriate for a self-injectable device dosed once every three months or longer. The preclinical and modeling data to date suggest that at equal or potentially lower doses STAR-0215 would have a significantly longer duration of action than lanadelumab and could result in STAR-0215 being an effective preventative therapy for patients with HAE due to inhibition of the pathologic activity of plasma kallikrein for an extended time period.
January 2021 Quellis Acquisition and February 2021 Financing
In January 2021, we acquired Quellis pursuant to an Agreement and Plan of Merger, or the Merger Agreement, by and among us, Cabo Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary, or the First Merger Sub, Cabo Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary, or the Second Merger Sub, and Quellis, or the Quellis Acquisition. Pursuant to the Merger Agreement, the First Merger Sub merged with and into Quellis, pursuant to which Quellis was the surviving entity and became a wholly owned subsidiary of ours, or the First Merger. Immediately following the First Merger, Quellis merged with and into the Second Merger Sub, pursuant to which the Second Merger Sub was the surviving entity, or the Second Merger and, together with the First Merger, the Merger. Under the terms of the Merger Agreement, at the closing of the Merger, we issued to the Quellis stockholders 555,444 shares of our common stock, and 50,504 shares of newly designated Series X Preferred Stock (as described below). In addition, we assumed outstanding Quellis stock options, which became options for 55,414 shares of our common stock, and assumed a warrant exercisable for Quellis common stock, which became a warrant to purchase 2,805 shares of Series X Preferred Stock at an exercise price of $341.70 per share, and a warrant to purchase 30,856 shares of our common stock at an exercise price of $2.10 per share. Upon stockholder approval of the Conversion Proposal (as defined below) on June 2, 2021, the warrant to purchase Series X Preferred Stock was converted into the right to purchase 467,500 shares of our common stock, at a per share exercise price of $2.10 per share. We concluded that the Quellis Acquisition was not the acquisition of a business, as substantially all of the fair value of the non-monetary assets acquired was concentrated in a single identifiable asset, STAR-0215.
In January 2021, we also entered into a Stock Purchase Agreement, or the Purchase Agreement, with certain institutional and accredited investors pursuant to which we sold an aggregate of 35,573 shares of Series X Preferred Stock for an aggregate purchase price of $110.0 million, or the February 2021 Financing. Our stockholders approved the conversion of the Series X Preferred Stock into shares of common stock in accordance with Nasdaq Listing Rule 5635(a), or the Conversion Proposal, at our Annual Meeting of Stockholders on June 2, 2021. On the fourth business day after the approval of the Conversion Proposal, each share of Series X Preferred Stock automatically converted into 166.67 shares of common stock, subject to certain beneficial ownership limitations, including that a holder of Series X Preferred Stock is prohibited from converting shares of Series X Preferred Stock into shares of common stock if, as a result of such conversion, such holder, together with its affiliates, would beneficially own more than a specified percentage (as of March 31, 2022, these percentages are set at 4.99% to 9.99% and can be adjusted by the holder to a number between 4.99% and 19.99%) of the total number of shares of common stock issued and outstanding immediately after giving effect to such conversion. Shares of Series X Preferred Stock not converted automatically are thereafter subject to conversion at the option of the holder, subject to certain beneficial ownership limitations. As of April 29, 2022, 54,622 shares of Series X Preferred Stock have been converted into 9,103,664
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shares of common stock and 31,455 shares of Series X Preferred Stock remained outstanding. Each share of Series X Preferred Stock is convertible into 166.67 shares of common stock and therefore the number of shares of underlying common stock issuable upon conversion of the outstanding shares Series X Preferred Stock is 5,242,501. Outstanding shares of Series X Preferred Stock are subject to conversion at the option of the holder.
Reverse Stock Split
On August 4, 2021, our Board of Directors approved a reverse stock split of our outstanding shares of common stock at a ratio of one-for-six (1:6). The reverse stock split became effective on August 19, 2021. The reverse stock split was approved by our stockholders at our Annual Meeting of Stockholders on June 2, 2021. All share and per share amounts of the common stock included in this Quarterly Report on Form 10-Q, including in the accompanying unaudited condensed consolidated financial statements, have been retrospectively adjusted to give effect to the reverse stock split for all periods presented, including reclassifying an amount equal to the reduction in par value to additional paid-in capital. As of April 29, 2022, we had 13,016,955 shares of outstanding common stock and approximately 31,455 shares of outstanding Series X Preferred Stock, which we issued in the Quellis Acquisition and the February 2021 Financing, which are convertible into 5,242,501 shares of common stock.
Financial Overview
Our business is almost entirely dependent on the success of STAR-0215, which is in the preclinical stage of development, and has only produced results in preclinical and nonclinical settings. Our net losses were $15.3 million and $170.1 million (including $164.6 million of in-process research and development expenses) for the three months ended March 31, 2022 and 2021, respectively. As of March 31, 2022, we had an accumulated deficit of $471.1 million. We have financed our operations to date primarily through private placements of preferred stock before we became a public company and our private placement of preferred stock in the February 2021 Financing, registered offerings of our common stock and our at-the-market programs, and have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and clinical development programs. As of March 31, 2022, we had $112.8 million in cash, cash equivalents and short-term investments. We expect that our existing cash, cash equivalents and short-term investments are sufficient to support our operating expenses and capital expenditures through 2023. Advancing the development of STAR-0215 or any future product candidates will require a significant amount of capital. Our existing cash , cash equivalents and short-term investments will not be sufficient to fund STAR-0215 or any future product candidates through regulatory approval. We will need to obtain substantial additional funding to complete the development and commercialization of STAR-0215 or any future product candidates and support our continuing operations, future clinical trials and expansion of our pipeline. Furthermore, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional financing to fund our long-term operations sooner than planned. See the section titled “Liquidity and Capital Resources” below for additional information.
Research and Development Expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our drug discovery efforts, and the development of our product candidates, which include:
| ● | employee-related expenses including salaries, benefits and stock-based compensation expense; |
| ● | expenses incurred under agreements with third parties, including contract research organizations that conduct clinical trials and research and development and preclinical activities on our behalf; |
| ● | the cost of consultants; |
| ● | the cost of lab supplies and acquiring, developing and manufacturing study materials; and |
| ● | facilities and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies. |
Research and development costs are expensed as incurred. Nonrefundable 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.
We typically use our employee, consultant and infrastructure resources across our development programs. We track outsourced development costs by product candidate or development program, but we do not allocate personnel costs, other internal costs or external
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consultant costs to specific product candidates or development programs. We record our research and development expenses net of any research and development tax incentives we are entitled to receive from government authorities.
The following table summarizes our research and development expenses by program (in thousands):