Basis of Presentation
|3 Months Ended|
Jun. 30, 2020
|Organization, Consolidation and Presentation of Financial Statements [Abstract]|
|Basis of Presentation||
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States (U.S. GAAP) for interim financial information and with the instructions to Form 10-Q and Rule 8-03 of Regulation S-X. Accordingly, they do not contain all of the information and footnotes required for complete consolidated financial statements. In the opinion of management, the accompanying unaudited Condensed Consolidated Financial Statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly our interim financial information. The accompanying Condensed Consolidated Balance Sheet at March 31, 2020 has been derived from our audited consolidated financial statements at that date but does not include all disclosures required by U.S. GAAP. The operating results for the three months ended June 30, 2020 are not necessarily indicative of the operating results to be expected for our fiscal year ending March 31, 2021, or for any other future interim or other period.
The accompanying unaudited Condensed Consolidated Financial Statements and notes to the Condensed Consolidated Financial Statements contained in this Report should be read in conjunction with our audited Consolidated Financial Statements for our fiscal year ended March 31, 2020 contained in our Annual Report on Form 10-K, as filed with the Securities and Exchange Commission (SEC) on June 29, 2020.
The accompanying unaudited Condensed Consolidated Financial Statements have been prepared assuming we will continue as a going concern. As a clinical-stage biopharmaceutical company having not yet developed commercial products or achieved sustainable revenues, we have experienced recurring losses and negative cash flows from operations resulting in a deficit of approximately $205.0 million accumulated from inception (May 1998) through June 30, 2020. We expect losses and negative cash flows from operations to continue for the foreseeable future as we engage in further development of PH94B, PH10 and AV-101, execute our drug rescue programs and pursue potential drug development and regenerative medicine opportunities.
Since our inception in May 1998 through June 30, 2020, we have financed our operations and technology acquisitions primarily through the issuance and sale of our equity and debt securities for cash proceeds of approximately $86.1 million, as well as from an aggregate of approximately $17.7 million of government research grant awards (excluding the fair market value of government sponsored and funded clinical trials), strategic collaboration payments, intellectual property licensing and other revenues. Additionally, we have issued equity securities with an approximate value at issuance of $38.2 million in noncash acquisitions of product licenses and in settlements of certain liabilities, including liabilities for professional services rendered to us or as compensation for such services.
At June 30, 2020, we had cash and cash equivalents of approximately $1.5 million. As more completely described in Note 8, Capital Stock, on March 24, 2020, we entered into a purchase agreement and a registration rights agreement with Lincoln Park Capital Fund (Lincoln Park) pursuant to which Lincoln Park committed to purchase up to $10,250,000 of our common stock at market-based prices over a period of 24 months (the LPC Agreement). To satisfy our obligations under the registration rights agreement, we filed a Registration Statement on Form S-1 (the LPC Registration Statement) with the Securities and Exchange Commission (the SEC) on March 31, 2020, which the SEC declared effective on April 14, 2020 (Registration No. 333-237514). Subsequent to the effectiveness of the LPC Registration Statement, through June 30, 2020, we sold 6,201,995 registered shares of our common stock to Lincoln Park and received gross cash proceeds of $2,840,200. Refer to Note 12, Subsequent Events, for dislosure of additional sales of our common stock under the LPC Agreement subsequent to June 30, 2020.
As more completely described in Note 11, Sublicensing and Collaboration Agreements, and in Note 12, Subsequent Events, in June 2020, we entered into a strategic licensing and collaboration agreement for the clinical development and commercialization of PH94B for acute treatment of anxiety in adults with SAD and other potential anxiety-related disorders, with EverInsight Therapeutics Inc., a biopharmaceutical company focused on developing and commercializing transformative pharmaceutical products for patients in Greater China and other parts of Asia (the EverInsight Agreement). Under the terms of the EverInsight Agreement, EverInsight agreed to make a non-dilutive upfront license payment of $5.0 million to us. Upon successful development and commercialization of PH94B, we are also eligible to receive up to $172 million in additional development and commercial milestone payments, in addition to royalties on commercial sales. In August 2020, we received the $5.0 million non-dilutive upfront license payment from EverInsight, which resulted in net cash proceeds to us of approximately $4.655 million after the sublicense payment we agreed to make to Pherin Pharmaceuticals, Inc. (Pherin) pursuant to our PH94B license from Pherin, and payment for consulting services related to the EverInsight Agreement.
As described more completely in Note 12, Subsequent Events, on August 2, 2020, we entered into an underwriting agreement (the Underwriting Agreement) pursuant to which we sold to the Underwriter, in an underwritten public offering (the Public Offering), an aggregate of 15,625,000 shares (the Shares) of our common stock for a public offering price of $0.80 per Share, resulting in gross proceeds to us of $12,500,000. The Public Offering closed on August 5, 2020. Under the terms of the Underwriting Agreement, we granted to the Underwriter a 45-day over-allotment option (the Over-Allotment Option) to purchase up to an additional 2,343,750 Shares (the Option Shares) at a public offering price of $0.80 per share. On August 5, 2020, the Underwriter exercised the Over-Allotment Option with respect to an aggregate of 2,243,250 Option Shares (the Exercised Option Shares). We completed the sale of the Exercised Option Shares on August 7, 2020, which resulted in additional gross proceeds to us of $1,794,600. Net proceeds to us from the sale of the Shares and the Exercised Option Shares, after deducting underwriting discounts and commissions and offering expenses payable by us, were approximately $12.9 million.
Although the transactions described above have generated approximately $20.0 million in net cash procceds for us between April 1, 2020 and the date of this Report, we believe it is possible that our cash position at June 30, 2020, together with such net proceeds will not be sufficient to fund our planned operations for the twelve months following the issuance of these financial statements, which raises substantial doubt that we can continue as a going concern. During the next twelve months, subject to securing appropriate and adequate additional financing, we plan to prepare for and launch (i) a pivotal Phase 3 clinical trial of PH94B for acute treatment of anxiety in adult patients with SAD, (ii) a small exploratory open-label Phase 2A study of PH94B for acute treatment of adult patients with AjDA, and (iii) several nonclinical studies involving PH94B, PH10 and AV-101. When necessary and advantageous, we plan to raise additional capital, through the sale of our equity securities in one or more (i) private placements to accredited investors, (ii) public offerings and/or (iii) in strategic licensing and development collaborations involving one or more of our drug candidates in markets outside the United States, similar to the Everinsight Agreement. Subject to certain restrictions, our Registration Statement on Form S-3 (Registration No. 333-234025) (the S-3 Registration Statement), which became effective on October 7, 2019, remains available for future sales of our equity securities in one or more public offerings from time to time. While we may make additional sales of our equity securities under the S-3 Registration Statement, we do not have an obligation to do so.
As we have been in the past, we expect that, when and as necessary, we will be successful in raising additional capital from the sale of our equity securities either in one or more public offerings or in one or more private placement transactions with individual accredited investors and institutions. In addition to the potential sale of our equity securities, we may also seek to enter research, development and/or commercialization collaborations similar to the EverInsight Agreement and the Bayer Agreement that could generate revenue or provide funding, including non-dilutive funding, for development of one or more of our CNS product candidate programs. We may also seek additional government grant awards or agreements similar to our prior agreement with the U.S. National Institutes of Health (NIH), Baylor University and the U.S. Department of Veterans Affairs in connection with certain government-sponsored studies of AV-101. Such strategic collaborations may provide non-dilutive resources to advance our strategic initiatives while reducing a portion of our future cash outlays and working capital requirements. We may also pursue intellectual property arrangements similar to the EverInsight Agreement and the Bayer Agreement with other parties. Although we may seek additional collaborations that could generate revenue and/or provide non-dilutive funding for development of our product candidates, as well as new government grant awards and/or agreements, no assurance can be provided that any such collaborations, awards or agreements will occur in the future.
Our future working capital requirements will depend on many factors, including, without limitation, potential impacts related to the current COVID-19 pandemic, the scope and nature of opportunities related to our success and the success of certain other companies in nonclinical and clinical trials, including our development and commercialization of our current product candidates and various applications of our stem cell technology platform, the availability of, and our ability to obtain, government grant awards and agreements, and our ability to enter into collaborations on terms acceptable to us. To further advance the clinical development of PH94B, PH10, and AV-101 and, to a lesser extent, our stem cell technology platform, as well as support our operating activities, we plan to continue to carefully manage our routine operating costs, including our employee headcount and related expenses, as well as costs relating to regulatory consulting, contract manufacturing, research and development, investor and public relations, business development, legal, intellectual property acquisition and protection, public company compliance and other professional services and operating costs.
Notwithstanding the foregoing, there can be no assurance that our current strategic collaborations under the EverInsight Agreement and the Bayer Agreement, will generate revenue from future potential milestone payments, or that future financings or government or other strategic collaborations will be available to us in sufficient amounts, in a timely manner, or on terms acceptable to us, if at all. If we are unable to obtain substantial additional financing on a timely basis when needed in 2021 or thereafter, our business, financial condition, and results of operations may be harmed, the price of our stock may decline, we may be required to reduce, defer, or discontinue certain of our research and development activities and we may not be able to continue as a going concern. As noted above, these Condensed Consolidated Financial Statements do not include any adjustments that might result from the negative outcome of this uncertainty.
The entire disclosure for the basis of accounting, or basis of presentation, used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS).
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef