ACURX PHARMACEUTICALS, INC. The following discussion and analysis of our financial condition and results of
operations should be read in conjunction with our unaudited condensed financial
statements and related notes appearing elsewhere in this Quarterly Report on
Form 10-Q and our audited consolidated financial statements and the related
notes and the discussion under the heading "Management's Discussion and Analysis
of Financial Condition and Results of Operations" for the fiscal year ended
Overview
Our approach is to develop antibiotic candidates that block the DNA polymerase IIIC ("Pol IIIC"). We believe we are developing the first Pol IIIC inhibitor to enter clinical trials. Pol IIIC is the primary catalyst for DNA replication of several Gram-positive bacterial cells. Our research and development pipeline includes clinical stage and early stage antibiotic candidates that target Gram-positive bacteria for oral and/or parenteral treatment of infections caused by Clostridium difficile ("C. difficile"), Enterococcus (including vancomycin-resistant strains ("VRE")), Staphylococcus (including methicillin-resistant strains ("MRSA")), and Streptococcus (including antibiotic resistant strains).
Pol IIIC is required for the replication of DNA in certain Gram-positive bacterial species. By blocking this enzyme, our antibiotic candidates are believed to be bactericidal and inhibit proliferation of several common bacterial pathogens, including both sensitive and resistant C. difficile, MRSA, vancomycin-resistant Enterococcus, penicillin-resistant Streptococcus pneumonia ("PRSP") and other resistant bacteria.
We intend to "de-risk" this new class of antibiotics through our drug development activities and potentially partner with a fully-integrated pharmaceutical company for late-stage clinical trials and commercialization.
Our lead antibiotic candidate, ibezapolstat (formerly named ACX-362E), has a
novel mechanism of action that targets the Pol IIIC enzyme, a previously
unexploited scientific target. On
Prior to that, we completed our Phase 2a clinical trial of ibezapolstat to treat
patients with CDI and reported the top-line data in
16
Table of Contents
The
The
Currently available antibiotics used to treat CDI infections utilize other mechanisms of action. We believe ibezapolstat is the first antibiotic candidate to work by blocking the DNA Pol IIIC enzyme in C. difficile. This enzyme is necessary for replication of the DNA of certain Gram-positive bacteria, like C. difficile.
We also have an early stage pipeline of antibiotic product candidates with the same previously unexploited mechanism of action which has established proof of concept in animal studies. This pipeline includes ACX-375C, a potential oral and parenteral treatment targeting Gram-positive bacteria, including MRSA, VRE and PRSP.
Recent Developments
Referring Physician Program and Trial Site Expansion
In
According to the physician prescribing data available to us from an industry-standard source, identified RPs in the aggregate of just fourteen of our currently activated clinical trial sites treated a total of over 30,000 patients in a recent one-year period, suggesting that a substantial number of subjects could potentially be available for referral to one of these fourteen clinical trial sites if the patients qualify. The first tranche of this program has been activated with four of our clinical trial sites and is planned to be followed up later this year with a second tranche of twelve to twenty clinical trial sites as we expand our participating sites from sixteen up to thirty.
We believe the Referring Physician Program, which has a number of other supportive elements, will enhance the rate of enrollment potentially mitigating or partially mitigating the countervailing enrollment disruption caused by the COVID-19 pandemic.
Additionally, in
Registered Direct Offering
On
17
Table of Contents
and sold in a registered direct offering an aggregate of 1,159,211 shares of our
common stock, par value
The gross proceeds to us from the registered direct offering were
In a concurrent private placement, we issued to the
On
Initial Public Offering
On
Effects of Coronavirus (COVID-19) on Our Business
The
18
Table of Contents
directives, mask requirements, shelter-in-place orders and vaccination programs. The impact of COVID-19 and its variants, including direct and indirect economic effects as a result of inflation, supply chain disruptions and labor shortages, have been and remain unpredictable.
Since the start of the COVID-19 pandemic, we continued to enroll patients in our Phase 2a and Phase 2b clinical trial of our lead antibiotic candidate, ibezapolstat, although enrollment rates decreased significantly compared to expectations. Other areas of our business experienced no change, including our research and development activities with key vendors. We believe that the COVID-19 pandemic has highlighted the importance of antibiotic development in responding to global health issues particularly because many hospitalized COVID-19 patients were also prescribed antibiotics which only accelerates the current antimicrobial resistance crisis described by several regulatory bodies worldwide.
The extent to which the COVID-19 pandemic will ultimately continue to impact our business, results of operations, financial condition and cash flows depends on future developments that are highly uncertain, rapidly evolving and difficult to predict at this time. Given the global economic slowdown, the overall disruption of global supply chains and distribution systems and the other risks and uncertainties associated with the COVID-19 pandemic, our business, financial condition, results of operations and growth prospects could be materially and adversely affected. While we believe that we are well positioned for the future as we navigate the crisis and prepare for an eventual return to a more normal operating environment, we continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans and response strategy.
In
On
Components of our Results of Operations
Revenue
We have not generated any revenue since our inception and do not expect to generate any revenue from the sale of products in the near future, if at all.
Research and Development Expenses
To date, our research and development expenses have related primarily to development of ibezapolstat, preclinical studies and other preclinical activities related to our portfolio. Research and development expenses are recognized as incurred and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
Research and development expenses include:
external research and development expenses incurred under agreements with
? contract research organizations, or CROs, and consultants to conduct our
preclinical, toxicology and other preclinical studies;
? laboratory supplies;
? costs related to manufacturing product candidates, including fees paid to
third-party manufacturers and raw material suppliers;
? license fees and research funding; and
facilities, depreciation and other allocated expenses, which include direct and
? allocated expenses for rent, maintenance of facilities, insurance, equipment
and other supplies.
19
Table of Contents
Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. We outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials.
We plan to substantially increase our research and development expenses for the foreseeable future as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of preclinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and preclinical studies of product candidates. Clinical and preclinical development timelines, the probability of success and the amount of development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future preclinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate's commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.
Our future clinical development costs may vary significantly based on factors such as:
? per-patient trial costs;
? the number of trials required for regulatory approval;
? the number of sites included in the trials;
? the countries in which the trials are conducted;
? the length of time required to enroll eligible patients;
? the number of patients that participate in the trials;
? the number of doses that patients receive;
? the drop-out or discontinuation rates of patients;
? potential additional safety monitoring requested by regulatory agencies;
? the duration of patient participation in the trials and follow-up;
? the phase of development of the product candidate; and
? the efficacy and safety profile of the product candidate.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and
employee-related costs, including stock-based compensation, for personnel in our
executive, finance and other administrative functions. Other significant costs
include facility-related costs, legal fees relating to intellectual property and
corporate matters, professional fees for accounting and consulting services and
insurance costs. We anticipate that our general and administrative expenses will
increase in the future to support our continued research and development
activities, pre-commercialization and, if any product candidates receive
marketing approval, commercialization activities. We also anticipate increased
expenses related to audit, legal, regulatory and tax-related services associated
with maintaining compliance with exchange listing and
20
Table of Contents
Results of Operations
Three Months Ended
The following table presents a summary of the changes in our results of operations for the three months endedJune 30, 2022 compared with the three months endedJune 30, 2021 : Three Months Ended June 30, Percentage 2022 2021 Increase (Decrease) (in thousands) Research and Development Expenses$ 912 $ 95 859 % General and Administrative Expenses$ 1,709 $ 3,976 (57) % Total Operating Expenses$ 2,621 $ 4,071 (36) % Gain on PPP Loan Forgiveness $ -$ 67 (100) % Net Loss$ (2,621) $ (4,004) (35) %
Research and Development Expenses
Research and development expenses were
General and Administrative Expenses
General and administrative expenses were
Net Loss
Net loss was
Six Months Ended
The following table presents a summary of the changes in our results of operations for the six months endedJune 30, 2022 compared with the six months endedJune 30, 2021 : Six Months Ended June 30, Percentage 2022 2021 Increase (Decrease) (in thousands) Research and Development Expenses$ 1,730 $ 187 825 % General and Administrative Expenses$ 3,561 $ 5,358 (34) % Total Operating Expenses$ 5,291 $ 5,545 (5) % Gain on PPP Loan Forgiveness $ -$ 67 (100) % Net Loss$ (5,291) $ (5,478) (3) %
Research and Development Expenses
Research and development expenses were
21
Table of Contents
General and Administrative Expenses
General and administrative expenses were
Net Loss
Net loss was
Liquidity and Capital Resources
Overview
Since inception, we have generated no revenue from operations and we have
incurred cumulative losses of approximately
Based upon our lack of revenue expected for the foreseeable future, and because of numerous risks and uncertainties associated with the research, development and future commercialization of our product candidates, we are unable to estimate with certainty the amounts of increased capital outlays and operating expenditures associated with our anticipated clinical trials and development activities.
As of
The following table sets forth selected cash flow information for the periods
indicated:
For the six months ended
June 30,
2022 2021
(in thousands)
Net cash used in operating activities
- 14,797
Net (decrease)/increase in cash $ (3,867) $ 13,920
Net cash used in operating activities was
Net cash used in operating activities was
Net Cash Provided by Financing Activities
There was no cash provided from financing activities for the six months ended
Net cash provided by financing activities was
22
Table of Contents
Critical Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results
of operations are based on our financial statements, which have been prepared in
accordance with
While our significant accounting policies are described in more detail in Note 2, "Summary of significant accounting policies", we believe the following accounting policies and estimates to be most critical to the preparation of our financial statements.
Income Taxes
The Company estimates an annual effective tax rate of 0% as the Company incurred
net losses for the six months ended
Based on the Company's history of generating operating losses and its anticipation of operating losses for the foreseeable future, the Company has determined that it is more likely than not that the tax benefits from those net operating losses would not be realized and a full valuation allowance against all deferred tax assets has been recorded. Should the Company's assessment change, tax benefits associated with the historic net operating loss carryforwards could be limited due to future ownership changes.
Prior to the Company's corporate conversion in
Research and Development
The Company expenses research and development costs when incurred. At times, the
Company may make cash advances for future research and development services.
These amounts are deferred and expensed in the period the service is provided.
The Company incurred research and development expenses in the amount of
Share-Based Compensation
The Company accounts for the cost of services performed by officers and directors received in exchange for an award of Company membership interests, common stock or stock options, based on the grant-date fair value of the award. The Company recognizes compensation expense based on the requisite service period.
Compensation expense associated with stock option awards is recognized over the
requisite service period based on the fair value of the option at the grant date
determined based on the Black-Scholes option pricing model. Option valuation
models require the input of highly subjective assumptions including the expected
price volatility. The Company's employee stock options have characteristics
significantly different from those of traded options, and changes in the
subjective input assumptions can materially affect the fair value computation
using the Black-Scholes option pricing model. Because there is no public market
for the Company's stock options and very little historical experience with the
Company's stock, similar public companies were used for the comparison of
volatility and the dividend yield. The risk-free rate of return was derived from
Share-Based Payments to Vendors
The Company accounts for the cost of services performed by vendors in exchange for an award of Company membership interests, common stock, or stock options, based on the grant-date fair value of the award or the fair value of the services rendered;
23
Table of Contents
whichever is more readily determinable. Such fair value is measured as of the date the services or the date performance by the other party is complete. The Company recognizes the expense in the same period and in the same manner as if the Company had paid cash for the services.
Other Company Information
Emerging Growth Company Status
We are an emerging growth company as defined in the Jumpstart Our Business Startups Act of 2012 (the "JOBS Act"). Under the JOBS Act, companies have extended transition periods available for complying with new or revised accounting standards. We have elected this exemption to delay adopting new or revised accounting standards until such time as those standards apply to private companies.
In addition, we intend to rely on the other exemptions and reduced reporting
requirements provided by the JOBS Act. Subject to certain conditions set forth
in the JOBS Act, we are entitled to rely on certain exemptions as an emerging
growth company; we are not required to, among other things, (i) provide an
auditor's attestation report on our system of internal controls over financial
reporting pursuant to Section 404(b), (ii) provide all of the compensation
disclosure that may be required of non-emerging growth public companies under
the Dodd-Frank Wall Street Reform and Consumer Protection Act, (iii) comply with
any requirement that may be adopted by the
Recent Accounting Pronouncements
The
24
Table of Contents
© Edgar Online, source
