APPLIED MOLECULAR TRANSPORT INC. You should read the following discussion and analysis of our financial condition
and results of operations together with our condensed financial statements and
related notes included elsewhere in this Quarterly Report on Form 10-Q and in
the Company's Annual Report on Form 10-K for the fiscal year ended
Overview
We are a clinical-stage biopharmaceutical company leveraging our proprietary
technology platform to design and develop a pipeline of novel oral and
respiratory biologic product candidates to treat autoimmune, inflammatory,
metabolic, and other diseases. Our proprietary technology platform allows us to
exploit existing natural cellular trafficking pathways to facilitate the active
transport of diverse therapeutic payloads across epithelial barriers, such as
the intestinal epithelium (IE) and the respiratory epithelium (RE). Active
transport is an efficient mechanism that uses the cell's own machinery to
transport materials across epithelial barriers. We are developing oral and
respiratory biologic product candidates in patient-friendly dosage forms that
are designed for either targeting local GI tissue or entering systemic
circulation to precisely address the relevant pathophysiology of disease. We are
building a portfolio of oral and respiratory product candidates based on our
technology platform including our most advanced product candidate, AMT-101, a
gastrointestinal (GI)-selective oral fusion of interleukin-10 (IL-10) and our
proprietary carrier molecule. We announced top-line Phase 2 results from the
MARKET combination trial for AMT-101 in biologic-naïve patients with
moderate-to-severe UC on
Since the date of our incorporation in
We do not currently have any products approved for sale, and we have not generated any revenue from product sales. Our ability to generate product revenue sufficient to achieve profitability, if ever, will depend on the successful development of one or more of our product candidates which we expect will take a number of years. Given our stage of development, we have not yet established a commercial organization or distribution capabilities. We intend to build a commercial infrastructure to support sales of our product candidates. We expect to manage sales, marketing and distribution through internal resources and third-party relationships. While we may commit significant financial and management resources to commercial activities, we may also consider collaborating with one or more pharmaceutical companies to enhance our commercial capabilities.
Manufacturing of protein therapeutics is a complex process and represents a critical path to creating biologic therapeutics and a key component of our long-term success. We have spent significant resources to date on developing our current manufacturing processes and know-how to produce sufficient supply and optimize functionality. We manufacture clinical supply at a facility located in South
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In addition, even after the completion of our in-house manufacturing facility, we expect to continue to rely on third parties for the manufacture of our product candidates for preclinical and clinical testing, as well as for commercial manufacture if any of our product candidates obtain marketing approval. We also rely, and expect to continue to rely, on third parties to package, label, store and distribute our product candidates, as well as for our commercial products if marketing approval is obtained. We believe that this strategy allows us to maintain more efficient infrastructure by eliminating the need for us to invest in our own manufacturing facilities, equipment and personnel while also enabling us to focus our expertise and resources on the development of our product candidates.
Since the date of our incorporation, we have incurred significant losses and
negative cash flows from operations. During the six months ended
To date, we have financed our operations primarily through the private
placements of convertible preferred stock and the issuance of common stock upon
the completion of our IPO. We completed our IPO in
In
? pursue regulatory approval of product candidates;
? continue to invest in our technology platform;
? seek marketing approvals for any product candidates that successfully complete
clinical trials;
? implement operational, financial and management information systems;
? hire additional personnel;
? buildout and expand our in-house manufacturing capabilities;
? continue to operate as a public company;
? expand our pipeline of product candidates;
? obtain, maintain, expand, and protect our intellectual property portfolio; and
? establish a sales, marketing, and distribution infrastructure to commercialize
any product candidate for which we may obtain marketing approval and related
commercial manufacturing build-out.
As a result, we will require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Until such time as we can generate sufficient revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity offerings, debt financings, collaborations and licensing arrangements. We may be unable to raise additional funds or enter into such agreements or arrangements on favorable terms, or at all. Our failure to obtain sufficient funds on acceptable terms when needed could have a material adverse effect on our business, results of operations or financial condition, and could force us to delay, reduce or eliminate our drug development or future commercialization efforts. We may also be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. The amount and timing
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of our future funding requirements will depend on many factors including the pace and results of our development efforts. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.
Based on our current operating plan, we believe that our existing cash and cash equivalents will be sufficient to fund our planned operations through at least the next 12 months from the date of issuance of these financial statements. We have based this projection on assumptions that may be inaccurate and as a result, we may utilize our capital resources sooner than we expect.
COVID-19
Our financial results could be affected by the COVID-19 pandemic in various ways. As a result of the COVID-19 pandemic, we have experienced and could experience disruptions that could severely impact our business, current and planned clinical trials and preclinical studies. For example, the COVID-19 pandemic could result in delays to our clinical trials and preclinical studies for numerous reasons including difficulties in enrolling patients or healthy volunteers, diversion of healthcare resources away from the conduct of clinical trials, delays in receiving regulatory authorities to initiate clinical trials, and delays in receiving supplies to conduct clinical trials and preclinical studies. Moreover, there has been an increase in infections from COVID-19 variants which has impacted patient recruitment at certain of our clinical trial sites and could result in increased costs and delays. In addition, as a result of ongoing COVID-19 research and the current global supply chain issues, there is currently limited availability for certain resources required to conduct some of our preclinical studies and clinical trials, which may result in longer lead times, increased costs, and delays in completing preclinical studies and clinical trials. As a result, research and development expenses and general and administrative expenses may vary significantly if there is an increased impact from COVID-19 on the costs and timing associated with the conduct of the clinical trial and other related business activities.
We are carefully monitoring the pandemic and the potential length and depth of
the resulting economic impact on our financial condition, including our cash
flows and results of operations. We intend to continue to execute on our
strategic plans and operational initiatives during the COVID-19 pandemic.
However, the extent to which the COVID-19 pandemic impacts our business will
depend on future developments, which are highly uncertain and cannot be
predicted, such as the spread or emergence of new variants, the duration and
severity of surges in outbreaks, travel restrictions and social distancing in
Components of Results of Operations
Revenue
We have not generated any revenue from product sales or otherwise and do not expect to generate any revenue for the foreseeable future.
Operating Expenses
We classify operating expenses into two main categories: (i) research and development expenses and (ii) general and administrative expenses.
Research and Development Expenses
Our research and development expenses consist primarily of external and internal expenses incurred in connection with our research activities and development programs.
These expenses include, but are not limited to:
External expenses, consisting of: ? clinical trials-expenses associated with CROs for managing and conducting
clinical trials and sample analysis;
? materials-expenses associated with laboratory supplies and other materials;
? preclinical studies-expenses associated with preclinical studies performed by
vendors;
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? contract manufacturing-expenses associated with manufacturing clinical trial
materials including under agreements with contract development and
manufacturing organizations (CDMOs) and other vendors; and
? other research and development-expenses associated with consulting and other
external expenses.
Internal expenses, consisting of: ? personnel-personnel expenses including salaries, bonuses, benefits, and
stock-based compensation expense; and
? equipment, depreciation, and facility-expenses associated with service and
repair of equipment, equipment depreciation, and allocated facility costs for
research and development occupied space.
To date, the vast majority of these expenses have been incurred to advance our
most advanced product candidate, AMT-101. We expect to incur significant
additional spending to progress AMT-101 through the remainder of the clinical
development phases. These expenses will primarily consist of expenses for the
administration of clinical studies as well as manufacturing costs for clinical
material supply. In
In addition, we have incurred minimal expenses in connection with our second product candidate, AMT-126, including expenses for internal animal studies and preclinical studies performed at CROs. We also concluded a Phase 1a clinical trial for AMT-126 which was well tolerated in healthy volunteers. We are evaluating next steps for the AMT-126 clinical program. We expect that significant additional spending will be required if we progress AMT-126 through additional clinical trials at some point in the future. We have also incurred minimal expenses to expand our development pipeline and for general discovery research. We expect that spending for these early-stage research and development activities may increase at some point in the future. We deploy our personnel, equipment, and facility resources across all our research and development activities.
Research and development expenses are recognized as they are incurred. If deposits are required by external vendors, the non-current portion of the deposit is included as a prepaid expense until the related services are provided.
At this time, we cannot reasonably estimate or know the nature, timing, and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We expect our research and development expenses to increase significantly in the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, as our product candidates advance into later stages of development, as we begin to conduct larger clinical trials, as we seek regulatory approvals for any product candidates that successfully complete clinical trials, and incur expenses associated with hiring additional personnel to support our research and development efforts. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming, the successful development of our product candidates is highly uncertain, and we may never succeed in achieving regulatory approval for any of our product candidates.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs
(including salaries, bonuses, benefits, and stock-based compensation expense)
for personnel in executive, finance, accounting, corporate development, and
other administrative functions. General and administrative expenses also include
legal fees, professional fees paid for accounting, auditing, consulting, tax,
and investor relations services, insurance costs, and facility costs not
otherwise included in research and development expenses, and public company
expenses such as costs associated with compliance with the rules and regulations
of the
Our general and administrative expenses are expected to only increase marginally in the near future as a result of the Strategic Plan. We expect that our general and administrative expenses could increase significantly in the future if additional financing is secured and additional administrative personnel and services are required to manage these functions of a public company and as our pipeline of product candidates expands.
Interest Income, Net and Other Income (expense), Net
Interest income, net and other income (expense), net primarily consists of interest income earned on our cash, cash equivalents, investments, realized gain and loss on investments, interest expense from finance lease liabilities, and net losses on foreign currency transactions related to third-party contracts with foreign-based vendors.
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Table of Contents Results of Operations
Comparisons of the Three Months Ended
Three Months Ended June 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 25,909 $ 16,534 $ 9,375
General and administrative 10,113 7,093 3,020
Total operating expenses 36,022 23,627 12,395
Loss from operations (36,022 ) (23,627 ) (12,395 )
Interest income, net 75 59 16
Other income (expense), net 2 (62 ) 64
Net loss $ (35,945 ) $ (23,630 ) $ (12,315 ) Research and Development Expenses
Research and development expenses were
Three Months Ended June 30,
2022 2021 Change
External expenses:
Clinical trials $ 4,238 $ 4,175 $ 63
Materials 2,143 1,565 578
Preclinical studies 1,965 557 1,408
Contract manufacturing 220 297 (77 )
Other research and development 2,487 333 2,154
Internal expenses:
Personnel 10,549 7,155 3,394
Equipment, depreciation, and facilities 4,307 2,452 1,855
Total research and development expenses
General and Administrative Expenses
General and administrative expenses were
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Table of Contents Interest Income, Net
Interest income, net was insignificant during each of the three months ended
Other Income (expense), Net
Other income (expense), net was insignificant during each of the three months
ended
Results of Operations
Comparisons of the Six Months Ended
Six Month Ended June 30,
2022 2021 Change
(in thousands)
Operating expenses:
Research and development $ 57,148 $ 31,415 $ 25,733
General and administrative 21,450 12,692 8,758
Total operating expenses 78,598 44,107 34,491
Loss from operations (78,598 ) (44,107 ) (34,491 )
Interest income, net 72 99 (27 )
Other income (expense), net 6 (84 ) 90
Net loss $ (78,520 ) $ (44,092 ) $ (34,428 ) Research and Development Expenses
Research and development expenses were
Six Months Ended June 30,
2022 2021 Change
External expenses:
Clinical trials $ 12,685 $ 7,305 $ 5,380
Materials 6,078 3,021 3,057
Preclinical studies 3,363 1,466 1,897
Contract manufacturing 677 1,156 (479 )
Other research and development 4,195 682 3,513
Internal expenses:
Personnel 20,908 13,068 7,840
Equipment, depreciation, and facilities 9,242 4,717 4,525
Total research and development expenses
General and Administrative Expenses
General and administrative expenses were
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Table of Contents Interest Income, Net
Interest income, net was insignificant during each of the six months ended
Other Income (expense), Net
Other income (expense), net was insignificant during each of the six months
ended
Liquidity and Capital Resources
We believe that our existing cash and cash equivalents as of
In
In connection with the Strategic Plan, we recognized restructuring charges of
approximately
As of
Future Funding Requirements
To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval and commercialize any of our product candidates, and we do not know when, or if, that will occur. We will continue to require additional capital to develop our product candidates and fund operations for the foreseeable future. Our primary uses of cash are to fund our operations, which consist primarily of research and development expenses related to our programs, and to a lesser extent, general and administrative expenses. We expect our expenses to continue to increase in connection with our ongoing activities as we continue to advance our product candidates. In addition, we expect to incur additional costs associated with operating as a public company.
We may seek to raise capital through public equity or debt financings, collaborative agreements or other arrangements with other companies, or through other sources of financing. Adequate additional funding may not be available to us on acceptable terms or at all. Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including: ? the progress, costs, trial design, results of and timing of our various
clinical trials of our product candidates;
? the progress, costs and results of our research pipeline;
? the willingness of the
candidates, as well as data from our completed and planned clinical trials and
preclinical studies and other work, as the basis for review and approval of
our product candidates for various indications;
? the outcome, costs and timing of seeking and obtaining FDA, EMA, and any other
regulatory approvals;
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? the number and characteristics of product candidates that we pursue;
? our ability to manufacture sufficient quantities of our product candidates;
? our need to expand our research and development activities;
? the costs associated with manufacturing our product candidates, including
building-out and expanding our own manufacturing facilities, and establishing
commercial supplies and sales, marketing, and distribution capabilities;
? the costs associated with securing and establishing commercialization;
? the costs of acquiring, licensing, or investing in businesses, product
candidates, and technologies;
? our ability to maintain, expand, and defend the scope of our intellectual
property portfolio, including the amount and timing of any payments we may be
required to make, or that we may receive, in connection with the licensing,
filing, prosecution, defense, and enforcement of any patents or other
intellectual property rights;
? our need and ability to retain key management and hire scientific, technical,
business, and medical personnel;
? the effect of competing drugs and product candidates and other market
developments;
? the timing, receipt, and amount of sales from our potential products;
? our need to implement additional internal systems and infrastructure,
including financial and reporting systems;
? the economic and other terms, timing of and success of any collaboration,
licensing or other arrangements which we may enter in the future;
? the potential effects of inflation on our business operations; and
? the potential effects of the COVID-19 pandemic on our business operations.
If we raise additional funds by issuing equity securities, our stockholders will
experience dilution. If we raise additional capital through debt financing, we
may be subject to covenants that restrict our operations including limitations
on our ability to incur liens or additional debt, pay dividends, repurchase our
common stock, make certain investments, and engage in certain merger,
consolidation or asset sale transactions. Any debt financing or additional
equity that we raise may contain terms that are not favorable to us or our
stockholders. If we are unable to raise additional funds when needed, we may be
required to delay, reduce, or terminate some or all of our development programs
and clinical trials. We may also be required to sell or license to others the
rights to our product candidates in certain territories or indications that we
would prefer to develop and commercialize ourselves. In addition, our ability to
raise additional capital may be adversely impacted by potential worsening global
economic conditions and the recent disruptions to and volatility in the credit
and financial markets in
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