NewAmsterdam Pharma pany N.V.(NAMS) - 2024 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Unaudited Condensed Consolidated Financial Statements The company's cash increased to $430.7 million by June 30, 2024, driven by a follow-on offering, while net loss widened to $132.8 million due to higher R&D and SG&A expenses and lower revenue Unaudited Condensed Consolidated Balance Sheets As of June 30, 2024, total assets increased to $446.7 million, primarily from a rise in cash to $430.7 million, with total shareholders' equity growing to $387.4 million from share issuances Condensed Consolidated Balance Sheets (in thousands of USD) | Account | June 30, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Assets | | | | Cash | 430,708 | 340,450 | | Total current assets | 445,352 | 346,791 | | Total assets | 446,690 | 347,097 | | Liabilities and Shareholders' Equity | | | | Total current liabilities | 45,307 | 49,897 | | Total liabilities | 59,251 | 58,704 | | Total shareholders' equity | 387,439 | 288,393 | | Total liabilities and shareholders' equity | 446,690 | 347,097 | Unaudited Condensed Consolidated Statements of Comprehensive Income (Loss) For the six months ended June 30, 2024, the company reported a net loss of $132.8 million on $3.7 million revenue, a significant increase from the prior year due to higher operating expenses and fair value changes Condensed Consolidated Statements of Operations (in thousands of USD) | Metric | Three Months Ended June 30, 2024 | Three Months Ended June 30, 2023 | Six Months Ended June 30, 2024 | Six Months Ended June 30, 2023 | | :--- | :--- | :--- | :--- | :--- | | Revenue | 2,279 | 1,717 | 3,680 | 10,346 | | Research and development expenses | 38,379 | 34,341 | 80,809 | 74,761 | | Selling, general and administrative expenses | 16,475 | 9,858 | 30,928 | 17,920 | | Operating loss | (52,575) | (42,482) | (108,057) | (82,335) | | Loss for the period | (39,007) | (38,291) | (132,774) | (80,309) | | Net loss per ordinary share, basic and diluted | $(0.41) | $(0.47) | $(1.45) | $(0.98) | Unaudited Condensed Consolidated Statements of Cash Flows Net cash used in operating activities increased to $108.6 million for the six months ended June 30, 2024, offset by $202.8 million from financing activities, resulting in a cash balance of $430.7 million Condensed Consolidated Statements of Cash Flows (in thousands of USD, for the six months ended June 30) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (108,581) | (61,168) | | Net cash used in investing activities | (594) | (12) | | Net cash provided by financing activities | 202,838 | 8,726 | | Net change in cash | 93,663 | (52,454) | | Cash at the beginning of the period | 340,450 | 467,728 | | Cash at the end of the period | 430,708 | 416,706 | Notes to Unaudited Condensed Consolidated Financial Statements The notes detail accounting policies, revenue recognition, fair value measurements, and share-based compensation, highlighting positive Phase 3 BROOKLYN trial results as a key subsequent event impacting derivative liability valuation - All revenue recognized is derived from the license agreement with Menarini. For the six months ended June 30, 2024, revenue was $3.7 million, compared to $10.3 million in the same period of 2023, which included $5.4 million from a clinical development milestone[24][70] - On February 16, 2024, the company completed a public offering of ordinary shares and pre-funded warrants, raising net proceeds of $190.0 million[30] - Share-based compensation expense for the six months ended June 30, 2024, was $16.2 million, an increase from $13.2 million in the prior-year period[38] - Subsequent to the quarter's end, on July 29, 2024, the company announced positive topline results from its Phase 3 BROOKLYN trial. This event increased the probability of achieving a related milestone from 40% to 65%, resulting in a $6.2 million increase in the fair value of the derivative earnout liability[49] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's focus on obicetrapib, recent positive Phase 3 BROOKLYN data, and strong liquidity of $430.7 million, despite increased R&D and SG&A expenses leading to a higher net loss Overview and Recent Developments The company, a late-stage biopharmaceutical firm, is advancing obicetrapib for LDL-C lowering, marked by positive Phase 3 BROOKLYN data, a new U.S. patent, and completed enrollment for PREVAIL and TANDEM trials - The company's mission is to improve care for patients with metabolic diseases, focusing on obicetrapib, an oral, low-dose CETP inhibitor for lowering LDL-C[51] - On July 29, 2024, the company announced positive topline data from its Phase 3 BROOKLYN clinical trial, which met its primary endpoint with a statistically significant reduction of LDL-C versus placebo[55] - A new U.S. composition of matter patent was issued, expected to provide patent protection for obicetrapib until July 2043[54] - Enrollment was completed for the pivotal Phase 3 TANDEM clinical trial, with topline data expected in the first quarter of 2025[55] Results of Operations For the six months ended June 30, 2024, revenue decreased to $3.7 million due to a prior-year milestone, while R&D and SG&A expenses significantly increased, resulting in a net loss of $132.8 million Comparison of Results for the Six Months Ended June 30 (in thousands of USD) | Metric | 2024 | 2023 | Change | | :--- | :--- | :--- | :--- | | Revenue | 3,680 | 10,346 | (6,666) | | Research and development expenses | 80,809 | 74,761 | 6,048 | | Selling, general and administrative expenses | 30,928 | 17,920 | 13,008 | | Operating Loss | (108,057) | (82,335) | (25,722) | | Loss for the period | (132,774) | (80,309) | (52,465) | - The 64% decrease in revenue for the first six months of 2024 compared to 2023 is primarily due to the recognition of a $5.4 million clinical development milestone payment from Menarini in 2023, with no such milestone achieved in 2024[70] - R&D expenses increased by $6.0 million (8%) YoY for the six-month period, mainly due to a $12.1 million increase in clinical expenses for ongoing Phase 3 trials, partially offset by a $5.8 million decrease in manufacturing costs[71] - SG&A expenses increased by $13.0 million (73%) YoY for the six-month period, driven by an $8.8 million increase in personnel costs (including $4.8 million in share-based compensation) and a $6.5 million increase in marketing expenses for commercial preparedness[72] Liquidity and Capital Resources The company maintains strong liquidity with a cash balance of $430.7 million as of June 30, 2024, primarily funded by equity placements including a $190.0 million follow-on offering, sufficient for current operating capital and expenditure requirements and R&D needs - As of June 30, 2024, the company had cash of $430.7 million and an accumulated loss of $449.7 million[78] - On February 16, 2024, the company completed a follow-on offering, raising net proceeds of $190.0 million[80] Summary of Cash Flows for the Six Months Ended June 30 (in thousands of USD) | Activity | 2024 | 2023 | | :--- | :--- | :--- | | Net cash used in operating activities | (108,581) | (61,168) | | Net cash used in investing activities | (594) | (12) | | Net cash provided by financing activities | 202,838 | 8,726 | Quantitative and Qualitative Disclosures About Market Risk The company faces market risks primarily from foreign currency fluctuations, with a $89.6 million Euro exposure, and price risk from derivative liabilities tied to its securities, where a 1% change could impact earnings by $0.9 million - The company's primary market risks are foreign currency risk, interest rate risk, and other price risks related to derivative liabilities[95] - As of June 30, 2024, net exposure to foreign currency risk was $89.6 million, mainly related to the Euro. A hypothetical 1% change in exchange rates would affect earnings by about $0.9 million[98] - The fair value of derivative warrant liabilities ($23.5 million) and the derivative earnout liability ($13.4 million) are directly correlated to the market prices of NAMSW and NAMS, respectively. A 1% change in these prices would change the liability values by $0.2 million and $0.1 million, respectively[99] Controls and Procedures Management concluded that disclosure controls were not effective as of June 30, 2024, due to unremediated material weaknesses in internal control over financial reporting, including insufficient personnel and lack of documented risk assessment procedures, despite ongoing remediation efforts - Management concluded that as of June 30, 2024, disclosure controls and procedures were not effective due to previously disclosed material weaknesses in internal control[101] - The identified material weaknesses include: - A lack of consistent risk assessment procedures and control activities - Failure to maintain a sufficient complement of personnel for accounting and reporting requirements[101][102] - The company is implementing a remediation plan that includes hiring additional resources, redesigning critical processes, implementing a new ERP system, and establishing better segregation of duties and management review[103][104] PART II. OTHER INFORMATION Legal Proceedings The company is not currently a party to any material pending legal proceedings - The company is not party to any material pending legal proceedings[107] Risk Factors The company faces significant risks from its limited operating history, sole product candidate (obicetrapib), clinical development uncertainties, competition, reliance on third parties, intellectual property challenges, regulatory changes, internal control weaknesses, and stock price volatility Risks Related to Financial Condition and Capital Requirements As a clinical-stage company with no approved products, the company has a history of net losses and requires substantial additional financing to fund product development and commercialization, which may not be available on acceptable terms - The company is a clinical-stage entity with a limited operating history, no approved products, and has incurred significant net losses since inception, with an accumulated deficit of $449.8 million as of June 30, 2024[109] - Substantial additional financing is required to achieve goals, and failure to obtain it could force delays or termination of product development and commercialization efforts[111] Risks Related to Product Development, Regulatory Approval and Commercialization The company's success is entirely dependent on obicetrapib, facing lengthy, expensive, and uncertain clinical development, potential trial failures, significant competition from existing and new therapies, and challenges in market acceptance and reimbursement - The company is entirely dependent on the success of its only product candidate, obicetrapib, which has not yet received regulatory approval[115] - Clinical drug development is a long and expensive process with uncertain outcomes, and positive results from earlier trials are not predictive of future success[118] - If approved, obicetrapib will face significant competition from existing LDL-C lowering therapies and potentially from Merck's oral PSCK9 inhibitor, MK-0616, which is advancing to Phase 3 development[139][140] Risks Related to Collaboration and Third-Party Reliance The company relies on third-party CMOs for manufacturing and its Menarini collaboration for European commercialization, creating risks of supply chain disruptions, partnership failure, and challenges due to limited internal sales and marketing capability - The company contracts with third-party CMOs for all aspects of obicetrapib manufacturing, creating risks related to supply chain disruptions, quality assurance, and regulatory compliance[142] - The company relies on its collaboration with Menarini for the commercialization of obicetrapib in most of Europe. Failure or termination of this agreement would materially harm the company's business in those jurisdictions[147] - The company has limited experience and no internal capability in marketing or distributing products, making it dependent on building a commercial organization or entering into further third-party agreements[148] Risks Related to Business and Strategy The company faces challenges in managing growth, potential liability from off-label promotion, product liability lawsuits, attracting and retaining key senior management, and international operational risks including foreign exchange fluctuations and inflation - The company is expanding its capabilities and may encounter difficulties managing growth, which could disrupt operations[155][161] - The company's success depends on retaining key senior management, and competition for qualified personnel in the pharmaceutical field is intense[158] - International operations expose the company to risks such as foreign currency fluctuations, differing regulatory and reimbursement systems, and complex tax laws[163] Risks Related to Intellectual Property The company's commercial success depends on protecting its intellectual property for obicetrapib, facing risks of patent invalidation, infringement claims, and the high cost and limited global protection of IP - The company's ability to compete effectively depends on protecting its intellectual property for obicetrapib, but there is no guarantee that patent applications will issue or that issued patents will provide a competitive advantage[170] - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against infringement claims from third parties, with no certainty of success[181][185] - Protecting intellectual property rights worldwide is prohibitively expensive, and the laws of some foreign countries do not protect these rights to the same extent as U.S. laws[178] Risks Related to Government Regulation The company is subject to extensive government regulation, including healthcare reforms like the Inflation Reduction Act (IRA) impacting pricing, stringent fraud and abuse laws, privacy laws (GDPR, HIPAA), and anti-bribery laws, with non-compliance leading to significant penalties - Future legislation and healthcare reform, such as the Inflation Reduction Act (IRA), could increase limitations on reimbursement and drug pricing, adversely affecting profitability[191][192] - The company's relationships with healthcare professionals and other entities are subject to complex federal, state, and foreign healthcare fraud and abuse laws, where non-compliance can lead to severe penalties[195] - The company is subject to stringent privacy laws like GDPR in Europe and HIPAA in the U.S., which govern the processing of personal and health information and carry substantial fines for non-compliance[197] Risks Related to Financial Position The company's ability to use its $301.1 million tax loss carryforwards may be limited by Dutch tax law, it relies on subsidiary distributions, and may be classified as a Passive Foreign Investment Company (PFIC) for U.S. tax purposes, potentially causing adverse U.S. federal income tax consequences for U.S. shareholders - The company's ability to use its unused tax losses of $301.1 million (as of Dec 31, 2023) may be subject to limitations under Dutch law, particularly concerning changes in ownership[206] - The company believes it may be treated as a Passive Foreign Investment Company (PFIC) for the 2023 tax year, which could result in adverse U.S. federal income tax consequences to U.S. holders of its securities[209] Risks Related to Ownership of Our Securities Ownership of the company's securities carries risks including potential price drops from sales by existing securityholders, stock price volatility, identified material weaknesses in its internal control over financial reporting, loss of 'emerging growth company' status, significant insider control, and anti-takeover provisions - Sales of a substantial number of shares by existing securityholders could cause the price of Ordinary Shares and Warrants to fall[210] - The company has identified material weaknesses in its internal control over financial reporting, which if not remediated, could adversely affect its ability to report financial results accurately and timely[227] - As of June 30, 2024, executive officers, directors, and 5%+ shareholders beneficially owned approximately 62% of outstanding Ordinary Shares, allowing them to significantly influence corporate matters[224] - The company will no longer qualify as an 'emerging growth company' as of December 31, 2024, which will result in increased compliance costs and more stringent reporting requirements[240] Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[241] Other Information On June 27, 2024, the company's Chief Accounting Officer adopted a Rule 10b5-1 trading arrangement for the potential sale of up to 213,073 Ordinary Shares, expiring June 26, 2026 - On June 27, 2024, Chief Accounting Officer Louise Kooij adopted a Rule 10b5-1 trading plan for the potential sale of up to 213,073 Ordinary Shares[242] Exhibits This section lists the exhibits filed with the quarterly report, including certifications by the CEO and CFO, and XBRL data files - The report includes exhibits such as the Articles of Association, Inducement Plan, CEO and CFO certifications (Sections 302 and 906), and Inline XBRL documents[244]