Evoke Pharma(EVOK) - 2019 Q4 - Annual Report

PART I This part covers the company's business overview, risk factors, and foundational information, including forward-looking statements Forward-Looking Statements and Market Data This section outlines the nature of forward-looking statements within the report, emphasizing inherent risks and uncertainties that may cause actual results to differ materially from projections - Forward-looking statements are primarily contained in the "Risk Factors," "Management's Discussion and Analysis of Financial Condition and Results of Operations," and "Business" sections[4] - These statements involve known and unknown risks, uncertainties, and other important factors that may cause actual results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied[4] - The company claims the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995[4] Item 1. Business Evoke Pharma is a specialty pharmaceutical company focused on developing Gimoti, a metoclopramide nasal spray for diabetic gastroparesis in women, with its NDA resubmitted and a PDUFA target date of June 19, 2020 Overview Evoke Pharma develops Gimoti for diabetic gastroparesis in women, with NDA resubmitted and PDUFA date of June 19, 2020 - Evoke Pharma is developing Gimoti, an investigational metoclopramide nasal spray for the relief of symptoms associated with acute and recurrent diabetic gastroparesis in women[5] - Gimoti is designed to bypass the digestive system for more predictable absorption, especially during vomiting, and may be better tolerated than oral medication for nauseated patients[7] - The New Drug Application (NDA) for Gimoti was resubmitted to the FDA on December 19, 2019, and accepted for review on January 17, 2020, with a Prescription Drug User Fee Act (PDUFA) target goal date of June 19, 2020[7][9][10] - On January 21, 2020, the company entered into a commercial services agreement with Eversana Life Sciences Services, LLC for the commercialization and distribution of Gimoti in the United States, if approved, which includes a $5 million revolving credit facility[9] - The company has incurred losses in each year since its inception and expects to continue to incur significant expenses and operating losses for at least the next several years, having generated no revenue from product sales[9] Business Strategy The company aims to develop and commercialize products for GI disorders, focusing on Gimoti's regulatory approval and market partnerships - The company's objective is to develop and bring to market products for acute and chronic GI disorders with unmet needs[10] - Key strategies include pursuing regulatory approval for Gimoti, seeking partnerships to maximize its potential, building commercial capabilities in the U.S. (e.g., with Eversana), and exploring international regulatory approval[10][11][12][13] The Gastrointestinal Market The GI market presents significant unmet needs, particularly in upper GI motility disorders like gastroparesis, with substantial associated costs - In 2004, GI disorders accounted for over 72 million ambulatory care visits in the United States, with annual costs exceeding $114 billion in direct and indirect expenditures[14] - Limited innovation in upper GI motility disorders, such as gastroparesis, presents a substantial market opportunity due to significant unmet medical needs[14] - Hospitalizations with a primary diagnosis of gastroparesis increased 158% from 1995 to 2004, with an average length of stay of approximately six days and an estimated cost of $22,000 per stay[22] - Hospitalizations for gastroparesis rose from roughly 900 in 1994 to 16,400 in 2014, with median costs climbing from $6,000 to approximately $24,500 during that period[23] Etiology and Prevalence of Gastroparesis Gastroparesis affects millions in the U.S., predominantly women, with cases linked to diabetes, post-surgical complications, and idiopathic causes - Gastroparesis cases are associated with diabetes (29%), post-surgical complications (13%), and unknown causes (idiopathic, 36%)[24] - The prevalence of symptomatic gastroparesis is estimated to be up to 4% of the U.S. population, equating to approximately 12 to 16 million adults, with women comprising 82% of this population[24][25] - Approximately 2.3 million diabetic patients with moderate or severe gastroparesis symptoms are seeking treatment in the United States[25] Unmet Needs in Gastroparesis Treatment Existing gastroparesis treatments are inadequate, highlighting Gimoti's potential to improve care for female patients with a non-oral option - Existing treatment options for diabetic gastroparesis are inadequate, leading physicians to use medications 'off-label' due to limited FDA-approved therapies[26] - Oral metoclopramide is the only FDA-approved product for gastroparesis, with approximately 4.0 million prescriptions in the United States per year (2015)[26] - Gimoti, if approved, could significantly improve the standard of care for female gastroparesis patients by offering a non-oral, promotility, and anti-emetic treatment that can be absorbed even with delayed gastric emptying or nausea and vomiting[28][29] Clinical Trial Results Clinical trials for Gimoti include PK, Phase 3, Male Companion, Phase 2b, Bioavailability, and ECG studies, showing varied efficacy and safety profiles Comparative Exposure PK Trial This trial assessed Gimoti's bioequivalence and tolerability against oral metoclopramide, showing equivalence in women for AUC - Two of the three Gimoti doses tested met the bioequivalence criteria for AUC (90% confidence interval within 80-125%) compared to Reglan Tablets 10 mg in pooled data from healthy volunteers[30] - The maximum observed plasma concentration (Cmax) for Gimoti was slightly lower than the equivalence range[30] - Analysis by sex revealed that women independently met equivalence criteria for AUC0-inf and AUC0-t at the Gimoti dose proposed in the NDA[30] - All Gimoti doses were well tolerated with no serious or clinically significant adverse events reported[30] Phase 3 Clinical Trial The Phase 3 trial did not meet its primary endpoint in the ITT population but showed significant symptom improvements in moderate to severe female patients - The primary endpoint for the intent-to-treat (ITT) population (change in symptoms from baseline to Week 4) was not statistically significant (p=0.881)[33] - Exploratory analyses showed statistically significant improvements in total symptom scores for patients with moderate to severe baseline symptoms[33] Phase 3 Change from Baseline in Daily Total Symptom Scores (Moderate to Severe Symptoms) | Population | Time Period | Placebo (N=53/40) | Gimoti (N=52/38) | p-value | |:-----------|:------------|:------------------|:-----------------|:--------| | Intent-to-Treat | Week 1 | -0.387 | -0.588 | 0.036 | | | Week 2 | -0.614 | -0.950 | 0.025 | | | Week 3 | -0.749 | -1.096 | 0.039 | | | Week 4 | -0.856 | -1.220 | 0.085* | | Per Protocol | Week 1 | -0.362 | -0.623 | 0.019 | | | Week 2 | -0.625 | -1.040 | 0.015 | | | Week 3 | -0.714 | -1.286 | 0.003 | | | Week 4 | -0.841 | -1.373 | 0.014 | Phase 3 Change from Baseline in Daily Nausea and Upper Abdominal Pain Scores (Moderate to Severe Symptoms) | Symptom | Time Period | Placebo (N=53) | Gimoti (N=52) | p-value | |:--------|:------------|:---------------|:--------------|:--------| | Nausea | Week 1 | -0.370 | -0.859 | 0.001 | | | Week 2 | -0.696 | -1.149 | 0.032* | | | Week 3 | -0.818 | -1.242 | 0.043 | | | Week 4 | -0.905 | -1.404 | 0.027 | | Upper Abdominal Pain | Week 1 | -0.394 | -0.641 | 0.025 | | | Week 2 | -0.554 | -0.990 | 0.016 | | | Week 3 | -0.690 | -1.194 | 0.008 | | | Week 4 | -0.791 | -1.218 | 0.047 | - Treatment-emergent adverse events were similar in both groups (36% Gimoti and 35% placebo), mostly mild or moderate, with no reports of tardive dyskinesia[33] Male Companion Trial A companion trial in male patients with diabetic gastroparesis was stopped due to futility, showing no significant efficacy in men - A companion clinical trial in male patients with diabetic gastroparesis was stopped due to futility, showing no statistically significant efficacy in men[37] - The safety profile for Gimoti in men was well-tolerated and comparable to placebo[37] Phase 2b Clinical Trial The Phase 2b trial showed significant symptom improvement in female subjects, despite not reaching overall statistical significance due to male placebo response - The Phase 2b trial did not achieve statistical significance in the overall population due to a high placebo response rate among male subjects[38] - Female subjects demonstrated clinically and statistically significant improvement in gastroparesis symptoms (mGCSI-DD and GCSI-DD total scores) for both 10 mg and 14 mg Gimoti doses compared to placebo[38][40] Phase 2b Clinical Trial P-Value Summary (Gimoti vs. Placebo: Change from Baseline to Week 4) | | Gimoti 10 mg p-values | Gimoti 14 mg p-values | |:---|:----------------------|:----------------------| | mGCSI-DD Total Score (per FDA guidance) | | | | All Subjects | 0.1504 | 0.3005 | | Females | 0.0247 | 0.0215 | | Males | 0.4497 | 0.2174 | | GCSI-DD Total Score (per trial protocol) | | | | All Subjects | 0.2277 | 0.5266 | | Females | 0.0485 | 0.0437 | | Males | 0.4054 | 0.0972 | - The 10 mg dose was considered the lowest effective dose in this study[40] - Adverse events occurring more commonly in Gimoti groups (≥2% difference vs. placebo) included dysgeusia, headache, nasal discomfort, rhinorrhea, throat irritation, fatigue, hypoglycemia, and hyperglycemia, with most being mild to moderate and transient[48][49] Phase 1 Comparative Bioavailability Bridging Study This study demonstrated dose-related increases in metoclopramide concentrations and comparable absolute bioavailability for Gimoti nasal spray - Mean plasma metoclopramide concentrations (Cmax and AUCinf) increased in a dose-related manner after nasal spray administration of 10 mg and 20 mg Gimoti[50] - The absolute bioavailability of Gimoti was comparable for the 10 mg (47.4%) and 20 mg (52.5%) doses[50] - Relative bioavailability to the oral tablet was 60.1% for 10 mg and 66.5% for 20 mg Gimoti[50] Thorough ECG (QT/QTc) Study This study confirmed that Gimoti, at therapeutic and supratherapeutic doses, does not prolong the QT/QTc interval in healthy subjects - A thorough ECG (QT/QTc) study demonstrated that Gimoti, at therapeutic and supratherapeutic doses, did not prolong the QT/QTc interval in healthy subjects[53] - The study met its pre-specified primary endpoint, satisfying an FDA safety requirement for NDA submission[53] Prior Development Evoke acquired Gimoti rights in 2007, optimizing its formulation and evaluating it in six clinical trials involving 746 subjects - Evoke acquired worldwide rights to metoclopramide nasal spray from Questcor in 2007, after initial development by Nastech Pharmaceutical Company[54] - The current Gimoti formulation was optimized to improve stability, palatability, and tolerability[54] - The current formulation of Gimoti has been evaluated in six completed clinical trials, enrolling a total of 746 healthy volunteers and patients with diabetic gastroparesis[54] Intellectual Property and Proprietary Rights Evoke's IP portfolio includes U.S. and international patents for Gimoti's nasal administration and formulations, along with registered trademarks - Evoke's patent portfolio includes U.S. patents for nasal administration of agents for gastroparesis (expected to expire no earlier than 2021) and nasal formulations of metoclopramide (expected to expire no earlier than 2030)[57] - Pending U.S. patent applications cover treatment of symptoms associated with female gastroparesis (if granted, exp. no earlier than 2032) and moderate/severe gastroparesis (if granted, exp. no earlier than 2037)[58] - The company also holds European, Canadian, and Mexican patents for method of use and pharmaceutical compositions, with expirations ranging from 2021 to 2032[59] - Evoke owns the registered trademark 'EVOKE PHARMA' and the trademarked product name 'GIMOTI' in the United States[60] Commercialization Evoke plans to commercialize Gimoti in the U.S. through partnerships, aiming to establish it as the preferred prescription for diabetic gastroparesis in women - Evoke plans to commercialize Gimoti in the United States through partnerships, aiming to establish it as the prescription product of choice for diabetic gastroparesis in women[62] - The company has engaged Eversana to manage marketing, market access, distribution, sales, and patient support services for Gimoti in the U.S[62][63] - Evoke will maintain ownership of the Gimoti NDA and retain more than 80% of net product profits after reimbursing Eversana's commercialization costs and paying a percentage of profits[63] Commercial Services and Loan Agreements with Eversana Evoke entered an agreement with Eversana for Gimoti's U.S. commercialization and distribution, including a $5 million revolving credit facility upon FDA approval - The Eversana Agreement, effective January 21, 2020, outlines Eversana's role in commercializing and distributing Gimoti in the United States, if approved by the FDA[63] - The agreement's term is five years from the date of FDA approval, with termination clauses for both parties based on performance, material breach, insolvency, safety recalls, or non-approval by December 31, 2020 (by Eversana)[63] - Eversana will provide a revolving credit facility of up to $5.0 million to Evoke upon FDA approval of the Gimoti NDA, subject to customary conditions[63] Manufacturing Evoke relies on third-party contract manufacturers for Gimoti's raw materials, drug substance, and finished product, with Patheon and Cosma as key suppliers - Evoke does not own or operate manufacturing facilities and relies on third-party contract manufacturers for all raw materials, drug substance, and finished product[65] - Patheon UK Limited (a Thermo Fisher subsidiary) manufactures commercial quantities of Gimoti under an agreement that extends five years from FDA marketing approval[65] - Cosma S.p.A. is the exclusive commercial supplier of metoclopramide for Gimoti manufacturing[65] - Commercial scale lots of Gimoti were manufactured in September 2019, and pump performance testing was completed to meet FDA requirements for the NDA resubmission[65] Competition The pharmaceutical industry is highly competitive, with Gimoti facing existing metoclopramide formulations and pipeline candidates from larger companies - The pharmaceutical industry is characterized by intense competition from large pharmaceutical, biotechnology, specialty, and generic drug companies[66] - If approved, Gimoti will compete directly with existing metoclopramide oral, erythromycin, and domperidone formulations[66] Gastroparesis Treatment Development Pipeline | Product | Class | Route | Company | Status | |:--------|:------------------------------------|:------|:------------------|:-------------| | Gimoti | dopamine antagonist /mixed 5-HT3 antagonist 5-HT4 agonist | nasal | Evoke Pharma | NDA Submitted | | Relamorelin/RM-131 | ghrelin agonist | sub-cutaneous | Rhythm/Allergan | Phase 3 | | Velusetrag/TAK-954 | 5-HT4 receptor agonist | oral | Theravance/Takeda | Phase 2 | | Tradipitant | NK-1 antagonist | oral | Vanda | Phase 2/3 | | Renzapride | 5-HT4 agonist/ 5-HT3 antagonist | oral | Endologic | Phase 2 | | NG-101 | D2/D3 antagonist | Oral | Neurogastrx | Phase 1 | - Many potential competitors possess substantially greater financial, technical, and human resources, as well as more experience in product development and commercialization[66] Technology Acquisition Agreement Evoke acquired worldwide rights to Gimoti in 2007 and may owe up to $52 million in milestone payments and low single-digit royalties to Mallinckrodt - In June 2007, Evoke acquired all worldwide rights, data, and patents for Gimoti from Questcor Pharmaceuticals, Inc[72] - Evoke may be required to make additional milestone payments totaling up to $52 million to Mallinckrodt (Questcor's acquirer), with a $5 million payment due one year after FDA approval[72] - A low single-digit royalty on net sales of Gimoti is payable to Mallinckrodt until the expiration of the last patent right covering Gimoti, expected in 2032[72] Government Regulation Pharmaceutical products are subject to extensive FDA regulation covering development, approval, manufacturing, and post-market requirements FDA Review and Approval Process The FDA approval process involves pre-clinical testing, IND, clinical trials, cGMP inspections, and NDA submission, with Gimoti pursuing the 505(b)(2) pathway - Pharmaceutical products are subject to extensive regulation by the FDA, covering research, development, testing, manufacturing, approval, labeling, promotion, and distribution[74] - The approval process involves pre-clinical testing, submission of an Investigational New Drug Application (IND), Institutional Review Board (IRB) approval, human clinical trials (Phase 1, 2, 3), FDA inspection of manufacturing facilities for cGMP compliance, and submission and review of a New Drug Application (NDA)[74] - Gimoti is pursuing FDA approval through the Section 505(b)(2) regulatory pathway, which allows reliance on FDA's prior findings of safety and effectiveness for a previously approved drug (Reglan Tablets 10 mg)[74][87] - FDA has 60 days to determine if an NDA is sufficiently complete for review, with target review goals of 10 months for standard review and 6 months for priority review, though actual review times can be longer[80] Post-Approval Requirements Approved products face ongoing FDA regulation, including recordkeeping, reporting, advertising rules, and potential post-approval studies or REMS - Approved products are subject to pervasive and continuing FDA regulation, including requirements for drug/device listing, recordkeeping, periodic reporting, product sampling, distribution, advertising, promotion, and adverse event reporting[81] - Manufacturers must register with FDA and state agencies and are subject to periodic unannounced inspections for compliance with current Good Manufacturing Practices (cGMP) requirements[82] - FDA may require post-approval studies (Phase 4) and a Risk Evaluation and Mitigation Strategy (REMS) to ensure drug benefits outweigh risks; metoclopramide products require a boxed warning for tardive dyskinesia (TD)[83][84] - FDA strictly regulates marketing, labeling, advertising, and promotion, prohibiting off-label promotion, with violations potentially leading to significant liability and sanctions[84] Section 505(b)(2) New Drug Applications This pathway allows reliance on prior FDA findings for approved drugs, involving patent certifications and potential three-year exclusivity for new clinical studies - The Section 505(b)(2) pathway permits reliance on studies not conducted by the applicant and FDA's prior findings of safety and effectiveness for an approved product[87] - Applicants must certify regarding patents listed in the FDA Orange Book; a Paragraph IV certification can trigger a 30-month stay if challenged by patent holders[87] - A product may be granted three-year Hatch-Waxman exclusivity if new clinical studies (other than bioavailability or bioequivalence) were essential to its approval and sponsored by the applicant[87] Manufacturing Requirements Manufacturers must comply with FDA's cGMP regulations and are subject to inspections, with non-compliance leading to severe legal and regulatory actions - Manufacturers must comply with FDA's cGMP regulations, including Quality System Regulation (QSR) requirements for device components[88] - Manufacturing facilities are subject to pre-approval and periodic unannounced inspections by FDA and other authorities[88] - Failure to comply with regulatory requirements can lead to severe legal or regulatory actions, including warning letters, product seizure/recall, injunctions, and civil/criminal penalties[88] Other Regulatory Requirements The company is subject to various laws concerning laboratory practices, animal use, hazardous substances, and broad FDA enforcement powers - The company is subject to various laws and regulations concerning laboratory practices, experimental animal use, and the use and disposal of hazardous substances[90] - FDA possesses broad regulatory and enforcement powers in these areas, including the ability to levy fines, suspend approvals, seize products, and withdraw approvals[90] Coverage and Reimbursement Commercial success depends on third-party payor coverage and reimbursement, with cost-containment measures potentially limiting revenue and harming financial results - Commercial success and sales of approved products depend significantly on coverage and reimbursement policies from third-party payors (government programs, commercial insurance, managed healthcare organizations)[91] - Increasing cost-containment measures, such as price controls, coverage restrictions, and generic substitution requirements, could limit net revenue and adversely affect financial results[91] - Decreased reimbursement or a decision by a third-party payor not to cover Gimoti could reduce physician utilization and materially harm sales and financial condition[91] Other Healthcare Laws Commercialization subjects the company to federal and state healthcare laws, including anti-kickback, fraud and abuse, false claims, and physician payment transparency regulations - Upon commercialization, the company will be subject to federal and state healthcare regulation and enforcement, including anti-kickback, fraud and abuse, false claims, privacy and security, and physician sunshine laws[92] - The federal Anti-Kickback Statute prohibits offering or receiving remuneration to induce referrals or purchases under federal healthcare programs, with violations potentially leading to significant penalties[92] - The False Claims Act prohibits knowingly presenting false claims for payment to the U.S. government, with violations resulting in significant monetary penalties and treble damages[92] - The federal Physician Payment Sunshine Act requires reporting of payments and other transfers of value made to physicians and teaching hospitals[94] Healthcare Reform The Affordable Care Act and ongoing legislative changes, including increased scrutiny on drug pricing, create uncertainty and impact the pharmaceutical industry - The Affordable Care Act (ACA) significantly changed healthcare financing, increasing Medicaid rebates for brand-name drugs from 15.1% to 23.1% and imposing an annual fee on pharmaceutical manufacturers[95] - Ongoing judicial and Congressional challenges to the ACA create uncertainty regarding its future impact on the pharmaceutical industry[95] - Other legislative changes include aggregate reductions of Medicare payments to providers and heightened governmental scrutiny over drug pricing, leading to proposed bills for increased transparency[95] Data Privacy and Security The company is subject to U.S. federal and state, and foreign data privacy laws like HIPAA, CCPA, and GDPR, with potential for significant fines for non-compliance - The company is subject to U.S. federal and state (e.g., HIPAA, CCPA) and foreign (e.g., GDPR) health information privacy, security, and data breach notification laws[96][98] - HIPAA imposes privacy, security, and breach reporting obligations on covered entities and their business associates, with potential for significant civil, criminal, and administrative fines[96] - The California Consumer Privacy Act (CCPA), effective January 1, 2020, creates new data privacy obligations and rights for California residents, including a private right of action for certain data breaches[98] - The EU General Data Protection Regulation (GDPR), effective May 2018, imposes stringent data protection requirements with potential fines up to €20 million or 4% of annual global revenues[98] Employees As of February 29, 2020, Evoke Pharma had five full-time employees and several consultants, maintaining good relationships without collective bargaining - As of February 29, 2020, the company had five full-time employees and several consultants in regulatory, clinical, manufacturing, and finance areas[99] - None of the employees are represented by a collective bargaining arrangement, and the company believes its relationship with employees is good[99] About Evoke Evoke Pharma, Inc. was formed in Delaware in January 2007, with its principal executive offices located in Solana Beach, California - Evoke Pharma, Inc. was formed as a Delaware corporation in January 2007[100] - Its principal executive offices are located at 420 Stevens Avenue, Suite 370, Solana Beach, California 92075[100] Financial Information about Segments The company operates in a single segment focused on the development of pharmaceutical products - The company operates in one segment, which is the development of pharmaceutical products[101] Available Information Evoke files annual, quarterly, and current reports with the SEC, which are accessible on its website and the SEC's website - Evoke files annual reports on Form 10-K, quarterly reports on Form 10-Q, and current reports on Form 8-K with the SEC[102] - These reports are available free of charge on the company's website (www.evokepharma.com) and the SEC's website (www.sec.gov)[102](index=102&type=chunk) Item 1A. Risk Factors This section details numerous risks and uncertainties that could materially affect Evoke Pharma's business, financial condition, and results of operations, including dependence on Gimoti, funding needs, competition, and regulatory complexities - The company's business is entirely dependent on the success of Gimoti, which failed to achieve its primary endpoint in a Phase 3 clinical trial, and there is no assurance of FDA approval for the resubmitted NDA[104] - Evoke requires substantial additional funding; existing cash is sufficient only into Q3 2020, and even with the Eversana Credit Facility, additional funds will be needed to continue as a going concern into 2021[107][108] - Topline or interim data may not accurately reflect complete results, and regulatory agencies may interpret data differently, potentially impacting approval or commercialization[111] - Failure to obtain regulatory approval for Gimoti would prevent commercialization and severely limit the company's ability to generate revenue[113] - Delays in clinical trials or regulatory approval could significantly increase costs, delay revenue generation, and adversely affect commercial prospects[115] - The company relies on Eversana and other third parties for commercialization, sales, and manufacturing, introducing risks related to their performance and potential termination of agreements[119][131] - Evoke faces substantial competition from established pharmaceutical companies and other pipeline candidates, many of whom have greater resources[132] - Product liability lawsuits, particularly concerning metoclopramide's side effects like tardive dyskinesia (TD), could result in substantial liabilities and limit commercialization[142] - Protecting intellectual property rights is difficult and costly; patents may be challenged, narrowed, or circumvented, potentially affecting the company's competitive position[153] - Recurring losses from operations have raised substantial doubt about the company's ability to continue as a going concern, as noted by management and the independent auditor[166] Item 1B. Unresolved Staff Comments This item indicates that there are no unresolved staff comments from the SEC regarding the company's previous filings - There are no unresolved staff comments[186] Item 2. Properties Evoke Pharma occupies approximately 3,000 square feet of office space in Solana Beach, California, under a lease extended through December 2020 - The company occupies approximately 3,000 square feet of office space in Solana Beach, California[186] - The lease for the office space was extended in September 2018 and December 2019, with an expiration date through December 2020[186] - The current facility is considered adequate, and additional space can be leased on commercially reasonable terms if necessary for future growth[186] Item 3. Legal Proceedings Evoke Pharma is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings[186] Item 4. Mine Safety Disclosures This item is not applicable to Evoke Pharma, Inc - This item is not applicable[186] PART II This part details the company's market information, selected financial data, management's discussion and analysis, and controls and procedures Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities This section provides information on the market for Evoke Pharma's common stock, its stockholder base, and dividend policy, noting no plans for future dividends Market Information Evoke Pharma's common stock is traded on the Nasdaq Capital Market under the symbol 'EVOK' - Evoke Pharma's common stock is traded on the Nasdaq Capital Market under the symbol "EVOK"[189] Holders of Common Stock As of February 29, 2020, there were 16 holders of record of the company's common stock - As of February 29, 2020, there were 16 holders of record of the company's common stock[189] Dividend Policy The company has never paid cash dividends and does not anticipate doing so, retaining future earnings for business development - The company has never declared or paid any cash dividends on its common stock and does not anticipate doing so in the foreseeable future[190] - Future earnings are expected to be retained for the development, operation, and expansion of the business[190] Unregistered Sales of Equity Securities There were no unregistered sales of equity securities - There were no unregistered sales of equity securities[190] Issuer Repurchases of Equity Securities There were no issuer repurchases of equity securities - There were no issuer repurchases of equity securities[190] Securities Authorized for Issuance Under Equity Compensation Plans Information on equity compensation plans is incorporated by reference from Item 12 of Part III of this report - Information about equity compensation plans is incorporated by reference to Item 12 of Part III of this Annual Report on Form 10-K[190] Item 6. Selected Financial Data This section presents a summary of selected financial data for 2019 and 2018, derived from audited financial statements, highlighting recurring net losses and an accumulated deficit Selected Statement of Operations Data (Years Ended December 31) | Metric | 2019 | 2018 | |:---|:---|:---| | Research and development expense | $3,416,466 | $4,095,014 | | General and administrative expense | $3,737,987 | $3,919,671 | | (Gain) from change in fair value of warrant liability | $— | $(433,392) | | Net loss | $(7,125,655) | $(7,566,080) | | Net loss per common share, basic and diluted | $(0.32) | $(0.46) | | Weighted-average shares outstanding, basic and diluted | 22,296,089 | 16,602,422 | Selected Balance Sheet Data (As of December 31) | Metric | 2019 | 2018 | |:---|:---|:---| | Cash and cash equivalents | $5,663,833 | $5,319,004 | | Working capital | $4,230,456 | $4,013,769 | | Total assets | $6,395,628 | $5,659,773 | | Current liabilities | $2,015,083 | $1,634,453 | | Accumulated deficit | $(85,730,390) | $(78,604,735) | | Total stockholders' equity | $4,380,545 | $4,025,320 | Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on Evoke Pharma's financial condition and operational results, focusing on Gimoti's development, financial performance, liquidity, and capital resources Overview Evoke Pharma focuses on Gimoti for diabetic gastroparesis in women, with an NDA resubmitted and a PDUFA date of June 19, 2020, facing ongoing losses and funding needs - Evoke Pharma is a specialty pharmaceutical company focused on developing Gimoti, a metoclopramide nasal spray for acute and recurrent diabetic gastroparesis in women[195] - The NDA for Gimoti was resubmitted on December 19, 2019, and accepted by the FDA on January 17, 2020, with a PDUFA target goal date of June 19, 2020[195] - The company has no approved products or revenue, has incurred losses since inception, and expects to continue incurring significant expenses and operating losses for at least the next several years[197] - As of December 31, 2019, cash and cash equivalents were approximately $5.7 million[197] - Existing cash and the Eversana Credit Facility (up to $5 million upon FDA approval) are expected to fund operations into 2021, but additional funds will be required to continue as a going concern[197] Technology Acquisition Agreement Evoke acquired Gimoti rights in 2007 and may owe up to $52 million in milestone payments and low single-digit royalties to Mallinckrodt - In June 2007, Evoke acquired all worldwide rights, data, and patents for Gimoti from Questcor Pharmaceuticals, Inc[198] - The company may be required to make additional milestone payments totaling up to $52 million to Mallinckrodt (Questcor's acquirer), with a $5 million payment due one year after FDA approval[198] - A low single-digit royalty on net sales of Gimoti is payable to Mallinckrodt until the expiration of the last patent right covering Gimoti, expected in 2032[198] Financial Operations Overview This section outlines the company's research and development, general and administrative expenses, and other income, reflecting its operational focus Research and Development Expenses All R&D expenses are expensed as incurred, primarily for Gimoti's clinical trials, regulatory costs, and manufacturing, with significant and uncertain future costs - All research and development expenses are expensed as incurred, primarily related to clinical trials, regulatory costs, manufacturing, and employee-related expenses for Gimoti[199] - The successful development and commercialization of Gimoti is highly uncertain, and the costs incurred in its continued development and regulatory review are significant and difficult to estimate[200] General and Administrative Expenses G&A expenses include salaries, professional fees, and public company costs, expected to increase with expanding operations and commercialization efforts - General and administrative expenses primarily include salaries, benefits, stock-based compensation, professional fees (accounting, tax, patent, legal), insurance, facility costs, and costs associated with being a publicly-traded company[204] - These expenses are expected to increase in the future as the company expands its operating activities and prepares for the potential commercialization of Gimoti[204] Other Income Other income primarily reflects changes in warrant liability fair value, which significantly decreased after reclassification in March 2018 - Other income primarily consists of changes in the fair value of the warrant liability[205] - This income decreased significantly after March 2018 when warrants were reclassified from a liability to additional paid-in capital due to amendments, eliminating the need for periodic revaluation[205] Critical Accounting Policies and Significant Judgments and Estimates This section details critical accounting policies, including stock-based compensation and warrant accounting, which involve significant management estimates and judgments Stock-Based Compensation Stock-based compensation expense is recorded at fair value on the grant date and recognized over the service period, requiring estimates of exercise behavior and volatility - Stock-based compensation expense for stock option grants and employee stock purchases is recorded at the estimated fair value of the award on the grant date and recognized on a straight-line basis over the employee's requisite service period[207] - The estimation of fair value requires management to make estimates and judgments regarding employee exercise behavior, forfeiture rates, and volatility of common stock[207] - In June 2019, a one-time option exchange resulted in 2,456,999 stock options being exchanged for 1,842,746 replacement options, leading to approximately $84,000 of additional stock-based compensation expense over the four-year vesting term[209] Warrant Accounting Warrants were reclassified from a liability to additional paid-in capital in March 2018, eliminating periodic fair value remeasurement due to amendments - Prior to March 2018, warrants were classified as a liability and revalued at each reporting date due to a feature that could require cash transfer upon a change of control[210] - Following warrant amendments in March 2018, the warrants were reclassified to additional paid-in capital, eliminating the requirement for periodic remeasurement as a liability[210] Other Information This section covers net operating loss carryforwards and R&D tax credits, noting potential limitations on their annual use due to ownership changes Net Operating Loss Carryforwards The company holds significant federal and California NOL and R&D tax credit carryforwards, subject to annual utilization limits due to potential ownership changes - As of December 31, 2019, the company had federal net operating loss (NOL) carryforwards of approximately $74.5 million and California NOL carryforwards of approximately $47.7 million, expiring from 2027 and 2028, respectively[211] - Federal NOLs generated after 2017 (approximately $12.6 million) do not expire but may only offset 80% of taxable income[211] - The company also had federal research and development (R&D) tax credit carryforwards of approximately $2.3 million (expiring from 2027) and California R&D tax credit carryforwards of $1.4 million (carrying forward indefinitely)[211] - Annual use of NOL and R&D credit carryforwards may be limited by Section 382 of the Internal Revenue Code due to potential ownership changes[211] Results of Operations This section compares the company's operating expenses and other income for 2019 and 2018, highlighting decreases in R&D, G&A, and other income Comparison of Years Ended December 31, 2019 and 2018 Operating expenses and other income decreased in 2019 compared to 2018, primarily due to reduced NDA preparation costs and warrant reclassification Operating Expenses and Other Income (Years Ended December 31) | Metric | 2019 | 2018 | Increase/ (Decrease) | |:---|:---|:---|:---| | Research and development expense | $3,416,466 | $4,095,014 | $(678,548) | | General and administrative expense | $3,737,987 | $3,919,671 | $(181,684) | | Other income | $28,798 | $448,605 | $(419,807) | - Research and development expenses decreased by approximately $679,000 in 2019, primarily due to reduced NDA preparation costs compared to 2018[212][215] - General and administrative expenses decreased by approximately $182,000 in 2019[215] - Other income decreased by approximately $420,000 in 2019, primarily because warrants were no longer required to be revalued as liabilities after their reclassification in March 2018[215] Liquidity and Capital Resources The company has funded operations through equity sales and borrowings, faces substantial doubt about going concern, and requires additional funding beyond existing cash and credit facilities - The company has funded operations primarily through equity sales and borrowings, including approximately $25.1 million net proceeds from its IPO in 2013[216] - As of February 29, 2020, the company had sold approximately $10.9 million of common stock through its at-the-market offering program (FBR Sales Agreement)[216] - Due to its public float being less than $75 million (approximately $34.2 million as of February 29, 2020), future public offerings are limited to one-third of its public float, leaving approximately $5.1 million capacity under the FBR Sales Agreement[216] - Management concluded there is substantial doubt about the company's ability to continue as a going concern due to recurring losses and negative cash flows[218] - Existing cash and cash equivalents, combined with the Eversana Credit Facility (upon FDA approval), are projected to fund operations into 2021, but additional funds will be required[218] Cash Flow Summary (Years Ended December 31) | Metric | 2019 | 2018 | |:---|:---|:---| | Net cash used in operating activities | $(5,762,093) | $(6,978,560) | | Net cash provided by financing activities | $6,106,922 | $4,618,297 | | Net increase (decrease) in cash and cash equivalents | $344,829 | $(2,360,263) | Off-Balance Sheet Arrangements As of December 31, 2019, the company had not entered into any off-balance sheet arrangements - As of December 31, 2019, the company had not entered into any off-balance sheet arrangements[224] Contractual Obligations and Commitments The company has an operating lease for office space and potential milestone payments and royalties to Mallinckrodt related to Gimoti - The company has an operating lease for office space in Solana Beach, California, with future minimum lease payments of approximately $146,000 for 2020[225] - Potential milestone payments to Mallinckrodt for Gimoti total up to $52 million, including a $5 million payment due one year after FDA approval[225] - A low single-digit royalty on net sales of Gimoti is payable to Mallinckrodt until the expiration of the last patent right, expected in 2032[225] Item 7A. Quantitative and Qualitative Disclosure about Market Risk This section discusses Evoke Pharma's exposure to market risks, including interest rate fluctuations, foreign currency exchange risk, and inflation risk, anticipating no material impact from these risks Interest Rate Fluctuation Risk The company's interest income sensitivity from cash and cash equivalents is not expected to materially impact financial results due to short-term nature - The company's primary exposure to market risk is interest income sensitivity from its cash and cash equivalents[227] - Due to the short-term nature of its cash and cash equivalents, a sudden change in market interest rates is not expected to have a material impact on its financial condition or results of operations[227] Foreign Currency Exchange Risk Contracting with foreign organizations for manufacturing and clinical trials may expose the company to currency fluctuations, but no material impact is expected - The company contracts with foreign organizations for manufacturing and clinical trials, potentially exposing it to fluctuations in foreign currency rates[228] - Such fluctuations are not expected to have a material impact on the company's operations[228] Inflation Risk Inflation affects labor and clinical trial costs, but has not had a material effect on the company's business or financial results in 2019 and 2018 - Inflation generally affects the company by increasing its cost of labor and clinical trial costs[229] - Inflation has not had a material effect on the company's business, financial condition, or results of operations during the years ended December 31, 2019 and 2018[229] Item 8. Financial Statements and Supplementary Data This section presents the audited financial statements of Evoke Pharma, Inc. for 2019 and 2018, including the auditor's report and detailed notes Report of Independent Registered Public Accounting Firm BDO USA, LLP audited Evoke Pharma's financial statements, providing an unqualified opinion but noting substantial doubt about the company's going concern ability Opinion on the Financial Statements BDO USA, LLP issued an unqualified opinion on Evoke Pharma's 2019 and 2018 financial statements, affirming fair presentation in conformity with GAAP - BDO USA, LLP audited Evoke Pharma, Inc.'s financial statements for the years ended December 31, 2019 and 2018[246] - The auditor opined that the financial statements present fairly, in all material respects, the financial position, results of operations, and cash flows in conformity with GAAP[246] Going Concern Uncertainty The auditor highlighted recurring losses and negative cash flows, raising substantial doubt about the company's ability to continue as a going concern - The auditor noted that the company has suffered recurring losses from operations and has not generated revenues or positive cash flows from operations[247] - These factors raise substantial doubt about the company's ability to continue as a going concern[247] - The financial statements do not include any adjustments that might result from the outcome of this uncertainty[247] Basis for Opinion Audits were conducted per PCAOB standards, assessing risks and evaluating accounting principles, without an audit of internal control over financial reporting - The audits were conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB)[248] - The audits included assessing risks of material misstatement and evaluating accounting principles and significant management estimates[248] - The company was not required to have, nor was the auditor engaged to perform, an audit of its internal control over financial reporting[248] Balance Sheets This section presents the company's financial position as of December 31, 2019 and 2018, detailing assets, liabilities, and stockholders' equity Balance Sheets (As of December 31) | Assets | 2019 | 2018 | |:---|:---|:---| | Cash and cash equivalents | $5,663,833 | $5,319,004 | | Prepaid expenses | $581,706 | $329,218 | | Total current assets | $6,245,539 | $5,648,222 | | Operating lease right-of-use asset | $138,538 | $— | | Other assets | $11,551 | $11,551 | | Total assets | $6,395,628 | $5,659,773 | | Liabilities and stockholders' equity | | | | Accounts payable and accrued expenses | $1,033,383 | $476,202 | | Accrued compensation | $843,162 | $1,158,251 | | Operating lease liability | $138,538 | $— | | Total current liabilities | $2,015,083 | $1,634,453 | | Common stock | $2,443 | $1,743 | | Additional paid-in capital | $90,108,492 | $82,628,312 | | Accumulated deficit | $(85,730,390) | $(78,604,735) | | Total stockholders' equity | $4,380,545 | $4,025,320 | | Total liabilities and stockholders' equity | $6,395,628 | $5,659,773 | Statements of Operations This section presents the company's financial performance for 2019 and 2018, detailing operating expenses, other income, and net loss Statements of Operations (Years Ended December 31) | Operating expenses: | 2019 | 2018 | |:---|:---|:---| | Research and development | $3,416,466 | $4,095,014 | | General and administrative | $3,737,987 | $3,919,671 | | Total operating expenses | $7,154,453 | $8,014,685 | | Loss from operations | $(7,154,453) | $(8,014,685) | | Other income: | | | | Interest income | $28,798 | $15,213 | | Gain from change in fair value of warrant liability | $— | $433,392 | | Total other income | $28,798 | $448,605 | | Net loss | $(7,125,655) | $(7,566,080) | | Net loss per share of common stock, basic and diluted | $(0.32) | $(0.46) | | Weighted-average shares used to compute basic and diluted net loss per share | 22,296,089 | 16,602,422 | Statements of Stockholders' Equity This section details changes in stockholders' equity for 2018 and 2019, including stock-based compensation, stock issuance, and net loss Statements of Stockholders' Equity (Years Ended December 31) | | Common Shares | Common Stock Amount | Additional Paid-In Capital | Accumulated Deficit | Total Stockholders' Equity | |:---|:---|:---|:---|:---|:---| | Balance at December 31, 2017 | 15,413,610 | $1,541 | $73,202,863 | $(71,038,655) | $2,165,749 | | Stock-based compensation expense | — | — | 1,539,469 | — | 1,539,469 | | Issuance of common stock from employee stock purchase plan | 28,869 | 3 | 47,054 | — | 47,057 | | Issuance of common stock, net | 1,985,054 | 199 | 4,571,041 | — | 4,571,240 | | Reclassification of warrant liability due to warrant amendment | — | — | 3,267,885 | — | 3,267,885 | | Net loss | — | — | — | (7,566,080) | (7,566,080) | | Balance at December 31, 2018 | 17,427,533 | 1,743 | 82,628,312 | (78,604,735) | 4,025,320 | | Stock-based compensation expense | — | — | 1,373,958 | — | 1,373,958 | | Issuance of common stock, net | 7,004,381 | 700 | 6,106,222 | — | 6,106,922 | | Net loss | — | — | — | (7,125,655) | (7,125,655) | | Balance at December 31, 2019 | 24,431,914 | $2,443 | $90,108,492 | $(85,730,390) | $4,380,545 | Statements of Cash Flows This section presents the company's cash inflows and outflows from operating, investing, and financing activities for 2019 and 2018 Statements of Cash Flows (Years Ended December 31) | Operating activities | 2019 | 2018 | |:---|:---|:---| | Net loss | $(7,125,655) | $(7,566,080) | | Adjustments to reconcile net loss to net cash used in operating activities: | | | | Stock-based compensation expense | 1,373,958 | 1,539,469 | | Change in fair value of warrant liability | — | (433,392) | | Change in operating assets and liabilities: | | | | Prepaid expenses and other assets | (116,676) | (78,172) | | Accounts payable and accrued expenses | 106,280 | (440,385) | | Net cash used in operating activities | $(5,762,093) | $(6,978,560) | | Financing activities | | | | Proceeds from issuance of common stock, net | 6,106,922 | 4,618,297 | | Net cash provided by financing activities | 6,106,922 | 4,618,297 | | Net increase (decrease) in cash and cash equivalents | 344,829 | (2,360,263) | | Cash and cash equivalents at beginning of period | 5,319,004 | 7,679,267 | | Cash and cash equivalents at end of period | $5,663,833 | $5,319,004 | | Non-cash financing activities | | | | Reclassification of warrant liability to equity due to amendment of warrants | — | $3,267,885 | Notes to Financial Statements This section provides detailed explanations and disclosures supporting the financial statements, covering organization, accounting policies, commitments, and other financial information 1. Organization and Basis of Presentation Evoke Pharma, incorporated in 2007, develops Gimoti, faces going concern uncertainty due to recurring losses, and regained Nasdaq compliance in 2019 - Evoke Pharma, Inc. was incorporated in Delaware in January 2007 and is a specialty pharmaceutical company focused on developing Gimoti for gastrointestinal disorders[265] - The New Drug Application (NDA) for Gimoti was resubmitted on December 19, 2019, and accepted by the FDA on January 17, 2020, with a PDUFA target goal date of June 19, 2020[265] - The company has incurred recurring losses and negative cash flows from operations since inception, raising substantial doubt about its ability to continue as a going concern[266] - Existing cash and the Eversana Credit Facility are expected to fund operations into 2021, but additional financing will be required, and the financial statements do not include adjustments for this uncertainty[266] - The company received a Nasdaq delisting notice in May 2019 for failing to meet the minimum $1.00 bid price requirement but regained compliance on November 29, 2019[269] 2. Summary of Significant Accounting Policies This note outlines the company's GAAP-compliant accounting policies, including segment reporting, cash equivalents, risk concentrations, warrant and stock-based compensation, R&D, and income taxes - The financial statements are prepared in accordance with GAAP, requiring management to make estimates and assumptions that affect reported amounts[270] - The company operates in one segment: the development of pharmaceutical products in the United States[271] - Cash equivalents include highly liquid investments with original maturities of three months or less[272] - Key concentrations of risk include cash deposits exceeding insured limits, reliance on third-party CROs and consultants for regulatory submissions, and dependence on single third-party manufacturers (Patheon) and sole-source suppliers (Cosma) for Gimoti[274] - Warrants were reclassified from a liability to additional paid-in capital in March 2018 due to amendments, eliminating the need for fair value remeasurement[276] - Stock-based compensation expense is recorded at grant date fair value and recognized over the service period, using the Black-Scholes model for valuation[277] - Research and development costs are expensed as incurred, including compensation, third-party contractor fees, and pre-approval inventories[278] - The company accounts for income taxes under ASC 740, reflecting deferred tax assets and liabilities with a valuation allowance, and recognizes interest and penalties related to income tax matters in income tax expense[279] Potentially Dilutive Securities Excluded from Diluted Net Loss Per Share (As of December 31) | Security Type | 2019 | 2018 | |:---|:---|:---| | Warrants to purchase common stock | 2,713,561 | 2,713,561 | | Common stock options | 3,114,371 | 3,017,624 | | Employee stock purchase plan | 25,000 | 10,785 | | Total excluded securities | 5,852,932 | 5,760,761 | - The company adopted ASU No. 2016-02, Leases (Topic 842), effective January 1, 2019, requiring the recognition of right-of-use (ROU) assets and lease liabilities for leases longer than 12 months[283] 3. Commitments The company has an operating lease for office space in Solana Beach, California, expiring on December 31, 2020, with a recorded ROU asset and liability of approximately $139,000 - The company has an operating lease for office space in Solana Beach, California, expiring on December 31, 2020[284] - As of December 31, 2019, an operating lease ROU asset and liability of approximately $139,000 were recorded based on the present value of future minimum lease payments[284] - Rent expense was approximately $145,000 in 2019 and $139,000 in 2018[284] - Future minimum lease payments for 2020 are approximately $146,000[285] 4. Technology Acquisition Agreement Evoke acquired Gimoti rights in 2007 and may owe up to $52 million in milestone payments