Astria Therapeutics(ATXS) - 2018 Q4 - Annual Report

PART I Business The company is a clinical-stage biopharmaceutical firm focused on developing edasalonexent for Duchenne muscular dystrophy, with a Phase 3 trial underway Overview Catabasis Pharmaceuticals is a clinical-stage biopharmaceutical company developing edasalonexent for Duchenne muscular dystrophy - Catabasis Pharmaceuticals is a clinical-stage biopharmaceutical company focused on novel therapeutics[16] - Its lead product candidate, edasalonexent, is an oral small molecule inhibiting NF-kB for Duchenne muscular dystrophy (DMD)[16] - Edasalonexent has received Orphan Drug, Fast Track, and Rare Pediatric Disease designations from the FDA and Orphan Medicinal Product designation from the EC for DMD[16] - A global Phase 3 trial (PolarisDMD) for edasalonexent in DMD was initiated in September 2018, with top-line results expected in Q2 2020 and an NDA submission goal in early 2021[17] Our Product Candidates The company's pipeline includes edasalonexent for Duchenne muscular dystrophy in Phase 3 and preclinical candidate CAT-5571 for cystic fibrosis Edasalonexent Edasalonexent, an NF-kB inhibitor for DMD, has shown preserved muscle function and functional improvements in trials, with a Phase 3 trial ongoing - Edasalonexent inhibits NF-kB, a protein activated in DMD that drives inflammation, fibrosis, muscle degeneration, and suppresses muscle regeneration[25] - In the MoveDMD open-label extension (through 72 weeks), edasalonexent showed preserved muscle function and consistent improvements in NSAA score, time to stand, 4-stair climb, and 10-meter walk/run compared to off-treatment control[22][40] - Statistically significant improvement in the rate of change in lower leg composite MRI T2 was observed through 12, 24, 36, and 48 weeks on 100 mg/kg of edasalonexent treatment[21][40] - All four muscle enzymes tested were significantly decreased compared to baseline following edasalonexent treatment through 72 weeks (p<0.05)[22][42] - C-reactive protein (CRP), a marker of inflammation, was significantly decreased with edasalonexent at 12, 24, 36, and 48 weeks compared to baseline (p<0.001)[43] - Edasalonexent was well tolerated in the MoveDMD trial with no clinical safety signals observed through 2 years of treatment; most adverse events were mild and transient gastrointestinal issues[22][44] - The PolarisDMD Phase 3 trial is a randomized, double-blind, placebo-controlled trial enrolling approximately 125 patients aged four to seven, regardless of mutation type, who have not been on steroids for at least six months[18][38] - Primary efficacy endpoint for PolarisDMD is change in North Star Ambulatory Assessment (NSAA) score after 12 months; key secondary endpoints include timed function tests[18][38] - A new open-label extension trial, GalaxyDMD, is being initiated to provide longer-term safety data for registration filings[19] - Collaborations with UT Southwestern and Sarepta are exploring edasalonexent's potential for cardiac function improvement in DMD/BMD and combination with exon-skipping therapy, respectively[46][47] CAT-5571 CAT-5571 is a preclinical SMART Linker conjugate for cystic fibrosis, designed to activate autophagy, with IND-enabling activities completed - CAT-5571 is a SMART Linker conjugate of cysteamine and DHA, developed as a potential oral treatment for cystic fibrosis (CF)[52] - It is designed to activate autophagy, a cellular mechanism important for host defenses and depressed in CF[52] - IND-enabling activities for CAT-5571 have been completed[23][52] - The company intends to further develop CAT-5571 through selective collaborations[52] Sales and Marketing The company plans to commercialize edasalonexent in North America independently upon approval, seeking collaborators for international markets - The company has not yet established a commercial organization or distribution capabilities[54] - If edasalonexent is approved, the company plans to commercialize it in North America independently and seek collaborators for markets outside North America[35][54] Manufacturing and Supply The company relies on contract manufacturers for drug substance and product, planning to continue this strategy for commercial supply - The company has no manufacturing facilities and relies on contract manufacturers for drug substance and drug product for clinical trials[57] - They plan to continue relying on contract manufacturers and potential collaborators for commercial quantities if products are approved[57] - Product candidates are small molecule compounds manufactured from readily available raw materials using conventional chemistries[56] Competition The biopharmaceutical industry is highly competitive, with numerous approved and developing therapies for Duchenne muscular dystrophy, impacting commercial success - The development and commercialization of new drugs is highly competitive, with many competitors having significantly greater financial resources and expertise[58][298] - Key competitive factors include efficacy, safety, convenience, price, and reimbursement availability[59] - Currently, two therapies are approved in the US for DMD: Sarepta's EXONDYS 51 (exon 51 skipping) and PTC Therapeutics' EMFLAZA (deflazacort, a glucocorticoid)[31][60][295] - PTC Therapeutics' Translarna™ is conditionally approved in the EU for nonsense mutation DMD[34][60][295] - Several other companies are developing DMD therapies in late-stage clinical development, including exon-skipping and alternative approaches[34][61][63][64][295] - Dystrophin-targeted therapies are expected to be effective in approximately 34% of DMD patients, while edasalonexent aims to be effective for all DMD patients regardless of mutation[34][35] Intellectual Property The company protects its SMART Linker platform and product candidates through patents and trade secrets, with key patents expiring in 2029-2030 - The company protects its proprietary technologies, including the SMART Linker drug discovery platform, through patents and trade secrets[65] - As of December 31, 2018, the patent estate included over 10 issued U.S. patents, over 70 issued foreign patents, and numerous pending applications[24][68] - For edasalonexent, there are six issued U.S. patents with composition of matter and method of use claims, expected to expire in 2029[24][70] - For CAT-5571, there are four issued U.S. patents with composition of matter and method of use claims, scheduled to expire in 2030[24][71] - The company intends to apply for patent term extensions under the Hatch-Waxman Act and similar provisions in other jurisdictions if product candidates receive approval[73] Government Regulation and Product Approvals Pharmaceutical products are subject to extensive, lengthy, and costly government regulations in the US and EU, covering development, approval, marketing, and post-market compliance - Pharmaceutical products are extensively regulated by government authorities in the US (FDA) and other countries (e.g., EU) across their entire lifecycle[75] - The US approval process involves preclinical studies, IND submission, IRB approval, human clinical trials (Phase 1-4), NDA submission, FDA inspections, advisory committee review, user fees, and post-approval requirements[79] - Expedited review programs include Fast Track, Breakthrough Therapy, Priority Review, and Regenerative Advanced Therapy designations for serious or life-threatening conditions with unmet medical needs[118] - Accelerated approval pathway allows approval based on surrogate or intermediate clinical endpoints for serious conditions, contingent on post-approval confirmatory studies[124][127] - Orphan Drug Designation provides market exclusivity (7 years in US, 10 years in EU) for products treating rare diseases, with potential for a Priority Review Voucher in the US for rare pediatric diseases[153][157] - EU regulatory system includes clinical trial approval, PRIME designation for unmet medical needs, and marketing authorization via centralized or decentralized procedures[161][166][167] - Post-approval, products are subject to ongoing regulation, including cGMP compliance, advertising/promotion restrictions, and potential for withdrawal or penalties for non-compliance[132][135][397][398] - Healthcare reforms (e.g., ACA in US) and government price controls in the US and EU significantly impact coverage, reimbursement, and profitability of pharmaceutical products[183][187][189][194][195] - Relationships with healthcare providers and payors are subject to anti-kickback, fraud and abuse, and other healthcare laws (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA, GDPR), with potential for significant penalties for violations[191][429][431][435] Employees As of December 31, 2018, the company had 24 employees, with 14 in R&D and 8 Ph.D. holders, maintaining good employee relations - As of December 31, 2018, the company had 24 employees, with 14 in R&D and 8 holding Ph.D. degrees[206] - None of the employees are represented by a labor union, and employee relations are considered good[206] Our Corporate Information Catabasis Pharmaceuticals, Inc. was incorporated in Delaware on June 26, 2008, and effected a 1-for-10 reverse stock split on December 28, 2018 - Catabasis Pharmaceuticals, Inc. was incorporated in Delaware on June 26, 2008[207] - On December 28, 2018, the company effected a 1-for-10 reverse split of its common stock[208] Available Information The company's SEC filings and corporate governance documents are publicly available on its website and the SEC's website - Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments are available on the company's website and the SEC's website[209] - Corporate Governance Guidelines, Code of Business Conduct and Ethics, and committee charters are posted on the company's website[210] Risk Factors The company faces substantial risks across financial stability, product development, commercialization, intellectual property, and regulatory compliance in a highly uncertain environment - The company will need substantial additional funding for operations, especially for the PolarisDMD Phase 3 trial and potential commercialization, with existing capital projected to last into Q4 2020[213][214][215][216][219] - Raising additional capital may cause substantial dilution to stockholders, restrict operations, or require relinquishing rights to technologies or product candidates[220][221][224] - The company has incurred significant losses since inception ($197.3 million accumulated deficit as of December 31, 2018) and expects to continue incurring losses, with no guarantee of achieving profitability[226][227][229][230] - Success is highly dependent on edasalonexent; any setback in its development, approval, or commercialization would substantially harm the business[236][237][241] - Clinical drug development is lengthy, expensive, and uncertain, with preclinical and early-stage results not always predictive of later-stage success, and potential for delays or failures[248][249][256][257][259][261] - Challenges in patient enrollment for clinical trials, especially for rare diseases like DMD, could lead to significant delays or abandonment of trials[270][271][274][276] - The company faces substantial competition from major pharmaceutical and biotechnology companies, including existing approved therapies and numerous product candidates in development for DMD[293][294][295][296][297][298] - Ability to obtain and maintain sufficient patent protection is critical; patents may be challenged, narrowed, or invalidated, and trade secrets are difficult to protect[343][344][345][349][350][351][353][354] - The company relies on third parties for clinical trials and manufacturing, increasing risks of delays, non-compliance, and supply interruptions[329][330][331][334][335][336][337][340][341] - Compliance with extensive healthcare laws and regulations (e.g., federal Anti-Kickback Statute, False Claims Act, HIPAA, GDPR) is costly and complex, with potential for significant penalties for non-compliance[428][429][431][432][435] Unresolved Staff Comments The company reports no unresolved staff comments - No unresolved staff comments[493] Properties The company leases 19,000 square feet of office and lab space in Cambridge, Massachusetts, with the lease and a 15,000 square foot sublease expiring in June 2020 - The company leases approximately 19,000 square feet of office and laboratory space in Cambridge, Massachusetts[494] - The lease for the facilities expires in June 2020[494] - Approximately 15,000 square feet of the leased space is subleased to a third party, with the sublease also expiring in June 2020[495] - The existing facilities are considered sufficient for the company's needs for the foreseeable future[495] Legal Proceedings The company may face ordinary course legal proceedings but does not anticipate any current claims to have a material adverse effect - The company may become subject to various legal proceedings and claims in the ordinary course of business[496] - As of the report date, the company does not believe any current claim or litigation would have a material adverse effect on its business[496] - Litigation can have an adverse impact due to defense and settlement costs, and diversion of management resources[496] Mine Safety Disclosures This item is not applicable to the company - Not applicable[496] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq under 'CATB', with no dividends paid or intended, and no issuer purchases or unregistered sales during the period - Common stock has been publicly traded on The Nasdaq Global Market under "CATB" since June 25, 2015[498] - As of March 7, 2019, there were approximately 31 holders of record of common stock[499] - The company has never declared or paid cash dividends and does not intend to in the foreseeable future, planning to retain earnings for business growth[500] - No unregistered equity securities were sold, and no registered equity securities were purchased by the issuer during the period covered by this report[501][502] Management's Discussion and Analysis of Financial Condition and Results of Operations This section reviews the company's financial condition and operational results, focusing on edasalonexent development, ongoing losses, and future funding needs - The company is a clinical-stage biopharmaceutical company focused on edasalonexent for DMD, with the PolarisDMD Phase 3 trial ongoing and GalaxyDMD open-label extension initiating[503][504][506] - Since inception in June 2008, the company has devoted resources to platform technology, product development, preclinical studies, clinical trials, intellectual property, and capital raising[512] - Total funding raised from inception through December 31, 2018, was $245.2 million, with an additional $20.5 million net proceeds from equity financings in 2019[512][543] - The company has not generated any revenue from product sales as of December 31, 2018, and incurred significant annual net operating losses, with an accumulated deficit of $197.3 million[514][543] - Existing cash, cash equivalents, and short-term investments, including 2019 financings, are expected to fund operations into Q4 2020[543][553] - Future funding requirements depend on clinical trial pace, regulatory approvals, commercialization costs, and intellectual property maintenance[554][556] Overview The company is a clinical-stage biopharmaceutical firm focused on edasalonexent for DMD, with a Phase 3 trial underway and preclinical candidate CAT-5571 for CF - Catabasis Pharmaceuticals is a clinical-stage biopharmaceutical company focused on edasalonexent for Duchenne muscular dystrophy (DMD)[503] - Edasalonexent is an oral small molecule designed to inhibit NF-kB, with Orphan Drug, Fast Track, and Rare Pediatric Disease designations from the FDA, and Orphan Medicinal Product designation from the EC[503] - A global Phase 3 trial (PolarisDMD) was initiated in September 2018, with top-line results expected in Q2 2020 and an NDA submission goal in early 2021[504] - The MoveDMD Phase 1/2 trial showed preserved muscle function and consistent improvements in NSAA score and timed function tests through 72 weeks of edasalonexent treatment[510] - CAT-5571, a potential oral treatment for cystic fibrosis, has completed IND-enabling activities[511] - The company has raised $245.2 million from inception through December 31, 2018, primarily through equity offerings and debt financing, and has an accumulated deficit of $197.3 million[512][543] Financial Overview The company reported no product revenue, a 9% decrease in R&D expenses, and a 5% increase in G&A expenses in 2018, with improved other income - No revenue from product sales as of December 31, 2018[514] - Recognized $0.5 million revenue in 2017 from an option agreement, which was terminated in December 2017[515] Research and Development Expenses (in thousands) | Program | 2018 | 2017 | Change ($) | Change (%) | | :--------------------------------------------------------- | :------ | :------ | :--------- | :--------- | | Edasalonexent | $7,897 | $5,887 | $2,010 | 34.1% | | CAT-5571 | $528 | $2,436 | $(1,908) | -78.3% | | Other research and platform programs | $628 | $1,393 | $(765) | -54.9% | | Costs not directly allocated to programs (Employee, Facilities, Consultants, Other) | $7,989 | $8,966 | $(977) | -10.9% | | Total Research and Development Expenses | $17,042 | $18,682 | $(1,640) | -8.8% | - General and administrative expenses increased by $0.4 million (5%) to $9.3 million in 2018, primarily due to one-time performance bonuses for employees, partially offset by cost cutting in consulting services[539] - A strategic shift in April 2018 to focus on edasalonexent led to a 40% workforce reduction, incurring $0.9 million in restructuring charges ($0.4 million G&A, $0.5 million R&D)[215][529] - Other income (expense), net, increased by $0.8 million in 2018, driven by a $0.4 million decrease in interest expense and a $0.3 million increase in interest and investment income[540][542] Critical Accounting Policies and Significant Judgments and Estimates Financial statements rely on significant judgments and estimates, particularly for accrued R&D expenses, fair value measurements, and stock-based compensation - Financial statements require significant judgments and estimates, especially for accrued research and development expenses[532][534] - Estimates for R&D expenses are based on reviewing contracts, identifying services performed by CROs, and estimating costs for unbilled services[534][535] - Other critical accounting policies include fair value of financial instruments and stock-based compensation[533][647][655] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its short-term, low-risk investment portfolio, with no material foreign currency liabilities - Primary market risk is interest rate sensitivity, affecting cash, cash equivalents, and short-term investments[570] - An immediate 10% change in interest rates would not have a material effect on the fair market value of the investment portfolio or interest income, due to short-term duration and low-risk profile[570] - No material liabilities denominated in foreign currencies as of December 31, 2018 and 2017[571] Financial Statements and Supplementary Data Consolidated financial statements and the independent auditor's report are appended, with financial schedules omitted as information is presented elsewhere - Consolidated financial statements and the report of the independent registered public accounting firm are appended to this report[572] - All financial schedules are omitted because the information is presented in the consolidated financial statements or notes, or is not applicable[597] Changes in and Disagreements With Accountants on Accounting and Financial Disclosure There have been no changes in accountants or disagreements on accounting principles, practices, or financial disclosure - No change of accountants or disagreements with accountants on accounting principles, practices, or financial disclosure[573] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of December 31, 2018, with an exemption from auditor attestation - Management evaluated the effectiveness of disclosure controls and procedures as of December 31, 2018, and concluded they were effective at the reasonable assurance level[576] - Management assessed the effectiveness of internal control over financial reporting as of December 31, 2018, concluding it was effective based on COSO criteria[577][579][580] - The company is exempt from the independent registered public accounting firm's attestation report on internal control over financial reporting due to its status as an "emerging growth company"[580] - No material changes in internal control over financial reporting occurred during the three months ended December 31, 2018[581] Other Information This item is not applicable to the company - Not Applicable[582] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information on directors, executive officers, and corporate governance is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement[584] - The company has adopted a Code of Business Conduct and Ethics, corporate governance guidelines, and committee charters, accessible on its website[586] Executive Compensation Information concerning executive compensation is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information on executive compensation is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement[587] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters This section details securities authorized under equity compensation plans and security ownership, including outstanding options and shares available for future issuance Equity Compensation Plan Information (as of December 31, 2018) | Plan Category | Number of securities to be issued upon exercise of outstanding stock options, warrants and rights (a) | Weighted-average exercise price of outstanding options, warrants and rights (b) | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) (c) | | :--------------------------------------------------------- | :------------------------------------------------------------------------------------------------ | :------------------------------------------------------------------------------ | :------------------------------------------------------------------------------------------------------------------------------------------------ | | Equity compensation plans approved by security holders | 433,389 | $29.05 | 953,928 | | Equity compensation plans not approved by security holders | — | — | — | | Total | 433,389 | $29.05 | 953,928 | - The 2015 Employee Stock Purchase Plan provides for annual increases in authorized shares, with 36,470 shares added as of January 1, 2019[590] - Other information on security ownership is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement[591] Certain Relationships and Related Transactions, and Director Independence Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information on certain relationships, related transactions, and director independence is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement[592] Principal Accountant Fees and Services Information concerning principal accountant fees and services is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement - Information on principal accountant fees and services is incorporated by reference from the 2019 Annual Meeting of Stockholders proxy statement[593] PART IV Exhibits and Financial Statement Schedules This section lists financial statements and the independent auditor's report, with omitted schedules and a comprehensive exhibit index detailing corporate documents - The financial statements filed as part of this Annual Report on Form 10-K include the Report of Independent Registered Public Accounting Firm, Consolidated Balance Sheets, Statements of Operations and Comprehensive Loss, Stockholders' Equity, and Cash Flows[595][596] - All financial schedules have been omitted because the required information is either presented in the consolidated financial statements or their notes, or is not applicable[597] - A detailed Exhibit Index is provided, listing various corporate documents, stock warrants, equity incentive plans, employment agreements, lease agreements, and regulatory certifications[600][601][602][603] Form 10-K Summary This item is not applicable to the company - Not applicable[604] REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for 2018 and 2017, conducted under PCAOB standards - Ernst & Young LLP issued an unqualified opinion on the consolidated financial statements for the years ended December 31, 2018 and 2017[607] - The audit was conducted in accordance with PCAOB standards, focusing on material misstatement risks, accounting principles, and management estimates[609][610] - The company is not required to have, nor was the firm engaged to perform, an audit of its internal control over financial reporting[609] - Ernst & Young LLP has served as the company's auditor since 2010[611] Consolidated Financial Statements This section presents the company's consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, stockholders' equity, and cash flows, with detailed notes Consolidated Balance Sheets Total assets increased to $39.2 million in 2018, driven by cash and investments, while liabilities decreased and equity rose due to financings Consolidated Balance Sheet Summary (in thousands) | Item | December 31, 2018 | December 31, 2017 | | :----------------------------------------- | :---------------- | :---------------- | | Assets | | | | Cash and cash equivalents | $15,294 | $16,369 | | Short-term investments | $22,276 | $— | | Total current assets | $38,915 | $17,463 | | Property and equipment, net | $56 | $321 | | Restricted cash | $113 | $113 | | Other assets | $85 | $— | | Total assets | $39,169 | $17,897 | | Liabilities | | | | Accounts payable | $1,408 | $773 | | Accrued expenses | $2,763 | $2,432 | | Current portion of notes payable, net of discount | $— | $2,479 | | Total current liabilities | $4,171 | $6,016 | | Total liabilities | $4,227 | $6,105 | | Stockholders' Equity | | | | Additional paid-in capital | $232,243 | $183,224 | | Accumulated deficit | $(197,304) | $(171,434) |\ | Total stockholders' equity | $34,942 | $11,792 | | Total liabilities and stockholders' equity | $39,169 | $17,897 | - Total assets increased from $17.9 million in 2017 to $39.2 million in 2018, primarily due to an increase in cash, cash equivalents, and short-term investments[613][614] - Total liabilities decreased from $6.1 million in 2017 to $4.2 million in 2018, mainly due to the repayment of notes payable[613][614] - Stockholders' equity increased from $11.8 million to $34.9 million, reflecting additional paid-in capital from equity financings despite an accumulated deficit of $197.3 million[613][614] Consolidated Statements of Operations The company reported a net loss of $25.9 million in 2018, an improvement from 2017, with no revenue and decreased operating expenses Consolidated Statements of Operations Summary (in thousands, except per share data) | Item | Year Ended December 31, 2018 | Year Ended December 31, 2017 | | :----------------------------------------------------------------- | :--------------------------- | :--------------------------- | | Revenue | $— | $500 | | Operating expenses: | | | | Research and development | $17,042 | $18,682 | | General and administrative | $9,329 | $8,912 | | Total operating expenses | $26,371 | $27,594 | | Loss from operations | $(26,371) | $(27,094) | | Other income (expense), net | $501 | $(270) | | Net loss | $(25,870) | $(27,364) | | Net loss per share—basic and diluted | $(5.12) | $(12.62) | | Weighted-average common shares outstanding used in net loss per share—basic and diluted | 5,054,823 | 2,168,153 | - Net loss decreased from $27.4 million in 2017 to $25.9 million in 2018[616] - Revenue was $0 in 2018, down from $0.5 million in 2017[616] - Total operating expenses decreased by $1.2 million (4.4%) from $27.6 million in 2017 to $26.4 million in 2018[616] - Other income (expense), net, improved by $0.8 million, shifting from a net expense of $0.3 million in 2017 to a net income of $0.5 million in 2018[616] Consolidated Statements of Comprehensive Loss Comprehensive loss for 2018 was $25.9 million, an improvement from 2017, primarily reflecting the net loss with minor investment impacts Consolidated Statements of Comprehensive Loss (in thousands) | Item | Year Ended December 31, 2018 | Year Ended December 31, 2017 | | :--------------------------------- | :--------------------------- | :--------------------------- | | Net loss | $(25,870) | $(27,364) | | Other comprehensive (loss) income: | | | | (Loss) gain on short-term investments | $(4) | $4 | | Total other comprehensive (loss) income: | $(4) | $4 | | Comprehensive loss | $(25,874) | $(27,360) | - Comprehensive loss for 2018 was $25.9 million, an improvement from $27.4 million in 2017[618] - The primary component of comprehensive loss is net loss, with a small unrealized loss on short-term investments in 2018 and a small gain in 2017[618] Consolidated Statements of Stockholders' Equity Total stockholders' equity increased to $34.9 million in 2018, driven by $38.9 million from public offerings and $8.4 million from ATM offerings, despite a $25.9 million net loss Consolidated Statements of Stockholders' Equity Summary (in thousands, except share data) | Item | Common Stock (Number of Shares) | Common Stock (Par Value) | Additional Paid-in Capital | Accumulated Deficit | Accumulated Other Comprehensive (Loss) Gain | Total Stockholders' Equity | | :----------------------------------------- | :------------------------------ | :----------------------- | :------------------------- | :------------------ | :------------------------------------------ | :------------------------- | | Balance at December 31, 2017 | 2,364,526 | $2 | $183,224 | $(171,434) | $— | $11,792 | | Issuance of common stock and warrants in public offering, net of issuance costs | 4,200,000 | $4 | $38,882 | — | — | $38,886 | | Issuance of common stock for at-the-market offerings, net of issuance costs | 577,195 | $1 | $8,362 | — | — | $8,363 | | Stock-based compensation expense | — | — | $1,771 | — | — | $1,771 | | Net loss | — | — | — | $(25,870) | — | $(25,870) | | Balance at December 31, 2018 | 7,141,996 | $7 | $232,243 | $(197,304) | $(4) | $34,942 | - Total stockholders' equity increased from $11.8 million in 2017 to $34.9 million in 2018[621][623] - This increase was primarily driven by $38.9 million in net proceeds from the June 2018 public offering and $8.4 million from at-the-market offerings[622] - The company reported a net loss of $25.9 million and $1.8 million in stock-based compensation expense in 2018[622][623] Consolidated Statements of Cash Flows Net cash decrease was $1.1 million in 2018, with reduced operating cash outflow, a shift to investing cash outflow, and increased financing cash inflow Consolidated Statements of Cash Flows Summary (in thousands) | Item | Year Ended December 31, 2018 | Year Ended December 31, 2017 | | :---------------------------------------------------------- | :--------------------------- | :--------------------------- | | Net cash used in operating activities | $(23,465) | $(26,836) | | Net cash (used in) provided by investing activities | $(21,905) | $14,883 | | Net cash provided by financing activities | $44,295 | $4,726 | | Net decrease in cash, cash equivalents and restricted cash | $(1,075) | $(7,227) | | Cash, cash equivalents and restricted cash, end of period | $15,407 | $16,482 | - Net cash used in operating activities decreased by $3.4 million to $23.5 million in 2018, primarily due to a lower net loss and favorable changes in operating assets and liabilities[562][626] - Net cash (used in) provided by investing activities shifted from a $14.9 million inflow in 2017 to a $21.9 million outflow in 2018, mainly due to purchases of short-term investments[564][626] - Net cash provided by financing activities significantly increased to $44.3 million in 2018 from $4.7 million in 2017, driven by proceeds from public offerings and ATM programs[565][626] Notes to Consolidated Financial Statements The notes detail the company's accounting policies, financial instruments, equity, and commitments, highlighting its $197.3 million accumulated deficit and Q4 2020 funding outlook - The company is a clinical-stage biopharmaceutical company focused on edasalonexent for DMD, with an accumulated deficit of $197.3 million as of December 31, 2018[629][633] - Operations are primarily financed through public offerings and private placements of equity securities, with $22.6 million remaining available under current ATM programs[630][636] - Existing cash, cash equivalents, and short-term investments, including $20.5 million net proceeds from 2019 equity financings, are expected to fund operations into Q4 2020[634] - A 1-for-10 reverse stock split was effected on December 28, 2018, to regain Nasdaq compliance, retrospectively adjusting all share and per share amounts[637] - The company adopted ASU 2016-18 (Restricted Cash) and ASU 2018-07 (Stock Compensation) in 2018, with ASU 2016-02 (Leases) to be adopted in 2019[666][668][670] - Accrued expenses as of December 31, 2018, totaled $2.8 million, including compensation, contracted research costs, and professional fees[682] - The credit facility with MidCap Financial Trust, Flexpoint MCLS SPV LLC, and Square 1 Bank, which provided $10.0 million in term loans, expired after all outstanding payments were made as of December 31, 2018[683] - Future minimum lease payments under non-cancelable operating lease obligations total $2.1 million as of December 31, 2018, with $1.4 million due in 2019 and $0.7 million in 2020[568][686] - The company had $176.3 million in federal and $175.4 million in state net operating loss carryforwards as of December 31, 2018, fully offset by a valuation allowance due to a history of losses[719] - Subsequent to December 31, 2018, the company raised an additional $2.1 million net proceeds from ATM programs and $18.5 million net proceeds from a February 2019 public offering of common stock and warrants[725][726] SIGNATURES The Annual Report on Form 10-K was signed on March 14, 2019, by the President and CEO, along with other directors and officers - The Annual Report on Form 10-K was signed on March 14, 2019[731] - Signatories include Jill C. Milne (President and CEO), Deirdre A. Cunnane (Chief Legal Officer and Treasurer), Noah Clauser (Vice President of Finance), and other directors[733][734] - A power of attorney was granted to Jill C. Milne and Deirdre Cunnane to sign any amendments to the report[731]