Astria Therapeutics(ATXS) - 2019 Q3 - Quarterly Report

PART I—FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements, highlighting asset growth, net losses, and significant financing activities for the period ended September 30, 2019 Condensed Consolidated Balance Sheets As of September 30, 2019, total assets increased to $43.8 million, driven by cash and investments, while liabilities rose to $5.6 million and equity grew to $38.3 million Condensed Consolidated Balance Sheet Data (in thousands) | Account | Sep 30, 2019 | Dec 31, 2018 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $17,765 | $15,294 | | Short-term investments | $22,850 | $22,276 | | Total current assets | $42,726 | $38,915 | | Total assets | $43,834 | $39,169 | | Liabilities & Equity | | | | Total current liabilities | $5,561 | $4,171 | | Total liabilities | $5,561 | $4,227 | | Accumulated deficit | ($216,987) | ($197,304) | | Total stockholders' equity | $38,273 | $34,942 | Condensed Consolidated Statements of Operations The company reported a net loss of $6.5 million for Q3 2019 and $19.7 million for the nine-month period, primarily due to increased research and development expenses with no operational revenue Operating Results (in thousands, except per share data) | Metric | Q3 2019 | Q3 2018 | Nine Months 2019 | Nine Months 2018 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $4,697 | $3,897 | $14,054 | $13,383 | | General and administrative | $1,985 | $2,111 | $6,287 | $6,900 | | Total operating expenses | $6,682 | $6,008 | $20,341 | $20,283 | | Loss from operations | ($6,682) | ($6,008) | ($20,341) | ($20,283) | | Net loss | ($6,514) | ($5,679) | ($19,683) | ($19,810) | | Net loss per share | ($0.56) | ($0.80) | ($1.80) | ($4.54) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities totaled $18.8 million for the nine months ended September 30, 2019, primarily offset by $21.8 million in financing activities, resulting in a $2.5 million net cash increase Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($18,799) | ($18,196) | | Net cash used in investing activities | ($578) | ($22,999) | | Net cash provided by financing activities | $21,848 | $44,702 | | Net increase in cash | $2,471 | $3,507 | Notes to Condensed Consolidated Financial Statements These notes detail the company's focus on edasalonexent for DMD, significant capital raises of $18.5 million and $3.2 million, adoption of ASC 842, and a $40.6 million cash position expected to fund operations through 2020 - The company's lead program is edasalonexent for the treatment of Duchenne muscular dystrophy (DMD), which has received orphan drug, fast track, and rare pediatric disease designations from the FDA[22] - In February 2019, the company raised net proceeds of $18.5 million through an underwritten public offering of common stock and warrants[25] - The company believes its cash, cash equivalents, and short-term investments of $40.6 million as of September 30, 2019, are sufficient to fund operations through 2020[27] - Upon adopting the new lease accounting standard (ASC Topic 842) on January 1, 2019, the company recognized a lease liability and a right-of-use asset of approximately $1.9 million[43] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the clinical development of edasalonexent, including the completed Phase 3 PolarisDMD trial, increased R&D expenses, and the company's financial position strengthened by $21.7 million in equity offerings, with $40.6 million cash expected to fund operations through 2020 Overview This overview details the company's focus on edasalonexent for DMD, the completed enrollment of the Phase 3 PolarisDMD trial with 131 boys, and anticipated top-line results in Q4 2020 for a 2021 NDA submission - The global Phase 3 PolarisDMD trial for edasalonexent completed enrollment with 131 boys, exceeding the target of 125[86] - Top-line results from the PolarisDMD trial are expected in the fourth quarter of 2020, with a goal to file a New Drug Application (NDA) in 2021[86] - The GalaxyDMD open-label extension trial was initiated in March 2019 to provide longer-term safety data to support registration filings[91] Results of Operations R&D expenses increased to $4.7 million in Q3 2019 and $14.1 million for the nine-month period due to the PolarisDMD trial, while G&A expenses decreased, resulting in a stable net loss of $19.7 million for the nine months Comparison of Operating Expenses (in thousands) | Expense Category | Q3 2019 | Q3 2018 | Change | Nine Months 2019 | Nine Months 2018 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & Development | $4,697 | $3,897 | +$800 | $14,054 | $13,383 | +$671 | | General & Administrative | $1,985 | $2,111 | -$126 | $6,287 | $6,900 | -$613 | - The increase in R&D expenses for both the three and nine-month periods was primarily attributable to increased costs to support the edasalonexent program due to activities associated with conducting the PolarisDMD trial[114][120] Liquidity and Capital Resources As of September 30, 2019, the company held $40.6 million in cash and investments, bolstered by $18.5 million and $3.2 million from equity offerings, sufficient to fund operations through 2020, despite an accumulated deficit of $217.0 million - As of September 30, 2019, the company had $40.6 million in cash, cash equivalents, and short-term investments[123] - The company raised net proceeds of $18.5 million from the February 2019 public offering and $3.2 million from its ATM program during the first nine months of 2019[125][126] - Existing cash is expected to be sufficient to support operating expenses through 2020, but the company will need to raise additional capital for future operations[134][135] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate sensitivity on its $40.6 million cash and investment portfolio, which is not expected to be materially affected by a 10% interest rate change due to its short-term, low-risk nature - The company's primary market risk is interest rate sensitivity related to its cash, cash equivalents, and short-term investments of $40.6 million[143] - Due to the short-term and low-risk nature of the investment portfolio, a 10% change in interest rates is not expected to have a material effect on its fair market value[143] Item 4. Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2019, with no material changes to internal control over financial reporting during the third quarter - Management concluded that as of September 30, 2019, the company's disclosure controls and procedures were effective at the reasonable assurance level[146] - There were no material changes in internal control over financial reporting during the three months ended September 30, 2019[148] PART II—OTHER INFORMATION Item 1A. Risk Factors The company faces substantial risks including financial instability, dependence on edasalonexent, clinical development uncertainties, reliance on third parties, intense competition, intellectual property challenges, regulatory hurdles, and common stock volatility and dilution Risks Related to Financial Position and Need for Capital The company requires substantial additional funding beyond 2020, has a history of significant operating losses with an accumulated deficit of $217.0 million, and faces potential dilution or program delays if capital is not secured - The company will need substantial additional funding and could be forced to delay, reduce, or eliminate product development or commercialization efforts if unable to raise capital[151] - Existing cash, cash equivalents, and short-term investments are expected to fund operations only through 2020[156] - The company has incurred significant losses since inception, with an accumulated deficit of $217.0 million as of September 30, 2019, and expects to incur significant losses for at least the next several years[166] Risks Related to Product Development and Commercialization The company's success hinges on edasalonexent, facing lengthy, expensive, and uncertain clinical development, intense competition in the DMD market, and risks of limited market acceptance or unfavorable pricing even if approved - The company is substantially dependent on the success of its single product candidate, edasalonexent, and any setback would materially harm the business[174][175] - Clinical drug development is a lengthy and expensive process with an uncertain outcome, and early positive results may not be predictive of future success[185][192] - The company faces substantial competition in the DMD space from approved therapies like EXONDYS 51 and EMFLAZA, as well as from numerous companies in late-stage development[222][223] Risks Related to Dependence on Third Parties The company's heavy reliance on third-party CROs and CMOs for clinical trials and manufacturing introduces risks of performance failures, delays, non-compliance, and significant business harm if key partners are lost - The company relies on third parties, such as contract research organizations (CROs), to conduct its clinical trials, limiting its control over these activities while remaining responsible for regulatory compliance[250][253] - The company has no manufacturing facilities and relies on third-party contractors for the manufacture of its product candidates, increasing risks related to supply sufficiency, cost, and quality[256][257] Risks Related to Intellectual Property The company's success depends on obtaining and maintaining patent protection, which is uncertain and vulnerable to challenges, and faces risks of expensive and time-consuming intellectual property litigation - The company's ability to successfully commercialize its products depends on obtaining and maintaining sufficient patent protection, which is an uncertain, expensive, and time-consuming process[265][266] - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against claims of infringing the intellectual property of others[275][278] Risks Related to Regulatory Approval and Legal Compliance The company faces a lengthy and uncertain regulatory approval process, ongoing post-approval regulations, potential adverse impacts from healthcare reform on pricing and reimbursement, and risks of significant penalties for non-compliance with complex healthcare laws - The marketing approval process is expensive, time-consuming, and uncertain, and the company may be unable to obtain approvals for its product candidates[297] - Healthcare reform measures, such as changes to the ACA and drug pricing initiatives, could increase costs, reduce reimbursement, and harm the business[326][333] - The company is subject to complex healthcare laws, including anti-kickback statutes and data privacy regulations like GDPR, with non-compliance potentially leading to significant penalties[342][350] Risks Related to Our Common Stock The company's common stock faces high price volatility, potential delisting risk from Nasdaq due to minimum bid price requirements, substantial dilution from outstanding warrants, and no anticipated dividends, relying solely on capital appreciation for investor returns - The company's stock price is likely to be highly volatile, and an active trading market may not be sustained[378][380] - The company faces a risk of being delisted from The Nasdaq Stock Market if it fails to meet continued listing requirements, such as the minimum $1.00 bid price[379] - A significant number of outstanding warrants to purchase common stock could cause substantial dilution and have a negative effect on the market price if exercised[392][393] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including a Sublease Agreement, Sarbanes-Oxley certifications, and XBRL data files - The exhibits filed with the report include a new Sublease Agreement, officer certifications pursuant to Sarbanes-Oxley Sections 302 and 906, and XBRL instance documents[407]