Astria Therapeutics(ATXS) - 2020 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements (unaudited) The unaudited financial statements show increased total assets to $57.1 million driven by financing activities, alongside a growing net loss of $17.5 million for the first half of 2020 Condensed Consolidated Balance Sheet As of June 30, 2020, total assets increased to $57.1 million, primarily driven by a substantial rise in cash and cash equivalents reflecting recent financing activities Condensed Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | June 30, 2020 | December 31, 2019 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $51,885 | $9,899 | | Short-term investments | $2,001 | $26,345 | | Total current assets | $55,598 | $38,958 | | Total assets | $57,087 | $41,780 | | Liabilities & Equity | | | | Total current liabilities | $5,509 | $5,032 | | Total liabilities | $6,227 | $6,060 | | Total stockholders' equity | $50,860 | $35,720 | Condensed Consolidated Statements of Operations The company reported increased operating and net losses for the three and six-month periods ended June 30, 2020, compared to 2019, due to higher research and development expenses Condensed Consolidated Statements of Operations (in thousands, except per share data) | Metric | Three Months Ended June 30, 2020 | Three Months Ended June 30, 2019 | Six Months Ended June 30, 2020 | Six Months Ended June 30, 2019 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $6,750 | $5,160 | $12,039 | $9,357 | | General and administrative | $2,803 | $2,165 | $5,555 | $4,302 | | Total operating expenses | $9,553 | $7,325 | $17,594 | $13,659 | | Loss from operations | $(9,553) | $(7,325) | $(17,594) | $(13,659) | | Net loss | $(9,508) | $(7,131) | $(17,460) | $(13,169) | | Net loss per share | $(0.53) | $(0.62) | $(1.03) | $(1.24) | Condensed Consolidated Statements of Cash Flows For the first six months of 2020, a net cash increase of $41.7 million was driven by $31.9 million in financing activities, offsetting cash used in operations Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2020 | 2019 | | :--- | :--- | :--- | | Net cash used in operating activities | $(14,455) | $(12,325) | | Net cash provided by (used in) investing activities | $24,310 | $(14,229) | | Net cash provided by financing activities | $31,889 | $20,875 | | Net increase (decrease) in cash | $41,744 | $(5,679) | Notes to Condensed Consolidated Financial Statements The notes detail the company's focus on edasalonexent for DMD, significant financing activities raising over $31 million, and management's belief that current cash is sufficient for at least twelve months - The company's lead program is edasalonexent, an oral small molecule for the treatment of Duchenne muscular dystrophy (DMD), which has received orphan drug, fast track, and rare pediatric disease designations from the FDA[18] - In January 2020, the company raised net proceeds of $24.6 million from an underwritten public offering of 5,290,000 shares of common stock[21] - During the first six months of 2020, the company sold 1,100,001 shares through its ATM Programs, generating net proceeds of $7.3 million[20] - As of June 30, 2020, the company had $53.9 million in cash, cash equivalents, and short-term investments, which is believed to be sufficient to fund operations for at least the next twelve months[24] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the focus on developing edasalonexent, rising expenses due to clinical trial activities, and a strengthened liquidity position providing a cash runway through Q3 2021 Overview Catabasis is a clinical-stage biopharmaceutical company focused on its lead product candidate, edasalonexent, with top-line Phase 3 trial results expected in Q4 2020 - The company's lead product candidate is edasalonexent, an oral small molecule for treating Duchenne muscular dystrophy (DMD)[57] - The Phase 3 PolarisDMD trial completed enrollment with 131 boys, and top-line results are expected in the fourth quarter of 2020, with a goal to submit an NDA in 2021[58] - Contingency plans for the COVID-19 pandemic have been implemented for clinical trials, including delivery of study drugs to homes and use of telehealth, though the full impact on timelines remains uncertain[60] Results of Operations Operating expenses increased for the three and six months ended June 30, 2020, driven by higher costs for the edasalonexent program and commercialization activities Comparison of Operating Expenses (in thousands) | Expense Category | Q2 2020 | Q2 2019 | Change | 6 Months 2020 | 6 Months 2019 | Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Research & development | $6,750 | $5,160 | $1,590 | $12,039 | $9,357 | $2,682 | | General & administrative | $2,803 | $2,165 | $638 | $5,555 | $4,302 | $1,253 | | Total operating expenses | $9,553 | $7,325 | $2,228 | $17,594 | $13,659 | $3,935 | - The increase in R&D expenses for the six months ended June 30, 2020 was primarily due to a $1.6 million increase in costs for the edasalonexent program and a $0.6 million increase in employee-related expenses[90] - The increase in G&A expenses for the six months ended June 30, 2020 was mainly attributable to a $0.9 million increase in consulting and professional services for ongoing commercialization activities[91] Liquidity and Capital Resources The company's liquidity was significantly strengthened by raising $31.9 million in the first half of 2020, providing sufficient capital to fund operations through Q3 2021 - As of June 30, 2020, the company had $53.9 million in cash, cash equivalents and short-term investments[93] - The company raised net proceeds of $24.6 million from the January 2020 public offering and $7.3 million from ATM offerings in the first six months of 2020[94][95] - Existing cash is expected to be sufficient to support operating expenses through the third quarter of 2021 and beyond a potential NDA filing[103] Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is interest rate sensitivity on its investment portfolio, which is not considered material due to the portfolio's short-term, low-risk nature - The company's primary market risk exposure is interest rate sensitivity on its $53.9 million portfolio of cash, cash equivalents, and short-term investments[111] - Due to the short-term and low-risk nature of the investment portfolio, an immediate 10% change in interest rates is not expected to have a material effect[111] Controls and Procedures Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2020, with no material changes to internal controls during the quarter - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were effective at the reasonable assurance level[114] - No material changes were made to the company's internal control over financial reporting during the three months ended June 30, 2020[116] PART II. OTHER INFORMATION Risk Factors The company faces substantial risks related to its need for additional funding, heavy dependence on a single product candidate, and uncertainties from the COVID-19 pandemic Risks Related to Financial Position and Need for Capital The company requires substantial additional funding to continue operations, with existing cash projected to last only through Q3 2021 and a history of significant losses - 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[119] - Existing cash, cash equivalents, and short-term investments are expected to fund operations through the third quarter of 2021, but this estimate is based on assumptions that may prove wrong[124] - The company has incurred significant losses since inception, with an accumulated deficit of $241.1 million as of June 30, 2020, and expects to incur significant losses for at least the next several years[131] Risks Related to Discovery, Development and Commercialization The company's prospects depend almost entirely on the success of its lead candidate, edasalonexent, which faces risks from the COVID-19 pandemic and substantial competition - The company is heavily dependent on the success of its single lead product candidate, edasalonexent, and any setback would substantially harm the business[139][140] - The COVID-19 pandemic may delay clinical trials and disrupt regulatory activities, and the use of telehealth assessments could impact the FDA's view of data integrity[143][145] - The company faces substantial competition from approved DMD therapies like EXONDYS 51, VYONDYS 53, and EMFLAZA, as well as from numerous other companies developing treatments[192][194] Risks Related to Dependence on Third Parties The company relies on third-party CROs and CMOs, including sole-source suppliers, for critical clinical trial and manufacturing functions, creating significant operational risk - The company relies on third parties, such as CROs, to conduct its clinical trials, limiting its control over these activities while remaining responsible for compliance with standards like cGCPs[220][221][222] - The company relies on third-party contract manufacturers, including single-source suppliers for its active pharmaceutical ingredient and a key starting raw material, which increases the risk of manufacturing delays and supply interruptions[225][228][229] - The company expects to seek collaborations for development and commercialization, but may not be able to establish them on reasonable terms, which could force it to alter or delay its plans[211][212] Risks Related to Intellectual Property The company's success hinges on its ability to obtain and defend patent protection for its products, which is an uncertain process, and it also faces risks related to trade secret protection - The company's ability to successfully commercialize its products depends on obtaining and maintaining sufficient patent protection, but the patent process is highly uncertain and patents may be challenged or circumvented[235][237] - The company may become involved in expensive and time-consuming lawsuits to protect its patents or defend against claims that it infringes on the intellectual property of others[244][246] - The company relies on trade secrets for its technology platform, which are at risk of being disclosed or independently developed by competitors if confidentiality agreements are breached[242][243] Risks Related to Regulatory Approval and Other Legal Compliance The company faces a lengthy and uncertain regulatory approval process, extensive ongoing regulation post-approval, and complex compliance requirements for healthcare and data privacy laws - The marketing approval process is expensive, time-consuming, and uncertain, and the company may be unable to obtain approvals for its product candidates[263] - Recently enacted and future healthcare legislation may increase the difficulty and cost of obtaining marketing approval and could negatively affect product pricing and reimbursement[289][290] - The company is subject to complex global privacy and data security requirements, such as the GDPR, and failure to comply could result in significant fines and penalties[309][310] Exhibits This section lists the exhibits filed with the report, including the company's stock incentive plan and certifications required by the Sarbanes-Oxley Act - The report includes certifications from the principal executive officer and principal financial officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[361] Signatures The report was duly signed and authorized on August 10, 2020, by the company's Treasurer and Vice President of Finance - The Form 10-Q was signed on August 10, 2020, by Noah C Clauser, Treasurer and Vice President of Finance[362][363]