Benitec Biopharma(BNTC) - 2020 Q4 - Annual Report

Part I Business Benitec Biopharma is a development-stage biotechnology company focused on genetic medicines using its proprietary ddRNAi "silence and replace" platform, with lead candidate BB-301 for OPMD Company Overview Benitec Biopharma, based in Hayward, California, develops genetic medicines using its ddRNAi platform for OPMD (BB-301) and Chronic Hepatitis B, having re-domiciled to Delaware in April 2020 - The company's core technology is DNA-directed RNA interference (ddRNAi), which combines RNA interference with gene therapy to achieve long-term silencing of disease-causing genes from a single administration[22] - Benitec's lead candidate, BB-301 for Oculopharyngeal Muscular Dystrophy (OPMD), employs a "silence and replace" strategy, designed to silence the mutated gene while simultaneously replacing it with a normal, functional gene to restore cell function[23] - On April 15, 2020, the company completed a re-domiciliation, changing its jurisdiction of incorporation from Australia to Delaware and making the Australian entity (Benitec Limited) a wholly owned subsidiary[29] Our Technology and Approach The company's ddRNAi and "silence and replace" technologies use AAV vectors for single-dose, long-term gene silencing and functional protein replacement, addressing limitations of traditional siRNA therapies - The ddRNAi approach uses viral vectors (like AAV) to deliver a DNA construct into the cell's nucleus, which continuously produces short hairpin RNAs (shRNAs) processed into siRNAs to silence the target disease-causing gene[40][41] - The "silence and replace" approach enhances ddRNAi by including a wildtype transgene in the DNA construct, allowing for simultaneous silencing of the mutant gene and continuous production of the normal protein, aiming to restore native biological processes[39][42] - This approach aims to overcome key limitations of traditional siRNA therapies, including the need for repeat dosing, patient compliance challenges, and the inability to replace defective genes[37][38] Our Pipeline Benitec's pipeline prioritizes BB-301 for OPMD, currently in IND-enabling studies, while actively seeking strategic partners for its BB-103 HBV program due to funding limitations Product Candidate Development Status | Product Candidate | Indication | Development Stage | | :--- | :--- | :--- | | BB-301 | Oculopharyngeal Muscular Dystrophy (OPMD) | Late-Stage Nonclinical (IND-enabling studies) | | BB-103 | Chronic Hepatitis B Virus (HBV) | Nonclinical (Seeking partners for IND-enabling studies) | - The company is prioritizing its cash and cash equivalents to advance BB-301 for OPMD[46] - For the BB-103 HBV program, Benitec is actively seeking a strategic partnership to support its development and complete IND-enabling studies due to current liquidity and funding limitations[46][52][60] Intellectual Property Benitec's IP strategy protects its ddRNAi and "silence and replace" technologies with patent families for BB-103 (HBV) and BB-301 (OPMD) extending through at least 2036, alongside registered trademarks - The patent portfolio for the HBV program (BB-103) consists of four patent families covering RNAi agents targeting the HBV genome and the AAV delivery system[101] - The patent portfolio for the OPMD program (BB-301) includes five patent families covering shRNA/shmiRs targeting the PABPN1 gene, the 'silence and replace' therapeutic concept, the specific BB-301 construct, and the AAV delivery system[105] - The company has a growing patent portfolio protecting its technology and product candidates through at least 2036, with potential for further patent life[54] Key Registered Trademarks | Trademark | Jurisdiction(s) | | :--- | :--- | | BENITEC ® | Australia, United States | | BENITEC BIOPHARMA ® | Australia, United States | | GIVING DISEASE THE SILENT TREATMENT ® | Australia, European Union | | SILENCING GENES FOR LIFE ® | Australia, United States | Manufacturing, Competition, and Regulation Benitec relies on third-party manufacturers, faces strong competition in gene therapy, and is subject to extensive FDA regulation for its biologic products, with evolving pathways like RMAT - The company does not own or operate manufacturing facilities and relies on third-party contract manufacturing organizations (CMOs) to produce its product candidates under cGMP standards[118][119] - Benitec faces competition from well-funded companies in the gene therapy and gene silencing space, with specific competitors in the hepatitis B field including Alnylam, Arbutus, and Arrowhead[122] - The company's products are subject to extensive regulation by the FDA as biologics, requiring a rigorous development process including nonclinical testing, an Investigational New Drug (IND) application, and multi-phase clinical trials before a Biologics License Application (BLA) can be submitted for marketing approval[128][140] - The FDA has established specific guidance and an office (Office of Tissues and Advanced Therapies) for gene therapy products, and new regulations such as the Regenerative Medicine Advanced Therapy (RMAT) designation may provide expedited pathways for qualifying products[133][134] Risk Factors The company faces significant risks including historical losses, capital needs, unproven novel technologies, reliance on third parties, IP challenges, intense competition, and COVID-19 impacts - The company has a history of significant losses, with an accumulated deficit of $116.6 million as of June 30, 2020, and expects to incur further losses as it advances its research and development programs[195] - Benitec will require additional funding to advance its product candidates through clinical trials and to commercialization, and failure to secure this capital could force the company to delay or discontinue its development programs[205][208] - The company's ddRNAi and silence and replace technologies are novel, with no products based on them yet approved for commercial sale, posing significant development, regulatory, and market acceptance risks[214] - Benitec relies on third parties for critical functions, including conducting preclinical studies and clinical trials, and for manufacturing its product candidates, making it vulnerable to delays or failures by these partners[280][284] - The COVID-19 pandemic poses a risk to the business, potentially causing delays in clinical trials, disruptions to the supply chain, and negative impacts on the company's ability to raise capital[308][311] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[432] Properties The company's corporate headquarters and R&D facility are located in a leased 7,295 sq ft space in Hayward, California, with the lease expiring in June 2022 - The company's main facility is a leased 7,295 sq ft office and lab space in Hayward, California, with the lease expiring in June 2022[433] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently involved in any material legal proceedings[435] Mine Safety Disclosures This item is not applicable to the company - Not applicable[436] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Benitec's common stock trades on Nasdaq under "BNTC", has never paid dividends, and recently issued shares related to its re-domiciliation - The company's common stock trades on Nasdaq under the symbol "BNTC"[440] - The company has never declared or paid cash dividends and intends to retain all available funds for future operations and growth[442] - In connection with the Re-domiciliation on April 15, 2020, the company issued 1,070,957 shares of common stock in exchange for all outstanding ordinary shares of its Australian predecessor, Benitec Limited[445] Selected Financial Data As a smaller reporting company, Benitec is not required to provide selected financial data - The company is a smaller reporting company and is not required to provide selected financial data[450] Management's Discussion and Analysis of Financial Condition and Results of Operations FY2020 saw a sharp revenue decline to $102 thousand and a net loss of $8.3 million due to the Axovant agreement termination, with $9.8 million cash and a planned offering to fund operations Results of Operations FY2020 total revenues declined to $102 thousand from $12.2 million in 2019 due to the Axovant agreement termination, resulting in an $8.3 million operating loss Revenue Comparison (FY 2020 vs. FY 2019) | Revenue Source | FY 2020 (in thousands) | FY 2019 (in thousands) | | :--- | :--- | :--- | | Revenues from customers | $97 | $11,551 | | Government R&D grants | $5 | $648 | | Total revenues | $102 | $12,199 | Expense Comparison (FY 2020 vs. FY 2019) | Expense Category | FY 2020 (in thousands) | FY 2019 (in thousands) | | :--- | :--- | :--- | | Royalties and license fees | $(185) | $435 | | Research and development | $3,001 | $4,567 | | General and Administrative | $5,567 | $4,614 | | Total expenses | $8,383 | $9,616 | - The significant decrease in customer revenue in FY2020 was due to the termination of the License and Collaboration Agreement with Axovant Sciences, which was effective September 3, 2019[480][481] - The decrease in R&D expenses was primarily due to reimbursement of $606 thousand from Axovant for OPMD program costs and the termination of the AMD program[489] Liquidity and Capital Resources As of June 30, 2020, the company had $9.8 million in cash, a cumulative deficit of $116.6 million, and expects current cash plus a planned offering to fund operations for the next twelve months - The company had cash and cash equivalents of $9.8 million as of June 30, 2020[495] Net Cash Flow Summary (FY 2020 vs. FY 2019) | Activity | FY 2020 (in thousands) | FY 2019 (in thousands) | | :--- | :--- | :--- | | Operating activities | $(7,535) | $4,790 | | Investing activities | $(94) | $(400) | | Financing activities | $1,770 | $0 | | Net (decrease) increase in cash | $(5,859) | $4,390 | - Management estimates that current cash and proceeds from a planned public offering will fund operations for at least the next twelve months, with the company having filed a registration statement on Form S-1 on August 14, 2020[503][630] Critical Accounting Policies and Significant Accounting Estimates Critical accounting policies involve significant judgment, including Revenue Recognition (ASC 606) for complex licensing and Share-Based Compensation (ASC 718) requiring fair value estimates - Revenue Recognition (ASC 606) is a critical policy, requiring management judgment to identify performance obligations and allocate transaction prices, especially for licensing revenues[511][512] - Share-Based Compensation (ASC 718) is also critical, as it requires the use of the Black-Scholes model to determine the fair value of awards, which involves significant estimates for inputs like expected volatility and award life[519] Quantitative and Qualitative Disclosures about Market Risk As a smaller reporting company, Benitec is not required to provide quantitative and qualitative disclosures about market risk - The company is a smaller reporting company and is not required to provide this information[527] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for FY2020 and FY2019, including balance sheets, statements of operations, equity, cash flows, and accompanying notes Consolidated Balance Sheet Highlights (as of June 30) | Metric (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Cash and cash equivalents | $9,801 | $15,718 | | Total assets | $11,587 | $19,235 | | Total liabilities | $1,349 | $2,641 | | Total stockholders' equity | $10,238 | $16,594 | Consolidated Statement of Operations Highlights (for the year ended June 30) | Metric (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Total revenues | $102 | $12,199 | | Total operating expenses | $8,383 | $9,616 | | Net income (loss) | $(8,274) | $2,609 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Information on changes in and disagreements with accountants was previously disclosed in a Form 8-K filed on June 5, 2020, and amended on August 19, 2020 - The company refers to a previously filed Form 8-K for information on this topic[696] Controls and Procedures Management concluded that disclosure controls and internal control over financial reporting were effective as of June 30, 2020, with no material changes during the quarter - Management concluded that as of June 30, 2020, the company's disclosure controls and procedures were effective[697] - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2020, based on the COSO framework[699] - No changes occurred during the quarter ended June 30, 2020, that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[698] Other Information The company reports no other information for this item - None[702] Part III Directors, Executive Officers and Corporate Governance The company's leadership includes CEO Dr. Jerel Banks, with a five-member staggered Board of Directors, three standing committees, and an adopted Code of Ethics and Business Conduct - The executive officers are Dr. Jerel Banks (CEO) and Megan Boston (Executive Director)[706] - The Board of Directors is classified into three staggered three-year terms and has standing Audit, Compensation, and Nominating and Corporate Governance committees[724][726] - The company has adopted a Code of Ethics and Business Conduct, which is available on its website[734][735] Executive Compensation In FY2020, CEO Dr. Jerel Banks received $431,704 and Executive Director Megan Boston received $238,205 in total compensation, with both having at-will employment agreements requiring six-month termination notice FY 2020 Named Executive Officer Compensation | Named Executive Officer | Position | Salary ($) | Total ($) | | :--- | :--- | :--- | :--- | | Dr. Jerel A. Banks | CEO | 400,000 | 431,704 | | Megan Boston | Executive Director | 221,430 | 238,205 | - Both NEOs have employment agreements that are "at will" but require the company to provide six months' prior notice or pay in lieu of notice for termination[747][751] - Non-employee directors receive annual fees for their service, with Mr. Buchi's fee at $51,432 and Mr. Smith's at $50,000 annually[781] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters As of September 15, 2020, Nant Capital, LLC is the sole beneficial owner of over 5% of common stock at 26.4%, while directors and executive officers collectively own 4.1% Principal Stockholders (as of Sept 15, 2020) | Name of Beneficial Owner | Percentage of Shares Beneficially Owned | | :--- | :--- | | Nant Capital, LLC | 26.4% | | All Executive Officers and Directors As a Group (5 persons) | 4.1% | Certain Relationships and Related Transactions, and Director Independence The company has engaged in various transactions with its largest shareholder, Nant Capital, LLC, and its affiliates, with the Audit Committee responsible for reviewing related party transactions - The company has a strategic relationship with Nant Capital, LLC, its largest shareholder (26.4% ownership), which includes a prior equity investment and collaboration agreements[789][786] - A sublicense agreement with NantWorks, LLC (an affiliate of Nant Capital) for the BB-401 program was terminated in June 2020 as the program was discontinued[789] - The Audit Committee reviews and approves any related party transaction that requires disclosure[792] Principal Accountant Fees and Services For FY2020, Squar Milner LLP billed the company $206,800 for audit, audit-related, and tax services, all pre-approved by the Audit Committee Accountant Fees for Fiscal Year 2020 | Fee Category | Amount ($) | | :--- | :--- | | Audit Fees | $183,600 | | Audit-Related Fees | $16,200 | | Tax Fees | $7,000 | | Total | $206,800 | - The Audit Committee pre-approves 100% of all services rendered by the independent registered public accounting firm[796] Part IV Exhibits and Financial Statement Schedules This section indexes exhibits filed with Form 10-K, including corporate governance documents, executive employment agreements, and required SEC certifications - This section contains the index of all exhibits filed as part of the annual report[802] - Key filed exhibits include corporate governance documents, material contracts such as executive employment agreements, and required SEC certifications[798][803] Form 10-K Summary This item is not applicable - Not applicable[806]