Amylyx(AMLX) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, reflecting the company's transition to a commercial-stage entity with first-time product revenue and a shift to net income Item 1. Financial Statements (Unaudited) This section presents the unaudited condensed consolidated financial statements, reflecting the company's transition to a commercial-stage entity with first-time product revenue and a shift to net income Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity at specific points in time Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $114,563 | $62,526 | | Short-term investments | $231,111 | $284,419 | | Total current assets | $389,053 | $382,133 | | Total assets | $407,958 | $391,453 | | Liabilities & Equity | | | | Total current liabilities | $51,616 | $46,609 | | Total liabilities | $55,310 | $50,846 | | Total stockholders' equity | $352,648 | $340,607 | Condensed Consolidated Statements of Operations This section outlines the company's financial performance over a period, showing revenue, expenses, and net income or loss Statement of Operations Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Product revenue, net | $71,428 | $0 | | Total operating expenses | $73,481 | $47,814 | | Loss from operations | $(2,053) | $(47,814) | | Net income (loss) | $1,573 | $(47,848) | | Diluted net income (loss) per share | $0.02 | $(0.93) | - The company achieved profitability in Q1 2023 with a net income of $1.6 million, a significant turnaround from a net loss of $47.8 million in Q1 2022, driven by the successful commercial launch of its product[19] Condensed Consolidated Statements of Cash Flows This section details the sources and uses of cash, categorized into operating, investing, and financing activities Cash Flow Summary (in thousands) | Cash Flow Activity | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,072) | $(40,634) | | Net cash provided by (used in) investing activities | $55,994 | $(99,311) | | Net cash provided by financing activities | $1,040 | $200,455 | | Net increase in cash | $52,037 | $60,442 | - Cash used in operating activities decreased significantly to $5.1 million from $40.6 million year-over-year, reflecting improved operational performance. Financing activities in the prior year period were dominated by proceeds from the company's initial public offering[31] Notes to Condensed Consolidated Financial Statements This section provides detailed accounting policies and financial results, including product revenue, inventory valuation, and contingent royalty obligations - The company's sole product, RELYVRIO® (ALBRIOZA™ in Canada), is approved for ALS in the U.S. and Canada. An application is under review in Europe. The company is also developing AMX0035 for other neurodegenerative diseases like PSP and Wolfram syndrome[34] Q1 2023 Product Revenue Gross-to-Net Reconciliation (in thousands) | Description | Amount | | :--- | :--- | | Product revenue, gross | $84,553 | | GTN adjustments | $(13,125) | | Product revenue, net | $71,428 | - The company has royalty payment obligations to the ALS Association and ALS Finding a Cure Foundation, calculated as 3% of net sales until 150% of the grant received is repaid. In Q1 2023, the company recorded $2.5 million in royalty expense[83] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's transition to a commercial-stage entity, highlighting Q1 2023 financial results, product revenue, and ongoing clinical trials, confirming sufficient liquidity for the next twelve months - The company's first product, RELYVRIO® (U.S.) / ALBRIOZA™ (Canada), is now commercially available for the treatment of ALS. An application for approval in the EU is under review, with a decision anticipated in Q3 2023 at the earliest[89][91][92] - Enrollment is complete for the Phase 3 PHOENIX trial for ALS, with topline results expected in mid-2024. The company is also advancing AMX0035 in other indications, having dosed the first participant in a Phase 2 study for Wolfram syndrome and planning a global Phase 3 trial for progressive supranuclear palsy (PSP)[94][95][97] - As of March 31, 2023, the company had $345.7 million in cash, cash equivalents, and short-term investments. Management believes this, along with product revenue, is sufficient to fund operations for at least the next year[101] Results of Operations This section details the company's Q1 2023 financial performance, showing $71.4 million in net product revenue, a shift to net income, and increased operating expenses due to commercialization Comparison of Operations for the three months ended March 31 (in thousands) | Metric | 2023 | 2022 | Change (%) | | :--- | :--- | :--- | :--- | | Product revenue, net | $71,428 | $0 | N/A | | Cost of sales | $5,283 | $0 | N/A | | Research and development | $24,192 | $21,464 | 13% | | Selling, general and administrative | $44,006 | $26,350 | 67% | | Net income (loss) | $1,573 | $(47,848) | 103% | - Cost of sales for Q1 2023 was $5.3 million, which included $2.5 million in royalty expenses. Gross margin was favorably impacted as $3.2 million in costs for units sold were expensed prior to regulatory approval. Gross margin is expected to decrease as this pre-commercialization inventory is depleted[121] - The 67% increase in SG&A expenses to $44.0 million was primarily due to hiring additional commercial and administrative personnel to support growth and commercialization efforts in the U.S. and EU[125] Liquidity and Capital Resources This section details the company's liquidity, with $345.7 million in cash and investments, deemed sufficient for the next twelve months, and a significant reduction in cash used in operations - The company believes that revenue from AMX0035 sales in the U.S. and Canada, combined with existing cash of $345.7 million, will be sufficient to meet operating and capital needs for at least the next twelve months from the filing date[129][133] Cash Flow Comparison for the three months ended March 31 (in thousands) | Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,072) | $(40,634) | | Net cash provided by (used in) investing activities | $55,994 | $(99,311) | | Net cash provided by financing activities | $1,040 | $200,455 | Item 3. Quantitative and Qualitative Disclosures About Market Risk This section discusses market risks, primarily interest rate sensitivity on $345.7 million in cash and investments, with minor foreign currency and inflation impacts - The primary market risk is interest rate sensitivity on the company's $345.7 million in cash and investments. Due to the portfolio's duration and low-risk profile, management believes the impact of interest rate changes would not be material[149] - The company is not currently exposed to significant foreign currency exchange risk but acknowledges potential future risk as it contracts with international vendors. Inflation has not had a material effect on the business but may impact labor costs[150] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - As of March 31, 2023, the company's management concluded that its disclosure controls and procedures were effective[152] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[153] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, and other disclosures Item 1. Legal Proceedings The company is not currently a party to any material legal proceedings and is unaware of any pending or threatened actions - As of the filing date, the company is not involved in any material legal proceedings[155] Item 1A. Risk Factors This section details significant risks and uncertainties across financial position, commercialization, product development, third-party dependence, intellectual property, and business operations Risks Related to Financial Position and Need for Capital This subsection outlines financial risks, including a history of significant losses, limited commercial operating history, and the potential need for additional funding - The company has a history of significant losses, with an accumulated deficit of $352.6 million as of March 31, 2023, and may incur more if revenue from its approved products does not cover expenses[167] - The company has a limited operating history as a commercial entity, having only recently launched its first products, which makes evaluating future viability difficult[173] Risks Related to Commercialization This subsection details commercialization risks for AMX0035, including limited experience, market acceptance, reimbursement challenges, and potential generic competition - The company has limited experience as a commercial entity and may not be successful in commercializing AMX0035, which could prevent it from generating meaningful product revenue[196] - Successful commercialization is dependent on achieving market acceptance and securing adequate coverage and reimbursement from third-party payors, which is uncertain and may be limited[204][228] Risks Related to Discovery and Development This subsection highlights drug development risks, including high dependence on AMX0035 and the critical risk of the PHOENIX trial failing, potentially leading to approval withdrawal - The company's business is highly dependent on the success of its single advanced product candidate, AMX0035. Failure to maintain or obtain additional approvals would materially harm the business[259][260] - A critical risk is that the ongoing global Phase 3 PHOENIX trial may not be successful. The company has stated it would voluntarily withdraw the product from the market if the trial fails, and regulators could also mandate a withdrawal[175][277][287] Risks Related to Dependence on Third Parties This subsection discusses risks from reliance on third-party manufacturers for supply and contract research organizations for clinical trials, potentially causing disruptions or delays - The company relies on third-party manufacturers for the production of AMX0035, which increases risks related to supply sufficiency, quality control (cGMP compliance), and potential delays[388][389] - The company depends on CROs and other third parties to conduct its clinical trials. Poor performance by these parties could compromise data integrity and delay or prevent regulatory approval[383] Risks Related to Intellectual Property This subsection covers intellectual property risks, including obtaining and maintaining patent protection for AMX0035, potential infringement litigation, and trade secret protection challenges - The company's commercial success is dependent on its ability to obtain and maintain intellectual property protection for AMX0035. If patent protection is not sufficiently broad, competitors may develop similar products[402][403][404] - The company may face costly litigation if sued for infringing on the intellectual property rights of third parties, which could prevent or delay the commercialization of its products[437] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the period - None[510] Item 5. Other Information The company entered into a standard indemnification agreement with newly appointed director Karen Firestone on May 8, 2023 - The company entered into a standard indemnification agreement with newly appointed director Karen Firestone on May 8, 2023[511] Item 6. Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including corporate governance documents, material contracts, and officer certifications - Exhibits filed include amendments to manufacturing and supply agreements, director indemnification agreements, and officer certifications[514]