Axsome Therapeutics(AXSM) - 2022 Q2 - Quarterly Report

Financial Information This section provides a comprehensive overview of the company's financial performance, condition, and related disclosures Financial Statements The unaudited consolidated financial statements for Axsome Therapeutics, Inc. as of and for the three and six months ended June 30, 2022, are presented, including balance sheets, statements of operations, stockholders' equity, cash flows, and explanatory notes Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of June 30, 2022, and December 31, 2021 Consolidated Balance Sheet Highlights (Unaudited) (in millions USD) | Account | June 30, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $73.4 | $86.5 | | Total current assets | $104.0 | $86.5 | | Goodwill | $11.9 | $— | | Intangible asset, net | $62.9 | $— | | Total assets | $180.6 | $87.8 | | Liabilities & Equity | | | | Total current liabilities | $42.6 | $23.1 | | Contingent consideration, non-current | $29.3 | $— | | Loan payable, long-term | $93.5 | $49.1 | | Total liabilities | $165.4 | $72.2 | Consolidated Statements of Operations This section details the company's revenues and expenses, presenting net loss and loss per common share for the three and six months ended June 30, 2022 and 2021 Consolidated Statements of Operations (Unaudited) (in millions USD, except per share data) | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $8.8 | $— | $8.8 | $— | | Research and development | $15.8 | $14.5 | $28.4 | $31.1 | | Selling, general and administrative | $31.2 | $16.3 | $56.9 | $27.6 | | Loss from operations | ($39.2) | ($30.8) | ($77.5) | ($58.7) | | Net loss | ($41.4) | ($32.3) | ($81.1) | ($61.5) | | Net loss per common share | ($1.06) | ($0.86) | ($2.09) | ($1.64) | Consolidated Statements of Cash Flows This section outlines the company's cash inflows and outflows from operating, investing, and financing activities for the six months ended June 30, 2022 and 2021 Cash Flow Summary for the Six Months Ended June 30 (Unaudited) (in millions USD) | Activity | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | ($66.2) | ($52.6) | | Net cash used in investing activities | ($53.5) | ($0.049) | | Net cash provided by financing activities | $106.6 | $10.0 | | Net (decrease) increase in cash | ($13.1) | ($42.7) | | Cash at end of period | $73.4 | $141.2 | Notes to Consolidated Financial Statements Detailed notes explain the company's accounting policies and financial data, covering business nature, the Sunosi acquisition, goodwill, debt, stock-based compensation, and contingencies - In May 2022, the Company acquired the U.S. rights to Sunosi® from Jazz Pharmaceuticals, which is now a key part of its CNS portfolio[21] - The company has incurred operating losses since inception, with an accumulated deficit of $490.3 million as of June 30, 2022, and expects losses to continue for the foreseeable future[24] - The acquisition of Sunosi was accounted for as a business combination with a total preliminary purchase consideration of $89.1 million, including $53 million in cash and $36.1 million in fair value of contingent consideration[79][82] - The company amended its loan agreement with Hercules Capital, increasing its term loan facility to $300 million and drawing down an additional $45.0 million in May 2022 to finance the Sunosi acquisition[106][107] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's financial condition and operational results for the quarter ended June 30, 2022, including business overview, recent developments, financial analysis, and liquidity Company Overview This section provides an overview of Axsome's biopharmaceutical focus on central nervous system conditions and its product portfolio, including commercial and clinical-stage candidates - Axsome is a biopharmaceutical company focused on developing and delivering therapies for central nervous system (CNS) conditions[156] - The company's portfolio includes the commercial product Sunosi® (acquired from Jazz Pharmaceuticals in May 2022) and four clinical-stage candidates: AXS-05 (MDD, AD agitation), AXS-07 (migraine), AXS-12 (narcolepsy), and AXS-14 (fibromyalgia)[156][157][158] - The NDA for AXS-05 for MDD is under review by the FDA. The NDA for AXS-07 for migraine received a Complete Response Letter (CRL) from the FDA related to chemistry, manufacturing, and controls (CMC) issues[158] Results of Operations This section analyzes the company's operational performance, comparing product sales, research and development, and selling, general, and administrative expenses for the three and six months ended June 30, 2022 and 2021 Comparison of Operating Results (Three Months Ended June 30) (in millions USD) | Item | 2022 | 2021 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $8.8 | $0 | +$8.8 | Launch of Sunosi sales post-acquisition | | R&D Expenses | $15.8 | $14.5 | +$1.3 | Increased personnel expense and ongoing clinical trial costs | | SG&A Expenses | $31.2 | $16.3 | +$14.9 | Pre-commercial and commercial activities for Sunosi, increased personnel, and stock compensation | Comparison of Operating Results (Six Months Ended June 30) (in millions USD) | Item | 2022 | 2021 | Change | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Product sales, net | $8.8 | $0 | +$8.8 | Launch of Sunosi sales post-acquisition | | R&D Expenses | $28.4 | $31.1 | -$2.7 | Decrease driven by NDA fees incurred in the prior period | | SG&A Expenses | $56.9 | $27.6 | +$29.3 | Pre-commercial and commercial activities for Sunosi, increased personnel, and stock compensation | Liquidity and Capital Resources This section discusses the company's cash position, primary funding sources, and management's assessment of future funding requirements and sufficiency of capital - As of June 30, 2022, the company had $73.4 million in cash and cash equivalents[231] - Primary funding sources have been equity offerings and debt borrowings. In H1 2022, financing activities provided $106.6 million, primarily from a $45.0 million debt draw, $56.8 million from an at-the-market stock offering, and a $5.0 million stock purchase by Hercules[198][210] - Management believes current cash and committed capital from its $300 million term loan facility are sufficient to fund operations into 2024, assuming the potential launch of AXS-05 in MDD[205] Quantitative and Qualitative Disclosure About Market Risk This section details the company's exposure to market risks, including interest rate, foreign currency, and inflation, none of which are currently deemed to have a material financial impact - The company is exposed to interest rate risk from its debt borrowings, but does not believe a 100 basis point increase would have a material effect due to the nature of its debt and investment portfolio[231] - Foreign currency exchange risk exists due to contracts with vendors in Europe, but to date, the effects have not been material[232] - Inflation is not believed to have had a material effect on the business during the six months ended June 30, 2022[232] Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2022, with no material changes to internal control over financial reporting other than those related to the Sunosi acquisition - Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[233] - No material changes to internal control over financial reporting were identified during the quarter, apart from those related to the integration of the Sunosi acquisition[234] Other Information This section provides additional disclosures beyond financial statements, including legal proceedings, risk factors, and a list of exhibits filed with the report Legal Proceedings This section discloses a securities class action lawsuit and a shareholder derivative action filed against the company, both alleging false statements regarding AXS-07's CMC practices - A securities class action lawsuit was filed against the company in May 2022, alleging false statements and omissions concerning the Chemistry Manufacturing and Controls (CMC) practices for its product candidate, AXS-07[236] - A shareholder derivative action was filed in July 2022 against the company's directors and certain officers, arising from similar allegations as the securities class action[237] Risk Factors This section comprehensively outlines significant risks and uncertainties that could adversely affect the company's business, financial condition, and operations, categorized across various critical areas - The company has a history of significant losses ($490.3 million accumulated deficit) and may never achieve profitability[239][252] - The business is substantially dependent on the success of its products, particularly the commercialization of Sunosi and the regulatory approval and launch of its pipeline candidates like AXS-05[241][275] - The company relies heavily on third parties for clinical trial conduct, manufacturing, and other essential services, and failure by these parties to perform could significantly harm the business[243][403] - Significant competition exists from major pharmaceutical companies, and the company faces risks related to intellectual property protection, potential infringement lawsuits, and reliance on licensed IP[242][438][452] Exhibits This section lists exhibits filed with the Quarterly Report on Form 10-Q, including warrant agreements, share transfer agreements, and required certifications from executive officers List of Filed Exhibits | Exhibit Number | Description | | :--- | :--- | | 10.1 | Form of Warrant Agreement with Hercules Capital, Inc. | | 10.2 | Share Transfer Agreement with Hercules Capital, Inc. and related entities | | 31.1 / 31.2 | Certifications of Principal Executive Officer and Principal Financial Officer (Section 302) | | 32.1 / 32.2 | Certifications of Principal Executive Officer and Principal Financial Officer (Section 906) | | 101 / 104 | Inline XBRL documents | Signatures This section confirms the official signing of the report by the company's President and Chief Executive Officer and Chief Financial Officer - The report was duly signed on August 9, 2022, by Herriot Tabuteau, M.D., President and Chief Executive Officer, and Nick Pizzie, Chief Financial Officer[560]