Biora Therapeutics(BIOR) - 2021 Q4 - Annual Report

Part I Business Progenity, Inc. is a biotechnology company focused on developing oral biotherapeutics using ingestible smart capsules for targeted GI and systemic delivery - In June 2021, the company announced a strategic transformation to refocus on its R&D pipeline, which included closing its genetics lab in Michigan and selling its Avero laboratory business. These former Laboratory Operations are now reported as discontinued operations[13][436][551] - The company's new focus is on developing oral biotherapeutics through two primary platforms: targeted delivery to the GI tract for IBD and systemic delivery of large molecules to replace injections[10][14] - Progenity holds rights to approximately 350 issued patents and pending patent applications covering its therapeutic and device methods, systems, and compositions[33][89] Product Pipeline The company's pipeline focuses on drug-device combinations, including targeted GI therapeutics, systemic oral biotherapeutics, and GI diagnostic platforms Key Product Candidates and Platforms | Platform | System | Lead Candidate(s) | Indication | Status | | :--- | :--- | :--- | :--- | :--- | | Targeted Therapeutics | DDS Capsule | PGN-600 (tofacitinib) | Ulcerative Colitis | Phase 1 planned for late 2022 | | | | PGN-001 (anti-TNF-alpha) | Ulcerative Colitis | Preclinical | | Systemic Therapeutics | OBDS Capsule | PGN-OB1 (anti-TNF-alpha) | Autoimmune Conditions | Preclinical | | | | PGN-OB2 (GLP-1 agonist) | Type 2 Diabetes | Preclinical | | GI Diagnostics | RSS Capsule | N/A | GI Sampling | Proof of concept study completed | | | PIL Dx Capsule | N/A | SIBO Diagnosis | Subsystem testing completed | - The company has active partnerships with Ionis Pharmaceuticals and two other leading pharmaceutical companies to evaluate the OBDS platform for delivering their proprietary drugs[25][70] - Projects for a preeclampsia rule-out test (Preecludia™) and a single-molecule detection assay have been deprioritized and are being marketed to potential commercial partners[30][32] Competition Progenity faces substantial competition from major pharmaceutical and biotechnology companies across its IBD, systemic oral delivery, and GI diagnostics markets - The IBD therapeutics market is mature, with competition from large pharmaceutical companies like AbbVie, Eli Lilly, Gilead, J&J, Pfizer, Roche, and Takeda[84] - In systemic oral biotherapeutics, competition comes from various technologies, including functional excipients (Enteris, Novo Nordisk), enteric coatings (Catalent, Cosmo), and other ingestible devices (Novo Nordisk, Rani Therapeutics, Amgen)[85] Government Regulation The company's drug-device combination product candidates are subject to extensive FDA regulation, requiring complex reviews and adherence to data privacy laws like HIPAA - Medical device product candidates are regulated by the FDA and classified into Class I, II, or III based on risk, determining the pathway to market (e.g., 510(k) clearance or PMA)[95][96] - Drug and biologic product candidates require a comprehensive development process, including preclinical testing and multi-phase clinical trials, before submitting a New Drug Application (NDA) or Biologics License Application (BLA) to the FDA[123][124][128] - The company's drug-device combination products will be regulated by the FDA, with one center having primary jurisdiction based on the product's primary mode of action. The company expects its therapeutic candidates to be reviewed as drugs or biologics[168][172][173] - The company is subject to data privacy and security laws, including HIPAA, which imposes obligations regarding the handling of protected health information (PHI)[176][267] Risk Factors The company faces significant risks including strategic transformation challenges, going concern doubts, complex product development, intense competition, and stock price volatility - The company's strategic transformation to focus on R&D has materially reduced operating expenditures but also revenue, creating difficulties in managing the changes and potential adverse effects on financial condition[205][207][209] - The company has a history of losses and expects to need significant additional capital to fund operations. If it cannot raise capital, it may have to curtail or cease operations[218][219] - The development of new product candidates is complex and costly, with no assurance of success in clinical trials, obtaining regulatory authorization, or achieving market acceptance[233][237][241] - The company's outstanding convertible notes may impair financial flexibility, and the issuance of shares upon conversion will dilute existing stockholders. Hedging activity related to these notes could also depress the stock price[260][394][395] - The company's common stock may be a target of "short squeezes," which can cause extreme price volatility disconnected from the company's underlying value, posing a risk of significant loss to investors[392] Properties Progenity maintains its primary office and lab facilities through a combination of leased and owned properties in San Diego, CA, Irving, TX, and Ann Arbor, MI - The company's main facilities include leased office and lab space in San Diego, CA, and owned/leased space in Ann Arbor, MI[419] Legal Proceedings Progenity is involved in various legal and regulatory matters, including Medicaid recoupment claims, government subpoenas, patent infringement, and securities litigation - The Colorado Department of Health is seeking recoupment of approximately $9.0 million ($5.7M + $3.3M) for historical Medicaid payments related to carrier screening tests[420][676][677] - The company received a subpoena from the California Attorney General's Office related to its former genetic testing practices, particularly NIPT, for California patients[423][678] - Ravgen, Inc. filed a patent infringement suit against Progenity related to its former NIPT testing business. The litigation is currently stayed pending patent validity challenges[425][689] - The company is facing securities litigation related to its June 2020 IPO, with plaintiffs alleging false and misleading statements and omissions in the registration statement. The company is vigorously defending against these claims[426][690] Part II Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses Progenity's financial performance reflecting its strategic transformation, reporting increased net losses and a going concern doubt, with historical laboratory operations as discontinued - The company's financial statements reflect the Strategic Transformation, with its historical Laboratory Operations now reported as discontinued operations. The company's focus is now on its R&D pipeline for oral biotherapeutics[436][444] Comparison of Operations (Continuing Operations) | Statement of Operations Data (in thousands) | 2021 | 2020 | | :--- | :--- | :--- | | Revenues | $1,247 | $162 | | Research and development | $45,785 | $47,743 | | Selling and marketing | $4,758 | $5,949 | | General and administrative | $68,541 | $54,089 | | Loss from continuing operations | ($178,521) | ($105,086) | - The increase in G&A expenses in 2021 was primarily due to consulting fees for the strategic restructuring, legal fees for litigation, and higher D&O insurance premiums[467] - As of December 31, 2021, the company had $88.4 million in cash and cash equivalents. Management has stated there is substantial doubt about the company's ability to continue as a going concern without additional funding[475][476][552] Financial Statements and Supplementary Data This section presents the audited financial statements, highlighting the auditor's going concern doubt, significant losses, accumulated deficit, and details of financing activities - The report from independent auditor KPMG LLP includes a "Going Concern" paragraph, highlighting that the company's recurring losses and accumulated deficit raise substantial doubt about its ability to continue as a going concern[534] Consolidated Balance Sheet Data (in thousands) | | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $88,397 | $92,076 | | Total current assets | $98,429 | $126,338 | | Total assets | $108,839 | $154,440 | | Liabilities & Stockholders' Deficit | | | | Total current liabilities | $61,609 | $72,670 | | Convertible notes, net | $126,392 | $158,886 | | Total liabilities | $193,815 | $261,434 | | Accumulated deficit | ($788,686) | ($541,274) | | Total stockholders' deficit | ($84,976) | ($106,994) | Consolidated Statement of Operations Data (in thousands) | | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Loss from continuing operations | ($178,521) | ($105,086) | | Loss from discontinued operations | ($68,891) | ($87,442) | | Net loss | ($247,412) | ($192,528) | | Net loss per share, basic and diluted | ($2.57) | ($7.00) | - In 2021, the company raised significant capital through multiple offerings: a $25M private placement in February, a $40M private placement in June, a $40M public offering in August, a $20M registered direct offering in October, and initiated a $90M at-the-market (ATM) program in November[493][494][495] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021, following its strategic transformation - Management concluded that disclosure controls and procedures were effective as of December 31, 2021[749] - Management concluded that internal control over financial reporting was effective as of December 31, 2021[751] Part III Directors, Executive Compensation, and Corporate Governance Information on directors, executive compensation, and corporate governance is incorporated by reference from the company's forthcoming 2022 proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the forthcoming 2022 proxy statement[752][753][754] Part IV Exhibits, Financial Statement Schedules This section provides an index of all financial statements and exhibits filed with the Form 10-K, including governance documents and officer certifications - This section provides an index of all exhibits filed with the Form 10-K, including governance documents, material agreements, and officer certifications[758]