Cocrystal(COCP) - 2021 Q4 - Annual Report

Part I Business Cocrystal Pharma develops novel antiviral therapeutics using a proprietary structure-based drug discovery platform - The company's core strategy is to discover and develop novel antiviral therapeutics for serious viral diseases, including coronavirus, influenza, hepatitis C, and norovirus, using its unique structure-based technologies[12] - Cocrystal's proprietary drug discovery platform integrates computational chemistry, X-ray crystallography, and medicinal chemistry to design small molecule therapeutics that target highly conserved regions of viral enzymes, aiming for high efficacy and a high barrier to resistance[14][16] - The company's influenza A candidate, CC-42344, received regulatory clearance in Australia and began enrolling subjects for a Phase 1 clinical trial in March 2022[28] - For its coronavirus program, the company selected CDI-45205 as its lead protease inhibitor and is targeting a Phase 1 clinical study in 2022, with two other oral candidates, CDI-988 and CDI-873, selected for further development[32][33][34] - A key collaboration with Merck for influenza A/B antiviral agents has completed its research obligations, with Merck now solely responsible for further development, making Cocrystal eligible for up to $156 million in milestones plus royalties[58][59] - The company has licensed broad-spectrum antiviral compounds from Kansas State University Research Foundation (KSURF) for norovirus and coronavirus, involving upfront fees, annual maintenance fees, and potential milestone payments up to approximately $7.3 million across two agreements[60][63][65] Risk Factors The company faces significant risks from financial losses, COVID-19, regulatory uncertainty, competition, and Nasdaq compliance - The company has a history of significant losses, with an accumulated deficit of $259.1 million as of December 31, 2021, and expects to continue incurring losses as it has no commercialized products[79][93] - The COVID-19 pandemic has adversely affected operations, causing material delays and cost increases in R&D due to facility shutdowns, personnel illness, and supply chain issues with CROs and CMOs[81][88] - The company is dependent on its collaboration with Merck for the development and commercialization of its Influenza A/B product candidates, and Merck can terminate the agreement at its discretion without cause, eliminating potential milestone payments (up to $156 million) and royalties[111][114][115] - The company faces intense competition in the COVID-19 therapeutic space from large pharmaceutical companies like Pfizer, Moderna, and Gilead, which possess substantially more resources and products in more advanced stages of development or already approved[107][108][109] - On November 16, 2021, the company was notified by Nasdaq of non-compliance with the minimum $1.00 bid price requirement, with failure to regain compliance by May 16, 2022, potentially resulting in delisting of the common stock[86][255] - As a result of a director being permanently enjoined from certain securities law violations, the company is unable to rely on certain registration exemptions like Rule 506, which could adversely affect its ability to raise capital through private placements[266] Unresolved Staff Comments The company has no unresolved staff comments from the Securities and Exchange Commission - Not applicable[294] Properties Cocrystal Pharma leases office and laboratory spaces in Bothell, Washington, and office space in Miami, Florida - The company leases office and laboratory space in Bothell, Washington (expiring Jan 2024) and office space in Miami, Florida (expiring Aug 2024)[296][297] Legal Proceedings The company is involved in a lawsuit with Liberty Insurance Underwriters Inc. and a pending petition for re-hearing in a dismissed legal proceeding - Liberty Insurance Underwriters Inc. filed a suit seeking a declaratory judgment of no insurance coverage for certain litigation and investigation costs, to which the company has filed a counterclaim, with the case set for trial in July 2022[299] - A lawsuit (Pederson II) filed by a former lawyer was dismissed and affirmed on appeal, with a petition for re-hearing by the Eighth Circuit pending as of the report date[301] Mine Safety Disclosures This item is not applicable to the company - Not applicable[303] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on Nasdaq, has approximately 434 holders, and does not pay cash dividends - The company's common stock trades on The Nasdaq Capital Market under the symbol "COCP"[305] - The company has never declared or paid cash dividends and does not anticipate doing so in the foreseeable future[306] Selected Financial Data As a smaller reporting company, Cocrystal Pharma is not required to provide selected financial data - Not required as the company is a smaller reporting company[308] Management's Discussion and Analysis of Financial Condition and Results of Operations The company reported no revenue in 2021, an increased net loss, higher R&D expenses, and a strengthened cash position of $55 million Financial Highlights | Financial Metric | 2021 (in USD) | 2020 (in USD) | Change (in USD) | Reason for Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $0 | $2,014,000 | ($2,014,000) | Completion of research obligations under Merck agreement in 2020 | | Net Loss | ($14,185,000) | ($9,648,000) | ($4,537,000) | Increased R&D costs for COVID-19 and Influenza programs | | R&D Expense | $8,794,000 | $6,034,000 | $2,760,000 | Advancements in COVID-19 and influenza programs | | G&A Expense | $5,427,000 | $5,566,000 | ($139,000) | Reduced professional fees from conclusion of legal matters | Cash Flow Highlights | Cash Flow Activity | 2021 (in USD) | 2020 (in USD) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($12,719,000) | ($9,830,000) | | Net Cash Used in Investing Activities | ($52,000) | ($240,000) | | Net Cash Provided by Financing Activities | $38,466,000 | $35,662,000 | - The company raised a total of $38.5 million in net proceeds from common stock public financings during the year ended December 31, 2021[331] - As of March 23, 2022, the company had approximately $55 million in cash, which management expects will be sufficient to fund operations through 2023[328] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this item is not applicable - Not applicable[344] Financial Statements and Supplementary Data Consolidated financial statements for 2021 and 2020 are presented, with an unqualified audit opinion and Goodwill Impairment Assessment identified as a critical audit matter - The independent registered public accounting firm, Weinberg & Company, issued an unqualified audit opinion on the consolidated financial statements[348] - The auditor identified the Goodwill Impairment Assessment as a critical audit matter due to the significant management judgment required in developing the fair value measurement of the reporting unit, which has a net balance of $19.1 million[352][353] Balance Sheet Highlights (in thousands) | Balance Sheet Highlights | Dec 31, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Cash | $58,705 | $33,010 | | Total Assets | $79,392 | $54,242 | | Total Liabilities | $1,843 | $1,737 | | Total Stockholders' Equity | $77,549 | $52,505 | Statement of Operations Highlights (in thousands) | Statement of Operations Highlights | Year Ended Dec 31, 2021 | Year Ended Dec 31, 2020 | | :--- | :--- | :--- | | Collaboration Revenue | $0 | $2,014 | | Research and Development Expense | $8,794 | $6,034 | | Net Loss | ($14,185) | ($9,648) | | Loss Per Share (basic and diluted) | ($0.16) | ($0.17) | Part III Directors, Executive Officers, Corporate Governance, Compensation, Security Ownership, and Certain Relationships Information for Items 10-14 is incorporated by reference from the company's definitive proxy statement - Information for Items 10, 11, 12, 13, and 14 is incorporated by reference from the company's definitive proxy statement to be filed within 120 days of December 31, 2021[489] Part IV Exhibits, Financial Statement Schedules This section provides an index of all exhibits filed with the Form 10-K, covering corporate governance and material contracts - The report includes an index of exhibits filed, such as corporate governance documents, material contracts, and officer certifications[492][494] Form 10-K Summary This item is not applicable - Not applicable[497]