Fresh Tracks Therapeutics(FRTX) - 2021 Q1 - Quarterly Report

Forward-Looking Statements The report includes forward-looking statements about future financial performance and clinical development, subject to significant risks and uncertainties - The report contains forward-looking statements regarding future financial performance, clinical trials, and commercialization, subject to significant risks detailed in the Risk Factors section[8][9] Risk Factors Summary The company's business relies on sofpironium bromide's success, facing risks from clinical trials, competition, third-party reliance, financing, and COVID-19 - The company's business is highly dependent on the successful development, regulatory approval, and commercialization of its lead product candidate, sofpironium bromide[14] - Key risks include challenges in Phase 3 trials, potential side effects, competition, reliance on partners, and the need for additional financing[14] - The COVID-19 pandemic poses a significant risk to financial condition, operations, and clinical trials[15] PART I. FINANCIAL INFORMATION This section presents the company's unaudited financial statements and management's discussion of its financial condition and operations Financial Statements (Unaudited) Q1 2021 saw decreased revenue and increased net loss due to higher R&D expenses, while cash improved from financing activities Condensed Consolidated Balance Sheet Data (in thousands) | Metric | March 31, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Cash and cash equivalents | $34,781 | $30,115 | | Total current assets | $38,778 | $33,604 | | Total assets | $38,851 | $33,634 | | Total current liabilities | $9,381 | $6,353 | | Total liabilities | $9,707 | $6,499 | | Total stockholders' equity | $29,144 | $27,135 | Condensed Consolidated Statements of Operations (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Total revenue | $17 | $1,046 | | Research and development | $6,052 | $2,664 | | General and administrative | $2,967 | $2,481 | | Loss from operations | $(9,002) | $(4,099) | | Net loss | $(9,005) | $(4,103) | | Net loss per share | $(0.15) | $(0.45) | Condensed Consolidated Statements of Cash Flows (in thousands) | Metric | Three Months Ended March 31, 2021 | Three Months Ended March 31, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,891) | $(6,610) | | Net cash provided by (used in) investing activities | $(40) | $4,500 | | Net cash provided by financing activities | $10,597 | $2,005 | | Net increase (decrease) in cash | $4,666 | $(105) | Management's Discussion and Analysis of Financial Condition and Results of Operations The company advances sofpironium bromide through Phase 3 trials; Q1 2021 revenue decreased, R&D expenses rose, and current cash is sufficient for the next 12 months Our Clinical Programs Brickell conducts two U.S. Phase 3 studies for sofpironium bromide, with topline results expected in Q4 2021, and Kaken launched the product in Japan in November 2020 - The company initiated two U.S. pivotal Phase 3 clinical trials (Cardigan I and Cardigan II) for sofpironium bromide gel, 15% in late 2020[87][88] - Topline results from the Cardigan studies are expected in Q4 2021, intended to support a U.S. New Drug Application (NDA) submission in 2022[89] - In Japan, partner Kaken received regulatory approval for sofpironium bromide gel, 5% (brand name ECCLOCK®) in September 2020 and launched commercial sales in November 2020[95][97] Results of Operations Q1 2021 revenue decreased by $1.0 million, R&D expenses rose by $3.4 million, resulting in a $9.0 million net loss, more than double Q1 2020 Comparison of Operations (in thousands) | Metric | Q1 2021 | Q1 2020 | | :--- | :--- | :--- | | Revenue | $17 | $1,046 | | Research and development expenses | $(6,052) | $(2,664) | | General and administrative expenses | $(2,967) | $(2,481) | | Net loss | $(9,005) | $(4,103) | - The decrease in revenue was primarily because a $15.6 million R&D payment from Kaken was fully accounted for by Q3 2020, with Q1 2021 revenue consisting of initial royalties from Kaken's sales in Japan[128] - The $3.4 million increase in R&D expenses was mainly due to increased clinical costs associated with the Phase 3 Cardigan studies, which began in Q4 2020[129] Liquidity and Capital Resources As of March 31, 2021, the company held $34.8 million in cash, sufficient for 12 months, with $10.6 million net cash from Q1 2021 financing activities - The company had cash and cash equivalents of $34.8 million as of March 31, 2021[131] - Management believes that current cash and cash equivalents are sufficient to fund operations for at least the next 12 months from the report's issuance date[132] - Net cash provided by financing activities increased to $10.6 million in Q1 2021 from $2.0 million in Q1 2020, mainly due to higher proceeds from the exercise of warrants[137] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Brickell Biotech is exempt from providing disclosures about market risk - The company is a smaller reporting company and is not required to provide disclosures about market risk[138] Controls and Procedures Management concluded disclosure controls were effective as of March 31, 2021, with no significant changes in internal control over financial reporting - Disclosure controls and procedures were effective as of March 31, 2021, based on evaluation by the principal executive and financial officers[141] - No significant changes in internal control over financial reporting occurred during the three months ended March 31, 2021[142] PART II. OTHER INFORMATION This section provides other information, including legal proceedings, risk factors, equity securities, and exhibits Legal Proceedings The company is not currently involved in any material legal proceedings that would adversely affect its business - As of the filing date, the company is not a party to any material legal proceedings[145] Risk Factors The company faces substantial risks, primarily its dependence on sofpironium bromide's success, covering business operations, financial stability, regulatory, strategic, third-party, and IP challenges Risks Related to Business Operations Business operations risks include heavy reliance on sofpironium bromide's success, clinical trial failures, side effects, competition, partner dependence, and COVID-19 impacts - The company's business is highly dependent on the successful financing, clinical development, regulatory approval, and commercialization of its lead asset, sofpironium bromide[147] - The COVID-19 pandemic could delay or interrupt clinical trials, participant recruitment, manufacturing, and regulatory review[172][173] - Sofpironium bromide, if approved, will face significant competition from existing treatments like OTC antiperspirants, BOTOX®, and Qbrexza®[177][178] Risks Related to Liquidity, Financial Matters and Common Stock Financial risks include the critical need for additional capital, high stock price volatility, potential illiquidity, and Nasdaq delisting risk if minimum bid price requirements are not met - The company will need to raise substantial additional financing to fund operations and the NDA submission for sofpironium bromide, which may not be available on favorable terms[195] - The company's stock price has been and may continue to be highly volatile, facing a risk of delisting from Nasdaq if it fails to meet continued listing requirements[200][209] - The exercise of outstanding stock options and warrants will dilute the ownership of existing stockholders[206] Risks Related to Legal, Regulatory, and Compliance Matters Regulatory risks include the possibility of failing to obtain U.S. approval, extensive post-approval review, product liability lawsuits, and compliance with complex healthcare laws - The company may never obtain U.S. regulatory approval for its product candidates and will be subject to extensive and continued regulatory review and compliance obligations post-approval[213] - The company faces inherent risk of product liability claims from clinical testing and potential commercialization, with potentially inadequate insurance coverage[220] - The company is subject to strict healthcare laws (e.g., Anti-Kickback Statute, False Claims Act), with non-compliance potentially leading to significant penalties and exclusion from federal healthcare programs[231] Risks Related to Strategic Matters The strategy to in-license or acquire additional product candidates carries risks of high cost, management distraction, and potential failure due to competition and development - The strategy to in-license and acquire additional product candidates could impact liquidity, increase expenses, and distract management[234] - Failure to successfully in-license, acquire, and develop additional product candidates would impair the company's ability to grow[235] Risks Related to Dependence on Third Parties The company's complete reliance on third-party contractors for manufacturing and distribution creates risks in quality control, capacity, pricing, and supply chain stability - The company relies completely on third-party contractors for manufacturing and distribution of clinical drug supplies, including sole-source suppliers[243] - Manufacturing and supply are complex and technically challenging, with potential for failure in quality control, scaling up, and distribution[249] Risks Related to Intellectual Property Intellectual property risks include challenges in obtaining, maintaining, and enforcing patent rights for sofpironium bromide globally, with potential for invalidation or limited lifespan - The company's success depends on its ability to obtain, maintain, and enforce patent and other intellectual property protections for sofpironium bromide[252] - Protecting intellectual property rights throughout the world is difficult, as laws and enforcement vary significantly by country[260] - The company could lose important license rights if it fails to comply with its obligations under intellectual property license agreements[266] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities were reported by the company during the period - None reported[277] Defaults Upon Senior Securities This section is not applicable to the company - Not applicable[278] Mine Safety Disclosures This section is not applicable to the company - Not applicable[279] Other Information No other information was reported by the company - None reported[280] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents, agreements, and officer certifications