Iterum Therapeutics(ITRM) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements and management's discussion and analysis for Iterum Therapeutics plc Item 1. Financial Statements (Unaudited) This section presents Iterum Therapeutics plc's unaudited financial statements, highlighting significant operating losses and going concern doubt Condensed Consolidated Balance Sheets Total assets decreased from $66.833 million to $39.728 million, primarily due to reduced cash and investments, with a significant decline in equity | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :-------------------------- | :-------------------------- | :-------------------------- | | Cash and cash equivalents | $4,816 | $21,092 | | Short-term investments | $31,076 | $39,712 | | Total current assets | $38,527 | $62,444 | | Total assets | $39,728 | $66,833 | | Total current liabilities | $16,396 | $9,064 | | Total liabilities | $36,296 | $38,834 | | Total shareholders' equity | $3,432 | $27,999 | Condensed Consolidated Statements of Operations and Comprehensive Loss Net loss improved to $3.877 million for Q3 2023, from $29.109 million in Q3 2022, due to derivative fair value adjustments and no share option cancellation expense | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | | :-------------------- | :------------------------------ | :------------------------------ | | Research and development | $(14,852) | $(4,353) | | General and administrative | $(1,833) | $(2,681) | | Total operating expenses | $(16,685) | $(7,034) | | Operating loss | $(16,685) | $(7,034) | | Adjustments to fair value of derivatives | $13,199 | $(4,834) | | Cancellation of share options | $0 | $(17,350) | | Net loss | $(3,877) | $(29,109) | | Net loss per share – basic and diluted | $(0.30) | $(2.38) | | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------- | :----------------------------- | :----------------------------- | | Research and development | $(30,248) | $(11,777) | | General and administrative | $(5,789) | $(10,680) | | Total operating expenses | $(36,037) | $(22,457) | | Operating loss | $(36,037) | $(22,457) | | Adjustments to fair value of derivatives | $11,361 | $2,498 | | Cancellation of share options | $0 | $(17,350) | | Net loss | $(26,009) | $(39,344) | | Net loss per share – basic and diluted | $(2.02) | $(3.22) | Condensed Consolidated Statements of Cash Flows Cash used in operations increased from $14.208 million to $26.487 million for the nine months ended September 30, 2023, partially offset by investing activities | Cash Flow Activity (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(26,487) | $(14,208) | | Net cash provided by investing activities | $9,813 | $9,579 | | Net cash provided by / (used in) financing activities | $445 | $(2,251) | | Net decrease in cash, cash equivalents and restricted cash | $(16,276) | $(6,957) | | Cash, cash equivalents and restricted cash, at end of period | $4,850 | $20,553 | Condensed Consolidated Statements of Stockholders' Equity Shareholders' equity decreased from $27.999 million to $3.432 million, primarily due to the net loss incurred during the period | Metric (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :-------------------- | :----------- | :----------- | | Ordinary Shares (Amount) | $130 | $126 | | Additional Paid-in Capital | $452,235 | $451,150 | | Accumulated Deficit | $(448,936) | $(422,927) | | Total Shareholders' Equity | $3,432 | $27,999 | Notes to Unaudited Condensed Consolidated Financial Statements These notes detail accounting policies, fair value, debt, equity, and commitments, highlighting liquidity challenges and going concern doubt 1. Basis of Presentation Iterum Therapeutics, a clinical-stage company, faces substantial doubt about its going concern ability due to significant losses and funding needs - Iterum Therapeutics plc is a clinical-stage pharmaceutical company developing sulopenem, a novel anti-infective compound, aiming to be the first oral penem in the U.S. and the first oral and IV branded penem globally[24] - The company has incurred operating losses since inception, with net losses of $26.009 million and $39.344 million for the nine months ended September 30, 2023 and 2022, respectively, and an accumulated deficit of $448.936 million as of September 30, 2023[31] - Based on available cash, cash equivalents, and short-term investments, the company does not have sufficient funds to cover operations and capital expenditures for the next 12 months, raising substantial doubt about its ability to continue as a going concern[31][33] 2. Summary of Significant Accounting Policies This section outlines significant accounting policies, including estimates, cash, credit risk, and net loss per share, noting ASU 2016-13 adoption - The company operates as a single business segment focused on the development and commercialization of innovative treatments for drug-resistant bacterial infections[45] | Operating Expenses (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :-------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Ireland | $15,201 | $5,675 | $31,754 | $15,302 | | U.S. | $1,484 | $1,352 | $4,260 | $7,129 | | Bermuda | $0 | $7 | $23 | $26 | | Total | $16,685 | $7,034 | $36,037 | $22,457 | - The company adopted ASU No. 2016-13, Financial Instruments - Credit Losses, effective January 1, 2023, but does not expect a material impact on its financial statements[47] 3. Fair Value of Financial Assets and Liabilities This note details fair value measurements of financial assets and liabilities, categorizing them by level, with Level 3 derivatives valued using specific models | Assets (in thousands) | Sep 30, 2023 Total | Dec 31, 2022 Total | | :-------------------- | :----------------- | :----------------- | | Commercial paper | $4,734 | $15,232 | | U.S. Treasury and Agency bonds | $26,342 | $16,699 | | Corporate bonds | $0 | $7,781 | | Total Short-term investments | $31,076 | $39,712 | | Liabilities (in thousands) | Sep 30, 2023 Book Value | Sep 30, 2023 Approximate Fair Value | Dec 31, 2022 Book Value | Dec 31, 2022 Approximate Fair Value | | :------------------------- | :---------------------- | :---------------------------------- | :---------------------- | :---------------------------------- | | Long-term exchangeable note | $12,462 | $12,569 | $10,094 | $10,827 | | Derivative liability - exchange option and change of control | $75 | $75 | $196 | $196 | | Royalty-linked notes | $7,131 | $7,131 | $18,372 | $18,372 | | Total | $19,668 | $19,775 | $28,662 | $29,395 | - The fair value of the derivative liability (exchange option and change of control premium) was determined using the binomial option pricing model and DCF analysis, with key inputs including share price, market capitalization, volatility, and risk-free interest rate[54][55][56] 4. Short-term Investments Short-term investments, classified as available-for-sale, comprise commercial paper and U.S. Treasury bonds, reported at fair value - Short-term investments are classified as available-for-sale and consist of highly liquid, minimum 'A-' rated commercial paper and U.S. Treasury and Agency bonds with maturities over three months at purchase[59] | Investment Type (in thousands) | Amortized Cost (Sep 30, 2023) | Fair Value (Sep 30, 2023) | Amortized Cost (Dec 31, 2022) | Fair Value (Dec 31, 2022) | | :----------------------------- | :---------------------------- | :------------------------ | :---------------------------- | :------------------------ | | Commercial paper | $4,736 | $4,734 | $15,230 | $15,232 | | U.S. Treasury and Agency bonds | $26,337 | $26,342 | $16,996 | $16,699 | | Corporate bonds | $0 | $0 | $7,836 | $7,781 | | Total | $31,073 | $31,076 | $40,062 | $39,712 | 5. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets increased from $1.338 million to $2.635 million, mainly due to higher prepaid R&D expenses | Item (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------ | :----------- | :----------- | | Prepaid research and development expenses | $1,705 | $458 | | Prepaid insurance | $687 | $592 | | Research and development tax credit receivable | $170 | $118 | | Other prepaid assets | $73 | $170 | | Total | $2,635 | $1,338 | 6. Intangible Asset, net Net intangible asset decreased from $1.719 million to $0.432 million due to accumulated amortization of a tableting facility reservation right | Item (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------ | :----------- | :----------- | | Gross intangible asset | $5,148 | $5,148 | | Less: accumulated amortization | $(4,716) | $(3,429) | | Net intangible asset | $432 | $1,719 | 7. Property and Equipment, net Net property and equipment slightly decreased from $0.069 million to $0.059 million, reflecting ongoing depreciation | Item (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------ | :----------- | :----------- | | Leasehold improvements | $148 | $148 | | Furniture and fixtures | $120 | $120 | | Computer equipment | $98 | $85 | | Total | $366 | $353 | | Less: accumulated depreciation | $(307) | $(284) | | Net property and equipment | $59 | $69 | 8. Leases Lease liabilities and right-of-use assets significantly decreased due to lease derecognition, with new agreements under ASC 842 - A Deed of Assignment in August 2023 led to the derecognition of a Right of Use asset and lease liability, reducing total lease liabilities from $1.636 million (Dec 31, 2022) to $0.621 million (Sep 30, 2023)[65][70] - The weighted-average remaining lease term decreased from 5.04 years (Dec 31, 2022) to 1.71 years (Sep 30, 2023), and the weighted-average discount rate increased from 5.5% to 12.9%[69] | Lease Liabilities (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------------------- | :----------- | :----------- | | Other assets (Right-of-use) | $630 | $1,770 | | Other current liabilities | $314 | $332 | | Other liabilities | $307 | $1,304 | | Total lease liabilities | $621 | $1,636 | 9. Accrued Expenses Accrued expenses significantly increased from $4.346 million to $9.049 million, primarily due to higher accrued clinical trial costs | Item (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :------------------ | :----------- | :----------- | | Accrued clinical trial costs | $6,634 | $1,549 | | Accrued payroll and bonus expenses | $2,113 | $1,971 | | Accrued professional fees | $83 | $606 | | Accrued other expenses | $219 | $220 | | Total | $9,049 | $4,346 | 10. Debt This note details debt obligations, including repaid facilities and outstanding 2025 Exchangeable Notes, with significant conversions to ordinary shares - The Secured Credit Facility with SVB and the Paycheck Protection Program loan were fully repaid in March 2022[73][89] - As of September 30, 2023, $12.607 million aggregate principal amount of 2025 Exchangeable Notes remained outstanding, after $39.201 million were exchanged for 3,592,555 ordinary shares between January 21, 2021, and September 30, 2023[81][88] | Scheduled Principal Payments (in thousands) | Amount | | :---------------------------------------- | :----- | | Year Ending September 30, 2024 | $0 | | Year Ending September 30, 2025 | $12,607 | | Thereafter | $104 | | Total | $12,711 | 11. Royalty-Linked Notes RLNs entitle holders to payments based on U.S. sulopenem net revenues, with the fair value liability adjusted due to reduced revenue forecasts - RLNs entitle holders to payments based on a percentage of U.S. net revenues from specified sulopenem products, contingent on FDA approval by December 31, 2025, and subject to a maximum return of $160.00 per RLN[91] - The RLN liability is carried at fair value, determined using discounted cash flow (DCF) analysis, and experienced a non-cash adjustment of $13.2 million (three months) and $11.4 million (nine months) ended September 30, 2023, primarily due to reduced management's forecasted U.S. sulopenem sales[92] | RLN Liability (in thousands) | Sep 30, 2023 | Dec 31, 2022 | | :--------------------------- | :----------- | :----------- | | Total liability related to the sale of future royalties, on inception | $10,990 | $10,990 | | Adjustments to fair value | $(7,576) | $3,665 | | Total liability at period end | $7,131 | $18,372 | | Long-term Portion | $7,131 | $18,372 | 12. Shareholders' Equity Authorized ordinary shares increased to 80,000,000, with 363,828 shares sold for $0.4 million and 3,592,555 shares issued from note conversions - Shareholders approved an increase of 60,000,000 ordinary shares, bringing the total authorized to 80,000,000 ordinary shares of $0.01 par value each as of September 30, 2023[95] - During the nine months ended September 30, 2023, the company sold 363,828 ordinary shares under an 'at-the-market' agreement for net proceeds of $0.4 million[97] - Between January 21, 2021, and September 30, 2023, $39.201 million of Exchangeable Notes were exchanged for 3,592,555 ordinary shares[98] 13. Share-Based Compensation The company granted 857,500 share options and recognized $0.645 million in share-based compensation, with $1.255 million unamortized - The company granted 857,500 share options to employees and directors during the nine months ended September 30, 2023, compared to 167,960 in the same period of 2022[118] | Share-Based Compensation Expense (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :---------------------------------------------- | :------------------------------ | :------------------------------ | :----------------------------- | :----------------------------- | | Research and development expense | $96 | $118 | $315 | $1,258 | | General and administrative expense | $46 | $304 | $330 | $3,043 | | Total | $142 | $422 | $645 | $4,301 | - Total unamortized share-based compensation expense for options and RSUs was $1.255 million as of September 30, 2023, expected to be recognized over a remaining average vesting period of 2.32 years[123] 14. Income Taxes Income tax expense was $0.471 million for the nine months ended September 30, 2023, with a full valuation allowance against NOLs due to historical losses - Income tax expense for the nine months ended September 30, 2023, was $0.471 million, compared to $0.200 million in the prior year[124] - The company has net operating loss carryforwards in Ireland of approximately $40.873 million as of September 30, 2023, for which a full valuation allowance has been recognized due to a history of losses[125] 15. Commitments and Contingencies The company has commitments under its Pfizer license, including milestone payments and royalties, and obligations for Royalty-Linked Notes based on future sulopenem sales - Under the Pfizer License, the company is obligated to pay Pfizer potential future regulatory and sales milestone payments (ranging from $250 million to $1 billion per product type) and royalties (single-digit to mid-teens percentage) based on net sales of licensed products[127] - Royalty-Linked Notes (RLNs) entitle holders to payments based on a percentage of U.S. net revenues from specified sulopenem products, subject to FDA approval and a maximum return of $160.00 per RLN[128] 16. Condensed Consolidating Financial Statements Iterum Bermuda issued Exchangeable Notes and RLNs, fully guaranteed by Iterum Therapeutics plc and its subsidiaries, with no significant funding restrictions - Iterum Bermuda, a wholly-owned finance subsidiary, issued $12.607 million in Exchangeable Notes and all RLNs outstanding as of September 30, 2023[132] - Iterum Therapeutics plc and its Subsidiary Guarantors provide a full and unconditional guarantee of Iterum Bermuda's obligations under the Exchangeable Notes and RLNs[133] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses financial condition, sulopenem development, significant losses, and going concern doubt, outlining plans for funding and strategic alternatives Overview Iterum Therapeutics, a clinical-stage company developing sulopenem, completed REASSURE trial enrollment, but significant losses raise going concern doubt - Iterum Therapeutics is developing sulopenem as potentially the first oral branded penem in the U.S. and the first oral and IV branded penem globally for drug-resistant bacterial infections[136] - The company completed enrollment of 2,229 patients in the REASSURE Phase 3 clinical trial for oral sulopenem in uUTIs in October 2023, with topline data expected in Q1 2024 and a potential NDA resubmission in Q2 2024[137] - The company has incurred significant operating losses since inception, with an accumulated deficit of $448.9 million as of September 30, 2023, and does not have sufficient cash to fund operations for the next 12 months, raising substantial doubt about its ability to continue as a going concern[138][141] Components of Our Results of Operations This section details R&D, G&A, interest, derivative fair value adjustments, and other income, emphasizing high costs and uncertainty in drug development - Research and development expenses primarily include costs for CROs, CMOs, clinical trials, manufacturing, employee-related expenses, regulatory compliance, and third-party licensing agreements[143] - General and administrative expenses cover salaries, benefits, share-based compensation for executive and administrative functions, director compensation, professional fees, and pre-commercialization activities[148] - Derivative liabilities, including Royalty-Linked Notes and embedded features in Exchangeable Notes, are revalued at each balance sheet date, with changes in fair value recorded as adjustments to fair value of derivatives in the statements of operations[151] Critical Accounting Policies and Significant Judgments and Estimates Management's financial statements rely on significant estimates for share-based compensation, RLNs, derivatives, and R&D accruals, with no material changes - Significant estimates and assumptions in the financial statements include the valuation of share-based compensation, Royalty-Linked Notes, and derivative liabilities, as well as accruals for research and development expenses[37] - There have been no significant changes to the company's critical accounting estimates from those described in its Annual Report on Form 10-K filed on March 16, 2023[156] Results of Operations This section compares financial performance for Q3 and YTD 2023 vs. 2022, noting increased R&D, decreased G&A, and derivative fair value fluctuations Comparison of the three months ended September 30, 2023 and 2022 Operating loss increased to $(16.685) million in Q3 2023, but net loss improved to $(3.877) million due to derivative fair value adjustments | Metric (in thousands) | Three Months Ended Sep 30, 2023 | Three Months Ended Sep 30, 2022 | Change | | :-------------------- | :------------------------------ | :------------------------------ | :----- | | Operating loss | $(16,685) | $(7,034) | $(9,651) | | Total other income / (expense), net | $12,969 | $(22,645) | $35,614 | | Loss before income taxes | $(3,716) | $(29,679) | $25,963 | - Research and development expenses increased by $10.1 million, primarily due to increased costs for the REASSURE trial[158] - General and administrative expenses decreased by $0.7 million, mainly due to lower legal fees[160] Comparison of the nine months ended September 30, 2023 and 2022 Operating loss increased to $(36.037) million for YTD 2023, but loss before taxes improved to $(25.538) million due to derivative fair value adjustments | Metric (in thousands) | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | Change | | :-------------------- | :----------------------------- | :----------------------------- | :----- | | Operating loss | $(36,037) | $(22,457) | $(13,580) | | Total other income / (expense), net | $10,499 | $(16,687) | $27,186 | | Loss before income taxes | $(25,538) | $(39,144) | $13,606 | - Research and development expenses increased by $19.2 million, primarily due to increased costs for the REASSURE trial[168] - General and administrative expenses decreased by $2.5 million, mainly due to lower share-based compensation expense and legal fees[169] Liquidity and Capital Resources The company faces going concern doubt due to insufficient cash, actively evaluating financing and strategic alternatives amidst share issuance limitations - As of September 30, 2023, the company had cash, cash equivalents, and short-term investments of $35.9 million, which is insufficient to fund operating expenses and capital expenditure requirements for the next 12 months, raising substantial doubt about its ability to continue as a going concern[141][182][204] - The company is evaluating corporate, strategic, financial, and financing alternatives, including licensing, sale of assets, merger, or other strategic transactions, to maximize stakeholder value[142][208] - Shareholder approval for the disapplication of statutory pre-emption rights was not received, limiting the company's ability to efficiently issue new ordinary shares for cash in capital raising transactions without a time-consuming pro-rata rights offering[178][231] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk on marketable securities, foreign currency fluctuations, and potential inflation impacts, without hedging activities - An immediate 100 basis point increase in interest rates would result in a $0.1 million decrease in the fair market value of the company's investment portfolio as of September 30, 2023[214] - The company is exposed to foreign currency rate fluctuations from global CRO and CMO contracts, but substantially all liabilities are U.S. dollar denominated, and no material effect from foreign currency gains/losses was reported for the nine months ended September 30, 2023[215] - Inflation has not had a material effect on the financial statements to date, but continued increases could raise labor, research, manufacturing, and development costs[216] Item 4. Controls and Procedures Management concluded disclosure controls and procedures were effective as of September 30, 2023, with no material changes in internal control over financial reporting - The company's disclosure controls and procedures were evaluated as effective at the reasonable assurance level as of September 30, 2023[217] - No material changes in internal control over financial reporting occurred during the three months ended September 30, 2023[218] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, exhibits, and signatures, detailing potential challenges and compliance matters Item 1. Legal Proceedings The company is not currently involved in any material legal proceedings or aware of any threatened litigation that could adversely affect its business - The company is not currently involved in any material legal proceedings and is unaware of any pending or threatened litigation that could materially adversely affect its business, operating results, or financial condition[220] Item 1A. Risk Factors This section outlines significant risks, including going concern doubt, dependence on sulopenem development, regulatory approval challenges, and the need for additional capital - The company has identified conditions that raise substantial doubt about its ability to continue as a going concern, with only $35.9 million in cash, cash equivalents, and short-term investments as of September 30, 2023, insufficient for the next 12 months[222] - The company is heavily dependent on the successful development, regulatory approval, and commercialization of its sulopenem program, particularly oral sulopenem, following a Complete Response Letter (CRL) from the FDA[223][240] - Failure to obtain additional funding on acceptable terms could force the company to delay, reduce, or eliminate product development programs or commercialization efforts[229][232] Risks Related to Our Financial Position and Capital Requirements Significant financial risks include going concern doubt, uncertain future funding, potential shareholder dilution, and financial statement volatility from derivative revaluations - The company has an accumulated deficit of $448.9 million as of September 30, 2023, and has incurred net losses every year since its inception in 2015[223] - The company's ability to raise additional capital is severely limited by the lack of shareholder approval for the disapplication of statutory pre-emption rights under Irish law, restricting cash issuance to 5.2 million ordinary shares until January 26, 2026[231] - The company's financial statements include substantial non-operating gains or losses from quarterly revaluation of derivative instruments, which are highly sensitive to changes in share price and management assumptions[235] Risks Related to Clinical Development and Commercialization Success depends on sulopenem regulatory approval and commercialization, facing clinical setbacks, market acceptance challenges, and intense competition - The FDA issued a Complete Response Letter (CRL) for oral sulopenem, requiring at least one additional adequate and well-controlled clinical trial and non-clinical PK/PD studies, which are being addressed by the ongoing REASSURE trial[223][237][272] - The REASSURE Phase 3 clinical trial for oral sulopenem in uUTIs completed enrollment in October 2023, with topline data expected in Q1 2024 and a potential NDA resubmission in Q2 2024, but an SPA agreement does not guarantee marketing approval[223][237][272][276][281][294][410][414] - Even if approved, oral sulopenem may not achieve market acceptance due to physician reluctance, broad availability of existing antibiotics, and potential pricing premiums over generic alternatives[304][305] Risks Related to Our Dependence on Third Parties Heavy reliance on third parties for Pfizer License, commercialization, and manufacturing poses risks to development, commercialization, and financial results - The company relies heavily on the Pfizer License for exclusive worldwide rights to develop, manufacture, and commercialize sulopenem, and failure to comply with obligations could lead to termination of the license[334][335][336] - The company intends to use collaborators for commercialization outside the U.S. and may seek them for U.S. development, but such arrangements carry risks of non-performance, delays, and relinquishing control[337][339] - The company relies on third-party contract manufacturers for all raw materials, drug substance, and finished product for preclinical and clinical trials, and will for commercialization, exposing it to risks of manufacturing delays, non-compliance with cGMPs, and potential misappropriation of trade secrets[349][350][354] Risks Related to Our Intellectual Property IP protection via Pfizer License and patents is crucial but uncertain, facing limited lifespan, infringement claims, litigation costs, and global trade secret challenges - The company's intellectual property for oral sulopenem relies on in-licensed patents from Pfizer and its own patents, including a U.S. patent for a bilayer tablet composition expiring no earlier than 2039 (absent extensions) and another for method of use[364][372] - The patent prosecution process is expensive, time-consuming, and uncertain, with risks of patent applications failing to issue, being narrowed, invalidated, or challenged by third parties[365][367] - The company also relies on trade secrets, protected by non-disclosure agreements, but faces risks of unauthorized disclosure, independent development by competitors, and difficulties in enforcement, particularly in countries with weaker intellectual property laws[401][402][403] Risks Related to Regulatory Approval and Other Legal Compliance Matters Substantial risks exist in obtaining and maintaining regulatory approvals globally, with complex compliance for anti-kickback, fraud, abuse, and privacy laws - Obtaining regulatory approval is a lengthy, expensive, and uncertain process, with the FDA having substantial discretion to delay, limit, or deny approval, as evidenced by the CRL for oral sulopenem[409][410][412] - Any approved product will be subject to ongoing regulatory requirements for labeling, manufacturing (cGMPs), reporting adverse events, and marketing, with potential for restrictions or withdrawal from the market if non-compliance occurs[426][428] - The company's relationships with healthcare providers and third-party payors are subject to complex anti-kickback, fraud and abuse, and privacy laws (e.g., FCPA, GDPR, HIPAA), with potential for significant civil and criminal penalties, fines, and reputational harm for non-compliance[431][433][462][467] Risks Related to Employee Matters and Managing Growth Future success depends on retaining key personnel and managing growth, requiring significant improvements in managerial, operational, and financial systems - The company's success is highly dependent on retaining its Chief Executive Officer and other key executives, and its ability to attract, retain, and motivate qualified personnel in a competitive industry[474][476] - Managing potential growth, particularly in manufacturing, regulatory affairs, sales, and marketing, will require significant improvements in managerial, operational, and financial systems, potentially diverting management attention and increasing expenses[477] - Conducting business in international markets, if approvals are obtained, exposes the company to additional risks such as reduced intellectual property protection, economic instability, and compliance with foreign regulations[479] Risks Related to Taxation Past and potential future PFIC status could adversely affect U.S. Holders, while Irish stamp duty and dividend withholding tax may impact shareholder returns - The company was a Passive Foreign Investment Company (PFIC) for U.S. federal income tax purposes in 2017, and while not expected to be a PFIC for 2023, its status is determined annually and could subject U.S. Holders to adverse tax consequences[483][484][486] - Transfers of ordinary shares not effected through DTC may be subject to Irish stamp duty (currently 1%), and dividends paid by the company may be subject to Irish dividend withholding tax (currently 25%), though exemptions exist for certain shareholders[492][493] Risks Related to Our Ordinary Shares Ordinary shares face price volatility, delisting risk, potential dilution from new issuances, and limitations on shareholder influence due to Irish law - The price of the company's ordinary shares has been highly volatile, ranging from a high of $1.495 to a low of $0.65 in the twelve months ending November 10, 2023, and may continue to fluctuate dramatically[497][498] - The company received a Nasdaq non-compliance letter on September 26, 2023, for failing to maintain a minimum bid price of $1.00 per share, with a deadline of March 25, 2024, to regain compliance; delisting could trigger a fundamental change under debt instruments[502][503] - The issuance of additional ordinary shares from future capital raises, conversion of Exchangeable Notes, or exercise of outstanding warrants and options could materially dilute existing shareholders' ownership interests[510][511][512] Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including officer certifications and Inline XBRL documents - Exhibits include certifications from the Principal Executive Officer and Principal Financial Officer (31.1, 31.2, 32.1, 32.2) and Inline XBRL documents (101.INS, 101.SCH, 101.CAL, 101.DEF, 101.LAB, 101.PRE, 104)[547] Signatures The report is signed by Corey Fishman, President and CEO, and Judith Matthews, CFO, on November 14, 2023 - The report is signed by Corey Fishman, President and Chief Executive Officer, and Judith Matthews, Chief Financial Officer, on November 14, 2023[551]