Longboard Pharmaceuticals(LBPH) - 2022 Q4 - Annual Report

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS This report contains forward-looking statements involving risks and uncertainties, made under the safe harbor provisions of federal securities laws - Forward-looking statements cover the R&D of product candidates, commercialization plans, clinical trial progress, financing ability, IP protection, and the impact of macroeconomic and geopolitical events[11][12][13] - The company cautions that actual results may differ materially from forward-looking statements due to known and unknown risks and uncertainties[12] SUMMARY RISK FACTORS Investing in the company's stock involves high risk, including a limited operating history, ongoing losses, and significant capital needs - The company has a limited operating history, has incurred losses since inception, and expects to continue generating significant losses[16] - Substantial additional capital is needed to fund operations, and access may be limited by macroeconomic and geopolitical events[16] - Development efforts are in early stages, with only LP352 in early clinical development, and failure to advance products would materially harm the business[16] - The clinical and preclinical drug development process is lengthy, expensive, and uncertain, with early results not predictive of future outcomes[16] - Regulatory approval processes by the FDA and similar foreign agencies are lengthy, costly, and inherently unpredictable[16] - The company currently lacks a marketing and sales organization and experience in commercializing products[16] - The company relies on third parties for preclinical studies and clinical trials, whose poor performance could harm the business[16] - The company depends on in-licensed intellectual property, and failure to protect it or termination of licenses could result in a significant loss of rights[16] PART I Business The company is a clinical-stage biopharmaceutical firm focused on developing novel therapeutics for neurological disorders - Longboard Pharmaceuticals is a clinical-stage biopharmaceutical company focused on developing innovative medicines for neurological diseases[17] - The company's main product candidates, LP352 and LP659, originate from Arena Pharmaceuticals' G protein-coupled receptor (GPCR) research platform[17][26] - The company's strategy includes advancing the clinical development of LP352 and LP659, identifying and expanding other product candidates and indications, and exploring strategic collaborations to maximize product value[28] Overview The company focuses on developing highly selective, centrally-acting product candidates targeting specific G protein-coupled receptors (GPCRs) - The company was formed in January 2020 by Arena Pharmaceuticals, Inc (Arena) to develop drugs for neurological diseases targeting specific G protein-coupled receptors (GPCRs)[17][26] - Key product candidates include LP352 (a 5-HT2C superagonist for DEEs) and LP659 (an S1P1,5 receptor modulator for various neurological diseases)[18][19][20] 2023 Product Development Milestones | Program | Mechanism of Action | Therapeutic Area | Preclinical | Phase I | Phase II | Phase III | 2023 Expected Milestones | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | LP352 | 5-HT2C Superagonist | DEEs & Other Refractory Epilepsies | | | | | · Ph 1b/2a PACIFIC study enrollment complete - H1 2023
· PACIFIC study top-line data - H2 2023 | | LP659 | S1P Receptor Modulator | Multiple Neurological Diseases | | | | | · Phase I study initiation - H1 2023
· Phase I SAD top-line data - H2 2023 | LP352 LP352 is an oral, centrally-acting 5-HT2C superagonist being developed for developmental and epileptic encephalopathies (DEEs) - LP352 is an oral, centrally-acting 5-HT2C superagonist designed to treat developmental and epileptic encephalopathies (DEEs) and other seizure disorders[22][29] - Its mechanism of action involves selectively targeting the 5-HT2C receptor to upregulate GABA release, thereby increasing the neuronal firing threshold and reducing seizures[23][29][40] - Preclinical studies showed no observable effects on 5-HT2B and 5-HT2A receptor subtypes, aiming to avoid serious side effects associated with these receptors (e g, valvular heart disease, pulmonary arterial hypertension, hallucinations, and anxiety)[18][50] - LP352 is currently in a Phase 1b/2a PACIFIC clinical trial for patients with DEEs, with enrollment completion expected in H1 2023 and top-line data in H2 2023[20][24][58] In Vitro Selectivity Comparison of LP352 with Other 5-HT2C Agonists | | Serotonin Receptor Subtype | EC50 nM | Ki, nM | Selectivity 5-HT2C vs 5-HT2B | Selectivity 5-HT2C vs 5-HT2A | Potential Adverse Events (per receptor subtype) | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | LP352 5-HT2C Superagonist | 5-HT2C | ~120 | ~50 | >200x | >200x | CNS, GI | | | 5-HT2B | Not Detected | Not Detected | | | n/a | | | 5-HT2A | Not Detected | Not Detected | | | n/a | | Norfenfluramine (active metabolite of fenfluramine) | 5-HT2C | 72.4 | 10.4 | 0.94x | 11.5x | CNS, GI | | | 5-HT2B | 25.7 | 9.8 | | | Cardiac, Pulmonary | | | 5-HT2A | 1778 | 120.2 | | | Psychiatric | | Lorcaserin | 5-HT2C | 39 | 13 | 11.3x | 7.1x | CNS, GI | | | 5-HT2B | 2380 | 147 | | | n/a | | | 5-HT2A | 553 | 92 | | | Psychiatric | LP659 LP659 is a centrally-acting S1P1,5 receptor modulator designed for inflammatory neurological diseases - LP659 is a centrally-acting S1P1,5 receptor modulator for the treatment of inflammatory neurological diseases[19][25][59] - LP659 is designed to avoid negative effects associated with S1P2 and S1P3 receptors, which may lead to more severe cardiac, pulmonary, and cancer-related side effects[25][64] - Preclinical data showed that LP659 dose-dependently slowed disease progression in a mouse model of demyelinating disease and rapidly reduced circulating lymphocytes[25][59][60] - The company expects to initiate a Phase 1 clinical trial for LP659 in H1 2023 and obtain top-line single ascending dose (SAD) data in H2 2023[20][25][61] Our Company History and Team The company was formed as a subsidiary of Arena Pharmaceuticals in 2020 and leverages Arena's extensive experience in GPCR research - The company was incorporated as Arena Neuroscience, Inc in January 2020 and was renamed Longboard Pharmaceuticals, Inc in October 2020, operating independently[26] - The company's product candidates, LP352 and LP659, were designed by Arena to have different selectivity and blood-brain barrier penetration profiles than other Arena product candidates like lorcaserin and etrasimod[26] Our Strategy The company's core strategy is to develop therapies with optimized pharmacology and pharmacokinetics for neurological diseases - The company aims to develop therapies targeting well-characterized receptor pathways with optimized pharmacology and pharmacokinetics to improve the lives of patients with neurological diseases, initially focusing on rare neurological disorders[28] - Key strategic elements include: - Advancing the clinical development and approval of LP352 in DEEs - Continuing preclinical development of LP659 and advancing it into clinical development, with a Phase 1 study expected to start in H1 2023 - Identifying and expanding other product candidates and indications - Exploring strategic collaborations to maximize the value of product candidates[28] Other Compounds The company holds licenses for additional compounds, including LP143 and those targeting the 5-HT2A receptor, but is not currently developing them - The company holds licenses for LP143 (a CB2 receptor agonist) and compounds targeting the 5-HT2A receptor, including nelotanserin[65] - The company is not currently developing these compounds[65] License Agreement with Arena The company has an exclusive, worldwide license agreement with Arena to develop and commercialize its key product candidates - The company has an exclusive, paid-up, sublicensable, worldwide license agreement with Arena to develop and commercialize LP352, LP659, LP143, and certain 5-HT2A compounds[27][66] - The company is obligated to pay Arena mid-to-low single-digit percentage royalties on net sales of LP352 and low single-digit percentage royalties for other licensed products[68][75] - Royalty obligations continue until ten years after the first commercial sale in a country or the expiration of relevant patents, expected through 2036 for LP352, 2029 for LP659, and 2030 for LP143[68] - Arena holds a right of first negotiation for LP659 products, triggered when the company announces Phase 2 clinical results or intends to license/partner[27][67] Royalty Purchase Agreement with Arena The company acquired the rights to all future milestone payments and royalties on net sales of lorcaserin from Arena - The company purchased the rights to all milestone payments, royalties, and other amounts receivable by Arena from Eisai Co, Ltd on net sales of lorcaserin for an upfront payment of approximately $0.1 million[70] - In addition, the company is entitled to a $25.0 million payment if annual net sales reach $250.0 million[70] Lorcaserin Annual Global Net Sales Royalty Rates | Annual Global Net Sales | Royalty Rate | | :--- | :--- | | ≤ $175.0 million | 9.5% | | > $175.0 million and ≤ $500.0 million | 13.5% | | > $500.0 million | 18.5% | Services Agreement with Arena The company has a services agreement with Arena for R&D, administrative, and management services, though reliance has decreased - The company entered into a services agreement with Arena in October 2020 for R&D, administrative, and management services[71] - The agreement had an initial term until December 31, 2021, and has since automatically renewed[71] - In 2022, the company significantly reduced its reliance on Arena's services by hiring its own employees or engaging third parties[71] Intellectual Property The company's success depends on its ability to obtain and maintain proprietary protection for its product candidates - As of February 1, 2023, the company exclusively licenses issued and pending patents for LP352 covering composition of matter and methods of treatment, with patent terms expected to extend to 2036 (excluding patent term adjustments)[72][73] - As of February 1, 2023, the company exclusively licenses issued and pending patents for LP659 covering composition of matter and methods of treatment, with patent terms expected to extend to 2029 (excluding patent term adjustments)[74] - The company also relies on trade secrets, trademark protection, and know-how to expand its intellectual property position and protects proprietary information through confidentiality agreements[75][76] Sales and Marketing The company is in the development stage and has not yet established a commercial organization or distribution capabilities - The company has not yet established a commercial organization or distribution capabilities[77] - The company plans to build a commercial infrastructure to support the sale of any approved products through internal resources and third-party collaborations[77] - The company intends to independently commercialize its product candidates in the United States and may seek strategic collaborations for international markets[77] Manufacturing The company relies on third-party manufacturers for all production and does not own or operate any manufacturing facilities - The company does not own or operate any manufacturing facilities and relies on third parties for preclinical and clinical test production, as well as for any commercialized products[78] - The company plans to identify and qualify manufacturers for API and drug products before submitting a New Drug Application (NDA) to the FDA or other marketing authorization applications[78] - The company's product candidates are small molecule compounds, which are expected to be manufactured cost-effectively at contract manufacturing facilities[79] Competition The biopharmaceutical industry is highly competitive, with the company facing competition from major pharmaceutical and biotechnology companies - The biopharmaceutical industry is highly competitive, and the company faces competition from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies worldwide[80](index=80&type=chunk][81] - In the DEEs therapeutic area, there are numerous anti-epileptic drugs (AEDs), non-pharmacologic therapies, and FDA-approved drugs such as fenfluramine, cannabidiol, and stiripentol[82] - In the S1P receptor modulator field, there are four FDA-approved drugs for multiple sclerosis, with many other drugs and product candidates in development[83] - Large pharmaceutical and biotechnology companies have a competitive advantage in terms of resources, experience, regulatory approvals, and marketing[85] - Key competitive factors for product candidate success include efficacy and safety, scope of marketing approval, intellectual property protection, and availability of funding and reimbursement[86] Government Regulation and Product Approval The company is subject to extensive government regulation in the United States and other countries covering all aspects of drug development and commercialization - The company is subject to extensive government regulation in the United States and other countries, covering all aspects of drug R&D, testing, manufacturing, quality control, approval, labeling, marketing, and distribution[87] - New drugs in the U S must go through the FDA's New Drug Application (NDA) process to be legally marketed, which includes preclinical testing, an IND application, three phases of clinical trials (Phase 1, 2, 3), and FDA review and approval[88](index=88&type=chunk][89](index=89&type=chunk][91](index=91&type=chunk][92](index=92&type=chunk][93](index=93&type=chunk][97] - The company's products may receive Orphan Drug Designation, which provides seven years of market exclusivity and financial incentives[103](index=103&type=chunk][104] - The company's products may be eligible for expedited development and review programs such as Fast Track, Priority Review, Accelerated Approval, and Breakthrough Therapy Designation to speed up the approval process[106](index=106&type=chunk][107](index=107&type=chunk][108](index=108&type=chunk][109] - Approved products are subject to ongoing regulatory requirements, including record-keeping, adverse event reporting, GMP compliance, product sampling and distribution requirements, and FDA promotion and advertising regulations[111](index=111&type=chunk][112](index=112&type=chunk][113](index=113&type=chunk][115] DEA Regulation The company's product candidates may be classified as controlled substances, subjecting them to strict regulation by the DEA - The DEA strictly regulates the manufacturing, use, sale, import, export, and distribution of controlled substances under the Controlled Substances Act (CSA), classifying them into Schedules I through V[120](index=120&type=chunk][121] - The company's product candidates, LP352 or LP659, may be classified as Schedule IV controlled substances by the DEA, imposing additional restrictions on their manufacturing, transport, storage, sale, and use, potentially limiting their commercial potential[121](index=121&type=chunk][122](index=122&type=chunk][242] - The company and its suppliers, manufacturers, contractors, customers, and distributors must obtain and maintain applicable registrations with state, federal, and foreign law enforcement and regulatory agencies and comply with relevant regulations[122](index=122&type=chunk][245] Other U.S. Healthcare Laws and Compliance Requirements The company is subject to various federal and state healthcare fraud and abuse, false claims, and data privacy laws - The company's business is subject to federal and state healthcare fraud and abuse laws, false claims laws, and data privacy and security laws and regulations[124](index=124&type=chunk][246](index=246&type=chunk][247] - Key laws include the federal Anti-Kickback Statute, the federal False Claims Act, and HIPAA, which prohibit fraudulent activities and protect personal health information[125](index=125&type=chunk][127](index=127&type=chunk][128](index=128&type=chunk][248] - The Physician Payments Sunshine Act requires drug manufacturers to report payments and transfers of value to physicians and other healthcare professionals[129](index=129&type=chunk][248] - Data privacy laws such as the California Consumer Privacy Act (CCPA), California Privacy Rights Act (CPRA), and the EU's General Data Protection Regulation (GDPR) impose strict obligations on the collection, use, disclosure, and transfer of personal data[130](index=130&type=chunk][131](index=131&type=chunk][132](index=132&type=chunk][133](index=133&type=chunk][248](index=248&type=chunk][249](index=249&type=chunk][250](index=250&type=chunk][251] - Failure to comply with these laws can result in significant fines, criminal penalties, exclusion from government programs, injunctions, reputational harm, and operational restrictions[137](index=137&type=chunk][256] Pharmaceutical Coverage, Pricing and Reimbursement Commercial success depends on the availability of coverage and adequate reimbursement from third-party payors - The commercial sale of the company's product candidates will depend in part on the availability of coverage and adequate reimbursement levels from third-party payors, including government healthcare programs and private insurance companies[138](index=138&type=chunk][139](index=139&type=chunk][258] - Third-party payors are increasingly challenging drug prices, medical necessity, and cost-effectiveness, which may limit coverage or set low reimbursement rates[139](index=139&type=chunk][258] - In the U S, there is no uniform policy for coverage and reimbursement, and the company may be required to participate in discount and rebate programs (e g, the Medicaid Drug Rebate Program)[139](index=139&type=chunk][140] - In the European Union, governments influence drug prices through pricing and reimbursement rules and control over national healthcare systems[141](index=141&type=chunk][142] - Inadequate coverage and reimbursement could affect the market acceptance, price, and profitability of the company's products[143](index=143&type=chunk][260] Healthcare Reform Healthcare reform measures in the U.S. and other jurisdictions may adversely affect drug pricing and reimbursement - The U S and other jurisdictions have implemented various healthcare reform measures aimed at controlling healthcare costs, improving quality, and expanding access[144](index=144&type=chunk][261](index=261&type=chunk][262] - The Affordable Care Act (ACA) and the Inflation Reduction Act of 2022 (IRA) are significant pieces of legislation, with the IRA authorizing HHS to negotiate prices for certain Medicare-covered drugs and imposing rebates for price increases exceeding inflation[145](index=145&type=chunk][146](index=146&type=chunk][264] - These reform measures are expected to result in additional downward pressure on the coverage and price of the company's products, which could materially harm the company's business, financial condition, and results of operations[147](index=147&type=chunk][265] The U.S. Foreign Corrupt Practices Act The company is subject to the U.S. Foreign Corrupt Practices Act (FCPA), which prohibits corrupt payments to foreign officials - The FCPA prohibits U S individuals or businesses from paying or offering anything of value to foreign officials, political parties, or candidates to influence their actions or decisions to obtain or retain business[148] - The FCPA also requires U S -listed companies to maintain books and records that accurately reflect all transactions and to devise a system of adequate internal accounting controls[148] Europe / Rest of World Government Regulation The company is subject to various regulations in jurisdictions outside the U.S., including those governing clinical trials and product licensing - The company is subject to various regulations in other jurisdictions, including those governing clinical trials, product licensing, pricing, and reimbursement[149](index=149&type=chunk][151] - In the European Union, clinical trials require the submission of a Clinical Trial Authorization (CTA) application and approval from an independent ethics committee[150] - Marketing of medicinal products in the EU requires either a centralized authorization procedure or a national authorization procedure[152](index=152&type=chunk][153](index=153&type=chunk][154] - The EU offers Orphan Drug Designation, which provides ten years of market exclusivity, extendable to twelve years[154] - Failure to comply with foreign regulatory requirements can result in fines, suspension or withdrawal of approvals, product recalls, operational restrictions, and criminal prosecution[156] Human Capital and Employee Engagement The company focuses on attracting and retaining a highly skilled team and fostering a positive, diverse, and inclusive corporate culture - The company is committed to attracting and retaining a highly skilled team and fostering a positive, diverse, inclusive, and dynamic corporate culture[157](index=157&type=chunk][158] - The company offers employees competitive base salaries, cash bonuses, a comprehensive benefits package, and equity incentives[158] Employee Composition (as of December 31, 2022) | Metric | Count | | :--- | :--- | | Total Employees | 33 | | Full-Time Employees | 32 | | Employees with M.D. or Ph.D. | 15 | Facilities The company leases office space in La Jolla, California, which it believes is sufficient for its current needs - The company leased office space in La Jolla, California in June 2021 and extended the lease in August 2022 through December 31, 2024[160] - The company believes its existing facilities are sufficient for its current needs and that suitable additional or substitute space will be available in the future[160] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings that could have a material adverse effect on its financial condition, results of operations, or cash flows[161] Risk Factors This section details significant risks associated with investing in the company's stock, covering operations, finance, and market factors - Investing in the company's stock is highly speculative and involves numerous risks, including a limited operating history, recurring losses, and dependence on additional capital[162](index=162&type=chunk][163](index=163&type=chunk][167] - The development and commercialization of product candidates is a long, expensive, and uncertain process, with risks of clinical trial failure, adverse side effects, low market acceptance, and intense competition[184](index=184&type=chunk][202](index=202&type=chunk][208](index=208&type=chunk][209] - The company faces stringent regulatory compliance requirements, including healthcare fraud and abuse laws, data privacy regulations, and challenges in protecting intellectual property[246](index=246&type=chunk][273](index=273&type=chunk][324] - The company is highly dependent on third parties for manufacturing and clinical trials, and the acquisition of Arena by Pfizer could negatively impact its business[334](index=334&type=chunk][340](index=340&type=chunk][347] - Risks related to common stock ownership include price volatility, no dividend payments, significant control by major stockholders, a dual-class stock structure, and potential dilution from future stock sales[360](index=360&type=chunk][363](index=363&type=chunk][364](index=364&type=chunk][365](index=365&type=chunk][370] Risks Related to Our Limited Operating History, Financial Position and Need For Additional Capital The company has a limited operating history, a history of net losses, and will require substantial additional capital to fund operations - The company has a limited operating history since its inception in January 2020 and has not yet successfully developed or commercialized any biopharmaceutical products[163] - The company expects to continue incurring significant losses and increasing expenses as it develops its product candidates and operates as a public company[165](index=165&type=chunk][166](index=166&type=chunk][167] - As of December 31, 2022, the company had $67.6 million in cash, cash equivalents, and short-term investments, which, combined with proceeds from a subsequent public offering in February 2023, is expected to fund operations for at least 12 months[168] - Macroeconomic and geopolitical events (e g, the COVID-19 pandemic, the conflict in Ukraine, inflation, and rising interest rates) may limit the company's ability to access capital, leading to delays, limitations, or termination of development efforts[167](index=167&type=chunk][170](index=170&type=chunk][171](index=171&type=chunk][175](index=175&type=chunk][176] - Raising additional capital through the issuance of equity or debt securities may cause dilution to existing stockholders or involve covenants that restrict the company's operations[172] Net Loss and Accumulated Deficit | Metric | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net Loss | $43.9 million | $27.8 million | | Accumulated Deficit | $86.1 million | $42.2 million | Risks Related to the Development and Commercialization of Our Product Candidates The development and commercialization of the company's product candidates are subject to numerous risks and uncertainties - The company is in the early stages of development, with LP352 being the only product in the clinical stage and other products (including LP659) still in the preclinical stage, making successful commercialization highly uncertain[177](index=177&type=chunk][178](index=178&type=chunk][179] - The clinical and preclinical drug development process is lengthy, expensive, and uncertain, with early study results not necessarily predictive of later success, and unexpected side effects may arise[184](index=184&type=chunk][185](index=185&type=chunk][201](index=201&type=chunk][202] - As a 5-HT2C superagonist, LP352, despite being designed for improved safety, may still face risks of side effects similar to those of other drugs in its class (e g, fenfluramine and lorcaserin), potentially leading to a black box warning or a REMS program[204](index=204&type=chunk][205] - If the market opportunity for the targeted indications is smaller than anticipated or the patient population is small, the company may struggle to achieve profitability and growth[208] - The company faces intense competition from major pharmaceutical companies, specialty pharmaceutical companies, and biotechnology companies that have advantages in resources and experience[209](index=209&type=chunk][210](index=210&type=chunk][211](index=211&type=chunk][212] - The regulatory approval process is lengthy, costly, and unpredictable, and may result in delays or rejection of approval, even if approved, products may be hindered by low market acceptance, ongoing regulatory review, or product liability lawsuits[217](index=217&type=chunk][222](index=222&type=chunk][229](index=229&type=chunk][239] - The company's product candidates may be classified as controlled substances, facing additional regulatory restrictions from the DEA and state agencies, which could impact their commercial potential[241](index=241&type=chunk][242](index=242&type=chunk][245] Risks Related to Regulatory Compliance The company's relationships with customers, healthcare providers, and third-party payors are subject to extensive healthcare laws and regulations - The company's business is subject to federal and state healthcare fraud and abuse laws, false claims laws, and data privacy and security laws and regulations, including the federal Anti-Kickback Statute, the False Claims Act, HIPAA, and the Physician Payments Sunshine Act[246](index=246&type=chunk][247](index=247&type=chunk][248] - Data privacy laws such as the EU GDPR, UK GDPR, and Swiss DPA impose strict obligations on the collection, processing, and cross-border transfer of personal data, with violations potentially leading to substantial fines and reputational damage[249](index=249&type=chunk][250](index=250&type=chunk][251](index=251&type=chunk][252](index=252&type=chunk][253](index=253&type=chunk][254] - If the company is found to have improperly promoted off-label uses, it may face prohibitions on sales or marketing, significant fines, penalties, and reputational harm[266](index=266&type=chunk][267] - The company may not be able to obtain or maintain orphan drug designation or exclusivity for its product candidates, which would limit their potential profitability[268](index=268&type=chunk][269] - Disruptions at the FDA and other government agencies due to funding shortages or global health issues (such as the COVID-19 pandemic) could hinder the timely development, approval, or commercialization of new products[270](index=270&type=chunk][271](index=271&type=chunk][272] Risks Related to Our Intellectual Property The company's success is highly dependent on its intellectual property, particularly technology and patents licensed from Arena - The company is highly dependent on intellectual property licensed from third parties, including Arena, and the termination of license agreements or failure to adequately protect licensed IP would severely harm the business[273](index=273&type=chunk][274](index=274&type=chunk][279] - The patent application process is expensive and time-consuming, with no guarantee of obtaining broad or meaningful patent protection, and issued patents may be challenged for validity or enforceability, leading to narrowed scope, invalidation, or unenforceability[292](index=292&type=chunk][293](index=293&type=chunk][294](index=294&type=chunk][297](index=297&type=chunk][299](index=299&type=chunk][300](index=300&type=chunk][317] - The company may face lawsuits from third parties alleging infringement of their intellectual property or may need to initiate litigation to protect its own patents, which can be time-consuming, costly, and uncertain in outcome[307](index=307&type=chunk][308](index=308&type=chunk][310] - Trade secrets may be discovered or misappropriated by competitors through collaboration with third parties, employee disclosure, or independent development, thereby weakening the company's competitive advantage[322](index=322&type=chunk][323](index=323&type=chunk][324](index=324&type=chunk][325](index=325&type=chunk][326] - The strength of intellectual property protection varies across countries, which may make it difficult for the company to effectively protect and enforce its IP in certain jurisdictions[319](index=319&type=chunk][320](index=320&type=chunk][321] Risks Related to Our Dependence on Third Parties or Their Actions The company relies heavily on third-party manufacturers and contract research organizations, posing risks to supply and clinical development - The company has no in-house manufacturing capabilities and is highly dependent on third-party manufacturers for clinical and commercial supply, which increases the risk of supply shortages, increased costs, or delays in development and commercialization[334](index=334&type=chunk][335](index=335&type=chunk][336](index=336&type=chunk][337](index=337&type=chunk][339] - Third-party manufacturers may fail to comply with cGMP regulations or similar foreign regulatory requirements, preventing their facilities from obtaining or maintaining marketing approval[338] - The company relies on third-party contract research organizations (CROs) for preclinical studies and clinical trials and has limited control over their performance; poor performance by CROs could lead to unreliable data or trial delays[340](index=340&type=chunk][341](index=341&type=chunk][342](index=342&type=chunk][343](index=343&type=chunk][344] - The acquisition of Arena by Pfizer could negatively impact the company's development programs and stock price, as Pfizer may not cooperate in protecting intellectual property or may sell its shares in the company[347](index=347&type=chunk][348] Risks Related to Our Business Operations, Employee Matters and Managing Growth The company's operations are dependent on its senior management team and ability to manage growth effectively - The company is highly dependent on the services of its senior management team, and the inability to retain key personnel or attract additional qualified talent would harm the business[349](index=349&type=chunk][350](index=350&type=chunk][351] - The company needs to expand its organization, and managing growth could lead to a strained infrastructure, operational inefficiencies, loss of business opportunities, and employee attrition[353] - Employees, principal investigators, consultants, and commercial partners may engage in misconduct, including non-compliance with regulatory standards and insider trading, which could lead to regulatory sanctions and reputational damage[354](index=354&type=chunk][355] - The COVID-19 pandemic has adversely affected the company's business and may continue to cause delays in clinical trials and operational disruptions, exacerbating other risks and uncertainties[356](index=356&type=chunk][357] Risks Related to Ownership of Our Common Stock Ownership of the company's common stock involves risks such as price volatility, lack of dividends, and significant control by major stockholders - The trading market for the company's common stock may be volatile, with significant price fluctuations, and investors may face investment losses[358](index=358&type=chunk][360](index=360&type=chunk][362] - The company does not intend to pay dividends, and stockholder returns will be limited to the appreciation in the value of the stock[363] - Principal stockholders and management hold a substantial portion of the company's stock, enabling them to exercise significant control over matters requiring stockholder approval and potentially preventing or discouraging unsolicited acquisition proposals[364] - The dual-class stock structure (voting and non-voting common stock) may limit stockholders' influence over company affairs[365] - Substantial sales of stock by existing stockholders (including Arena/Pfizer) or the market perception of such sales could cause the stock price to decline[366](index=366&type=chunk][367](index=367&type=chunk][368](index=368&type=chunk][369] - Future stock issuances could dilute the interests of existing stockholders and may cause the stock price to fall[370](index=370&type=chunk][371](index=371&type=chunk][372](index=372&type=chunk][373] - As an emerging growth company and a smaller reporting company, the company is subject to reduced reporting requirements, which may make the stock less attractive to some investors[374](index=374&type=chunk][375](index=375&type=chunk][376](index=376&type=chunk][377] - Delaware law and provisions in the company's charter could make a merger, tender offer, or proxy contest difficult, thereby depressing the stock price[378](index=378&type=chunk][379](index=379&type=chunk][381](index=381&type=chunk][382](index=382&type=chunk][383] - The exclusive forum provisions in the company's charter may limit a stockholder's ability to choose a favorable judicial forum and increase litigation costs[384](index=384&type=chunk][385](index=385&type=chunk][386](index=386&type=chunk][387] General Risk Factors The company faces general risks related to being a public company, including increased costs, internal control requirements, and IT system vulnerabilities - As a public company, the company will continue to incur significantly increased legal, accounting, and other expenses, and management will need to devote substantial time to new compliance requirements[388](index=388&type=chunk][389] - Failure to maintain effective and appropriate internal control over financial reporting could harm the accuracy and timeliness of financial statements, leading to a loss of investor confidence and a decline in stock price[390](index=390&type=chunk][391] - The company may face securities class action litigation, which would be costly and divert management's attention[393] - The actions of activist stockholders could negatively impact the company's business and stock price[394] - Failure to meet Nasdaq's continued listing requirements could result in the delisting of the company's common stock, which would negatively affect its stock price and liquidity[395] - Information technology system disruptions or data security incidents (including cyberattacks and data breaches) could result in significant financial, legal, regulatory, business, and reputational harm[397](index=397&type=chunk][398](index=398&type=chunk][399](index=399&type=chunk][400] Unresolved Staff Comments There are no unresolved staff comments in this report - There are no unresolved staff comments in this report[401] Properties The company leases 8,681 square feet of office space in La Jolla, California, with the lease extending to December 31, 2024 - The company leased 8,681 square feet of office space in La Jolla, California in June 2021[402] - The lease was extended in August 2022 through December 31, 2024[402] - The company believes its existing facilities are sufficient for its current needs[402] Legal Proceedings The company is not currently involved in any material legal proceedings - The company is not currently a party to any material legal proceedings that could have a material adverse effect on its financial condition, results of operations, or cash flows[403] Mine Safety Disclosures The company has no mine safety information to disclose - The company has no mine safety information to disclose[404] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the Nasdaq Global Market under the ticker "LBPH" and it does not plan to pay dividends - The company's common stock has been trading on the Nasdaq Global Market under the ticker symbol "LBPH" since March 12, 2021[407] - As of February 28, 2023, the closing price of the common stock was $5.06, and there were approximately three stockholders of record[408] - The company has never declared or paid cash dividends and plans to retain future earnings for business development[409] - The company completed its Initial Public Offering (IPO) in March 2021, selling 5,298,360 shares of common stock for net proceeds of $76.2 million[411](index=411&type=chunk][445] - In September 2022, the company entered into a sales agreement to sell up to $20.0 million of its common stock through an "at-the-market" offering program, but no shares were sold as of December 31, 2022[446](index=446&type=chunk][529] Management's Discussion and Analysis of Financial Condition and Results of Operations This section discusses the company's financial condition and results of operations, highlighting its status as a clinical-stage biopharmaceutical company - The company is a clinical-stage biopharmaceutical company focused on neurological diseases, with its main product candidates being LP352 and LP659[416] - The company has incurred net losses since its inception, with net losses of $43.9 million in 2022 and $27.8 million in 2021, and an accumulated deficit of $86.1 million as of December 31, 2022[421] - As of December 31, 2022, the company had $67.6 million in cash, cash equivalents, and short-term investments, which, combined with proceeds from a subsequent public offering in February 2023, is expected to fund operations for at least 12 months[421](index=421&type=chunk][449] - The company's operating expenses consist primarily of R&D expenses and G&A expenses, which are expected to increase substantially in the future[428](index=428&type=chunk][429](index=429&type=chunk][437](index=437&type=chunk][438] - The company has entered into a license agreement, a royalty purchase agreement, and a services agreement with Arena, which impact its operations and financial condition[417](index=417&type=chunk][424](index=424&type=chunk][425](index=425&type=chunk][426](index=426&type=chunk][427] Overview The company is a clinical-stage biopharmaceutical firm focused on developing novel therapeutics for neurological disorders - The company is a clinical-stage biopharmaceutical company focused on developing innovative medicines for neurological diseases, with its main product candidates being LP352 and LP659[416](index=416&type=chunk][418] - The company acquired product rights through a license agreement with Arena and has raised capital through equity financings[417](index=417&type=chunk][420] - As of December 31, 2022, the company had $67.6 million in cash, cash equivalents, and short-term investments, which, combined with proceeds from a subsequent public offering in February 2023, is expected to fund operations for at least 12 months[421](index=421&type=chunk][497] - Geopolitical events such as the COVID-19 pandemic and the conflict in Ukraine may adversely affect the company's business, operations, and development timelines[423](index=423&type=chunk][496] Net Loss and Accumulated Deficit | Metric | December 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Net Loss | $43.9 million | $27.8 million | | Accumulated Deficit | $86.1 million | $42.2 million | Agreements with Arena The company has three main agreements with Arena: a license agreement, a royalty purchase agreement, and a services agreement - The company has entered into a license agreement, a royalty purchase agreement, and a services agreement with Arena[424] - The license agreement grants the company an exclusive license to develop and commercialize LP352, LP659, and other compounds, with mid-to-low single-digit percentage royalties on net sales[425] - The royalty purchase agreement entitles the company to milestone payments and royalties on lorcaserin, with rates ranging from 9.5% to 18.5% of annual global net sales[419](index=419&type=chunk][426] - The services agreement provides for R&D and administrative services from Arena, but the company significantly reduced its reliance on these services in 2022[427] Components of Our Results of Operations The company's operating expenses consist primarily of R&D expenses and general and administrative expenses - The company's operating expenses consist primarily of R&D expenses and general and administrative expenses[428] - R&D expenses include external contract research, clinical trials, manufacturing costs, and internal personnel-related costs, and are expected to increase substantially as product candidates advance into later-stage development[429](index=429&type=chunk][430](index=430&type=chunk][431](index=431&type=chunk][432] - General and administrative expenses consist primarily of personnel-related costs, professional service fees, and facility-related costs, and are expected to increase moderately in the future to support R&D activities and the costs of operating as a public company[437](index=437&type=chunk][438] Financial Operations Overview The company's operating results for 2022 and 2021 show continued net losses, driven by increasing R&D and G&A expenses Summary of Results of Operations (for the years ended December 31) | (in thousands of U.S. dollars) | 2022 | 2021 | | :--- | :--- | :--- | | Operating expenses: | | | | Research and development | $34,638 | $19,774 | | General and administrative | $10,160 | $8,065 | | Total operating expenses | $44,798 | $27,839 | | Loss from operations | $(44,798) | $(27,839) | | Interest income, net | $837 | $64 | | Other income (expense) | $16 | $(22) | | Net loss | $(43,945) | $(27,797) | Summary of R&D Expenses (for the years ended December 31) | (in thousands of U.S. dollars) | 2022 | 2021 | | :--- | :--- | :--- | | Direct costs: | | | | LP352 | $19,389 | $8,212 | | Preclinical programs | $5,596 | $6,224 | | Indirect costs: | | | | Personnel-related | $8,408 | $4,548 | | All other | $1,245 | $790 | | Total R&D expenses | $34,638 | $19,774 | Summary of G&A Expenses (for the years ended December 31) | (in thousands of U.S. dollars) | 2022 | 2021 | | :--- | :--- | :--- | | Personnel-related costs | $5,300 | $4,000 | | Professional services and consulting fees | $2,000 | $1,700 | | Insurance expense | $1,600 | $1,500 | | Other | $1,260 | $865 | | Total G&A expenses | $10,160 | $8,065 | Liquidity and Capital Resources The company has funded its operations primarily through private placements of convertible preferred stock and public offerings of common stock - As of December 31, 2022, the company had $67.6 million in cash, cash equivalents, and short-term investments[443] - The company has raised capital primarily through a private placement of convertible preferred stock ($56.0 million) and public offerings of common stock (IPO net proceeds of $76.2 million, subsequent public offering net proceeds of $21.2 million in February 2023)[420](index=420&type=chunk][444](index=444&type=chunk][445](index=445&type=chunk][447] - The company expects its existing funds, combined with proceeds from the subsequent public offering in February 2023, to be sufficient to fund operations for at least 12 months[421](index=421&type=chunk][449] - The company will require substantial additional financing in the future to support product development and commercialization, and its ability to raise capital may be affected by global economic conditions and financial market volatility[449](index=449&type=chunk][450](index=450&type=chunk][451] - Failure to obtain necessary capital in a timely manner could result in delays, limitations, or termination of R&D programs[451] Cash Flows The company's cash flows show a continued net cash outflow from operating activities and significant cash inflows from financing activities in 2021 due to its IPO - Net cash used in operating activities was $38.1 million in 2022, primarily due to a net loss of $43.9 million, partially offset by $2.7 million in stock-based compensation and a $3.1 million change in operating assets and liabilities[454] - Net cash used in investing activities was $17.1 million in 2022, primarily consisting of $57.6 million in purchases of short-term investments and $40.5 million in maturities of short-term investments[455] - Net cash provided by financing activities was $76.5 million in 2021, primarily from the net proceeds of the IPO[456] Summary of Cash Flows (for the years ended December 31) | (in thousands of U.S. dollars) | 2022 | 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(38,063) | $(24,705) | | Net cash used in investing activities | $(17,064) | $(40,716) | | Net cash (used in) provided by financing activities | $(444) | $76,451 | | Net (decrease) increase in cash and cash equivalents | $(55,571) | $11,030 | | Cash and cash equivalents at beginning of period | $66,346 | $55,316 | | Cash and cash equivalents at end of period | $10,775 | $66,346 | Recent Accounting Pronouncements The company adopted FASB ASU No 2016-13, "Financial Instruments—Credit Losses," on January 1, 2023, with no material impact expected - The company adopted FASB ASU No 2016-13, "Financial Instruments—Credit Losses," on January 1, 2023[515] - The guidance requires the measurement of all expected credit losses for financial assets based on historical experience, current conditions, and reasonable and supportable forecasts[515] - The company does not expect the adoption of this standard to have a material impact on its financial statements[515] Critical Accounting Policies and Estimates The company's financial statements are prepared in accordance with U.S. GAAP, with accrued R&D expenses being a key accounting estimate - The company's financial statements are prepared in accordance with U S Generally Accepted Accounting Principles (GAAP), with accrued R&D expenses being a key accounting policy and estimate[458](index=458&type=chunk][460] - The company estimates accrued R&D expenses by reviewing contracts, communicating with personnel, and estimating the level of services performed and the associated costs[460](index=460&type=chunk][461] - As of December 31, 2022, a 10% increase in accrued R&D expenses would have resulted in an increase in net loss of approximately $0.4 million[463] Emerging Growth Company and Smaller Reporting Company Status The company qualifies as an "emerging growth company" and a "smaller reporting company," allowing for reduced disclosure requirements - The company is an "emerging growth company" as defined in the Jumpstart Our Business Startups (JOBS) Act and can elect to use an extended transition period for complying with new or revised accounting standards[464] - The company has elected to use this exemption and therefore will not be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies[464] - The company is also a "smaller reporting company" and can take advantage of reduced disclosure requirements, including an exemption from the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act[466] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk - As a smaller reporting company, the company is not required to provide quantitative and qualitative disclosures about market risk[467] Financial Statements and Supplementary Data This section contains the company's audited financial statements for the years ended December 31, 2022 and 2021 - This section contains the company's audited financial statements for the years ended December 31, 2022 and 2021[468](index=468&type=chunk][470] - The financial statements include the report of the independent registered public accounting firm, balance sheets, statements of operations and comprehensive loss, statements of convertible preferred stock and stockholders' equity (deficit), and statements of cash flows[470] - The notes provide detailed information on the company's organization, significant accounting policies, fair value measurements, short-term investments, accrued expenses, stockholders' equity, agreements with Arena, stock-based compensation, commitments and contingencies, income taxes, and employee benefits[470] Report of Independent Registered Public Accounting Firm KPMG LLP issued an unqualified opinion on the company's financial statements for the years ended December 31, 2022 and 2021 - KPMG LLP issued an unqualified opinion on the company's financial statements for the years ended December 31, 2022 and 2021[472] - The audit concluded that the financial statements present fairly, in all material respects, the financial position and results of operations of the company in conformity with U S generally accepted accounting principles[472] Balance Sheets As of December 31, 2022, the company's total assets were $70.6 million, a decrease from $109.0 million in 2021 - As of December 31, 2022, the company's total assets were $70.6 million, a decrease from $109.0 million in 2021, primarily due to a decrease in cash and cash equivalents and short-term investments - Total liabilities increased from $5.4 million in 2021 to $8.8 million in 2022, mainly driven by an increase in accrued R&D expenses and accrued compensation and related expenses - Stockholders' equity decreased from $103.3 million in 2021 to $61.5 million in 2022, reflecting continued net losses and accumulated other comprehensive loss Summary of Balance Sheets (as of December 31, in thousands of U.S. dollars) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $10,775 | $66,346 | | Short-term investments | $56,814 | $40,379 | | Prepaid expenses and other current assets | $2,249 | $1,659 | | Total current assets | $69,838 | $108,384 | | Right-of-use assets | $736 | $521 | | Property and equipment | $9 | $14 | | Other long-term assets | $33 | $33 | | Total assets | $70,616 | $108,952 | | Liabilities and Equity | | | | Accounts payable | $1,310 | $1,028 | | Accrued research and development expenses | $4,168 | $2,245 | | Accrued compensation and related expenses | $2,438 | $1,480 | | Accrued other expenses | $490 | $352 | | Right-of-use liabilities, current portion | $358 | $339 | | Total current liabilities | $8,764 | $5,444 | | Right-of-use liabilities, non-current portion | $382 | $185 | | Total liabilities | $9,146 | $5,629 | | Stockholders' Equity | | | | Voting common stock | $1 | $1 | | Non-voting common stock | $0 | $0 | | Additional paid-in capital | $148,303 | $145,683 | | Accumulated other comprehensive loss | $(692) | $(164) | | Accumulated deficit | $(86,142) | $(42,197) | | Total stockholders' equity | $61,470 | $103,323 | | Total liabilities and stockholders' equity | $70,616 | $108,952 | Statements of Operations and Comprehensive Loss The company reported a net loss of $43.9 million in 2022, an increase from the $27.8 million net loss in 2021 - The net loss for 2022 was $43.9 million, an increase from the $27.8 million net loss in 2021 - Total operating expenses increased from $27.8 million in 2021 to $44.8 million in 2022 - Comprehensive loss was $44.5 million in 2022 and $28.0 million in 2021, reflecting the net loss and unrealized losses on short-term investments Summary of Statements of Operations and Comprehensive Loss (for the years ended December 31, in thousands of U.S. dollars, except share and per share data) | (in thousands of U.S. dollars, except share and per share data) | 2022 | 2021 | | :--- | :--- | :--- | | Operating expenses: | | | | Research and development | $34,638 | $19,774 | | General and administrative | $10,160 | $8,065 | | Total operating expenses | $44,798 | $27,839 | | Loss from operations | $(44,798) | $(27,839) | | Interest income, net | $837 | $64 | | Other income (expense) | $16 | $(22) | | Net loss | $(43,945) | $(27,797) | | Net loss per share, basic and diluted | $(2.56) | $(1.93) | | Weighted-average shares outstanding, basic and diluted | 17,150,907 | 14,410,502 | | Comprehensive loss: | | | | Net loss | $(43,945) | $(27,797) | | Unrealized loss on short-term investments | $(528) | $(164) | | Comprehensive loss | $(44,473) | $(27,961) | Statements of Convertible Preferred Stock and Stockholders' Equity (Deficit) This statement shows the changes in the company's convertible preferred stock and stockholders' equity (deficit) for 2022 and 2021 - In 2021, the company converted its Series A convertible preferred stock into common stock and issued new common stock through its IPO, resulting in a significant increase in additional paid-in capital - In 2022, stockholders' equity decreased primarily due to the net loss and unrealized losses on short-term investments, while stock-based compensation expense increased additional paid-in capital Summary of Changes in Convertible Preferred Stock and Stockholders' Equity (Deficit) (for the years ended December 31, in thousands of U.S. dollars, except shares) | Item | 2022 | 2021 | | :--- | :--- | :--- | | Stockholders' Equity | | | | Voting common stock | $1 | $1 | | Non-voting common stock | $0 | $0 | | Additional paid-in capital | $148,303 | $145,683 | | Accumulated other comprehensive loss | $(692) | $(164) | | Accumulated deficit | $(86,142) | $(42,197) | | Total stockholders' equity | $61,470 | $103,323 | | Key Changes: | | | | Initial Public Offering (