Lisata Therapeutics(LSTA) - 2022 Q4 - Annual Report

PART I Business Lisata Therapeutics is a clinical-stage pharmaceutical company developing therapies for solid tumors, with its lead candidate LSTA1 designed to enhance anti-cancer drug penetration - The company's lead product is LSTA1, a drug designed to improve the efficacy of co-administered anti-cancer drugs by increasing their penetration into solid tumors[17][18] - Following the acquisition of Cend Therapeutics in September 2022, the company was renamed and executed a 1:15 reverse stock split[22][23][25] - The COVID-19 pandemic caused significant delays in clinical trial enrollment for HONEDRA and XOWNA, leading to the suspension of enrollment for both studies[26] - The company's CD34+ cell therapy programs, including HONEDRA and LSTA201, require strategic partners for further development due to high costs[18][39][42] - Intellectual property for the CendR Platform™ (LSTA1) includes two pending U.S. patent applications and thirteen pending applications outside the U.S[44][46] Risk Factors The company faces significant financial, clinical development, regulatory, and operational risks, including a history of losses and dependence on its lead product candidate LSTA1 - The company has a history of substantial losses, with an accumulated net loss of approximately $507.2 million since inception, and will require significant additional financing[104][105] - The business is substantially dependent on its lead product candidate, LSTA1, and any failure in its development or commercialization would materially harm the company[123] - The COVID-19 pandemic has adversely affected business operations, causing significant delays and suspension of the HONEDRA and XOWNA clinical trials[131][133] - The company relies on single-source contract manufacturing organizations (CMOs), creating a risk of disruption to clinical trials and future commercial supply[165] - Product development is subject to extensive and rigorous regulation by the FDA and other global authorities, and failure to obtain approvals would have a material adverse effect[210] - The company's ability to use its net operating loss (NOL) carryforwards is subject to limitations under Section 382 of the Code due to ownership changes[115][116] - The company faces risks related to the recent merger with Cend, including challenges in successfully integrating the businesses and potential litigation[321][323] Unresolved Staff Comments The company reports no unresolved comments from SEC staff - There are no unresolved staff comments[342] Properties The company's corporate headquarters are located in a leased office space in Basking Ridge, New Jersey - The company's main office is an 8,100 sq. ft. leased space in Basking Ridge, NJ, with the lease running until September 30, 2025[343] - The lease for the Rye Brook, New York office expired in March 2023 and was not renewed[343] Legal Proceedings The company is defending against a lawsuit inherited from the Cend merger concerning an alleged breach of contract - Cend, now a subsidiary, is in litigation with Lingmed Limited, which claims it is owed a success fee related to a collaboration with Qilu Pharmaceuticals[345] - The company denies Lingmed's allegations and plans to vigorously defend against the claim[345] Mine Safety Disclosures This section is not applicable to the company's operations - Not applicable[346] 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 Capital Market, and it has never paid cash dividends - The company's common stock trades on The Nasdaq Capital Market under the ticker symbol "LSTA"[349] - The company has never paid cash dividends and does not plan to in the foreseeable future, retaining earnings to fund growth[350] Equity Compensation Plan Information as of December 31, 2022 | Plan Category | Securities to be issued upon exercise of outstanding options | Weighted Average exercise price | Securities remaining available for future issuance | |---|---|---|---| | Equity compensation plans approved by security holders | 1,391,352 | $10.83 | 587,449 | [Reserved] This item is intentionally left blank Management's Discussion and Analysis of Financial Condition and Results of Operations The company's net loss increased significantly in 2022, primarily due to a one-time R&D expense from the Cend merger, but it maintains sufficient capital for near-term operations - The increase in net loss for 2022 was primarily due to a one-time $30.4 million in-process research and development expense associated with the Cend merger[362] - Research and development expenses decreased by $4.5 million (25.7%) in 2022, mainly due to the suspension of the XOWNA Phase 2b study[362] - As of December 31, 2022, the company had approximately $69.2 million in cash, cash equivalents, and marketable securities[368] - Management believes that current cash and marketable securities are sufficient to fund operating expenses for at least the next 12 months[376] Comparison of Operating Results | Metric | 2022 (in millions) | 2021 (in millions) | |---|---|---| | Research and development | $13.1 | $17.6 | | In-process research and development | $30.4 | $0 | | General and administrative | $14.1 | $11.5 | | Total operating expenses | $57.6 | $29.1 | | Net loss | $54.2 | $27.5 | Quantitative and Qualitative Disclosures About Market Risk This section is not applicable as the company is a smaller reporting company - Not applicable[385] Financial Statements and Supplementary Data The consolidated financial statements reflect a higher net loss in 2022 versus 2021, driven by merger-related expenses - The merger with Cend Therapeutics was accounted for as an asset acquisition with a total purchase price of $36.1 million, of which $30.4 million was expensed as IPR&D[449][450] - The company's ability to use its Federal Net Operating Losses (NOLs) is significantly limited due to ownership changes under IRC Section 382[480][481] Consolidated Balance Sheet | Consolidated Balance Sheet (in thousands) | Dec 31, 2022 | Dec 31, 2021 | |---|---|---| | Cash and cash equivalents | $32,154 | $24,647 | | Marketable securities | $37,072 | $70,323 | | Total Assets | $73,034 | $97,008 | | Total current liabilities | $6,383 | $4,523 | | Total Liabilities | $6,710 | $5,008 | | Total Stockholders' Equity | $66,324 | $92,000 | Consolidated Statement of Operations | Consolidated Statement of Operations (in thousands) | Year Ended Dec 31, 2022 | Year Ended Dec 31, 2021 | |---|---|---| | Operating Expenses | $57,601 | $29,050 | | Operating Loss | ($57,601) | ($29,050) | | Net Loss | ($54,225) | ($27,466) | | Basic and Diluted Loss Per Share | ($10.47) | ($7.45) | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure This section is not applicable to the company - Not applicable[505] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of year-end 2022 - As of December 31, 2022, management concluded that the company's disclosure controls and procedures were effective[507] - Management assessed internal control over financial reporting based on the COSO framework and found it to be effective as of December 31, 2022[510] - No material changes occurred during the fourth quarter of 2022 that affected the company's internal control over financial reporting[512] Other Information The company adopted a clawback policy for recouping incentive-based executive compensation in the event of an accounting restatement - On March 28, 2023, the company adopted a Clawback Policy to recoup incentive-based compensation from executives if a material accounting restatement is required[514] Disclosure Regarding Foreign Jurisdictions That Prevent Inspections This section is not applicable to the company - Not applicable[516] PART III Directors, Executive Officers and Corporate Governance This section details the company's leadership team and board of directors, with other governance information incorporated by reference - The report lists the executive officers and directors as of March 30, 2023, including CEO David J. Mazzo, Ph.D., and provides their professional biographies[519][520][521] - Detailed information regarding corporate governance, compliance, and code of ethics is incorporated by reference from the 2023 Proxy Statement[519] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement - Information on executive compensation is incorporated by reference from the 2023 Proxy Statement[537] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement - Information on security ownership and equity compensation plans is incorporated by reference from the 2023 Proxy Statement[538] Certain Relationships and Related Transactions, and Director Independence Information regarding related party transactions and director independence is incorporated by reference from the company's 2023 Proxy Statement - Information on related transactions and director independence is incorporated by reference from the 2023 Proxy Statement[539] Principal Accountant Fees and Services Information regarding principal accountant fees and services is incorporated by reference from the company's 2023 Proxy Statement - Information on principal accountant fees and services is incorporated by reference from the 2023 Proxy Statement[540] PART IV Exhibits, Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed as part of the annual report - This item provides a list of all financial statements, schedules, and exhibits filed as part of the Form 10-K[542][544] Form 10-K Summary The company has elected not to provide a Form 10-K summary - None[548]