Vaccinex(VCNX) - 2023 Q3 - Quarterly Report

PART I – FINANCIAL INFORMATION Financial Statements The company's unaudited financial statements for the nine months ended September 30, 2023, show a significant deterioration in its financial position Condensed Balance Sheets The balance sheet reflects a critical decline in liquidity and a shift from stockholders' equity to a significant deficit as of September 30, 2023 Condensed Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $127 | $6,391 | | Total current assets | $2,206 | $7,478 | | TOTAL ASSETS | $2,558 | $7,977 | | Liabilities & Equity | | | | Accounts payable | $4,225 | $1,518 | | Total current liabilities | $6,362 | $2,537 | | TOTAL LIABILITIES | $6,427 | $2,784 | | TOTAL STOCKHOLDERS' EQUITY/(DEFICIT) | $(3,869) | $5,193 | Condensed Statements of Operations and Comprehensive Loss The company reported wider net losses for the three and nine-month periods ending September 30, 2023, driven by increased research and development expenses Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | 9 Months 2023 | 9 Months 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $20 | $50 | $570 | $50 | | Research and development | $4,355 | $3,429 | $13,217 | $10,238 | | General and administrative | $1,499 | $1,413 | $5,250 | $4,599 | | Loss from operations | $(5,834) | $(4,792) | $(17,897) | $(14,787) | | Net loss | $(4,912) | $(4,759) | $(16,934) | $(14,737) | | Net loss per share | $(1.09) | $(1.67) | $(4.28) | $(5.34) | Condensed Statements of Stockholders' Equity (Deficit) The company's equity position reversed from a surplus to a deficit in the first nine months of 2023, primarily due to substantial net losses - Total stockholders' equity shifted from $5.19 million at the beginning of 2023 to a deficit of $(3.87) million as of September 30, 2023[20] - The primary drivers of the change were the net loss of $16.9 million for the nine-month period, partially offset by proceeds from the issuance of common shares[20] Condensed Statements of Cash Flows Despite raising capital from financing activities, the company experienced a significant net decrease in cash, leaving a minimal balance at the end of the period Cash Flow Summary (in thousands) | Activity | Nine Months Ended Sep 30, 2023 | Nine Months Ended Sep 30, 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(13,642) | $(14,475) | | Net cash used in investing activities | $(67) | $(101) | | Net cash provided by financing activities | $7,445 | $13,173 | | Net (decrease)/increase in cash | $(6,264) | $(1,403) | | Cash at end of period | $127 | $7,186 | Notes to Condensed Financial Statements Key notes highlight substantial doubt about the company's ability to continue as a going concern, a reverse stock split, and Nasdaq compliance issues - The company's financial condition, including a negative cash flow from operations of $13.6 million and an accumulated deficit of $336.6 million, raises substantial doubt about its ability to continue as a going concern[29] - A 1-for-15 reverse stock split of common stock was effected on September 25, 2023, with all share and per-share amounts retroactively adjusted[34] - The company received Nasdaq deficiency notices for failing to meet minimum bid price and stockholders' equity requirements, though it later regained equity compliance[49][50][52] - Subsequent to the quarter end, the company raised aggregate gross proceeds of $9.6 million in a public offering on October 3, 2023[79] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the company's clinical-stage focus, going concern risks, recent financing activities, and rising R&D expenses for key clinical trials Company Overview and Going Concern The company is a clinical-stage biotech whose significant historical losses and low cash balance raise substantial doubt about its ability to continue operations - The company is a clinical-stage biotechnology company focused on SEMA4D biology to develop its lead product candidate, pepinemab, for neurodegenerative diseases and cancer[87] - Recurring net losses and negative cash flows have raised substantial doubt about the company's ability to continue as a going concern[91] - As of September 30, 2023, cash and cash equivalents were $0.1 million, which is insufficient to fund planned operations for the next year[92] Corporate and Clinical Updates The company executed a reverse stock split and a public offering while pausing certain programs to focus resources on its Alzheimer's research - A 1-for-15 reverse stock split was completed on September 25, 2023, and a public offering raised $9.6 million in gross proceeds on October 3, 2023[98][100] - Interim data from the KEYNOTE B-84 study showed pepinemab plus KEYTRUDA doubled objective response rates (21.1%) and median progression-free survival in hard-to-treat patients[103] - The company has paused development for Huntington's Disease and Cancer research to focus on Alzheimer's research, with topline data for the SIGNAL-AD study expected in H2 2024[109][110] Results of Operations Operating results for the nine months ended September 30, 2023, show increased R&D and G&A expenses, partially offset by a milestone payment and an employee retention credit Operating Expenses Comparison (Nine Months Ended Sep 30, in thousands) | Expense Category | 2023 | 2022 | $ Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Research and development | $13,217 | $10,238 | $2,979 | 29% | | General and administrative | $5,250 | $4,599 | $651 | 14% | | Total operating expenses | $18,467 | $14,837 | $3,630 | 24% | - The increase in R&D expenses was primarily due to increased patient enrollment in the SIGNAL-AD (Alzheimer's) and head and neck clinical trials[118] - Other income for the nine months of 2023 was $0.96 million, a significant increase from $52,000 in 2022, mainly due to the recognition of a $0.92 million employee retention credit[120] Liquidity and Capital Resources The company's critically low liquidity has been managed through a series of equity sales, but it will require additional capital to sustain future operations - The company has relied on numerous private and public sales of equity to fund operations, including raising $2.04M in March 2023, $2.96M in May 2023, and $0.58M in September 2023[125][128][129] - Post-quarter financing includes a $9.6 million public offering in October 2023 and a $70,000 warrant offering in November 2023[123][124] - Net cash used in operating activities for the first nine months of 2023 was $13.6 million, and the company expects to continue generating losses[134][135][138] Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, this disclosure is not required - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[149] Controls and Procedures The company's principal officers concluded that disclosure controls and procedures were effective as of the end of the reporting period - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[150] - No material changes to the company's internal control over financial reporting occurred during the quarter ended September 30, 2023[151] PART II – OTHER INFORMATION Risk Factors The company faces a significant risk of delisting from Nasdaq due to non-compliance with the minimum bid price requirement - The company is not in compliance with Nasdaq's minimum bid price requirement and has until March 4, 2024, to regain compliance to avoid delisting[155][156] - The company previously failed to meet the minimum stockholders' equity requirement but regained compliance following a $9.6 million public offering on October 3, 2023[157][158] - A potential delisting from Nasdaq would negatively affect the stock price and materially harm the company's ability to raise capital[160] Exhibits This section lists exhibits filed with the report, including documents related to the reverse stock split and recent financing activities - Key exhibits filed include the Certificate of Amendment for the reverse stock split, forms of warrants, and stock purchase agreements from recent financing activities[167]