UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended JuneSeptember 30, 2021
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period fromto
Commission File Number: 001-39279
AYALA PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware | 82-3578375 | |
(State or other jurisdiction of | (I.R.S. Employer | |
incorporation or organization) | Identification No.) |
Oppenheimer 4
Rehovot, Israel 7670104
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (857) 444-0553
Not applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||
Common Stock, $0.01 par value per share | AYLA | The Nasdaq Global Market |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | Smaller reporting company | ☒ | ||||
Emerging growth company | ☒ |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule
As of AugustNovember 1, 2021, the registrant had 13,242,83413,935,254 shares of common stock, $0.01 par value per share, outstanding.
Table of Contents
Page | ||||||
PART I. | ||||||
Item 1. | 1 | |||||
1 | ||||||
2 | ||||||
3 | ||||||
4 | ||||||
5 | ||||||
Item 2. | 12 | |||||
Item 3. | 20 | |||||
Item 4. | 20 | |||||
PART II. | 21 | |||||
Item 1. | 21 | |||||
Item 1A. | 21 | |||||
Item 2. | 21 | |||||
Item 3. | 21 | |||||
Item 4. | 21 | |||||
Item 5. | 21 | |||||
Item 6. | Exhibits | 22 | ||||
23 |
i
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form
In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expect,” “plan,” “anticipate,” “could,”�� “intend,” “target,” “project,” “contemplate,” “believe,” “estimate,” “predict,” “potential”, or “continue” or the negative of these terms or other similar expressions. The forward-looking statements in this Quarterly Report are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. These forward-looking statements speak only as of the date of this Quarterly Report and are subject to a number of important factors that could cause actual results to differ materially from those in the forward-looking statements, including but not limited to: we have incurred significant losses since inception and anticipate that we will continue to incur losses for the foreseeable future. We are not currently profitable, and we may never achieve or sustain profitability; we will require additional capital to fund our operations, and if we fail to obtain necessary financing, we may not be able to complete the development and commercialization of AL101 and AL102; we have a limited operating history and no history of commercializing pharmaceutical products, which may make it difficult to evaluate the prospects for our future viability; we are heavily dependent on the success of AL101 and AL102, our most advanced product candidates, which are still under clinical development, and if either AL101 or AL102 does not receive regulatory approval or is not successfully commercialized, our business may be harmed; due to our limited resources and access to capital, we must prioritize development of certain programs and product candidates; these decisions may prove to be wrong and may adversely affect our business; the outbreak of
Moreover, we operate in an evolving environment. New risk factors and uncertainties may emerge from time to time, and it is not possible for management to predict all risk factors and uncertainties.
You should read this Quarterly Report and the documents that we reference in this Quarterly Report completely and with the understanding that our actual future results may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events, changed circumstances or otherwise.
ii
PART I—FINANCIAL INFORMATION
Item 1: Financial Statements
AYALA PHARMACEUTICALS, INC.
(In thousands, except share and per share amounts)
June 30 2021 | December 31 2020 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and Cash Equivalents | $ | 44,412 | $ | 42,025 | ||||
Short-term Restricted Bank Deposits | 119 | 90 | ||||||
Trade Receivables | 929 | 681 | ||||||
Prepaid Expenses and other Current Assets | 1,550 | 1,444 | ||||||
Total Current Assets | 47,010 | 44,240 | ||||||
LONG-TERM ASSETS: | ||||||||
Other Assets | $ | 270 | $ | 305 | ||||
Property and Equipment, Net | 1,192 | 1,283 | ||||||
Total Long-Term Assets | 1,462 | 1,588 | ||||||
Total Assets | $ | 48,472 | $ | 45,828 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade Payables | $ | 2,833 | $ | 3,726 | ||||
Other Accounts Payables | 2,377 | 3,151 | ||||||
Total Current Liabilities | 5,210 | 6,877 | ||||||
LONG TERM LIABILITIES: | ||||||||
Long-term Rent Liability | 502 | 553 | ||||||
Total Long-Term Liabilities | $ | 502 | $ | 553 | ||||
STOCKHOLDERS’ STOCKHOLDERS’ EQUITY: | ||||||||
Common Stock of $0.01 par value per share; 200,000,000 shares authorized at June 30, 2021 and December 31, 2020; 13,240,961 and 12,824,463 shares issued at June 30, 2021 and, respectively December 31, 2020; 13,092,925 and 12,728,446 shares outstanding at June 30, 2021 and December 31, 2020, respectively | $ | 131 | $ | 128 | ||||
Additional Paid-in Capital | 133,925 | 109,157 | ||||||
Accumulated Deficit | (91,296 | ) | (70,887 | ) | ||||
Total Stockholders’ Equity | 42,760 | 38,398 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 48,472 | $ | 45,828 | ||||
September 30 | December 31 | |||||||
2021 | 2020 | |||||||
(Unaudited) | ||||||||
CURRENT ASSETS: | ||||||||
Cash and Cash Equivalents | $ | 40,840 | $ | 42,025 | ||||
Short-term Restricted Bank Deposits | 120 | 90 | ||||||
Trade Receivables | 373 | 681 | ||||||
Prepaid Expenses and other Current Assets | 2,991 | 1,444 | ||||||
Total Current Assets | 44,324 | 44,240 | ||||||
LONG-TERM ASSETS: | ||||||||
Other Assets | $ | 272 | $ | 305 | ||||
Property and Equipment, Net | 1,148 | 1,283 | ||||||
Total Long-Term Assets | 1,420 | 1,588 | ||||||
Total Assets | $ | 45,744 | $ | 45,828 | ||||
LIABILITIES AND STOCKHOLDERS’ EQUITY: | ||||||||
CURRENT LIABILITIES: | ||||||||
Trade Payables | $ | 2,888 | $ | 3,726 | ||||
Other Accounts Payables | 2,979 | 3,151 | ||||||
Total Current Liabilities | 5,867 | 6,877 | ||||||
LONG TERM LIABILITIES: | ||||||||
Long-term Rent Liability | 493 | 553 | ||||||
Total Long-Term Liabilities | $ | 493 | $ | 553 | ||||
STOCKHOLDERS’ STOCKHOLDERS’ EQUITY: | ||||||||
Common Stock of $0.01 par value per share; 200,000,000 shares authorized at September 30, 2021 and December 31, 2020; 13,685,554 and 12,824,463 shares issued at September 30, 2021 and, respectively December 31, 2020; 13,549,362 and 12,728,446 shares outstanding at September 30, 2021 and December 31, 2020, respectively | $ | 135 | $ | 128 | ||||
Additional Paid-in Capital | 140,341 | 109,157 | ||||||
Accumulated Deficit | (101,092 | ) | (70,887 | ) | ||||
Total Stockholders’ Equity | 39,384 | 38,398 | ||||||
Total Liabilities and Stockholders’ Equity | $ | 45,744 | $ | 45,828 |
See accompanying notes to unaudited condensed consolidated financial statements.
AYALA PHARMACEUTICALS, INC.
(In thousands, except share & per share amounts)
For the Three Months Ended June 30, | For the Six Months Ended June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues from licensing agreement | $ | 761 | $ | 1,045 | $ | 1,735 | $ | 2,046 | ||||||||
Cost of services | (761 | ) | (1,045 | ) | (1,735 | ) | (2,046 | ) | ||||||||
Gross profit | 0 | 0 | 0 | 0 | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 8,121 | 5,067 | 15,046 | 10,195 | ||||||||||||
General and administrative | 2,536 | 1,546 | 4,839 | 2,857 | ||||||||||||
Operating loss | (10,657 | ) | (6,613 | ) | (19,885 | ) | (13,052 | ) | ||||||||
Financial Income (Loss), net | (22 | ) | 40 | (114 | ) | 2 | ||||||||||
Loss before income tax | (10,679 | ) | (6,573 | ) | (19,999 | ) | (13,050 | ) | ||||||||
Taxes on income | (162 | ) | (139 | ) | (410 | ) | (260 | ) | ||||||||
Net loss attributable to common stockholders | (10,841 | ) | (6,712 | ) | (20,409 | ) | (13,310 | ) | ||||||||
Net Loss per share attributable to common stockholders, basic and diluted | $ | (0.75 | ) | $ | (0.74 | ) | $ | (1.46 | ) | $ | (1.90 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 14,417,423 | 9,018,637 | 13,954,676 | 6,989,762 | ||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Revenues from licensing agreement | $ | 625 | $ | 658 | $ | 2,360 | $ | 2,704 | ||||||||
Cost of services | (625 | ) | (658 | ) | (2,360 | ) | (2,704 | ) | ||||||||
Gross profit | — | — | — | — | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 7,368 | 5,421 | 22,414 | 15,616 | ||||||||||||
General and administrative | 2,198 | 1,862 | 7,037 | 4,719 | ||||||||||||
Operating loss | (9,566 | ) | (7,283 | ) | (29,451 | ) | (20,335 | ) | ||||||||
Financial Income (Loss), net | (63 | ) | (40 | ) | (177 | ) | (38 | ) | ||||||||
Loss before income tax | (9,629 | ) | (7,323 | ) | (29,628 | ) | (20,373 | ) | ||||||||
Taxes on income | (167 | ) | (115 | ) | (577 | ) | (375 | ) | ||||||||
Net loss attributable to common stockholders | (9,796 | ) | (7,438 | ) | (30,205 | ) | (20,748 | ) | ||||||||
Net Loss per share attributable to common stockholders, basic and diluted | $ | (0.68 | ) | $ | (0.59 | ) | $ | (2.14 | ) | $ | (2.33 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 14,483,629 | 12,664,485 | 14,130,993 | 8,894,182 |
See accompanying notes to unaudited condensed consolidated financial statements.
AYALA PHARMACEUTICALS, INC.
Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Total Stockholders’ Deficit | ||||||||||||||||||||||||||||||||||||||||
Series A Preferred Stock | Series B Preferred Stock | Receipt on Account of Series B Preferred Stock | Total Amount | |||||||||||||||||||||||||||||||||||||||||
Number | Amount | Number | Amount | Number | Amount | |||||||||||||||||||||||||||||||||||||||
Balance as of December 31, | 3,679,778 | 23,823 | 3,750,674 | 29,550 | — | 53,373 | 4,998,874 | 51 | 1,770 | (40,741 | ) | (38,920 | ) | |||||||||||||||||||||||||||||||
Conversion of Preferred Stock | (3,679,778 | ) | (23,823 | ) | (3,750,674 | ) | (29,550 | ) | — | (53,373 | ) | 3,715,222 | 37 | 53,336 | — | 53,373 | ||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 6,056 | 1 | 693 | — | 694 | |||||||||||||||||||||||||||||||||
Issuance | — | — | — | — | — | — | 3,940,689 | 39 | 52,080 | — | 52,119 | |||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (13,310 | ) | (13,310 | ) | |||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | — | — | — | — | — | — | 12,660,841 | 128 | 107,879 | (54,051 | ) | 53,956 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | — | — | — | — | — | — | 12,728,446 | 128 | 109,157 | (70,887 | ) | 38,398 | ||||||||||||||||||||||||||||||||
Issuance of shares and warrants, net of Issuance Cost of $1,665 | — | — | — | — | — | — | 333,333 | 3 | 23,319 | — | 23,322 | |||||||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 25,146 | — | 1,419 | — | 1,419 | |||||||||||||||||||||||||||||||||
Exercise of stock options | — — | — — | — | — | — | — | 6,000 | — | 30 | — | 30 | |||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (20,409 | ) | (20,409 | ) | |||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | — — | — | — | — | — | — | 13,092,925 | 131 | 133,925 | (91,296 | ) | 42,760 | ||||||||||||||||||||||||||||||||
Balance as of March 31, 2020 | 3,679,778 | 23,823 | 3,750,674 | 29,550 | — | 53,373 | 5,003,380 | 51 | 2,063 | (47,339 | ) | (45,225 | ) | |||||||||||||||||||||||||||||||
Conversion of Preferred Stock | (3,679,778 | ) | (23,823 | ) | (3,750,674 | ) | (29,550 | ) | — | (53,373 | ) | 3,715,222 | 37 | 53,336 | — | 53,373 | ||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 1,550 | 1 | 400 | — | 401 | |||||||||||||||||||||||||||||||||
Issuance of Common Stock, Initial public offering net of issuance costs of $2,835 | — | — | — | — | — | — | 3,940,689 | 39 | 52,080 | — | 52,119 | |||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (6,712 | ) | (6,712 | ) | |||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | — | — | — | — | — | — | 12,660,841 | 128 | 107,879 | (54,051 | ) | 53,956 | ||||||||||||||||||||||||||||||||
Balance as of March 31, 2021 | — | — | — | — | — | — | 13,072,213 | 131 | 133,358 | (80,455 | ) | 53,034 | ||||||||||||||||||||||||||||||||
Conversion of Preferred Stock | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 20,712 | 567 | — | 567 | ||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (10,841 | ) | (10,841 | ) | |||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | — | — | — | — | — | — | 13,092,925 | 131 | 133,925 | (91,296 | ) | 42,760 | ||||||||||||||||||||||||||||||||
Convertible Preferred Stock | ||||||||||||||||||||||||||||||||||||||||||||
Receipt on | ||||||||||||||||||||||||||||||||||||||||||||
Series A Preferred | Series B Preferred | Account of Series B | Additional | Total | ||||||||||||||||||||||||||||||||||||||||
Stock | Stock | Preferred | Total | Common Stock | Paid-in | Accumulated | Stockholders’ | |||||||||||||||||||||||||||||||||||||
Number | Amount | Number | Amount | Stock | Amount | Number | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||||||||||||||
Balance as of December 31, 2019 | 3,679,778 | 23,823 | 3,750,674 | 29,550 | — | 53,373 | 4,998,874 | 51 | 1,770 | (40,741 | ) | (38,920 | ) | |||||||||||||||||||||||||||||||
Conversion of Preferred Stock | (3,679,778 | ) | (23,823 | ) | (3,750,674 | ) | (29,550 | ) | — | (53,373 | ) | 3,715,222 | 37 | 53,336 | — | 53,373 | ||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 12,750 | * | 1,095 | — | 1,095 | |||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | 2,625 | * | 13 | 13 | ||||||||||||||||||||||||||||||||||
Issuance of Common Stock, Initial public offering net of issuance costs of $2,835 | — | — | — | — | — | — | 3,940,689 | 39 | 52,080 | — | 52,119 | |||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (20,748 | ) | (20,748 | ) | |||||||||||||||||||||||||||||||
Balance as of September 30, 2020 | — | — | — | — | — | — | 12,670,160 | 127 | 108,294 | (61,489 | ) | 46,932 | ||||||||||||||||||||||||||||||||
Balance as of December 31, 2020 | — | — | — | — | — | — | 12,728,446 | 128 | 109,157 | (70,887 | ) | 38,398 | ||||||||||||||||||||||||||||||||
Issuance of shares and warrants, net of Issuance Cost of $1,665 | — | — | — | — | — | — | 333,333 | 3 | 23,319 | — | 23,322 | |||||||||||||||||||||||||||||||||
Issuance of shares Net of Issuance costs of $337. | 442,407 | 4 | 5,847 | 5,851 | ||||||||||||||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 36,990 | * | 1,964 | — | 1,964 | |||||||||||||||||||||||||||||||||
Exercise of stock options | — | — | — | — | — | — | 8,186 | * | 54 | — | 54 | |||||||||||||||||||||||||||||||||
Net loss | — | — | — | — | — | — | — | — | — | (30,205 | ) | (30,205 | ) | |||||||||||||||||||||||||||||||
Balance as of September 30, 2021 | — | — | — | — | — | — | 13,549,362 | 135 | 140,341 | (101,092 | ) | 39,384 | ||||||||||||||||||||||||||||||||
Balance as of June 30, 2020 | — | — | — | — | — | — | 12,660,841 | 127 | 107,879 | (54,051 | ) | 53,955 | ||||||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 6,694 | * | 402 | — | 402 | |||||||||||||||||||||||||||||||||
Exercise of stock options | 2,625 | * | 13 | 13 | ||||||||||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (7,438 | ) | (7,438 | ) | |||||||||||||||||||||||||||||||
Balance as of September 30, 2020 | — | — | — | — | — | — | 12,670,160 | 127 | 108,294 | (61,489 | ) | 46,932 | ||||||||||||||||||||||||||||||||
Balance as of June 30, 2021 | — | — | — | — | — | — | 13,092,925 | 131 | 133,925 | (91,296 | ) | 42,760 | ||||||||||||||||||||||||||||||||
Issuance of shares Net of Issuance costs of $337. | 442,407 | 4 | 5,847 | 5,851 | ||||||||||||||||||||||||||||||||||||||||
Exercise of stock options | 2,186 | * | 24 | 24 | ||||||||||||||||||||||||||||||||||||||||
Share based compensation | — | — | — | — | — | — | 11,844 | * | 545 | — | 545 | |||||||||||||||||||||||||||||||||
Net Loss | — | — | — | — | — | — | — | — | — | (9,796 | ) | (9,796 | ) | |||||||||||||||||||||||||||||||
Balance as of September 30, 2021 | — | — | — | — | — | — | 13,549,362 | 135 | 140,341 | (101,092 | ) | 39,384 |
* | Represents an amount lower than $1. |
See accompanying notes to unaudited condensed financial statements.
AYALA PHARMACEUTICALS, INC.
(In thousands)
Six Months Ended | ||||||||
June 30, 2021 | June 30, 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Loss | $ | (20,409 | ) | $ | (13,310 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities: | ||||||||
Shared Based Compensation | $ | 1,419 | $ | 694 | ||||
Depreciation | 94 | 89 | ||||||
(Increase) decrease in Prepaid Expenses and Other Assets | (106 | ) | 63 | |||||
Increase in Trade Receivables | (248 | ) | (367 | ) | ||||
Increase (decrease) in Trade Payable | (1,124 | ) | 430 | |||||
Increase in Long Term Rent Liability | 0 | 235 | ||||||
Increase (decrease) in other Accounts Payable | (823 | ) | 460 | |||||
Net Cash used in Operating Activities | (21,197 | ) | (11,706 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from maturities of long-term deposits | 0 | 237 | ||||||
Purchase of Property and Equipment | (3 | ) | (33 | ) | ||||
Net Cash provided by (used in) Investing Activities | (3 | ) | 204 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from Issuance of Shares, net | 0 | 52,369 | ||||||
Issuance of shares and warrants, Net | 23,553 | 0 | ||||||
Exercise of Stock Options | 30 | 0 | ||||||
Net Cash provided by Financing Activities | 23,583 | 52,369 | ||||||
Increase in Cash and Cash Equivalents and Restricted Bank Deposits | 2,383 | 40,867 | ||||||
Cash and Cash Equivalents and Restricted Bank Deposits at Beginning of the period | 42,370 | 16,808 | ||||||
Cash and Cash Equivalents and Restricted Bank Deposits at End of the period | $ | 44,753 | $ | 57,675 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES | ||||||||
Non-cash deferred issuance costs | $ | 231 | $ | 250 | ||||
Amortization of deferred rent liability | $ | 51 | $ | 0 | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Cash Received for Interest | $ | 7 | $ | 47 | ||||
Tax Paid in Cash, net of refunds | $ | 80 | $ | 92 | ||||
Reconciliation of cash, cash equivalents and restricted bank deposits | ||||||||
June 30,2021 | June 30,2020 | |||||||
Cash and Cash Equivalents | $ | 44,412 | $ | 57,355 | ||||
Restricted Bank Deposits | 119 | 83 | ||||||
Restricted Bank Deposits in Other Assets | 222 | 237 | ||||||
Cash and Cash Equivalents and Restricted Bank Deposits at End of the Period | $ | 44,753 | $ | 57,675 | ||||
Nine Months Ended | ||||||||
September 30, 2021 | September 30, 2020 | |||||||
CASH FLOWS FROM OPERATING ACTIVITIES: | ||||||||
Net Loss | $ | (30,205 | ) | $ | (20,748 | ) | ||
Adjustments to Reconcile Net Loss to Net Cash used in Operating Activities: | ||||||||
Shared Based Compensation | $ | 1,964 | $ | 1,095 | ||||
Depreciation | 140 | 138 | ||||||
(Increase) decrease in Prepaid Expenses and Other Assets | (1,546 | ) | (1,914 | ) | ||||
(Increase) decrease in Trade Receivables | 308 | (120 | ) | |||||
Increase (decrease) in Trade Payable | (993 | ) | 226 | |||||
Increase in Long Term Rent Liability | — | 163 | ||||||
Increase (decrease) in other Accounts Payable | (232 | ) | 592 | |||||
Net Cash used in Operating Activities | (30,564 | ) | (20,568 | ) | ||||
CASH FLOWS FROM INVESTING ACTIVITIES: | ||||||||
Proceeds from maturities of long-term deposits | — | 236 | ||||||
Purchase of Property and Equipment | (5 | ) | (74 | ) | ||||
Net Cash provided by (used in) Investing Activities | (5 | ) | 162 | |||||
CASH FLOWS FROM FINANCING ACTIVITIES: | ||||||||
Proceeds from Issuance of Shares, net | 6,007 | 52,654 | ||||||
Issuance of shares and warrants, Net | 23,322 | — | ||||||
Exercise of Stock Options | 54 | 13 | ||||||
Net Cash provided by Financing Activities | 29,383 | 52,667 | ||||||
Increase in Cash and Cash Equivalents and Restricted Cash Equivalents | (1,186 | ) | 32,261 | |||||
Cash and Cash Equivalents and Restricted Cash Equivalents at Beginning of the period | 42,370 | 16,808 | ||||||
Cash and Cash Equivalents and Restricted Cash Equivalents at End of the period | $ | 41,184 | $ | 49,069 | ||||
SUPPLEMENTAL DISCLOSURE OF NON-CASH FINANCING ACTIVITIES | ||||||||
Non-cash deferred issuance costs | $ | 156 | $ | 250 | ||||
Amortization of deferred rent liability | $ | 60 | $ | — | ||||
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION | ||||||||
Tax Paid in Cash, net of refunds | $ | 128 | $ | 92 | ||||
Reconciliation of cash, cash equivalents and restricted bank deposits | ||||||||
September 30, | September 30, | |||||||
2021 | 2020 | |||||||
Cash and Cash Equivalents | $ | 40,840 | $ | 48,749 | ||||
Restricted Bank Deposits | 120 | 84 | ||||||
Restricted Bank Deposits in Other Assets | 224 | 236 | ||||||
Cash and Cash Equivalents and Restricted Bank Deposits at End of the Period | $ | 41,184 | $ | 49,069 |
See accompanying notes to unaudited condensed consolidated financial statements
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES
General
a) Ayala Pharmaceuticals, Inc. (the “Company”) was incorporated in November 2017. The Company is a clinical stage onco
b) In 2017, the Company entered into an exclusive worldwide license agreement with respect to AL101 and AL102.
c) The Company’s lead product candidates, AL101 and AL102 have completed preclinical and Phase 1 studies. AL101 is currently being evaluated in a Phase 2 trial (ACCURACY) in patient with recurrent/metastatic adenoid cystic carcinoma (“R/M ACC”) bearing Notch-activating mutations and in a phase 2 trial (TENACITY) in patients with recurrent/metastatic triple negative breast cancer (“R/M TNBC”) bearing Notch-activating mutations. AL102 is currently being evaluated in a pivotal Phase 2/3 clinical trial for patients with desmoid tumors (RINGSIDE) and is being evaluated in a Phase 1 clinical trial in combination with Novartis’ BMCA targeting agent, WVT078, in Patients with relapsed/refractory Multiple Myeloma.
d) The Company has a wholly-owned Israeli subsidiary, Ayala-Oncology Israel Ltd. (the “Subsidiary”), which was incorporated in November 2017.
e) Since inception, the Company has devoted its primary efforts to raising capital and research and development activities and has incurred significant operating losses and negative cash flows from operations. From its inception through JuneSeptember 30, 2021, all of the Company’s financial support has been provided primarily from the sale of its convertible preferred and common stock.
The Company previously identified conditions and events that raise substantial doubt about its ability to continue as a going concern. As a result of the completion of the Company’s initial public offering (“IPO”) in May 2020 and the Private Placement in February 2021, the Company believes that its cash, cash equivalents and short-term restricted bank deposits as of JuneSeptember 30, 2021 will be sufficient to fund its operating expenses and capital expenditure requirements at least for the next 12 months. The Company has based this estimated on assumptions that may prove to be wrong, and it may use its available capital resources sooner than it currently expects. Future additional funding may not be available on terms available to the Company or at all. If the Company is unable to obtain sufficient funding, it could be required to delay its development efforts, limit activities and reduce research and development costs, which could adversely affect its business prospectsprospects.
Initial Public Offering and Related Transactions
On May 12, 2020, the Company completed the sale of shares of its common stock in its IPO. In connection with the IPO, the Company issued and sold 3,940,689 shares of common stock, including 274,022 shares associated with the partial exercise on June 4, 2020 of the underwriters’ option to purchase additional shares, at a price to the public of $15.00 per share, resulting in net proceeds to the Company of approximately $52.2 million after deducting underwriting discounts and commissions and offering expenses payable by the Company. All shares issued and sold were registered pursuant to a registration statement on Form
In connection with the IPO, the Company effected a
On February 19, 2021, the Company entered into a Securities Purchase Agreement (the “2021 Purchase Agreement”) with the purchasers named therein. Pursuant to the 2021 Purchase Agreement, the Company agreed to sell (i) an aggregate of 333,333 shares of its common stock (the “Private Placement Shares”), par value $0.01 per share, together with warrants to purchase an aggregate of 116,666 shares of its common stock with an exercise price of $18.10 per share (the “Common Warrants”), for an aggregate purchase price of $4,999,995.00 and
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (continued):
In June 2021, the Company entered into an Open Market Sale Agreement (the “Sales Agreement”) with Jefferies LLC, as the Company’s sales agent (the “Agent”). Pursuant to the terms of the Sales Agreement, the Company may from time to time issue and sell through the Agent shares of its common stock, par value $0.001 per share (the “Common Stock”), having an aggregate offering price of up to $200.0 million (the “ATM Shares”). Sales of common stock, if any, pursuant to the Sales Agreement, may be made in sales deemed to be an “at the market offering” as defined in Rule 415(a) of the Securities Act, including sales made directly through the Nasdaq Global Market or on any other existing trading market for the Company’s common stock. Pursuant to the Sales Agreement, during the nine months ended September 30, 2021, the Company sold a total of 442,407 shares of common stock for total gross proceeds of approximately $6.2 million.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and notes required by GAAP for annual financial statements. In the opinion of management, all adjustments (of a normal recurring nature) considered necessary for a fair statement of the results for the interim periods presented have been included. Operating results for the interim period are not necessarily indicative of the results that may be expected for the full year.
These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements for the year ended December 31, 2020 included in the Company’s Annual Report on FormReport.
Use of estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, judgments and assumptions that are reasonable based upon information available at the time they are made.
These estimates, judgments and assumptions can affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
Net Loss per Share
Basic and diluted loss per share (“LPS”) are computed by dividing net loss by the weighted average number of shares of the Company’s common stock, par value $0.01 per share (the “Common Stock”), outstanding for each period and the weighted average number of warrants to purchase common stock with $
The calculation of basic and diluted LPS includes 1,333,333
The calculation of diluted LPS does not includ
The calculation of diluted LPS does not include 3,679,778 shares of Series A Preferred Stock, and 3,750,674 shares of Series B Preferred Stock and 698,361745,861 options outstanding to purchase common stock with anti-dilutive effect for the three and six monthnine months ended JuneSeptember 30, 2020.
Newly Issued Accounting Pronouncements
As an “emerging growth company,” the Jumpstart Our Business Startups Act (“JOBS Act”) allows the Company to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable to private companies. The Company has elected to use this extended transition period under the JOBS Act. The adoption dates discussed below reflects this election.
In February 2016, the FASB issued ASU
(a) clarifies the definition of a lease; (b) requires a dual approach to lease classification similar to current lease classifications; and (c) causes lessees to recognize leases on the balance sheet as a lease liability with a corresponding
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1—SIGNIFICANT ACCOUNTING POLICIES (continued):
In June 2016, the FASB issued ASU
In December 2019, the FASB issued ASU
In August 2020, the FASB issued ASU
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2—REVENUES
The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers, which applies to all contracts with customers. Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:
(i) | identify the contract(s) with a customer; |
(ii) | identify the performance obligations in the contract; |
(iii) | determine the transaction price; |
(iv) | allocate the transaction price to the performance obligations in the contract; and |
(v) | recognize revenue when (or as) the entity satisfies a performance obligation. |
At contract inception, once the contract is determined to be within the scope of Topic 606, the Company assesses the goods or services promised within the contract and determines those that are performance obligations and assesses whether each promised good or service is distinct.
Customer option to acqu
In a contract with multiple performance obligations, the Company must develop estimates and assumptions that require judgment to determine the underlying stand-alone selling price for each performance obligation, which determines how the transaction price is allocated among the performance obligations.
The Company evaluates each performance obligation to determine if it can be satisfied at a point in time or over time.
Revenue is recognized when control of the promised goods or services is transferred to the customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those goods or services.
In December 2018, the Company entered into an evaluation, option and license agreement (the “Novartis Agreement”) with Novartis International Pharmaceutical Limited (“Novartis”) for which the Company is paid for its research and development costs.
The Company concluded that there is one distinct performance obligation under the Novartis Agreement: Research and development services, an obligation which is satisfied over time.
Revenue associated with the research and development services in the amount of approximately $0.8$0.6 million and $1.7$2.4 million were recognized in the three and sixnine months ended JuneSeptember 30, 2021, respectively.
The Company concluded that progress towards completion of the research and development performance obligation related to the Novartis Agreement is best measured in an amount proportional to the expenses relative to the total estimated expenses. The Company periodically reviews and updates its estimates, when appropriate, which may adjust revenue recognized for the period. The transaction price to be recognized as revenue under the Novartis Agreement consists of the reimbursable costs.
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 3—TAX
The Company has reviewed the tax positions taken, or to be taken, in its tax returns for all tax years currently open to examination by a taxing authority. As of JuneSeptember 30, 2021, and 2020, the Company has recorded an uncertain tax position liability exclusive of interest and penalties of $873$904 thousand and $591$581 thousand respectively which was classified as other long-term liabilities. As of JuneSeptember 30, 2021, and 2020, the Company accrued interest related to uncertain tax positions of $39$46 thousand and $13 thousand, respectively. These uncertain tax positions would impact the Company’s effective tax rate, if recognized. The Company does not expect that the amounts of uncertain tax positions will change significantly within the next 12 months. A reconciliation of the Company’s unrecognized tax benefits is below:
Six months ended | Three months ended | |||||||
June 30, | June 30, | |||||||
2021 | 2021 | |||||||
(in thousands) | ||||||||
Uncertain tax position at the beginning of the period | $ | 581 | $ | 695 | ||||
Additions for uncertain tax position of prior years (foreign exchange and interest) | 10 | 7 | ||||||
Additions for tax positions of current year | 320 | 209 | ||||||
Uncertain tax position at the end of the period | $ | 911 | $ | 911 | ||||
Nine months | Three months | |||||||
ended | ended | |||||||
September 30, | September 30, | |||||||
2021 | 2021 | |||||||
(in thousands) | ||||||||
Uncertain tax position at the beginning of the period | $ | 581 | $ | 911 | ||||
Additions for uncertain tax position of prior years (foreign exchange and interest) | 26 | 7 | ||||||
Additions for tax positions of current year | 297 | (14 | ) | |||||
Uncertain tax position at the end of the period | $ | 904 | $ | 904 |
The Company files U.S. federal, various U.S. state and Israeli income tax returns. The associated tax filings remain subject to examination by applicable tax authorities for a certain length of time following the tax year to which those filings relate. In the United States and Israel, the 2017 and subsequent tax years remain subject to examination by the applicable taxing authorities as of JuneSeptember 30, 2021.
NOTE 4—COMMITMENTS AND CONTINGENT
Liabilities Lease
In January 2019, the Company signed a new lease agreement. The term of the lease is for 63 months and includes an option to extend the lease for an additional 60 months. As part of the agreement, the lessor also provided the Company with finance in in the amount of approximately $0.5 million paid in arrears for of leasehold improvements. The financing was recorded as a Long-Term Rent Liability. The minimum rental payments under operating leases as of JuneSeptember 30, 2021, are as follows (in thousands):
Year ended December 31, | ||||
2021 | 91 | |||
2022 | 362 | |||
2023 | 362 | |||
2024 | 121 | |||
$ | 1,026 |
Year ended December 31, | ||||
2021 | 181 | |||
2022 | 362 | |||
2023 | 362 | |||
2024 | 121 | |||
$ | 1,026 | |||
The Subsidiary obtained a bank guarantee in the amount of approximately $0.2 million for its new office lease agreement.
Asset Transfer and License Agreement with Bristol-Myers Squibb Company.
In November 2017, the Company entered into a license agreement, or the BMS License Agreement, with Bristol-Myers Squibb Company, or BMS, under which BMS granted the Company a worldwide,
Under the BMS License Agreement, the Company is obligated to use commercially reasonable efforts to develop at least one BMS Licensed Product. The Company has sole responsibility for, and bear the cost of, conducting research and development and preparing all regulatory filings and related submissions with respect to the BMS Licensed Compounds and/or BMS Licensed Products. BMS has assigned and transferred all INDs for the BMS Licensed Compounds to the Company. The Company is also required to use commercially reasonable efforts to obtain regulatory approvals in certain major market countries for at least one BMS Licensed Product, as well as to effect the first commercial sale of and commercialize each BMS Licensed Product after obtaining such regulatory approval. The Company has sole responsibility for, and bear the cost of, commercializing BMS Licensed Products. For a limited period of time, the Company may not, engage directly or indirectly in the clinical development or commercialization of a Notch inhibitor molecule that is not a BMS Licensed Compound.
The Company is required to pay BMS payments upon the achievement of certain development or regulatory milestone events of up to $95 million in the aggregate with respect to the first BMS Licensed Compound to achieve each such event and up to $47 million in the aggregate with respect to each additional BMS Licensed Compound to achieve each such event. The Company is also obligated to pay BMS payments of up to $50 million in the aggregate for each BMS Licensed Product that achieves certain sales-based milestone events and tiered royalties on net sales of each BMS Licensed Product by the Company or its affiliates or sublicensees at rates ranging from a high single-digit to low teen percentage, depending on the total annual worldwide net sales of each such Licensed Product. If the Company sublicenses or assigns any rights to the licensed patents, the BMS Licensed Compounds and/or the BMS Licensed Products, the Company is required to share with BMS a portion of all consideration received from such sublicense or assignment, ranging from a
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4—COMMITMENTS AND CONTINGENT (continued):
The Company accounted for the acquisition of the rights granted by BMS as an asset acquisition because it did not meet the definition of a business. The Company recorded the total consideration transferred and value of shares issued to BMS as research and development expense in the consolidated statement of operations as incurred since the acquired the rights granted by BMS represented
The Company accounts for contingent consideration payable upon achievement of sales milestones in such asset acquisitions when the underlying contingency is resolved.
The BMS License Agreement remains in effect, on a
BMS has the right to terminate the BMS License Agreement in its entirety upon written notice to the Company (a) for insolvency-related events involving the Company, (b) for the Company’s material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, for the Company’s failure to fulfill its obligations to develop or commercialize the BMS Licensed Compounds and/or BMS Licensed Products not remedied within a defined period of time following written notice by BMS, or (d) if the Company or its affiliates commence any action challenging the validity, scope, enforceability or patentability of any of the licensed patent rights. The Company has the right to terminate the BMS License Agreement (a) for convenience upon prior written notice to BMS, the length of notice dependent on whether a BMS Licensed Project has received regulatory approval, (b) upon immediate written notice to BMS for insolvency-related events involving BMS, (c) for BMS’s material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, or (d) on a BMS Licensed
Upon termination of the BMS License Agreement in its entirety by the Company for convenience or by BMS, the Company grants an exclusive,
Option and License Agreement with Novartis International Pharmaceutical Ltd.
In December 2018, the Company entered into an evaluation, option and license agreement, or the Novartis Option Agreement, with Novartis International Pharmaceutical Limited, or Novartis, pursuant to which Novartis agreed to conduct certain studies to evaluate AL102 in combination with its
Under the Novartis Option Agreement, the Company granted Novartis an exclusive option to obtain an exclusive (including as to the Company and its affiliates), sublicensable (subject to certain terms and conditions), worldwide license and sublicense (as applicable) under certain patent rights and
AYALA PHARMACEUTICALS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 4—COMMITMENTS AND CONTINGENT (continued):
According to the agreement, Novartis shall pay the Company a low eight figure option exercise fee in order to exercise its option and activate its license, upon which the Company will be eligible to receive development, regulatory and commercial milestone payments of up to $
Novartis shall own any inventions, and related patent rights, invented solely by it or jointly with the Company in connection with activities conducted pursuant to the Novartis Option Agreement. The Company will maintain first right to prosecute and maintain any patents licensed to Novartis, both before and after its exercise of its option. The Company maintain the first right to defend and enforce its patents prior to Novartis’s exercise of its option, upon which Novartis gains such right with respect to patents included in the license.
The option granted to Novartis will remain in effect until the earlier of (a) 60 days following the last visit of the last subject in the evaluation studies, the termination of the Novartis Option Agreement, or (c) 36 months following the delivery by the Company to Novartis of sufficient amounts of clinical evaluation materials to conduct the anticipated clinical studies. The Novartis Option Agreement remains in effect until such time as no Novartis Licensed Product is being developed or commercialized by Novartis, its affiliates, or sublicensees (including distributors or commercial partners), unless terminated earlier. The Company has the right to terminate the Novartis Option Agreement (a) for Novartis’s material breach if such breach remains uncured for 60 days (such cure period shall be extended for an additional period during which Novartis is making good faith efforts to cure such breach) or (b) for Novartis’s failure to use commercially reasonable efforts to develop or commercialize AL102 and/or the Novartis Licensed Product not remedied within four months following written notice to Novartis. Novartis has the right to terminate the Novartis Option Agreement (a) in its entirety or on a
NOTE 5—SUBSEQUENT EVENTS
Pursuant to the Sales Agreement, in October 2021, the Company sold a total of 249,700 shares of common stock for total gross proceeds of approximately $3.0 million, $2.9 million net of issuance costs.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and the related notes included elsewhere in this Quarterly Report on Form
Overview
We are a clinical-stage oncology company focused on developing and commercializing small molecule therapeutics for patients suffering from rare and aggressive cancers, primarily in genetically defined patient populations. Our differentiated development approach is predicated on identifying and addressing tumorigenic drivers of cancer, through a combination of our bioinformatics platform and next-generation sequencing to deliver targeted therapies to underserved patient populations. Our current portfolio of product candidates, AL101 and AL102, targets the aberrant activation of the Notch pathway using gamma secretase inhibitors. Gamma secretase is the enzyme responsible for Notch activation and, when inhibited, turns off the Notch pathway activation. Aberrant activation of the Notch pathway has long been implicated in multiple solid tumor and hematological cancers and has often been associated with more aggressive cancers. In cancers, Notch is known to serve as a critical facilitator in processes such as cellular proliferation, survival, migration, invasion, drug resistance and metastatic spread, all of which contribute to a poorer patient prognosis. AL101 and AL102 are designed to address the underlying key drivers of tumor growth, and our initial Phase 2 clinical data of AL101 suggest that our approach may address shortcomings of existing treatment options. We believe that our novel product candidates, if approved, have the potential to transform treatment outcomes for patients suffering from rare and aggressive cancers.
Our product candidates, AL101 and AL102, are being developed as potent, selective, small molecule gamma secretase inhibitors, or GSIs. We obtained an exclusive, worldwide license to develop and commercialize AL101 and AL102 from Bristol-Myers Squibb Company, or BMS, in November 2017. BMS evaluated AL101 in three Phase 1 studies in more than 200 subjects and AL102 in a single Phase 1 study in 36 subjects with various cancers who had not been prospectively characterized for Notch activation, and to whom we refer to as unselected subjects. While these Phase 1 studies did not report statistically significant overall results, clinical activity was observed across these studies in cancers in which Notch has been implicated as a tumorigenic driver.
We are currently conducting our ongoing Phase 2 ACCURACY trial for the treatment of recurrent/metastatic adenoid cystic carcinoma, or R/M ACC, in subjects with progressive disease and Notch-activating mutations. If approved, we believe that AL101 has the potential to be the first therapy approved by the U.S. Food and Drug Administration, or FDA, for patients with R/M ACC and address the unmet medical need of these patients. AL101 was granted Orphan Drug Designation in May 2019 for the treatment of adenoid cystic carcinoma, or ACC, and fast track designation in February 2020 for the treatment of R/M ACC. In the second quarter of 2020, we commenced dosing of patients in our ACCURACY trial for the treatment of R/M ACC with Notch-activating mutations at the higher dose of 6mg. We plan to report additional data from this trial in [the second half of] 2021.2022.
We are currently also evaluating AL101 as a monotherapy in an open-label Phase 2 clinical trial for the treatment of patients with Notch-activated recurrent or metastatic (R/M) triple negative breast cancer (TNBC). We refer to this trial as the TENACITY trial. It is an open-label, multicenter, single arm study which is expected to initially enroll up to 26 patients with Notch-activated R/M TNBC whose disease has recurred or progressed after three or fewer lines of prior therapy. Notch activation will be determined using a Next Generation Sequencing (NGS) based assay screen. We dosed the first patient enrolled in this study in January 2021 and expect to report preliminary data in 2022.
We are currently evaluating AL102 as a monotherapy in a Phase 2/3 pivotal study (RINGSIDE) for the treatment of desmoid tumors in adult and adolescent patients. We expect to report interim data from Part A in
In addition, we are collaborating with Novartis International Pharmaceutical Limited, or Novartis, which is currently evaluating AL102 in a phase 1 clinical trial for the treatment of multiple myeloma, or MM, in combination with Novartis’
We are also developing AL101 for the treatment of
We were incorporated as a Delaware corporation on November 14, 2017, and our headquarters is located in Rehovot, Israel. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital and conducting research and development activities for our product candidates. To date, we have funded our operations primarily through the sales of common stock and convertible preferred stock.
We have incurred significant net operating losses in every year since our inception and expect to continue to incur significant expenses and increasing operating losses for the foreseeable future. Our net losses may fluctuate significantly from quarter to quarter and year to year and could be substantial. Our net losses were $20.4$30.2 million and $13.3$20.7 million for the sixnine months ended JuneSeptember 30, 2021 and 2020, respectively. As of JuneSeptember 30, 2021, we had an accumulated deficit of $91.3$101.1 million. We anticipate that our expenses will increase significantly as we:
● | advance our Phase 2 TENACITY trial of AL101 for the treatment of R/M TNBC; |
● | advance our Phase 2/3 RINGSIDE pivotal trial of AL102 for the treatment of desmoid tumors; |
● | initiate or commence a clinical trial for the treatment of relapsed/refractory T-cell acute lymphoblastic leukemia, or R/R T-ALL, or obtain and conduct clinical trials for any other product candidates; |
● | assuming successful completion of our Phase 2 ACCURACY trial of AL101 for the treatment of R/M ACC, may be required by the FDA to complete Phase 3 clinical trials to support submission of a New Drug Application, or NDA, of AL101 for the treatment of R/M ACC; |
● | establish a sales, marketing and distribution infrastructure to commercialize AL101 and/or AL102, if approved, and for any other product candidates for which we may obtain marketing approval; |
● | collaborate with leading diagnostic companies to develop diagnostic tests for identifying patients with Notch-activating mutations; |
● | maintain, expand, protect and enforce our intellectual property portfolio; |
● | hire additional staff, including clinical, scientific, technical, regulatory, operational, financial, commercial and other personnel, to execute our business plan; and |
● | add clinical, scientific, operational, financial and management information systems and personnel to support our product development and potential future commercialization efforts, and to enable us to operate as a public company. |
We do not expect to generate revenue from product sales unless and until we successfully complete clinical development and obtain regulatory approval for a product candidate. Additionally, we currently use contract research organizations, or CROs, to carry out our clinical development activities. Furthermore, we incur additional costs associated with operating as a public company. As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to fund our operations through public or equity offerings or debt financings, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements or other sources. We may, however, be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop our current or any future product candidates.
Because of the numerous risks and uncertainties associated with therapeutics product development, we are unable to predict accurately the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
As of JuneSeptember 30, 2021, we had cash and cash equivalents and restricted bank deposits totaling $44.4$41.2 million. We believe that our cash and cash equivalents, and short-term restricted bank deposits will be sufficient to fund our operating expenses and capital expenditure requirements at least for the next 12 months. We have based these estimates on assumptions that may prove to be imprecise or incorrect, and we may use our available capital resources sooner than we currently expect. See “— Liquidity and Capital Resources.” Because of the numerous risks and uncertainties associated with the development of our current and any future product candidates, the development of our platform and technology and because the extent to which we may enter into collaborations with third parties for development of any of our product candidates is unknown, we are unable to estimate the amounts of capital outlays and operating expenses required for completing the research and development of our product candidates.
If we raise additional funds through marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements with third parties, we may be required to relinquish valuable rights to our technologies, intellectual property, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate product candidate development programs or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Bristol-Myers Squibb License Agreements
In November 2017, we entered into an exclusive worldwide license agreement with Bristol-Myers Squibb Company, or BMS, for AL101 and AL102, each a small molecule gamma secretase inhibitor in development for the treatment of cancers. Under the terms of the license agreement, we have licensed the exclusive worldwide development and commercialization rights for AL101 (previously known as
We are responsible for all future development and commercialization of AL101 and AL102. In consideration for the rights granted under the agreement, we paid BMS a payment of $6 million and issued to BMS 1,125,929 shares of Series A preferred stock valued at approximately $7.3 million, which converted to 562,964 shares of common stock in connection with our initial public offering, or IPO. We are obligated to pay BMS up to approximately $142 million in the aggregate upon the achievement of certain clinical development or regulatory milestones and up to $50 million in the aggregate upon the achievement of certain commercial milestones by each product containing the licensed BMS compounds. In addition, we are obligated to pay BMS tiered royalties ranging from a high single-digit to a low teen percentage on worldwide net sales of all products containing the licensed BMS compounds.
BMS has the right to terminate the BMS License Agreement in its entirety upon written notice to us (a) for insolvency-related events involving us, (b) for our material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, (c) for our failure to fulfill our obligations to develop or commercialize the BMS Licensed Compounds and/or BMS Licensed Products not remedied within a defined period of time following written notice by BMS, or (d) if we or our affiliates commence any action challenging the validity, scope, enforceability or patentability of any of the licensed patent rights. We have the right to terminate the BMS License Agreement (a) for convenience upon prior written notice to BMS, the length of notice dependent on whether a BMS Licensed Product has received regulatory approval, (b) upon immediate written notice to BMS for insolvency-related events involving BMS, (c) for BMS’s material breach of the BMS License Agreement if such breach remains uncured for a defined period of time, or (d) on a BMS Licensed
Novartis License Agreements
In December 2018, we entered into an evaluation, option and license agreement, or the Novartis Agreement, with Novartis International Pharmaceutical Limited, or Novartis, pursuant to which we granted Novartis an exclusive option to obtain an exclusive license to research, develop, commercialize and manufacture AL102 for the treatment of multiple myeloma.
We will continue to supply Novartis quantities of AL102, products containing AL102 and certain other materials for purposes of conducting evaluation studies not comprising human clinical trials during the option period, together with our
At any time during the option term, Novartis may exercise its option by payment of a low eight figure option exercise fee. If Novartis exercises its option, it will be obligated to pay us up to an additional $245 million upon the achievement of certain clinical development and commercial milestones. In addition, Novartis is obligated to pay us tiered royalties at percentages ranging from a
The option we granted to Novartis will remain in effect until the earlier of (a) 60 days following the last visit of the last subject in the evaluation studies, (b) the termination of the Novartis Agreement, or (c) 36 months following the delivery by us to Novartis of sufficient amounts of clinical evaluation materials to conduct the anticipated clinical studies. The Novartis Agreement remains in effect until such time as no Novartis Licensed Product is being developed or commercialized by Novartis, its affiliates, or sublicensees (including distributors or commercial partners), unless terminated earlier. We have the right to terminate the Novartis Agreement (a) for Novartis’s material breach if such breach remains uncured for 60 days (such cure period shall be extended for an additional period during which Novartis is making good faith efforts to cure such breach) or (b) for Novartis’s failure to use commercially reasonable efforts to develop or commercialize AL102 and/or the Novartis Licensed Product not remedied within four months following written notice to Novartis. Novartis has the right to terminate the Novartis Agreement (a) in its entirety or on a
Financial Overview
Except as described below, there have been no material changes from the disclosure provided under the caption “Components of Results of Operations” in our Annual Report on Form
Results of Operations
Comparison of the three and sixnine months ended JuneSeptember 30, 2021, and 2020
The following table summarizes our results of operations for the three and sixnine months ended JuneSeptember 30, 2021 and 2020
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands except share and per share data) | ||||||||||||||||
Revenues from licensing agreement | $ | 761 | $ | 1,045 | $ | 1,735 | $ | 2,046 | ||||||||
Cost of services | (761 | ) | 1,045 | (1,735 | ) | 2,046 | ||||||||||
Gross profit | — | — | — | — | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 8,121 | 5,067 | 15,046 | 10,195 | ||||||||||||
General and administrative | 2,536 | 1,546 | 4,839 | 2,857 | ||||||||||||
Operating loss | (10,657 | ) | (6,613 | ) | (19,885 | ) | (13,052 | ) | ||||||||
Financial Income (loss), net | (22 | ) | 40 | (114 | ) | 2 | ||||||||||
Loss before income tax | (10,679 | ) | (6,573 | ) | (19,999 | ) | (13,050 | ) | ||||||||
Taxes on income | (162 | ) | (139 | ) | (410 | ) | (260 | ) | ||||||||
Net loss attributable to common stockholders | (10,841 | ) | (6,712 | ) | (20,409 | ) | (13,310 | ) | ||||||||
Net Loss per share attributable to common stockholders, basic and diluted | $ | (0.75 | ) | $ | (0.74 | ) | $ | (1.46 | ) | $ | (1.90 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 14,417,423 | 9,018,637 | 13,954,676 | 6,989,762 | ||||||||||||
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
(in thousands except share and per share data) | ||||||||||||||||
Revenues from licensing agreement | $ | 625 | $ | 658 | $ | 2,360 | $ | 2,704 | ||||||||
Cost of services | (625 | ) | (658 | ) | (2,360 | ) | (2,704 | ) | ||||||||
Gross profit | — | — | — | — | ||||||||||||
Operating expenses: | ||||||||||||||||
Research and development | 7,368 | 5,421 | 22,414 | 15,616 | ||||||||||||
General and administrative | 2,198 | 1,862 | 7,037 | 4,719 | ||||||||||||
Operating loss | (9,566 | ) | (7,283 | ) | (29,451 | ) | (20,335 | ) | ||||||||
Financial Income (loss), net | (63 | ) | (40 | ) | (177 | ) | (38 | ) | ||||||||
Loss before income tax | (9,629 | ) | (7,323 | ) | (29,628 | ) | (20,373 | ) | ||||||||
Taxes on income | (167 | ) | (115 | ) | (577 | ) | (375 | ) | ||||||||
Net loss attributable to common stockholders | (9,696 | ) | (7,438 | ) | (30,205 | ) | (20,748 | ) | ||||||||
Net Loss per share attributable to common stockholders, basic and diluted | $ | (0.68 | ) | $ | (0.59 | ) | $ | (2.14 | ) | $ | (2.33 | ) | ||||
Weighted average common shares outstanding, basic and diluted | 14,483,629 | 12,664,485 | 14,130,993 | 8,894,182 |
Revenue
To date, we have not generated any revenue from product sales and we do not expect to generate any revenue from the sale of products in the foreseeable future. If our development efforts for our product candidates are successful and result in regulatory approval and successful commercialization efforts, we may generate revenue from product sales in the future. We cannot predict if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates. We may never succeed in obtaining regulatory approval for any of our product candidates.
For the three months ended JuneSeptember 30, 2021 and 2020, we recognized $0.8$0.6 million and $1.0$0.7 million in revenue, respectively. For the sixnine months ended JuneSeptember 30, 2021 and 2020, we recognized $1.7$2.4 and $ 2.02.7 million in revenue, respectively, as a result of the Novartis Agreement. Refer to Note 2 to our unaudited condensed consolidated financial statements for information regarding our recognition of revenue under the Novartis Agreement.
Research and Development
Research and development expenses consist primarily of costs incurred for our research activities, including the development of and pursuit of regulatory approval of our lead product candidates, AL101 and AL102, which include:
● | employee-related expenses, including salaries, benefits and stock-based compensation expense for personnel engaged in research and development functions; |
● | expenses incurred in connection with the preclinical and clinical development of our product candidates, including under agreements with CROs, investigative sites and consultants; |
● | costs of manufacturing our product candidates for use in our preclinical studies and clinical trials, as well as manufacturers that provide components of our product candidates for use in our preclinical and current and potential future clinical trials; |
● | costs associated with our bioinformatics platform; |
● | consulting and professional fees related to research and development activities; |
● | costs related to compliance with clinical regulatory requirements; and |
● | Facility costs and other allocated expenses, which include expenses for rent and maintenance of our facility, utilities, depreciation and other supplies. |
We expense research and development costs as incurred. Our external research and development expenses consist primarily of costs such as fees paid to consultants, contractors and CROs in connection with our preclinical and clinical development activities. We typically use our employee and infrastructure resources across our development programs and we do not allocate personnel costs and other internal costs to specific product candidates or development programs with the exception of the costs to manufacture our product candidates.
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||||||
2021 | 2020 | Change | Change | 2021 | 2020 | Change | Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
Research and Development | 8,121 | 5,067 | 3,054 | 60 | % | 15,046 | 10,195 | 4,851 | 48 | % | ||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||||||
2021 | 2020 | Change | Change | 2021 | 2020 | Change | Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
Research and Development | 7,368 | 5,421 | 1,947 | 36 | % | 22,414 | 15,616 | 6,798 | 44 | % |
Research and development expenses were $8.1$7.4 million for the three months ended JuneSeptember 30, 2021 compared to $5.1$5.4 million for the three months ended JuneSeptember 30, 2020, an increase of $3.1$2.0 million. Research and development expenses were $15.0$22.4 million for the sixnine months ended JuneSeptember 30, 2021 compared to $10.2$15.6 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $4.9$6.8 million. This increase was primarily driven by additional costs in connection with the advancement of the clinical trials for the treatment of desmoid tumors and TNBC.
The following table summarizes our research and development expenses by product candidate or development program for the three and sixnine months ended JuneSeptember 30, 2021 and 2020:
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | June 30, | June 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Program-Specific Costs: | ||||||||||||||||
AL 101 | ||||||||||||||||
ACC | 3,680 | 3,794 | 7,936 | 7,461 | ||||||||||||
TNBC | 2,533 | 996 | 3,960 | 1,976 | ||||||||||||
General Expenses | 263 | 277 | 803 | 758 | ||||||||||||
AL 102 | ||||||||||||||||
General Expenses | 10 | — | 24 | — | ||||||||||||
Desmoid | 1,635 | — | 2,323 | — | ||||||||||||
Total Research and Development Expenses | $ | 8,121 | $ | 5,067 | $ | 15,046 | $ | 10,195 |
Three Months Ended | Nine Months Ended | |||||||||||||||
September 30, | September 30, | September 30, | September 30, | |||||||||||||
2021 | 2020 | 2021 | 2020 | |||||||||||||
Program-Specific Costs: | ||||||||||||||||
AL 101 | ||||||||||||||||
ACC | 3,415 | 3,477 | 11,351 | 10,938 | ||||||||||||
TNBC | 1,966 | 1,922 | 5,926 | 3,898 | ||||||||||||
General Expenses | 693 | 22 | 1,496 | 780 | ||||||||||||
AL 102 | ||||||||||||||||
General Expenses | 8 | — | 32 | — | ||||||||||||
Desmoid | 1,286 | — | 3,609 | — | ||||||||||||
Total Research and Development Expenses | $ | 7,368 | $ | 5,421 | $ | 22,414 | $ | 15,616 |
We expect our research and development expenses to increase for the foreseeable future as we continue to invest in research and development activities related to developing our product candidates, including investments in manufacturing, as our programs advance into later stages of development and as we conduct additional clinical trials.
General and Administrative Expenses
Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||||||
2021 | 2020 | Change | Change | 2021 | 2020 | Change | Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
General and Administrative | 2,536 | 1,546 | 990 | 64 | % | 4,839 | 2,857 | 1,982 | 69 | % | ||||||||||||||||||||||
Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||||||||||||||||||
$ | % | $ | % | |||||||||||||||||||||||||||||
2021 | 2020 | Change | Change | 2021 | 2020 | Change | Change | |||||||||||||||||||||||||
($ in thousands) | ||||||||||||||||||||||||||||||||
General and Administrative | 2,198 | 1,862 | 336 | 18 | % | 7,037 | 4,719 | 2,318 | 49 | % |
General and administrative expenses were $2.5$2.2 million for the three months ended JuneSeptember 30, 2021 compared to $1.5$1.9 million for the three months ended JuneSeptember 30, 2020, an increase of $1.0.$0.3 General and administrative expenses were $4.8$7.0 million for the sixnine months ended JuneSeptember 30, 2021 compared to $2.9$4.7 million for the sixnine months ended JuneSeptember 30, 2020, an increase of $2.0$2.3 million. This increase was primarily due to higher expenses in connection with becoming a public company, including officer and director insurance.
Financial Loss, net
Financial loss, net was $22$63 thousand for the three months ended JuneSeptember 30, 2021 compared to the financial income,loss, net of $40 thousand for the three months ended JuneSeptember 30, 2020. Financial loss, net was $114$177 thousand for the sixnine months ended JuneSeptember 30, 2021 compared to the financial income,loss, net of $2$38 thousand for the same period in 2020.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue from product sales and have incurred significant operating losses and negative cash flows from our operations. Our net losses were $20.4$30.2 million and $13.3$20.7 million for the sixnine months ended JuneSeptember 30, 2021 and 2020, respectively. As of JuneSeptember 30, 2021, we had an accumulated deficit of $91.3$101.1 million.
On May 12, 2020, we completed the sale of shares of our common stock in our IPO. In connection with the IPO, we issued and sold 3,940,689 shares of common stock, including 274,022 shares associated with the partial exercise on June 4, 2020 of the underwriters’ option to purchase additional shares, at a price to the public of $15.00 per share, resulting in net proceeds to us of approximately $52.8 million after deducting underwriting discounts and commissions and estimated offering expenses payable by us. All shares issued and sold were registered pursuant to a registration statement on Form
On February 19, 2021, we entered into a Securities Purchase Agreement (the “2021 Purchase Agreement”) with the purchasers named therein (the “Investors”). Pursuant to the 2021 Purchase Agreement, we agreed to sell (i) an aggregate of 333,333 shares of our common stock (the “Private Placement Shares”), par value $0.01 per share, together with warrants to purchase an aggregate of 116,666 shares of our common stock with an exercise price of $18.10 per share (the “Common Warrants”), for an aggregate purchase price of $4,999,995.00 and
The exercise price and the number of shares of common stock issuable upon exercise of each Private Placement Warrant are subject to adjustment in the event of certain stock dividends and distributions, stock splits, stock combinations, reclassifications or similar events affecting the common stock. In addition, in certain circumstances, upon a fundamental transaction, a holder of Common Warrants will be entitled to receive, upon exercise of the Common Warrants, the kind and amount of securities, cash or other property that such holder would have received had they exercised the Private Placement Warrants immediately prior to the fundamental transaction. The
The Private Placement was exempt from registration pursuant to Section 4(a)(2) of the Securities Act and Regulation D promulgated thereunder, as a transaction by an issuer not involving a public offering. On June 4, 2021, we filed a resale Registration Statement on Form
In June 2021, we entered into an Open Market Sales Agreement, or the Sales Agreement, with Jefferies LLC, or Jefferies, as sales agent, pursuant to which we may, from time to time, issue and sell common stock with an aggregate value of up to $200.0 million in
As of JuneSeptember 30, 2021, we had cash and cash equivalents and restricted bank deposits of $44.4$41.2 million.
Cash Flows
The following table summarizes our cash flow for the sixnine months ended JuneSeptember 30, 2021 and 2020:
Six Months Ended June 30, | ||||||||
2021 | 2020 | |||||||
($ in thousands) | ||||||||
Cash Flows provided by (used in): | ||||||||
Operating Activities | (21,197 | ) | (11,706 | ) | ||||
Investing Activities | (3 | ) | 204 | |||||
Financing Activities | 23,583 | 52,369 | ||||||
Net increase (decrease) in cash and cash equivalents and short-term restricted bank deposits | 2,383 | 40,867 | ||||||
Nine Months Ended September 30, | ||||||||
2021 | 2020 | |||||||
($ in thousands) | ||||||||
Cash Flows provided by (used in): | ||||||||
Operating Activities | (30,564 | ) | (20,568 | ) | ||||
Investing Activities | (5 | ) | 162 | |||||
Financing Activities | 29,383 | 52,667 | ||||||
Net increase (decrease) in cash and cash equivalents and short-term restricted bank deposits | (1,186 | ) | 32,261 |
Operating Activities
Net cash used in operating activities during the sixnine months ended JuneSeptember 30, 2021 of $21.2$30.6 million was primarily attributable to our net loss of $20.4$30.2 million, adjusted for
Net cash used in operating activities during the sixnine months ended June,September, 2020 of $11.7$20.6 million was primarily attributable to our net loss of $13.3$20.7 million, adjusted for
Investing Activities
Net cash used in investing activities during the sixnine months ended JuneSeptember 30, 2021 of $3$5 thousand was due to purchases of property and equipment.
Net cash provided by investing activities during the nine months ended September 30, 2020 of $162 thousand was primarily attributable to purchasesmaturing of property and equipment.
Financing Activities
Net cash provided by financing activities during the sixnine months ended JuneSeptember 30, 2021 of $23.6$29.4 million, was primarily attributable to the Private Placement, net of issuance costs.costs, and sales pursuant to the ATM.
Net cash used inprovided by financing activities during the sixnine months ended JuneSeptember 30, 2020 of $52.4$52.7 million, was primarily attributable to certain costs in connection with our IPO.
Funding Requirements
We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development for, initiate later-stage clinical trials for, and seek marketing approval for, our product candidates. In addition, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product sales, marketing, manufacturing and distribution. Furthermore, we incur additional costs associated with operating as a public company. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
As of JuneSeptember 30, 2021, we had cash and cash equivalents and restricted bank depositscash equivalents of $44.4$41.2 million. We expect that our existing cash and cash equivalents and short-term restricted bank deposits, will be sufficient to fund our operating expenses and capital expenditure requirements at least for the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we may use our available capital resources sooner than we currently expect. Our future capital requirements will depend on many factors, including:
● | the costs of conducting future clinical trials of AL101 and AL102; |
● | the cost of manufacturing additional material for future clinical trials of AL101 and AL102; 20 |
● | the scope, progress, results and costs of discovery, preclinical development, laboratory testing and clinical trials for other potential product candidates we may develop or acquire, if any; |
● | the costs, timing and outcome of regulatory review of our product candidates; |
● | the achievement of milestones or occurrence of other developments that trigger payments under any current or future license, collaboration or other agreements; |
● | the costs and timing of future commercialization activities, including product sales, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing approval; |
● | the amount of revenue, if any, received from commercial sales of our product candidates, should any of our product candidates receive marketing approval; |
● | the costs of preparing, filing and prosecuting patent applications, obtaining, maintaining, protecting and enforcing our intellectual property rights and defending intellectual property-related claims; |
● | the severity, duration and impact of the COVID-19 pandemic, which may adversely impact our business and clinical trials; |
● | our headcount growth and associated costs as we expand our business operations and our research and development activities; and |
● | the costs of operating as a public company. |
Conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all.
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interests may be diluted, and the terms of these securities may include liquidation or other preferences that could adversely affect your rights as a common stockholder. Any debt financing, if available, may involve agreements that include restrictive covenants that limit our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends, that could adversely impact our ability to conduct our business.
If we raise funds through collaborations, strategic alliances or licensing arrangements with third parties, such as the Novartis Agreement, we may have to relinquish valuable rights to our technologies, intellectual property, future revenue streams, research programs or product candidates or to grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual Obligations
There have been no material changes to our contractual obligations from those described in our Annual Report on Form
Off-Balance
We did not have during the periods presented, and we do not currently have, any
Critical Accounting Policies
Our management’s discussion and analysis of financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.
There have been no significant changes in our critical accounting policies as discussed in our Form
Emerging Growth Company Status
The Jumpstart Our Business
We will remain an emerging growth company until the earliest to occur of: (1) the last day of the fiscal year (a) following the fifth anniversary of the completion of our IPO, or December 31, 2025, (b) in which we have total annual gross revenues of $1.07 billion or more, or (c) in which we are deemed to be a large accelerated filer under the rules of the SEC, which means the market value of our outstanding common stock held by
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.
Item 4. Controls and Procedures.
Limitations on Effectiveness of Controls and Procedures
In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form
Changes in Internal control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
We are not subject to any material legal proceedings.
Item 1A. Risk Factors.
There have been no material changes to our risk factors as previously disclosed in our Annual Report on Form
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
On May 12, 2020, we completed our IPO and issued and sold 3,666,667 shares of our common stock at a price to the public of $15.00 per share. On June 9, 2020, in connection with the partial exercise of the underwriters’ option to purchase additional shares, we issued and sold 274,022 additional shares of common stock at a price of $15.00 per share.
The offer and sale of all of the shares in the offering was registered under the Securities Act pursuant to a Registration Statement on Form
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 6. Exhibits.
* | Filed herewith. |
** | Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
AYALA Pharmaceuticals, Inc. | |||||||
Date: | By: | /s/ Roni Mamluk | |||||
Roni Mamluk, Ph.D. | |||||||
Chief Executive Officer | |||||||
(principal executive officer) | |||||||
Date: November 15, 2021 | By: | /s/ Yossi Maimon | |||||
Yossi Maimon, CPA, M.B.A. | |||||||
Chief Financial Officer | |||||||
(principal financial and accounting officer) |
23