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 SeptemberJune 30, 2017
or
☐TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 001-36845
Bellerophon Therapeutics, Inc.
(Exact name of registrant as specified in its charter)
Delaware | 47-3116175 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) |
184 Liberty Corner Road, Suite 302
Warren,New Jersey
(Address of principal executive offices)
07059
(Zip Code)
(908) 574-4770
(Registrant’s telephone number, including area code)
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 | BLPH | The Nasdaq Capital 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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”filer,” “smaller reporting company,” and “smaller reporting“emerging growth company” in Rule 12b-2 of the Exchange Act. (Check one):
| | | | | | |
Large accelerated filer | ☐ | Accelerated filer | ☐ | |||
Non-accelerated filer | ☒ | | Smaller reporting company | ☒ | ||
| | | | Emerging growth company | | ☐ |
If an emerging growth company, indicate by a check mark if the registrant has elected not to use the extended transition 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 12b-2 of the Exchange Act). Yes
The number of shares outstanding of the registrant’s common stock as of November 1, 2017: 55,179,788
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Management’s Discussion and Analysis of Financial Condition and Results of Operations | ||||
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2
REFERENCES TO BELLEROPHON
In this Quarterly Report on Form 10-Q, unless otherwise stated or the context otherwise requires references to the “Company,” “Bellerophon,” “we,” “us” and “our” refer to Bellerophon Therapeutics, Inc. and its consolidated subsidiaries.
3
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, contained in this Quarterly Report on Form 10-Q, including statements regarding our future results of operations and financial position, business strategy and plans and objectives of management for future operations, are forward-looking statements. The words “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words.
The forward-looking statements in this Quarterly Report on Form 10-Q include, among other things, statements about:
● | the timing of the ongoing and expected clinical trials of our product candidates, including statements regarding the timing of completion of the trials and the respective periods during which the results of the trials will become available; |
● | our ability to obtain adequate financing to meet our future operational and capital needs; |
● | the timing of and our ability to obtain marketing approval of our product candidates, and the ability of our product candidates to meet existing or future regulatory standards; |
● | our ability to comply with government laws and regulations; |
● | our commercialization, marketing and manufacturing capabilities and strategy; |
● | our estimates regarding the potential market opportunity for our product candidates; |
● | the timing of or our ability to enter into partnerships to market and commercialize our product candidates; |
● | the rate and degree of market acceptance of any product candidate for which we receive marketing approval; |
● | our intellectual property position; |
● | our estimates regarding expenses, future revenues, capital requirements and needs for additional funding; |
● | the success of competing treatments; and |
● | our competitive position. |
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2016,2021, particularly in the “Risk Factors” section, that could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.
4
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
This Quarterly Report on Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information.
5
Item 1.
Financial Statements.BELLEROPHON THERAPEUTICS, INC.
(in thousands except share and per share data)
As of | As of | |||||||
September 30, 2017 | December 31, 2016 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 32,283 | $ | 14,453 | ||||
Restricted cash | — | 150 | ||||||
Marketable securities | 3,178 | 5,571 | ||||||
Prepaid expenses and other current assets | 3,934 | 6,331 | ||||||
Total current assets | 39,395 | 26,505 | ||||||
Restricted cash, non-current | 300 | 307 | ||||||
Other non-current assets | 59 | 1,491 | ||||||
Property and equipment, net | 1,116 | 1,399 | ||||||
Total assets | $ | 40,870 | $ | 29,702 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 2,755 | $ | 2,807 | ||||
Accrued research and development | 1,873 | 2,573 | ||||||
Accrued expenses | 1,784 | 1,115 | ||||||
Total current liabilities | 6,412 | 6,495 | ||||||
Common stock warrant liability | 18,784 | 5,215 | ||||||
Total liabilities | 25,196 | 11,710 | ||||||
Commitments and contingencies | ||||||||
Stockholders’ equity: | ||||||||
Common stock, $0.01 par value per share; 125,000,000 shares authorized, 54,960,068 and 31,702,624 shares issued and outstanding at September 30, 2017 and December 31, 2016, respectively | 550 | 317 | ||||||
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized, zero shares issued and outstanding at September 30, 2017 and December 31, 2016 | — | — | ||||||
Additional paid-in capital | 170,275 | 142,167 | ||||||
Accumulated other comprehensive income (loss) | — | — | ||||||
Accumulated deficit | (155,151 | ) | (124,492 | ) | ||||
Total stockholders’ equity | 15,674 | 17,992 | ||||||
Total liabilities and stockholders’ equity | $ | 40,870 | $ | 29,702 |
| | | | | | |
| | As of | | As of | ||
|
| June 30, 2022 |
| December 31, 2021 | ||
| | (Unaudited) | | | | |
Assets |
| |
|
| |
|
Current assets: |
| |
|
| |
|
Cash and cash equivalents | | $ | 16,328 | | $ | 24,736 |
Restricted cash | |
| 403 | |
| 103 |
Prepaid expenses and other current assets | |
| 257 | |
| 620 |
Total current assets | |
| 16,988 | |
| 25,459 |
Restricted cash, non-current | |
| — | |
| 300 |
Right of use assets, net | |
| 529 | |
| 863 |
Property and equipment, net | |
| 27 | |
| 67 |
Other non-current assets | | | 186 | | | 186 |
Total assets | | $ | 17,730 | | $ | 26,875 |
Liabilities and Stockholders' Equity | |
|
| |
|
|
Current liabilities: | |
|
| |
|
|
Accounts payable | | $ | 2,007 | | $ | 1,192 |
Accrued research and development | |
| 1,512 | |
| 1,397 |
Accrued expenses | |
| 1,344 | |
| 1,711 |
Current portion of operating lease liabilities | |
| 586 | |
| 752 |
Total current liabilities | |
| 5,449 | |
| 5,052 |
Long term operating lease liabilities | |
| — | |
| 203 |
Common stock warrant liability | |
| 1 | |
| 1 |
Total liabilities | |
| 5,450 | |
| 5,256 |
| | | | | | |
Commitments and contingencies | |
|
| |
|
|
| | | | | | |
Stockholders' equity: | |
|
| |
|
|
Common stock, $0.01 par value per share; 200,000,000 shares authorized and 9,545,451 and 9,545,451 shares issued and outstanding at June 30, 2022 and December 31, 2021, respectively | |
| 95 | |
| 95 |
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized, 0 shares issued and outstanding at June 30, 2022 and December 31, 2021 | |
| — | |
| — |
Additional paid-in capital | |
| 254,178 | |
| 253,771 |
Accumulated deficit | |
| (241,993) | |
| (232,247) |
Total stockholders' equity | |
| 12,280 | |
| 21,619 |
Total liabilities and stockholders' equity | | $ | 17,730 | | $ | 26,875 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
BELLEROPHON THERAPEUTICS, INC.
(in thousands except share and per share data)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Operating expenses: | |||||||||||||||||
Research and development | $ | 4,438 | $ | 2,472 | $ | 12,464 | $ | 11,539 | |||||||||
General and administrative | 1,746 | 1,745 | 4,826 | 4,926 | |||||||||||||
Total operating expenses | 6,184 | 4,217 | 17,290 | 16,465 | |||||||||||||
Loss from operations | (6,184 | ) | (4,217 | ) | (17,290 | ) | (16,465 | ) | |||||||||
Change in fair value of common stock warrant liability | (1,435 | ) | — | (13,455 | ) | — | |||||||||||
Interest and other income, net | 33 | 22 | 86 | 74 | |||||||||||||
Pre-tax loss | (7,586 | ) | (4,195 | ) | (30,659 | ) | (16,391 | ) | |||||||||
Income tax benefit (expense) | — | — | — | — | |||||||||||||
Net loss | $ | (7,586 | ) | $ | (4,195 | ) | $ | (30,659 | ) | $ | (16,391 | ) | |||||
Weighted average shares outstanding: | |||||||||||||||||
Basic and diluted | 34,989,831 | 13,854,188 | 33,505,444 | 13,335,358 | |||||||||||||
Net loss per share: | |||||||||||||||||
Basic and diluted | $ | (0.22 | ) | $ | (0.30 | ) | $ | (0.92 | ) | $ | (1.23 | ) |
| | | | | | | | | | | | |
| | Three Months Ended | | Six Months Ended | ||||||||
| | June 30, | | June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Operating expenses: | | | | | | | | | | | | |
Research and development | | $ | 4,488 | | $ | 3,239 | | $ | 8,897 | | $ | 6,823 |
General and administrative | |
| 2,053 | |
| 1,987 | |
| 3,286 | |
| 4,262 |
Total operating expenses | |
| 6,541 | |
| 5,226 | |
| 12,183 | |
| 11,085 |
Loss from operations | |
| (6,541) | |
| (5,226) | |
| (12,183) | |
| (11,085) |
Change in fair value of common stock warrant liability | |
| — | |
| 36 | |
| 0 | |
| 433 |
Interest and other income, net | |
| 19 | |
| 1 | |
| 20 | |
| 2 |
Pre-tax loss | |
| (6,522) | |
| (5,189) | |
| (12,163) | |
| (10,650) |
Income tax benefit | |
| 2,417 | |
| 1,800 | |
| 2,417 | |
| 1,800 |
Net loss and comprehensive loss | | $ | (4,105) | | $ | (3,389) | | $ | (9,746) | | $ | (8,850) |
Weighted average shares outstanding: | |
|
| |
|
| |
|
| |
|
|
Basic | |
| 9,545,451 | |
| 9,506,419 | |
| 9,545,451 | |
| 9,498,892 |
Diluted | |
| 9,545,451 | |
| 9,506,419 | |
| 9,545,451 | |
| 9,498,892 |
Net loss per share: | |
|
| |
|
| |
|
| |
|
|
Basic | | $ | (0.43) | | $ | (0.36) | | $ | (1.02) | | $ | (0.93) |
Diluted | | $ | (0.43) | | $ | (0.36) | | $ | (1.02) | | $ | (0.93) |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
BELLEROPHON THERAPEUTICS, INC.
CONDENSED CONSOLIDATED STATEMENTSSTATEMENT OF COMPREHENSIVE LOSSCHANGES IN STOCKHOLDERS’ EQUITY (UNAUDITED)
(in thousands)
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Net loss | $ | (7,586 | ) | $ | (4,195 | ) | $ | (30,659 | ) | $ | (16,391 | ) | |||||
Other comprehensive income | |||||||||||||||||
Unrealized (losses) gains on available-for-sale marketable securities | — | (3 | ) | — | 18 | ||||||||||||
Total other comprehensive (loss) income | — | (3 | ) | — | 18 | ||||||||||||
Comprehensive loss | $ | (7,586 | ) | $ | (4,198 | ) | $ | (30,659 | ) | $ | (16,373 | ) |
For the three and six months ended June 30, 2022:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | Total | |
| | Common Stock | | Additional Paid in | | Accumulated | | Stockholders' | ||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||
Balance at March 31, 2022 | | 9,545,451 | | $ | 95 | | $ | 253,963 | | $ | (237,888) | | $ | 16,170 |
Net loss |
| — | |
| — | |
| — | |
| (4,105) | |
| (4,105) |
Stock-based compensation |
| — | |
| — | |
| 215 | |
| — | |
| 215 |
Balance at June 30, 2022 |
| 9,545,451 | | $ | 95 | | $ | 254,178 | | $ | (241,993) | | $ | 12,280 |
| | | | | | | | | | | | | | |
Balance at December 31, 2021 | | 9,545,451 | | $ | 95 | | $ | 253,771 | | $ | (232,247) | | $ | 21,619 |
Net loss |
| — | |
| — | |
| — | |
| (9,746) | |
| (9,746) |
Stock-based compensation |
| — | |
| 0 | |
| 407 | |
| — | |
| 407 |
Balance at June 30, 2022 |
| 9,545,451 | | $ | 95 | | $ | 254,178 | | $ | (241,993) | | $ | 12,280 |
For the three and six months ended June 30, 2021:
| | | | | | | | | | | | | | |
| | | | | | | | | | | | | Total | |
| | Common Stock | | Additional Paid in | | Accumulated | | Stockholders' | ||||||
|
| Shares |
| Amount |
| Capital |
| Deficit |
| Equity | ||||
Balance at March 31, 2021 | | 9,506,419 | | $ | 95 | | $ | 252,986 | | $ | (219,952) | | $ | 33,129 |
Net loss |
| — | |
| — | |
| — | |
| (3,389) | |
| (3,389) |
Stock-based compensation |
| — | |
| — | |
| 357 | |
| — | |
| 357 |
Balance at June 30, 2021 |
| 9,506,419 | | $ | 95 | | $ | 253,343 | | $ | (223,341) | | $ | 30,097 |
| | | | | | | | | | | | | | |
Balance at December 31, 2020 |
| 9,491,111 | | $ | 95 | | $ | 252,645 | | $ | (214,491) | | $ | 38,249 |
Net loss |
| — | |
| — | |
| — | |
| (8,850) | |
| (8,850) |
Stock-based compensation |
| 15,308 | |
| 0 | |
| 698 | |
| — | |
| 698 |
Balance at June 30, 2021 |
| 9,506,419 | | $ | 95 | | $ | 253,343 | | $ | (223,341) | | $ | 30,097 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
BELLEROPHON THERAPEUTICS, INC.
(in thousands except share and per share data)
Common Stock | Additional | Accumulated Other Comprehensive | Accumulated | Total Stockholders’ | |||||||||||||||||||
Shares | Amount | Paid in Capital | Income (Loss) | Deficit | Equity | ||||||||||||||||||
December 31, 2016 | 31,702,624 | $ | 317 | $ | 142,167 | $ | — | $ | (124,492 | ) | $ | 17,992 | |||||||||||
Net loss | — | — | — | — | (30,659 | ) | (30,659 | ) | |||||||||||||||
Other comprehensive income | — | — | — | — | — | — | |||||||||||||||||
Sale of common stock and warrants in PIPE Offering, net of offering expenses of $677 | 19,449,834 | 195 | 22,565 | — | — | 22,760 | |||||||||||||||||
Sale of common stock in Direct Offering, net of offering expenses of $187 | 2,000,000 | 20 | 1,675 | — | — | 1,695 | |||||||||||||||||
Warrant exercises | 934,300 | 9 | 1,743 | — | — | 1,752 | |||||||||||||||||
Stock-based compensation | 873,310 | 9 | 2,125 | — | — | 2,134 | |||||||||||||||||
September 30, 2017 | 54,960,068 | $ | 550 | $ | 170,275 | $ | — | $ | (155,151 | ) | $ | 15,674 |
| | | | | | |
| | Six Months Ended June 30, | ||||
|
| 2022 |
| 2021 | ||
Cash flows from operating activities: | | | | | | |
Net loss | | $ | (9,746) | | $ | (8,850) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
|
| |
|
|
Depreciation | |
| 40 | |
| 57 |
Stock-based compensation | |
| 407 | |
| 698 |
Change in fair value of common stock warrant liability | |
| 0 | |
| (433) |
Changes in operating assets and liabilities: | |
| | |
| |
Prepaid expenses and other current assets | |
| 363 | |
| (470) |
Accounts payable, accrued research and development, accrued expenses and other liabilities | |
| 528 | |
| (4,259) |
Net cash used in operating activities | |
| (8,408) | |
| (13,257) |
| | | | | | |
Net change in cash, cash equivalents and restricted cash | |
| (8,408) | |
| (13,257) |
Cash, cash equivalents and restricted cash at beginning of period | |
| 25,139 | |
| 47,960 |
Cash, cash equivalents and restricted cash at end of period | | $ | 16,731 | | $ | 34,703 |
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
BELLEROPHON THERAPEUTICS, INC.
Nine Months Ended September 30, | ||||||||
2017 | 2016 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (30,659 | ) | $ | (16,391 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Change in fair value of common stock warrant liability | 13,455 | — | ||||||
Stock based compensation | 2,134 | 2,148 | ||||||
Depreciation | 283 | 301 | ||||||
Issuance costs attributable to common stock warrant liability | 111 | — | ||||||
Accretion and amortization of discounts and premiums on marketable securities, net | — | 29 | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 2,397 | (980 | ) | |||||
Restricted cash held as security deposit | 157 | — | ||||||
Other non-current assets | 1,432 | 3,397 | ||||||
Accounts payable, accrued research and development, and accrued expenses | (552 | ) | (3,298 | ) | ||||
Net cash used in operating activities | (11,242 | ) | (14,794 | ) | ||||
Cash flows from investing activities: | ||||||||
Capital expenditures | — | (22 | ) | |||||
Purchase of marketable securities | (2,982 | ) | — | |||||
Proceeds from sale of marketable securities | 5,375 | 10,566 | ||||||
Net cash provided by investing activities | 2,393 | 10,544 | ||||||
Cash flows from financing activities: | ||||||||
Proceeds from sale of Units in PIPE Offering | 23,437 | — | ||||||
Proceeds from sale of Units in Direct Offering, net of commissions and offering expenses | 2,730 | — | ||||||
Proceeds received from exercise of warrants | 747 | — | ||||||
Proceeds from sale of common stock in ATM Offering, net of commissions and offering expenses | — | 2,048 | ||||||
Tax withholding payments for stock compensation | — | (128 | ) | |||||
Payment of offering expenses related to the 2016 secondary offering | (235 | ) | — | |||||
Net cash provided by financing activities | 26,679 | 1,920 | ||||||
Net change in cash and cash equivalents | 17,830 | (2,330 | ) | |||||
Cash and cash equivalents at beginning of period | 14,453 | 6,260 | ||||||
Cash and cash equivalents at end of period | $ | 32,283 | $ | 3,930 | ||||
Non-cash financing activities: | ||||||||
Conversion of warrant liability to common stock upon exercise of warrants | $ | 1,005 | $ | — | ||||
Unpaid expenses related to offerings | $ | 720 | $ | 35 | ||||
Non-cash investing activities: | ||||||||
Change in unrealized holding gains on marketable securities, net | $ | — | $ | 18 |
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) Organization and Nature of the Business
Bellerophon Therapeutics, Inc., or the Company, is a clinical-stage therapeutics company focused on developing innovative products at the intersection of drugs and devices that address significant unmet medical needs in the treatment of cardiopulmonary diseases. The focus of the Company’s clinical program is the continued development of its nitric oxide therapy for patients with pulmonary hypertension, or PH, using its proprietary delivery system, INOpulse with pulmonary arterial hypertension, or PAH, representing the lead indication.. The Company has three3 wholly-owned subsidiaries: Bellerophon BCM LLC, a Delaware limited liability company; Bellerophon Pulse Technologies LLC, a Delaware limited liability company; and Bellerophon Services, Inc., a Delaware corporation.
The Company’s business is subject to significant risks and uncertainties, including but not limited to:
● | The risk that the Company will not achieve success in its research and development efforts, including clinical trials conducted by it or its potential collaborative partners. |
● | The expectation that the Company will experience operating losses for the next several years. |
● | Decisions by regulatory authorities regarding whether and when to approve the Company’s regulatory applications as well as their decisions regarding labeling and other matters which could affect the commercial potential of the Company’s products or product candidates. |
● | The risk that the Company will fail to obtain adequate financing to meet its future operational and capital needs. |
● | The risk that the Company will be unable to obtain additional funds on a timely basis and hence there will be substantial doubt about its ability to continue as a going concern. |
● | The risk that key personnel will leave the Company and/or that the Company will be unable to recruit and retain senior level officers to manage its business. |
● | There are many uncertainties regarding the novel coronavirus (“COVID-19”) pandemic, and the Company is closely monitoring the impact of the pandemic on all aspects of its business, including how the pandemic will impact its clinical trials, employees and suppliers. While the pandemic did not materially affect the Company’s financial results and business operations in the three and six months ended June 30, 2022, the extent to which the coronavirus impacts the Company’s results will depend on future developments, which are highly uncertain and cannot be predicted. Further, should COVID-19 continue to spread, the Company’s business operations could be delayed or interrupted. For instance, the Company may be forced to temporarily delay ongoing trials. |
(2) Summary of Significant Accounting Policies
(a) Basis of Presentation
The accompanying unaudited condensed consolidated financial statements were prepared following the requirements of the Securities and Exchange Commission, or the SEC, for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by accounting principles generally accepted in the United States of America, or U.S. GAAP, can be condensed or omitted. The Company operates in one1 reportable segment and solely within the United States. Accordingly, no segment or geographic information has been presented.
10
The Company is responsible for the unaudited condensed consolidated financial statements. The condensed consolidated financial statements include all normal and recurring adjustments that are considered necessary for the fair presentation of the Company’s financial position, results of operations and comprehensive loss and its cash flows for the periods presented. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2016,2021, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.2021. The results of operations for the three and ninesix months ended SeptemberJune 30, 20172022 for the Company are not necessarily indicative of the results expected for the full year.
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of costs and expenses during the reporting period, including right of use asset and operating lease liability, accrued expenses, accrued research and development expenses, stock-based compensation, common stock warrant liabilities and income taxes. Actual results could differ from those estimates.
(b) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity date of three months or less to be cash equivalents. All investments with maturities of greater than three months from the date of purchase are classified as available-for-sale marketable securities.
(c) Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with applicable accounting guidance which establishes accounting for share-based awards, including stock options and restricted stock, exchanged for services and requires companies to expense the estimated fair value of these awards over the requisite service period. The Company recognizes stock-based compensation expense in operations based on the fair value of the award on the date of the grant net of estimated forfeitures.grant. The resulting compensation expense, less estimated forfeitures, is recognized on a straight-line basis over the requisite service period or sooner if the awards immediately vest. The Company determines the fair value of stock options issued using a Black-Scholes-Merton option pricing model. Certain assumptions used in the model include expected volatility, dividend yield, risk-free interest rate, estimated forfeitures and expected term. For restricted stock, the fair value is the closing market price per share on the grant date. See Note 87 - Stock-Based Compensation for a description of these assumptions.
(d) Common Stock Warrants and Warrant Liability
The Company accounts for common stock warrants issued as freestanding instruments in accordance with applicable accounting guidance as either liabilities or as equity instruments depending on the specific terms of the warrant agreement. The Company classifies warrant liabilities on the consolidated balance sheet based on theirthe warrants’ terms as long-term liabilities, which are revalued at each balance sheet date subsequent to the initial issuance. Changes in the fair value of the warrants are reflected in the consolidated statement of operations as “Change in fair value of common stock warrant liability.” The Company uses the Black-Scholes-Merton pricing model to value the related warrant liabilities.liability. Certain assumptions used in the model include expected volatility, dividend yield and risk-free interest rate, and expected term.rate. See Note 6 - Fair Value Measurements for a description of these assumptions.
(e) Income Taxes
The Company uses the asset and liability approach to account for income taxes as required by applicable accounting guidance, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Valuation allowances are provided when necessary to reduce deferred tax assets to the amount expected to be realized, on a more likely than not basis. The Company recognizes the benefit of an uncertain tax position that it has taken or expects to take on income tax returns it files if such tax position is more likely than not to be sustained on examination by the taxing authorities, based on the technical merits of the position.
11
These tax benefits are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate resolution.
(f) Marketable Securities
Research and development costs are expensed as incurred. These expenses include the costs of the Company’s proprietary research and development efforts, as well as costs incurred in connection with certain licensing arrangements. Upfront and milestone payments made to third parties in connection with research and development collaborations are expensed as incurred up to the point of regulatory approval. Payments made to third parties upon or subsequent to regulatory approval are capitalized and amortized over the remaining useful life of the related product. The Company also expenses the
(g) Leases
A lease is a contract, or part of a contract, that conveys the right to conform tocontrol the current period presentation.
Leases are measured at present value using the rate implicit in the lease or, clarifying guidanceif the implicit rate is not determinable, the lessee’s implicit borrowing rate. As the implicit rate is not typically available, the Company uses its implicit borrowing rate based on eight specific cash flow issues. ASU 2016-15 is effective for annual and interim reporting periods beginning after December 15, 2017 and early adoption is permitted. ASU 2016-15 provides for retrospective application for all periods presented. the information available at the lease commencement date to determine the present value of future lease payments. The implicit borrowing rate approximates the rate the Company would pay to borrow on a collateralized basis over a similar term an amount equal to the lease payments.
The Company is assessing ASU 2016-15’s impact and will adopt it when effective.
(3) Liquidity
In the course of its development activities, the Company has sustained operating losses and expects such losses to continue over the next several years. The Company expects to continue to incur significant expenses and operating losses for the foreseeable future as it continues the development and clinical trials of, and seeks regulatory approval for its product candidates. The Company'sCompany’s primary uses of capital are, and it expects will continue to be, compensation and related expenses, third-party clinical research and development services, contract manufacturing services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.
If the Company obtains regulatory approval for any of its product candidates, the Company expects to incur significant commercialization expenses. The Company does not have a sales, marketing, manufacturing or distribution infrastructure for a pharmaceutical product. To develop a commercial infrastructure, the Company will have to invest financial and management resources, some of which would have to be deployed prior to having any certainty of marketing approval.
12
The Company had unrestricted cash and cash equivalents of $32.3 million and marketable securities of $3.2$16.3 million as of SeptemberJune 30, 2017.
The State of September 30, 2017, the Company had $3.2 million prepaymentsNew Jersey’s Technology Business Tax Certificate Transfer Program enables qualified, unprofitable New Jersey based technology or biotechnology companies to sell a percentage of NOL and research and development expenses related(R&D) credits to its amended drug supply agreement with Ikaria, Inc. (a subsidiaryunrelated profitable corporations, subject to meeting certain eligibility criteria. Based on consideration of Mallinckrodt plc), or Ikariavarious factors, including application processing time and past trend of benefits made available under the clinical research organization it has partnered with for the first of the two Phase 3 clinical trials for INOpulse for PAH. The corresponding prepayments balance as of December 31, 2016 was $7.2 million. These prepayment amounts are presented on the respective consolidated balance sheets as follows (in thousands):
September 30, 2017 | December 31, 2016 | ||||
Prepaid expenses and other current assets | 3,163 | 5,842 | |||
Other non-current assets | — | 1,406 | |||
3,163 | 7,248 |
The Company evaluated whether there are any remaining conditions and events, considered in the aggregate, that raise substantial doubt about itsthe Company’s ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q.
Based on such evaluation and the Company’s current plans, management believes that following the closing of the PIPE Offering in September 2017, substantial doubt about the Company’s ability to continue as a going concern has been alleviated and the Company's existing cash and cash equivalents and marketable securities as of SeptemberJune 30, 20172022 and proceeds expected to become available upon the sale of state NOLs and R&D credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program will not be sufficient to satisfy the Company'sits operating cash needs for at least one year after the filing of this Quarterly Report on Form 10-Q. In addition, the Company expects to have proceeds that become available upon the sale of the Company's state net operating losses, or NOLs, and R&D tax credits under the State of New Jersey's Technology Business Tax Certificate Transfer Program.
Until such time, if ever, as the Company can generate substantial product revenues, itsit expects to finance its cash needs through a combination of equity and debt offerings,financings, sales of state NOLs and R&D credits subject to program availability and approval, existing working capital and funding from potential future collaboration arrangements. To the extent that the Company raises additional capital through the future sale of equity or convertible debt, the ownership interest of its existing stockholders willmay be diluted, and the terms of such securities may include liquidation or other preferences or rights such as anti-dilution rights that adversely affect the rights of the Company'sits existing stockholders. If the Company raises additional funds through strategic partnerships in the future, it may have to relinquish valuable rights to its technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to it. If the Company is unable to raise additional funds through equity or debt financings when needed, or unable to sell its state NOLs and R&D credits, it may be required to delay, limit, reduce or terminate its product development or future commercialization efforts or grant rights to develop and market product candidates that it would otherwise prefer to develop and market itself. In addition, there are many uncertainties regarding the timingCOVID-19 pandemic, and the Company is closely monitoring the impact of when existingthe pandemic on all aspects of its business, including how the pandemic will impact its clinical trials, employees and new capital resources are usedsuppliers. While the pandemic did not materially affect the Company’s business operations, site activation and received may not alignpatient enrollment in its clinical trials have been affected by the COVID-19 pandemic. Further, should COVID-19 continue to spread, the Company’s business operations could be delayed or interrupted which could result in the use of more funds than anticipated in completing such trials.
(4) Right of Use Assets and Leases
The Company has 2 operating leases in Warren, NJ, one for the use of an office and research facility and a second for the use of a laboratory. The office and research facility lease is for a term of four years with a term date of March 31, 2023, with the Company’s right to extend the original term for 1 period of time evaluated by managementfive years. The laboratory lease is for going concern purposes such that management may be required to conclude that substantial doubt abouta term of three years and nine months with a term date of April 30, 2023, with the Company’s abilityright to continue asextend the original term for 1 period of 90 days. Operating lease expense is recognized on a going concern in accordance with relevant accounting guidance may exist in future periods.straight-line basis over the respective lease term.
13
The Company considers alldoes not recognize right of use assets or related lease liabilities with a lease term of twelve months or less on its investmentsconsolidated balance sheet. Short-term lease costs are recorded in our consolidated statements of operations in the period in which the obligation for those payments was incurred. Short-term lease costs for the three and six months ended June 30, 2022 and 2021 were de minimis.
Information related to be available-for-sale. Marketable securities as of September 30, 2017 consist of the following (in thousands):
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||
Certificates of deposit | 1,677 | — | — | 1,677 | |||||||
Agency bonds | 1,501 | — | — | 1,501 | |||||||
Total | 3,178 | — | — | 3,178 |
Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||
Certificates of deposit | 3,619 | — | — | 3,619 | |||||||
Corporate bonds | 1,952 | — | — | 1,952 | |||||||
Total | 5,571 | — | — | 5,571 |
| | | | | | | | | | | | | |
| Three Months Ended | | Six Months Ended | ||||||||||
| June 30, | | June 30, | ||||||||||
| 2022 | | 2021 | | 2022 | | 2021 | ||||||
Cash paid for operating lease liability | $ | 196 | | $ | 193 | | $ | 390 | | | $ | 383 | |
Operating lease expenses | $ | 177 | | $ | 177 | | $ | 354 | | | $ | 353 | |
Weighted average remaining lease term |
| | | | | |
| 0.8 | years | |
| 1.8 | years |
Weighted average discount rate |
| | | | | |
| 4.93 | % | |
| 4.93 | % |
Maturities of the lease liability as of June 30, 2017 and December 31, 2016 (in thousands):
September 30, 2017 | December 31, 2016 | ||||
Due within one year | 3,178 | 5,571 | |||
Due after one year | — | — | |||
3,178 | 5,571 |
| | | |
2022 | | $ | 393 |
2023 | |
| 205 |
| |
| 598 |
Less imputed interest | |
| (12) |
Total operating lease liability | | $ | 586 |
(5) Common Stock Warrants and Warrant Liability
On November 29, 2016, the Company issued 1,142,838 warrants to purchase 17,142,858 shares that were immediately exercisable and will expire 5 years from issuance at an exercise price of $12.00 per share (the “2016 Warrants”). On June 28, 2019, the Company entered into a warrant amendment (the “Warrant Amendment”) with certain holders (the “Holders”) of 839,899 of the 2016 Warrants to purchase shares. Pursuant to the Warrant Amendment, the Company and the Holders agreed to eliminate provisions that had previously precluded equity classification treatment on the Company’s consolidated balance sheets. In consideration of such amendment, the 2016 Warrants were extended by two (2) additional years (until November 29, 2023). The difference in fair market value of the warrants before and after the amendment, of $0.7 million, was recorded in the consolidated statement of operations as a warrant amendment charge during the year ended December 31, 2019. The fair market value of the amended warrants was reclassified from common stock warrant liability to stockholders’ equity. The balance of the 2016 Warrants that were not amended could require cash settlement under certain circumstances, and therefore continue to be classified as liabilities and to be recorded at estimated fair value using a Black-Scholes-Merton pricing model. During the year ended December 31, 2021, all of the previously outstanding liability classified warrants of the 2016 Warrants, which were not subject to the Warrant Amendment previously described, expired. As of June 30, 2022, there were 585,139 of the 2016 Warrants outstanding, all of which were equity classified. NaN warrants were exercised during the six months ended June 30, 2022.
On May 15, 2017, the Company issued to an investor warrants to purchase 66,666 shares that became exercisable commencing six months from their issuance and will expire five years from the initial exercise date at an exercise price of $22.50 per share. In addition, the Company issued to the placement agent warrants to purchase 4,000 shares that were immediately exercisable with an expiration date five years from issuance at an exercise price of $0.80$28.125 per share. As the warrants, under certain situations, could require cash settlement, the warrants were classified as liabilities and recorded at estimated fair value using a Black-Scholes-Merton pricing model. As of June 30, 2022, all of the warrants issued to the investor were outstanding. During the quarter ended June 30, 2022, all of the warrants issued to the placement agent expired.
14
The following table summarizes warrant activity for the ninesix months ended SeptemberJune 30, 20172022 (fair value amount in thousands):
Equity Classified | Liability Classified | |||||||||
Warrants | Warrants | Estimated Fair Value | ||||||||
Beginning balance | — | 17,142,858 | $ | 5,215 | ||||||
Exercises | — | (934,300 | ) | (1,005 | ) | |||||
Additions | 19,449,834 | 1,060,000 | 1,119 | |||||||
Change in fair value of common stock warrant liability recognized in consolidated statement of operations | — | — | 13,455 | |||||||
Ending balance | 19,449,834 | 17,268,558 | $ | 18,784 |
| | | | | | | |
| | Equity Classified | | Liability Classified | |||
|
| Warrants |
| Warrants |
| Estimated Fair Value | |
Warrants outstanding as of December 31, 2021 | | 1,881,789 | | 70,666 | | $ | 1 |
Expired |
| — |
| (4,000) | |
| — |
Warrants outstanding as of June 30, 2022 | | 1,881,789 | | 66,666 | | $ | 1 |
The following table summarizes warrant activity for the ninesix months ended SeptemberJune 30, 2016. 2021 (fair value amount in thousands):
| | | | | | | |
| | Equity Classified | | Liability Classified | |||
|
| Warrants |
| Warrants |
| Estimated Fair Value | |
Warrants outstanding as of December 31, 2020 | | 1,881,789 | | 146,837 | | $ | 601 |
Change in fair value of common stock warrant liability recognized in consolidated statement of operations |
| — |
| — | |
| (433) |
Warrants outstanding as of June 30, 2021 | | 1,881,789 | | 146,837 | | $ | 168 |
See Note 6 for determination of the fair value of the common stock warrant liability.
(6) Fair Value Measurements
Assets and liabilities recorded at fair value on the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure the fair value. Level inputs are as follows:
● | Level 1 — Values are based on unadjusted quoted prices for identical assets or liabilities in an active market which the Company has the ability to access at the measurement date. |
● | Level 2 — Values are based on quoted market prices in markets where trading occurs infrequently or whose values are based on quoted prices of instruments with similar attributes in active markets. |
● | Level 3 — Values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset. |
The following table summarizes fair value measurements by level at SeptemberJune 30, 20172022 for assets and liabilities measured at fair value on a recurring basis (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Marketable securities | $ | — | $ | 3,178 | $ | — | $ | 3,178 | ||||||||
Common stock warrant liability | — | — | 18,784 | 18,784 |
| | | | | | | | | | | | |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Common stock warrant liability | | $ | 0 | | $ | — | | $ | 1 | | $ | 1 |
The following table summarizes fair value measurements by level at December 31, 20162021 for assets and liabilities measured at fair value on a recurring basis (in thousands):
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Marketable securities | $ | — | $ | 5,571 | $ | — | $ | 5,571 | ||||||||
Common stock warrant liabilities | — | — | 5,215 | 5,215 |
| | | | | | | | | | | | |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Total | ||||
Common stock warrant liability | | $ | — | | $ | — | | $ | 1 | | $ | 1 |
The Company uses a Black-Scholes-Merton option pricing model to value its liability classified common stock warrants. The significant unobservable inputs used in calculating the fair value of common stock warrants represent management’s best estimates and involve inherent uncertainties and the application of management’s judgment.
15
For volatility, the Company useshistorically considered comparable public companies as a basis for its expected volatility to calculate the fair value of common stock warrants dueand transitioned to its limitedown volatility as the Company developed sufficient appropriate history as a public company. The risk-free interest rate is based on U.S. Treasury notes with a term approximating the expected term of the common stock warrant. Any significant changes in the inputs may result in significantly higher or lower fair value measurements.
The following are the weighted average and the range of assumptions used in estimating the fair value of warrants issuedoutstanding (weighted average calculated based on the number of outstanding warrants on each issuance) as of SeptemberJune 30, 20172022 and December 31, 2016:
September 30, 2017 | December 31, 2016 | ||||
Valuation assumptions: | |||||
Risk-free interest rate | 1.79 | % | 1.91 | % | |
Expected volatility | 95.80 | % | 83.73 | % | |
Expected term (in years) | 4.2 | 4.9 | |||
Dividend yield | — | % | — | % |
| | | | | | | | | | | | | | | |
| | June 30, 2022 | | December 31, 2021 | |||||||||||
Valuation assumptions: | | Range |
| Weighted Average |
| Range |
| Weighted Average | |||||||
Risk-free interest rate | | 2.78 | % | | 2.78 | % | | 0.39 | % | | 0.39 | % | |||
Expected volatility | | 115.21 | % | | 115.21 | % | | 77.35 | % | - | 82.82 | % | | 77.66 | % |
Expected term (in years) | | 0.4 | | | 0.4 | | | 0.4 | | - | 0.9 | | | 0.8 |
|
Dividend yield | | — | % |
| — | % |
| — | % | - | — | % |
| — | % |
(7) Restructuring Charges
September 30, 2017 | |||
Opening balance (a) | $ | 110 | |
Cash payments | (110 | ) | |
Ending balance | $ | — |
Bellerophon 2015 and 2014 Equity Incentive Plans
During 2014, the Company adopted the 2014 Equity Incentive Plan, or the 2014 Plan, which provided for the grant of options. Following the effectiveness of the Company’s registration statement filed in connection with its IPO, no options may be granted under the 2014 Plan. The awards granted under the 2014 Plan generally have a vesting period of between one to four years.
During 2015, the Company adopted the 2015 Equity Incentive Plan, or the 2015 Plan, which provides for the grant of options, restricted stock and other forms of equity compensation. On May 4, 2017, the Company’s stockholders approved an amendment to the 2015 Plan to increase
the aggregate number of shares available for the grant of awards toAs of June 30, 2022, there was approximately $2.3$0.8 million of total unrecognized compensation expense related to unvested stock awards. This expense is expected to be recognized over a weighted-average period of 1.61.25 years.
NaN tax benefit was recognized during the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 related to stock-based compensation expense since the Company incurred operating losses and has established a full valuation allowance to offset all of the potential tax benefits associated with its deferred tax assets.
16
Options
There were no options issuedgranted during the ninethree and six months ended SeptemberJune 30, 20172022 and 2016 were $0.84 and $1.52, respectively. The following are the weighted average assumptions used in estimating the fair values of options issued during the nine months ended September 30, 2017 and 2016.
Nine Months Ended September 30, 2017 | Nine Months Ended September 30, 2016 | ||||
Valuation assumptions: | |||||
Risk-free rate | 1.98 | % | 1.34 | % | |
Expected volatility | 90.98 | % | 81.80 | % | |
Expected term (years) | 6.0 | 6.1 | |||
Dividend yield | — | — |
A summary of option activity under the 2015 and 2014 Plans for the ninesix months ended SeptemberJune 30, 20172022 is presented below:
Bellerophon 2015 and 2014 Equity Incentive Plans | |||||||||||||||
Options | Range of Exercise Price | Weighted Average Price | Weighted Average Remaining Contractual Life (in years) | ||||||||||||
Options outstanding as of December 31, 2016 | 3,189,881 | $ | 0.49 | - | 13.28 | $ | 3.08 | 9.4 | |||||||
Granted | 80,800 | 1.12 | - | 1.38 | 1.12 | ||||||||||
Forfeited | (20,900 | ) | 0.49 | - | 12.00 | 1.58 | |||||||||
Options outstanding as of September 30, 2017 | 3,249,781 | $ | 0.49 | - | 13.28 | $ | 3.04 | 8.7 | |||||||
Options vested and exercisable as of September 30, 2017 | 540,908 | $ | 1.40 | - | 13.28 | $ | 11.19 | 7.0 |
| | | | | | | | | | | | |
| | Bellerophon 2015 and 2014 Equity Incentive Plans | ||||||||||
| | | | | | | | | | | | Weighted Average |
|
| |
| | |
| |
| Weighted |
| Remaining | |
| | | | Range of | | Average | | Contractual | ||||
|
| Options |
| Exercise Price |
| Price |
| Life (in years) | ||||
Options outstanding as of December 31, 2021 |
| 617,349 | | $ | 3.10 | - | 199.20 | | $ | 13.28 |
| 7.0 |
Forfeited |
| (293,701) | |
| 7.35 | - | 199.20 | |
| 14.09 |
| — |
Options outstanding as of June 30, 2022 |
| 323,648 | | $ | 3.10 | - | 199.20 | | $ | 12.55 |
| 7.2 |
Options vested and exercisable as of June 30, 2022 |
| 207,192 | | $ | 3.10 | - | 199.20 | | $ | 17.29 |
| 6.1 |
The intrinsic value of options outstanding, vested and exercisable as of SeptemberJune 30, 20172022 was zero.
Restricted Stock
All restricted stock awards granted under the 2015 Plan during the ninesix months ended SeptemberJune 30, 20172022 were in relation to 2016 incentives for employees or director compensation and vestvested in full less than one year fromduring the grant date.
A summary of restricted stock activity under the 2015 Plan for the ninesix months ended SeptemberJune 30, 20172022 is presented below:
Bellerophon 2015 Equity Incentive Plan | |||||||||||||
Shares | Weighted Average Fair Value | Aggregate Grant Date Fair Value (in millions) | Weighted Average Remaining Contractual Life (in years) | ||||||||||
Restricted stock outstanding as of December 31, 2016 | 155,846 | $ | 2.05 | $ | 0.3 | 0.0 | |||||||
Granted | 873,310 | 1.45 | 1.3 | ||||||||||
Vested | (374,981 | ) | (1.70 | ) | (0.6 | ) | |||||||
Restricted stock outstanding as of September 30, 2017 | 654,175 | $ | 1.45 | $ | 0.9 | 0.2 |
| | | | | | | | | | |
| | Bellerophon 2015 Equity Incentive Plan | ||||||||
|
| |
| | |
| | |
| Weighted Average |
| | | | | | | Aggregate Grant | | Remaining | |
| | | | Weighted Average | | Date Fair Value | | Contractual | ||
| | Shares | | Fair Value | | (in millions) | | Life (in years) | ||
Restricted stock outstanding as of December 31, 2021 |
| 0 | | $ | 0 | | $ | 0 |
| — |
Granted |
| 355,000 | |
| 2.35 | |
| 0.8 |
| |
Forfeited |
| (23,000) | |
| 2.36 | |
| (0.1) |
| |
Restricted stock outstanding as of June 30, 2022 |
| 332,000 | | $ | 2.35 | | $ | 0.7 |
| 1.4 |
Ikaria Equity Incentive Plans prior to February 12, 2014
Options
A summary of option activity under Ikaria equity incentive plans assumed in 2014 for the ninesix months ended SeptemberJune 30, 2017,2022, is presented below:
Ikaria Equity Incentive Plans | |||||||||||||||
Options | Range of Exercise Price | Weighted Average Price | Weighted Average Remaining Contractual Life (in years) | ||||||||||||
Options outstanding as of December 31, 2016 | 87,369 | $ | 7.77 | - | 17.92 | $ | 9.14 | 4.3 | |||||||
Forfeited | (10,530 | ) | 7.77 | - | 14.91 | 8.88 | |||||||||
Options outstanding as of September 30, 2017 | 76,839 | $ | 7.77 | - | 17.92 | $ | 9.17 | 4.0 | |||||||
Options vested and exercisable as of September 30, 2017 | 76,839 | $ | 7.77 | - | 17.92 | $ | 9.17 | 4.0 |
| | | | | | | | | | | | |
| | Ikaria Equity Incentive Plans | ||||||||||
| | | | | | | | | | | | Weighted Average |
| | | | | |
| | | Weighted | | Remaining | |
| | | | Range of | | Average | | Contractual | ||||
|
| Options |
| Exercise Price |
| Price |
| Life (in years) | ||||
Options outstanding as of December 31, 2021 |
| 1,098 | | $ | 124.05 | - | 223.65 | | $ | 126.94 |
| 1.2 |
Forfeited |
| (104) | |
| 124.05 | - | 223.65 | |
| 150.83 |
| — |
Options outstanding as of June 30, 2022 | | 994 | | $ | 124.05 | - | 131.55 | | $ | 124.44 | | 0.7 |
Options vested and exercisable as of June 30, 2022 |
| 994 | | $ | 124.05 | - | 131.55 | | $ | 124.44 |
| 0.7 |
The intrinsic value of options outstanding, vested and exercisable as of SeptemberJune 30, 20172022 was zero.0.
17
The following table summarizes the stock-based compensation expense by the unaudited condensed consolidated statement of operations line items for the ninesix months ended SeptemberJune 30, 20172022 and 20162021 (in thousands):
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
2017 | 2016 | 2017 | 2016 | ||||||||||||||
Research and development | $ | 188 | $ | 203 | $ | 661 | $ | 656 | |||||||||
General and administrative | 568 | 576 | 1,473 | 1,492 | |||||||||||||
Total expense | $ | 756 | $ | 779 | $ | 2,134 | $ | 2,148 |
| | | | | | | | | | | | |
| | | | | | | | | | | | |
| | Three Months Ended June 30, | | Six Months Ended June 30, | ||||||||
|
| 2022 |
| 2021 |
| 2022 |
| 2021 | ||||
Research and development | | $ | 133 | | $ | 88 | | $ | 246 | | $ | 151 |
General and administrative | |
| 82 | |
| 269 | |
| 161 | |
| 547 |
Total expense | | $ | 215 | | $ | 357 | | $ | 407 | | $ | 698 |
(8) Income Taxes
The effective tax rate for each of the three and ninesix months ended SeptemberJune 30, 20172022 and 20162021 was 0.0%. For the three and nine months ended September 30, 2017 and 2016, the effective rate which was lower than the federal statutory ratesrate primarily due to the losses incurred and the full valuation allowance on deferred tax assets.
The Company’s estimated tax rate for 20172022 excluding any benefits from any sales of net operating losses or research and development, or R&D, tax credits is expected to be zero0 because the Company expects to generate additional losses and currently has a full valuation allowance. The deferred tax assets balance before valuation allowance as of September 30, 2017 was approximately $60.0 million. The valuation allowance is required until the Company has sufficient positive evidence of taxable income necessary to support realization of its deferred tax assets. In addition, the Company may be subject to certain limitations in its annual utilization of NOL carry forwards to off-setoffset future taxable income (and of tax credit carry forwards to
Subject to state approval, the Company plans to sell NOLs and Research and Development credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program in the future. The proceeds from such sales are recorded as income tax benefit when sales occur and proceeds are received.
During April 2022, the Company did not have material uncertaincompleted the sale of $25.1 million of state NOLs and $0.2 million of R&D credits under the State of New Jersey’s Technology Business Tax Certificate Transfer Program for net proceeds of $2.2 million. In June 2021, the Company sold $16.4 million of state NOLs and $0.3 million of R&D tax positions ascredits under the State of SeptemberNew Jersey’s Technology Business Tax Certificate Transfer Program for net proceeds of $1.7 million, which resulted in the reversal of the valuation allowance and a tax benefit of $1.8 million for the six months ended June 30, 2017.
As of SeptemberJune 30, 2017,2022, there were no material uncertain tax positions. There are no0 tax positions for which a material change in any unrecognized tax benefit liability is reasonably possible in the next 12 months.
(9) Net Loss Per Share
Basic net loss per share is calculated by dividing net loss by the weighted average number of shares outstanding during the period, as applicable. Diluted net loss per share is calculated by dividing net loss, adjusted to reflect the impact of dilutive warrants, by the weighted average number of shares outstanding, adjusted to reflect potentially dilutive securities using the treasury stock method, except when the effect would be anti-dilutive.
The Company reported a net loss for the three and ninesix months ended SeptemberJune 30, 20172022 and 2016,2021, therefore diluted net loss per share is the same as the basic net loss per share.
As of SeptemberJune 30, 2017,2022, the Company had 3,326,620324,642 options to purchase shares 654,175 restricted shares and 1,948,455 warrants to purchase 36,718,392 shares outstanding that have been excluded from the computation of diluted weighted average shares outstanding, because such securities had an anti-dilutive impact due to the loss reported.
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As of June 30, 2021, the Company had 686,162 options to purchase shares and 2,028,626 warrants to purchase shares outstanding that have been excluded from the computation of diluted weighted average shares outstanding, because such securities had an anti-dilutive impact due to the loss reported.
(10) Commitments and Contingencies
Legal Proceedings
The Company periodically becomes subject to legal proceedings and claims arising in connection with its business. The ultimate legal and financial liability of the Company in respect to all proceedings, claims and lawsuits, pending or threatened, cannot be estimated with any certainty.
As of the date of this report, the Company is not aware of any proceeding, claim or litigation, pending or threatened, that could, individually or in the aggregate, have a material adverse effect on the Company’s business, operating results, financial condition and/or liquidity.
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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 condensed consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties. You should read the “Risk Factors” section in Part II—Item 1A. of this Quarterly Report on Form 10-Q and in Part I—Item 1A of our Annual Report on Form 10-K for the year ended December 31, 20162021 for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
Business
We are a clinical-stage therapeutics company focused on developing innovative products at the intersection of drugs and devices that address significant unmet medical needs in the treatment of cardiopulmonary diseases. Our focus is the continued development of our nitric oxide therapy for patients with or at risk of pulmonary hypertension, or PH, using our proprietary delivery system, INOpulse, with pulmonary arterial hypertension, or PAH, representing the lead indication. Our INOpulse platform is based on our proprietary pulsatile nitric oxide delivery device.
In February 2016, we announced positive data from the final analysis of our Phase 2 long-term extension clinical trial ofbegan developing INOpulse for PAH,the treatment of pulmonary hypertension associated with fibrotic interstitial lung disease (“fILD”), which was Part 2includes PH associated with idiopathic pulmonary fibrosis (“PH-IPF”) as well as other pulmonary fibrosing diseases. During May 2017, we announced the completion of our Phase 2 clinical trial of INOpulse for PAH. The data indicates a sustainability of benefit to PAH patients who received INOpulse therapy at the 75 mcg/kg of ideal body weight/hour dose for an average of greater than 12 hours per day and were on long-term oxygen therapy, or LTOT. After reaching agreement with the U.S. Food and Drug Administration, or FDA, and the European Medicines Agency, or EMA, on our Phase 3 protocol, we are moving forward with Phase 3 development. In September 2015, the FDA issued a Special Protocol Assessment, or SPA, for our Phase 3 PAH program for INOpulse, which will include two confirmatory clinical trials. The first of the two Phase 3 trials, or INOvation-1, has been initiated. During January 2017, we received confirmation from the FDA of its acceptance of all of our proposed modifications to our Phase 3 program. Under the newly modified Phase 3 program, the ongoing INOvation-1 study, and a second confirmatory randomized withdrawal study with approximately 40 patients who will be crossing over from the INOvation-1 study, can serve as the two adequate and well-controlled studies to support a NDA filing for INOpulse in PAH
During August 2017, we announced FDA acceptance by the U.S. Food and Drug Administration (the “FDA”) of our investigation new drugInvestigational New Drug (“IND”) application for our Phase 2b study(“iNO-PF”) clinical trial using INOpulse therapy in a broad population of patients with pulmonary fibrosis, or PF, at both low and intermediate/high risk of PH. In January 2019, we announced top-line results from cohort 1 of our iNO-PF trial. The results suggested directional improvements in multiple clinically meaningful exploratory endpoints as measured by a wearable medical-grade activity monitor. In addition, these results suggested that iNO may have a favorable safety profile, supporting the continuation into cohort 2. In April 2019, we announced that we reached an agreement with the FDA on modifying the ongoing Phase 2b trial into a seamless Phase 2/3 trial, with cohort 3 serving as the pivotal study, as well as an agreement on the primary endpoint in cohort 3 of change in moderate to vigorous activity (“MVPA”) from baseline to month 4, measured by Actigraphy. Actigraphy (medical wearable continuous activity monitoring) has the potential to provide highly sensitive objective real-world physical activity data that we expect to correlate with clinically meaningful patient functional abilities and without PH.health outcomes. Actigraphy is currently being utilized as the primary endpoint in multiple late-stage clinical programs in various cardiopulmonary diseases such as heart failure and chronic obstructive pulmonary disease (“COPD”). In December 2019, we announced top-line results from cohort 2 of the iNO-PF trial. Cohort 2 of iNO-PF suggested directionally favorable and potentially clinically meaningful placebo corrected improvement in MVPA, in subjects treated with iNO45 (45 mcg/kg IBW/hr) versus placebo. The improvement in MVPA was underscored by benefits in overall activity, as well as multiple patient reported outcomes. In March 2020, we announced that in consultation with the FDA, we had finalized some of the key elements of our planned pivotal Phase 3 study for fILD, including the use of MVPA as the primary endpoint for approval, the patient population of pulmonary fibrosis subjects at risk of PH, as well
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as the dose of iNO45. In December 2020, we announced the first patient enrollment in this Phase 3 study called REBUILD. Clinical site initiation and patient enrollment has been impacted due to the COVID-19 pandemic, however, to date we have activated a majority of our targeted clinical sites and continue to focus our efforts on site engagement and patient recruitment.
In 2018, we initiated an ancillary Phase 2 open-label intra-patient dose escalation study that utilizes right heart catheterization to assess the hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-PF subjects. In February 2020, we announced the completion of the study and that the top-line results demonstrated that INOpulse achieved clinically and statistically meaningful cardiopulmonary improvements in pulmonary vascular resistance and mean pulmonary arterial pressure. The data suggested that inhaled nitric oxide was generally well tolerated and may yield a favorable risk-benefit profile across doses.
In 2018, we also initiated development of INOpulse for the treatment of PH associated with Sarcoidosis (PH-Sarc). Sarcoidosis is a multi-system disease which is characterized by the growth of granulomas (inflammatory cells) in one or more organs. The most frequent organs involved are the lungs and lymph nodes within the chest. Pulmonary hypertension may be present in as many as 74% of patients depending on the disease severity and how the pulmonary hypertension (PH) is defined. The presence of PH in sarcoidosis is associated with a poor prognosis. There are a number of different mechanisms linking PH with sarcoidosis. The primary treatment for sarcoidosis is corticosteroids; however, the outcome of this treatment on the PH is unclear. There is no approved therapy for PH associated with sarcoidosis. Various PAH treatments have been tried including iNO and IV prostacyclin with some clinical and functional improvement. The study was a Phase 2 open-label dose escalation design that utilized right heart catheterization to assess the acute hemodynamic effect of INOpulse from a dose of iNO 30 to iNO 125 in PH-Sarc subjects. In December 2021, we announced the completion of the acute dose escalation phase of the study and that the top-line results demonstrated that INOpulse provided clinically meaningful improvements in pulmonary vascular resistance. Supported by the results from this study, on June 21, 2022, we submitted to the FDA an exploratory Phase 2 double-blinded placebo-controlled study to investigate the safety and efficacy of inhaled nitric oxide/INOpulse dosed chronically for six months in patients with PH-Sarc. Subsequently, on July 28, 2022, we received an FDA letter indicating that the FDA completed its review of our study protocol, with a minor recommendation to include safety stopping rules. We have agreed to incorporate this recommendation into our periodic safety reviews. We are now positioned to initiate this Phase 2 study and are currently assessing next steps.
We completed a randomized, placebo-controlled, double-blind, dose-confirmation Phase 2 clinical trial of INOpulse for pulmonary hypertension associated with chronic obstructive pulmonary disease, or PH-COPD, in July 2014. The results from this trial showed that iNO 30 was a potentially safe and effective dose for treatment of PH-COPD. Based on the results of this trial, we completed further Phase 2 testing to assess the targeted vasodilation provided by INOpulse in this patient population. We presented the results of this trial in September 2015 at the European Respiratory Society International Congress 2015 in Amsterdam. The data showed that INOpulse improved vasodilation in patients with PH-COPD. In July 2016, the results were published in the International Journal of COPD in an article entitled “Pulmonary vascular effects of pulsed inhaled nitric oxide in COPD patients with pulmonary hypertension.” During September 2017, we shared the results of our Phase 2a PH-COPD trial that was designed to evaluate the acute effects of pulsed inhaled nitric oxide, or iNO, on vasodilation as well as the chronic effect on hemodynamics and exercise tolerance. The trial showed a statistically significant increase (average 4.2%) in blood vessel volume on iNO compared to baseline (p=0.03), and a statistically significant correlation in Ventilation-Vasodilation (p=0.01). The chronic results demonstrated a statistically significant and clinically meaningful increase in six minute walk distance, or 6MWD, of 50.7m (p=0.04) as well as a decrease of 19.9% in systolic pulmonary arterial pressure (p=0.02), as compared to baseline. The data suggested that the dose may have a favorable safety profile. In May 2018, we announced that the FDA concurred with the design of our planned Phase 2b study of INOpulse for treatment of PH-COPD. The study will assess the effect of INOpulse on various parameters including exercise capacity, right ventricular function and oxygen saturation, as well as other composite endpoints. We continue to evaluate alternatives for the funding and timing of this program.
On March 19, 2020, the FDA granted emergency expanded access (“EA”) to allow for our INOpulse system to immediately be used as supportive treatment for a patient with COVID-19 under the care and supervision of the patient’s physician. The clinical goal of this experimental treatment was to mitigate the hospitalized patient’s disease progression
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and avoid the need to perform intubation. Under the emergency access program, 180 hospitalized patients with COVID-19 from 18 hospitals across the United States received treatment with INOpulse. In April 2020, we submitted an IND application to the FDA to study the iNO delivery system for the treatment of patients with COVID-19. The proposed randomized, placebo controlled study, called COViNOX, was designed to evaluate the efficacy and safety of INOpulse in patients diagnosed with COVID-19 who require supplemental oxygen before the disease progresses to necessitate mechanical ventilation support. The COViNOX protocol aimed to enroll up to 500 patients with COVID-19 who were to be treated with either INOpulse or placebo. The primary endpoint of the study required an assessment of the proportion of subjects who experienced respiratory failure or mortality during the 28-day study period, which would allow the trial to serve as a registrational study for approval. The IND application was accepted by the FDA in May 2020, and the trial was initiated with the first patient treated in July 2020. The first 100 patients completed their 28-day assessment periods in October 2020. In November 2020, we announced that the independent Data Monitoring Committee (“DMC”) had completed its pre-specified interim analysis from the first 100 patients. Based on the finding of futility, we placed the COViNOX study on a clinical hold. Although new enrollment of subjects into the study was halted, the remaining 91 subjects already enrolled at the time the clinical hold was announced were allowed to complete the treatment course. Upon completion of the protocol defined monitoring period, the pre-specified efficacy and safety analysis of these 191 patients was reviewed by the DMC and the DMC concluded that there were no safety concerns that were attributed to INOpulse for COVID-19. Based on the COViNOX results, we put the trial on a permanent clinical hold and we are not planning additional studies for INOpulse for the treatment of COVID-19. In May 2021, we submitted notification of withdrawal of the COViNOX IND to the FDA.
In addition, other opportunitiespotential indications for the application of our INOpulse platform include the following indications:include: chronic thromboembolic PH, or CTEPH PH associated with sarcoidosis and PH associated with pulmonary edema from high altitude sickness.
We have devoted all of our resources to our therapeutic discovery and development efforts, including performance of IND-enabling studies, conducting clinical trials for our product candidates, protecting our intellectual property and the general and administrative support of these operations. We have devoted significant time and resources to developing and optimizing our drug delivery system, INOpulse, which operates through the administration of nitric oxide as brief, controlled pulses that are timed to occur at the beginning of a breath.
To date, we have generated no revenue from product sales. We expect that it willmay be several years before we commercialize a product candidate, if ever.
Financial Operations Overview
Prior to February 2014, we were a wholly-owned subsidiary of Ikaria, Inc. (a subsidiary of Mallinckrodt plc), or Ikaria. As part of an internal reorganization of Ikaria in October 2013, Ikaria transferred to us exclusive worldwide rights, with no royalty obligations, to develop and commercialize pulsed nitric oxide in PAH, PH-COPD and PH-IPF. Following the internal reorganization, in February 2014, Ikaria distributed all of our then outstanding units to its stockholders through the payment of a special dividend on a pro rata basis based on each stockholder’s ownership of Ikaria capital stock, which we refer to as the Spin-Out, and as a result we became a stand-alone company. In November 2015, we entered into an amendment to our exclusive cross-license, technology transfer and regulatory matters agreement with Ikaria that included a royalty equal to 3% of net sales of any commercial products for PAH. In April 2018, we expanded the scope of our license from PH-IPF to PH in patients with Pulmonary Fibrosis (PH-PF), which includes idiopathic interstitial pneumonias, chronic hypersensitivity pneumonitis, occupational and environmental lung disease, with a royalty equal to 1% of net sales of any commercial products for PH-PF.
Revenue
To date, we have not generated any revenue from product sales and may not generate any revenue from product sales for the next several years, if ever. In the future, we may generate revenue from a combination of product sales, license fees and milestone payments in connection with strategic partnerships, and royalties from the sale of products developed under licenses of our intellectual property. Our ability to generate revenue and become profitable depends primarily on our ability to successfully develop and commercialize or partner our product candidates as well as any product candidates we may advance in the future. We expect that any revenue we may generate will fluctuate from
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quarter to quarter as a result of the timing and amount of any payments we may receive under future partnerships, if any, and from sales of any products we successfully develop and commercialize, if any. If we fail to complete the development of any of our product candidates currently in clinical development or any future product candidates in a timely manner, or to obtain regulatory approval for such product candidates,
Research and Development Expenses
Research and development expenses consist of costs incurred in connection with the development of our product candidates, including upfront and development milestone payments, related to in-licensed product candidates and technologies.
Research and development expenses primarily consist of:
● | employee-related expenses, including salary, benefits and stock-based compensation expense; |
● | expenses incurred under agreements with contract research organizations, investigative sites that conduct our clinical trials and consultants that conduct a portion of our pre-clinical studies; |
● | expenses relating to vendors in connection with research and development activities; |
● | the cost of acquiring and manufacturing clinical trial materials; |
● | facilities, depreciation and allocated expenses; |
● | lab supplies, reagents, active pharmaceutical ingredients and other direct and indirect costs in support of our pre-clinical and clinical activities; |
● | device development and drug manufacturing engineering; |
● | license fees related to in-licensed products and technology; and |
● | costs associated with non-clinical activities and regulatory approvals. |
We expense research and development costs as incurred.
Conducting a significant amount of research and development is central to our business model. Product candidates in late stages of clinical development generally have higher development costs than those in earlier stages of clinical development primarily due to the increased size and duration of late-stage clinical trials. Subject to the availability of requisite financing, we plan to increase our research and development expenses for ongoing clinical programs for the foreseeable future as we seek to continue multiple clinical trials for our product candidates, including to potentially advance INOpulse for PH-COPD and seek to identify additional early-stage product candidates.
We track external research and development expenses and personnel expenses on a program-by-program basis. We use our employee and infrastructure resources, including regulatory, quality, clinical development and clinical operations, across our clinical development programs and have included these expenses in research and development infrastructure. Research and development laboratory expenses are also not allocated to a specific program and are included in research and development infrastructure. Engineering activities related to INOpulse and the manufacture of cylinders related to INOpulse are included in INOpulse engineering.
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INOpulse for PAH
We initiated our clinical program in PH associated with interstitial lung disease, or PH-ILD,fILD in 2016. During May 2017,In March 2020, we announced that in consultation with the FDA, we had finalized the key elements of our planned pivotal Phase 3 study for PH-PF, including the use of MVPA as the primary endpoint for approval, the patient population of pulmonary fibrosis subjects at risk of PH, as well as the dose of iNO45. In December 2020, we announced the first patient enrollment in this Phase 3 study called REBUILD. Clinical site initiation and patient enrollment have been impacted due to the COVID-19 pandemic, however, to date we have activated a majority of our targeted clinical sites and continue to focus our efforts on site engagement and patient recruitment.
INOpulse for COVID-19
In April 2020, we submitted an IND application to the FDA to study the iNO delivery system for the treatment of patients infected with COVID-19. The IND application was accepted by the FDA in May 2020, and the trial was initiated with the first patient treated in July 2020. The first 100 patients completed their 28-day assessment period in October 2020. In November 2020, we announced that the independent DMC had completed its pre-specified interim analysis from the first 100 patients. Based on the finding of futility, we placed the COViNOX study on a clinical hold. Although new enrollment of subjects into the study was halted, the remaining 91 subjects already enrolled at the time the clinical hold was announced were allowed to complete the treatment course. Upon completion of our Phase 2 study usingthe protocol defined monitoring period, the pre-specified efficacy and safety analysis of these 191 patients was reviewed by the DMC and the DMC concluded that there were no safety concerns that were attributed to INOpulse therapyfor COVID-19. Based on the COViNOX results, we put the trial on a permanent clinical hold and we are not planning additional studies for INOpulse for the treatment of COVID-19. In May 2021, we submitted notification of withdrawal of the COViNOX IND to treat PH associated with idiopathic pulmonary fibrosis, or PH-IPF.
Drug and Delivery System Costs
Drug and delivery system costs include cartridge procurement, cartridge filling, delivery system manufacturing and delivery system servicing. These costs relate to all indications that utilize the INOpulse delivery system. During the three months ended September 2017, we began to incur drug and delivery system costs for our Phase 2b study using INOpulse
Research and Development Infrastructure
We invest in regulatory, quality, clinical development and clinical operations activities, which are expensed as incurred. These activities primarily support our clinical development programs.
INOpulse Engineering
We have invested a significant amount of funds in INOpulse, which is configured to be highly portable and compatible with available modes of LTOTlong-term oxygen therapy via nasal cannula delivery. Our Phase 2 clinical trials of INOpulse for PAH and INOpulse for PH-COPD utilized the first generation INOpulse DSDS/DS-C device. We believe that our second generation INOpulse device, as well as a custom triple-lumen cannula, willhave significantly improveimproved several characteristics of our INOpulse delivery system. We have also invested in design and engineering technology, through Ikaria, for the manufacture of our drug cartridges. In February 2015, we entered into an agreement with Flextronics Medical Sales and Marketing Ltd., a subsidiary of Flextronics International Ltd., or Flex, toWe manufacture and service the INOpulse devices that we are using in our ongoing clinical trials of INOpulse for PAH, PH-COPDfILD and PH-ILD.
General and Administrative Expenses
General and administrative expenses include salaries and costs related to executive, finance, and administrative support functions, patent filing, patent prosecution, professional fees for legal, insurance, consulting, investor relations, human resources, information technology and auditing and tax services not otherwise included in research and development expenses.
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Results of Operations
Comparison of Three Months Ended SeptemberJune 30, 20172022 and 2016
The following table summarizes our results of operations for the three months ended SeptemberJune 30, 20172022 and 2016.
Three Months Ended September 30, | |||||||||||||||
(Dollar amounts in thousands) | 2017 | 2016 | $ Change | % Change | |||||||||||
Research and development expenses: | |||||||||||||||
PAH | $ | 1,705 | $ | 475 | $ | 1,230 | 259 | % | |||||||
BCM | 7 | 16 | (9 | ) | (56 | )% | |||||||||
PH-COPD and PH-ILD | 48 | 11 | 37 | 336 | % | ||||||||||
Drug and delivery system costs | 1,174 | 381 | 793 | 208 | % | ||||||||||
Clinical programs | 2,934 | 883 | 2,051 | 232 | % | ||||||||||
Research and development infrastructure | 1,232 | 1,106 | 126 | 11 | % | ||||||||||
INOpulse engineering | 272 | 483 | (211 | ) | (44 | )% | |||||||||
Total research and development expenses | 4,438 | 2,472 | 1,966 | 80 | % | ||||||||||
General and administrative expenses | 1,746 | 1,745 | 1 | — | % | ||||||||||
Total operating expenses | 6,184 | 4,217 | 1,967 | 47 | % | ||||||||||
Loss from operations | (6,184 | ) | (4,217 | ) | (1,967 | ) | 47 | % | |||||||
Change in fair value of common stock warrant liability | (1,435 | ) | — | (1,435 | ) | n.a. | |||||||||
Interest and other income, net | 33 | 22 | 11 | 50 | % | ||||||||||
Net loss | $ | (7,586 | ) | $ | (4,195 | ) | $ | (3,391 | ) | 81 | % |
| | | | | | | | | | | | |
| | Three Months Ended | | | | | |
| ||||
| | June 30, | | | | | | | ||||
(Dollar amounts in thousands) |
| 2022 |
| 2021 |
| $ Change |
| % Change | ||||
Research and development expenses: | | | | | | | | | | | | |
fILD, PH-Sarc and PH-COPD | | $ | 1,190 | | $ | 842 | | $ | 348 |
| 41 | % |
COVID-19 | |
| (5) | |
| 3 | |
| (8) |
| (267) | % |
Other clinical trials | |
| — | |
| 3 | |
| (3) |
| (100) | % |
Drug and delivery system costs | | | 1,040 | | | 382 | | | 658 |
| 172 | % |
Clinical programs | |
| 2,225 | |
| 1,230 | |
| 995 |
| 81 | % |
Research and development infrastructure | |
| 1,808 | |
| 1,514 | |
| 294 |
| 19 | % |
INOpulse engineering | |
| 455 | |
| 495 | |
| (40) |
| (8) | % |
Total research and development expenses | |
| 4,488 | |
| 3,239 | |
| 1,249 |
| 39 | % |
General and administrative expenses | |
| 2,053 | |
| 1,987 | |
| 66 |
| 3 | % |
Total operating expenses | | | 6,541 | | | 5,226 | | | 1,315 | | 25 | % |
Loss from operations | |
| (6,541) | |
| (5,226) | |
| (1,315) |
| 25 | % |
Change in fair value of common stock warrant liability | |
| — | |
| 36 | |
| (36) |
| (100) | % |
Interest income and financing expenses, net | |
| 19 | |
| 1 | |
| 18 |
| 1,800 | % |
Pre-tax loss | |
| (6,522) | |
| (5,189) | |
| (1,333) |
| 26 | % |
Income tax benefit | |
| 2,417 | |
| 1,800 | |
| 617 |
| 34 | % |
Net loss | | $ | (4,105) | | $ | (3,389) | | $ | (716) |
| 21 | % |
Total Operating Expenses.
Total operating expenses for the three months endedResearch and Development Expenses.
Total research and development (R&D) expenses for the three months ended● | fILD, PH-Sarc and PH-COPD expenses for the three months ended June 30, 2022 were $1.2 million compared to $0.8 million for the three months ended June 30, 2021, an increase of $0.4 million or 41%. The increase was primarily due to the increase in site activations and patient related costs associated with the Phase 3 fILD trial. |
● | There were no COVID-19 expenses for the three months ended June 30, 2022 as we submitted notification of withdrawal of the IND to the FDA in May 2021. There was a de minimis amount of income recorded due to receipt of a refund related to a site. COVID-19 expense for the three months ended June 30, 2021 were related to completion and close-out activities. |
● | Drug and delivery system costs for the three months ended June 30, 2022 were $1.0 million, compared to $0.4 million for the three months ended June 30, 2021, an increase of $0.6 million, or 172%. Drug and delivery system costs are recorded at the time of procurement from our suppliers. |
● | Research and development infrastructure for the three months ended June 30, 2022 were $1.8 million compared to $1.5 million for the three months ended June 30, 2021, an increase of $0.3 million, or 19%. The increase was primarily due to an increase in contractor costs associated with the Phase 3 clinical trial for fILD during the three months ended June 30, 2022. |
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General and developmentAdministrative Expenses. General and administrative expenses for the three months ended June 30, 2022 and the three months ended June 30, 2021 stayed relatively flat at $2.1 million and $2.0 million, respectively.
Change in Fair Value of Common Stock Warrant Liability. The change in fair value of the common stock warrant liability for the three months ended June 30, 2022 was de minimis. The warrants were $1.7issued in November 2016 and May 2017 and the change in the liability fair value was due to a change in our stock price, volatility, and a shorter remaining term.
Income Tax Benefit. Income tax benefit was $2.4 million for the three months ended SeptemberJune 30, 2017,2022, compared to $0.5$1.8 million for the three months ended SeptemberJune 30, 2016,2021, an increase of $1.2$0.6 million, or 259%34%. In April 2022, we sold $25.1 million of state NOLs and $0.2 million of R&D tax credits under the State of New Jersey's Technology Business Tax Certificate Transfer Program for net proceeds of $2.2 million. In June 2021, we sold $16.4 million of state NOLs and $0.3 million of R&D tax credits under the State of New Jersey's Technology Business Tax Certificate Transfer Program for net proceeds of $1.7 million. The proceeds from such sales are recorded as income tax benefit when sales occur and proceeds are received.
Comparison of Six Months Ended June 30, 2022 and 2021
The following table summarizes our results of operations for the six months ended June 30, 2022 and 2021.
| | | | | | | | | | | | |
| | Six Months Ended | | | | | | | ||||
| | June 30, | | | | | | | ||||
(Dollar amounts in thousands) |
| 2022 |
| 2021 |
| $ Change |
| % Change | ||||
Research and development expenses: | | | | | | | | | | | | |
fILD, PH-Sarc and PH-COPD | | $ | 2,517 | | $ | 1,728 | | $ | 789 |
| 46 | % |
COVID-19 | | | (5) | | | 418 | | | (423) | | (101) | % |
Other clinical trials | |
| 1 | |
| 6 | |
| (5) |
| (83) | % |
Drug and delivery system costs | | | 1,839 | | | 759 | | | 1,080 |
| 142 | % |
Clinical programs | |
| 4,352 | |
| 2,911 | |
| 1,441 |
| 50 | % |
Research and development infrastructure | |
| 3,655 | |
| 2,903 | |
| 752 |
| 26 | % |
INOpulse engineering | |
| 890 | |
| 1,009 | |
| (119) |
| (12) | % |
Total research and development expenses | |
| 8,897 | |
| 6,823 | |
| 2,074 |
| 30 | % |
General and administrative expenses | |
| 3,286 | |
| 4,262 | |
| (976) |
| (23) | % |
Total operating expenses | | | 12,183 | | | 11,085 | | | 1,098 | | 10 | % |
Loss from operations | |
| (12,183) | |
| (11,085) | |
| (1,098) |
| 10 | % |
Change in fair value of common stock warrant liability | |
| — | |
| 433 | |
| (433) |
| (100) | % |
Interest income and financing expenses, net | |
| 20 | |
| 2 | |
| 18 |
| 900 | % |
Pre-tax loss | |
| (12,163) | |
| (10,650) | |
| (1,513) |
| 14 | % |
Income tax benefit | |
| 2,417 | |
| 1,800 | |
| 617 |
| 34 | % |
Net loss | | $ | (9,746) | | $ | (8,850) | | $ | (896) |
| 10 | % |
Total Operating Expenses. Total operating expenses for the six months ended June 30, 2022 were $12.2 million compared to $11.1 million for the six months ended June 30, 2021, an increase of $1.1 million, or 10%. This increase was primarily drivendue to an increase in clinical program expenses and research and development infrastructure expenses. This increase was partially offset by increased spending ona decrease in general and administrative expenses.
Research and Development Expenses. Total research and development (R&D) expenses for the PAH Phase 3 trial in 2017 and the closure in 2016 of the Phase 2 trial.
● | fILD, PH-Sarc and PH-COPD expenses for the six months ended June 30, 2022 were $2.5 million, compared to $1.7 million for the six months ended June 30, 2021, an increase of $0.8 million, or 46%. |
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● | The increase was primarily due to the increase in site activations and patient related costs associated with the Phase 3 fILD trial. |
● | COVID-19 expenses for the six months ended June 30, 2022 were $0.0 million, compared to $0.4 million for the six months ended June 30, 2021, a decrease of $0.4 million, or 101%. The decrease is due to the timing of the completion of the trial and close-out activities during the first quarter of 2021. |
● | Drug and delivery system costs for the six months ended June 30, 2022 were $1.8 million, compared to $0.8 million for the six months ended June 30, 2021, an increase of $1.0 million, or 142%. Drug and delivery system costs are recorded at the time of procurement from our suppliers. |
● | Research and development infrastructure for the six months ended June 30, 2022 were $3.7 million compared to $2.9 million for the six months ended June 30, 2021, an increase of $0.8 million, or 26%. The increase was primarily due to an increase in contractor costs associated with the Phase 3 clinical trial for fILD during the six months ended June 30, 2022. |
General and Administrative Expenses.
General and administrative expenses forChange in fair valueFair Value of common stock warrant liability.
Nine Months Ended September 30, | |||||||||||||||
(Dollar amounts in thousands) | 2017 | 2016 | $ Change | % Change | |||||||||||
Research and development expenses: | |||||||||||||||
PAH | $ | 4,333 | $ | 4,647 | $ | (314 | ) | (7 | )% | ||||||
BCM | 46 | 371 | (325 | ) | (88 | )% | |||||||||
PH-COPD and PH-ILD | 85 | 65 | 20 | 31 | % | ||||||||||
Drug and delivery system costs | 3,423 | 1,620 | 1,803 | 111 | % | ||||||||||
Clinical programs | 7,887 | 6,703 | 1,184 | 18 | % | ||||||||||
Research and development infrastructure | 3,766 | 3,346 | 420 | 13 | % | ||||||||||
INOpulse engineering | 811 | 1,490 | (679 | ) | (46 | )% | |||||||||
Total research and development expenses | 12,464 | 11,539 | 925 | 8 | % | ||||||||||
General and administrative expenses | 4,826 | 4,926 | (100 | ) | (2 | )% | |||||||||
Total operating expenses | 17,290 | 16,465 | 825 | 5 | % | ||||||||||
Loss from operations | (17,290 | ) | (16,465 | ) | (825 | ) | 5 | % | |||||||
Change in fair value of common stock warrant liability | (13,455 | ) | — | (13,455 | ) | n.a. | |||||||||
Interest and other income, net | 86 | 74 | 12 | 16 | % | ||||||||||
Net loss | $ | (30,659 | ) | $ | (16,391 | ) | $ | (14,268 | ) | 87 | % |
Income Tax Benefit. Income tax benefit was $2.4 million for the ninesix months ended SeptemberJune 30, 2016,2022, compared to $1.8 million for the six months ended June 30, 2021, an increase of $0.8$0.6 million, or 5%34%. This increase was primarily due to increases in drugIn April 2022, we sold $25.1 million of state NOLs and delivery system costs.
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Liquidity and Capital Resources
In the course of our development activities, we have sustained operating losses and expect such losses to continue over the next several years. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue to develop, conduct clinical trials and seek regulatory approval for our product candidates. Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical research and development services, contract manufacturing services, laboratory and related supplies, clinical costs, legal and other regulatory expenses and general overhead costs.
If we obtain regulatory approval for any of our product candidates, we expect to incur significant commercialization expenses. We do not have a sales, marketing, manufacture or distribution infrastructure for a pharmaceutical product. To develop a commercial infrastructure, we will have to invest financial and management resources, some of which would have to be deployed prior to having any certainty of marketing approval.
We had unrestricted cash and cash equivalents of $32.3 million and marketable securities of $3.2$16.3 million as of SeptemberJune 30, 2017.2022. Our existing cash and cash equivalents and marketable securities as of SeptemberJune 30, 20172022 will be used primarily to fund the first of two INOpulse for PAH Phase 3 trials, a portion of the second of two INOpulse for PAH Phase 3 trials, and a Phase 2b trial of INOpulse for PH-ILD. AsfILD.
The State of September 30, 2017, we had $3.2 million prepaymentsNew Jersey’s Technology Business Tax Certificate Transfer Program enables qualified, unprofitable New Jersey based technology or biotechnology companies to sell a percentage of NOL and research and development expenses related(R&D) tax credits to our amended drug supply agreement with Ikariaunrelated profitable corporations, subject to meeting certain eligibility criteria. Based on consideration of various factors, including application processing time and the clinical research organization we have partnered with for the firstpast trend of the two Phase 3 clinical trials for INOpulse for PAH. The corresponding prepayments balance as of December 31, 2016 was $7.2 million.
We have evaluated whether there are any remaining conditions and events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year beyond the filing of this Quarterly Report on Form 10-Q.
We have based our estimates on assumptions that may prove to be wrong, and we may exhaust our capital resources sooner than we expect. In addition, the process of testing product candidates in clinical trials is costly, and the timing of progress in clinical trials is uncertain. Because our product candidates are in clinical development and the outcome of these efforts is uncertain, we may not be able to accurately estimate the actual amounts that will be necessary to successfully complete the development and commercialization of our product candidates or whether, or when, we may achieve profitability. Our future capital requirements will depend on many factors, including:
● | progress and cost of our clinical trials and other research and development activities; |
● | our ability to manufacture sufficient supply of our product candidates and the costs thereof; |
● | the cost and timing of seeking regulatory approvals; |
● | the costs and timing of future commercialization activities, including product manufacturing, marketing, sales and distribution for any of our product candidates for which we receive marketing approval; |
● | the number and development requirements of any other product candidates we pursue; |
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● | our ability to enter into collaborative agreements and achieve milestones under those agreements; |
● | the revenue, if any, received from commercial sales of our product candidates for which we receive marketing approval; |
● | the cost of filing, prosecuting, defending and enforcing patent applications, claims, patents and other intellectual property rights; and |
● | the extent to which we acquire or in-license other products and technologies. |
In addition, there are many uncertainties regarding the COVID-19 pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how the pandemic impact our clinical trials, employees and other researchsuppliers. While the pandemic did not materially affect our business operations, site activation and development activities;
Until such time, if ever, as we can generate substantial product revenues, we expect to finance our cash needs through a combination of equity and debt offerings,financings, sales of state NOLNOLs and R&D credits subject to program availability and approval, existing working capital and funding from potential future collaboration arrangements. To the extent that we raise additional capital through the future sale of equity or convertible debt, the ownership interest of our existing stockholders willmay be diluted, and the terms of such securities may include liquidation or other preferences or rights such as anti-dilution rights that adversely affect the rights of our existing stockholders. If we raise additional funds through strategic partnerships in the future, we may have to relinquish valuable rights to our technologies, 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, or are unable to sell our state NOLs and R&D credits, 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. In addition, the timing of when existing and new capital resources are used and received may not align with the period of time evaluated by management for going concern purposes such that management may be required to conclude that substantial doubt about our ability to continue as a going concern in accordance with relevant accounting guidance may exist in future periods.
Cash Flows
The following table summarizes our cash flows for the ninesix months ended SeptemberJune 30, 20172022 and 2016:
Nine Months Ended September 30, | ||||||||
(Dollar amounts in thousands) | 2017 | 2016 | ||||||
Operating activities | $ | (11,242 | ) | $ | (14,794 | ) | ||
Investing activities | 2,393 | 10,544 | ||||||
Financing activities | 26,679 | 1,920 | ||||||
Net change in cash and cash equivalents | $ | 17,830 | $ | (2,330 | ) |
| | | | | | |
| | Six Months Ended | ||||
| | June 30, | ||||
(Dollar amounts in thousands) |
| 2022 |
| 2021 | ||
Operating activities | | $ | (8,408) | | $ | (13,257) |
Net change in cash, cash equivalents and restricted cash | | $ | (8,408) | | $ | (13,257) |
Net Cash Used in Operating Activities
Cash used in operating activities for the ninesix months ended SeptemberJune 30, 20172022 was $11.2$8.4 million, as compared to $14.8$13.3 million for the ninesix months ended SeptemberJune 30, 2016, a decrease of $3.6 million, or 24%.2021. The decreasechange in cash used in operating activities was primarily due to an increase in our operating expenses combined with the changes in our operating assets and liabilities.
Contractual Obligations and Commitments
There were no material changes in our outstanding contractual obligations from those disclosed in our Annual Report on Form 10-K for the year ended December 31, 2016.2021.
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In the course of our normal business operations, we also enter into agreements with contract service providers and others to assist in the performance of our research and development and manufacturing activities. We can elect to discontinue the work under these contracts and purchase orders at any time with notice, and such contracts and purchase orders do not contain minimum purchase obligations.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under applicable SEC rules.
Critical Accounting Policies and Significant Judgments and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with accounting principlesU.S. generally accepted in the United States.accounting principles. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities in our financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to research and development expense, stock-based compensation and fair value of liability classified warrants. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
During the ninesix months ended SeptemberJune 30, 2017,2022, there were no material changes to our critical accounting policies. Our critical accounting policies are described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016.
Item 3.
Quantitative and Qualitative Disclosures About Market Risk.We are exposed to market risk related to changes in interest rates. As of SeptemberJune 30, 2017,2022, we had unrestricted cash and cash equivalents of $32.3$16.3 million, consisting primarily of demand deposits with U.S. banking institutions and marketable securities of $3.2 million.institutions. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our investments are in cash and cash equivalents, federally insured certificates of deposit and corporate or agency bonds rated A or better.equivalents. Due to the nature of our deposits and the low risk profile of our investments, an immediate 10% change in interest rates would not have a material effect on the fair market value of our deposits.
Item 4.
Controls and Procedures.Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of SeptemberJune 30, 2017.2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
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Based on the evaluation of our disclosure controls and procedures as of SeptemberJune 30, 2017,2022, our principal executive officer and principal financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarterthree months ended SeptemberJune 30, 20172022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
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Item 1.
Legal Proceedings.We are currently not a party to any material legal proceedings.
Item 1A.
Risk Factors.There have been no material changes to our risk factors contained in our Annual Report on Form 10-K for the year ended December 31, 2016.2021. For a further discussion of our Risk Factors, refer to the “Risk Factors” discussion contained in our Annual Report on Form 10-K for the year ended December 31, 2016.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
Item 6. Exhibits.
The exhibits listed in the Exhibit Index to this Quarterly Report on Form 10-Q are incorporated herein by reference.
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Exhibit Index
Exhibit | Description | |
| ||
| ||
| ||
101.INS | | Inline XBRL Instance Document |
101.SCH | | Inline XBRL Taxonomy Extension Schema Document |
101.CAL | | Inline XBRL Taxonomy Extension Calculation Linkbase Document |
101.DEF | | Inline XBRL Taxonomy Extension Definition Linkbase Document |
101.LAB | | Inline XBRL Taxonomy Extension Label Linkbase Document |
101.PRE | | Inline XBRL Taxonomy Extension Presentation Linkbase Document |
104 | | Cover Page Interactive Date File (Formatted as Inline XBRL and contained in Exhibit 101) |
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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.
BELLEROPHON THERAPEUTICS, INC. | |||
| |||
Date: | By: | /s/ | |
| | Peter Fernandes | |
Principal Executive Officer (Principal Executive Officer) | |||
Date: | By: | /s/ | |
| | Nicholas Laccona | |
Principal Financial & Accounting Officer | |||
| | (Principal Financial Officer) |
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