| Description of Business and Summary of Significant Accounting Policies | 1. Description of Business and
Summary of Significant Accounting Policies
Chiasma, Inc. is a clinical-stage biopharmaceutical company
incorporated in 2001 under the laws of the State of Delaware.
Chiasma, Inc. is headquartered in Massachusetts and has two wholly
owned subsidiaries; Chiasma (Israel) Ltd., and Chiasma Securities
Corp, collectively referred to as “the Company,”
“we,” “us”, “our” or
“Chiasma”. We are focused on improving the lives of
patients who face challenges associated with their existing
treatments for rare and serious chronic disease. Employing our
proprietary Transient Permeability Enhancer (“TPE”)
technology platform, we seek to develop oral medications that are
currently available only as injections. We are currently conducting
an international Phase 3 clinical trial – MPOWERED – of
oral octreotide capsules (conditionally trade-named
“MYCAPSSA”) for the maintenance treatment of adult
patients with acromegaly to support a potential submission of a
Marketing Authorization Application (“MAA”) to the
European Medicines Agency (the “EMA”). The MPOWERED
trial is a global, randomized, open-label and active-controlled
15-month TPE-based
Our New Drug Application (“NDA”) for octreotide
capsules was filed in June 2015 and accepted for filing by the FDA
in August 2015. In April 2016, the FDA issued a CRL, which
indicated that the review for our application was complete and that
our NDA was not ready for approval in its present form. In June
2016, we participated in an End of Review meeting with the FDA to
discuss the concerns the FDA raised in the CRL. In its CRL, the FDA
advised us that it did not believe our NDA had provided substantial
evidence of efficacy to warrant approval, and advised us that we
would need to conduct another clinical trial in order to overcome
this deficiency. The FDA expressed concerns regarding certain
aspects of our single-arm,
In the End of Review meeting, we discussed the concerns raised by
the FDA in the CRL, and in the meeting minutes, the FDA reiterated
its strong recommendation for a randomized, double-blind and
controlled trial, and introduced the concept of a placebo control
as a design element that could potentially address some of the
FDA’s concerns. The OPTIMAL Phase 3 clinical trial protocol
agreed to under SPA is designed to address the concerns raised by
the FDA in its CRL. We cannot provide any assurance that if we
conduct the Phase 3 OPTIMAL clinical trial we will receive U.S.
regulatory approval of octreotide capsules for acromegaly. If our
efforts to address the concerns raised by the FDA in the CRL are
unsuccessful in the new Phase 3 OPTIMAL clinical trial or if we
fail to meet the primary or secondary endpoints in the trial, we
may be unable to obtain U.S. regulatory approval for the marketing
and sale of octreotide capsules at all or without submitting new or
additional clinical data to the FDA, which may require that we
conduct one or more additional clinical trials, which we are highly
unlikely to pursue. We believe conducting a randomized,
double-blind and controlled trial, with a placebo control, as
agreed to in the SPA and incorporated in the OPTIMAL study design,
may be particularly challenging. For example, it may be difficult
to identify patients with acromegaly willing to enroll in a trial
with this design, the trial could take years to complete, and the
FDA’s review of the data, if submitted, may also consume
significant time.
Liquidity
We have incurred significant losses from operations since our
inception and expect losses to continue for at least the next
several years. We are heavily dependent on the regulatory approval
and subsequent commercial success of our product candidate,
octreotide capsules for the treatment of acromegaly in the United
States and Europe, both of which may never occur.
We expect to continue with our ongoing international Phase 3
MPOWERED clinical trial of octreotide capsules in acromegaly to
support potential regulatory approval in Europe and to initiate
enrollment in the international Phase 3 OPTIMAL clinical trial of
octreotide capsules in acromegaly in the second half of 2017 to
support potential regulatory approval in the United States. In June
and August 2016, we announced two separate corporate restructuring
plans intended to focus our resources on the continued development
of octreotide capsules for the maintenance treatment of adult
acromegaly patients. We currently expect our existing cash, cash
equivalents and marketable securities to fund our operations for at
least one year after the date these condensed consolidated
financial statements are issued. We expect to continue to incur
significant operating losses for the foreseeable future.
Successful transition to attaining profitable operations is
dependent upon achieving a level of revenues adequate to support
our cost structure. As a result of the CRL and our subsequent
interactions with the FDA which resulted in a SPA agreement to the
Phase 3 OPTIMAL trial design, our ability to generate product
revenues has been delayed indefinitely. We plan to continue to fund
our losses from operations and capital funding needs from existing
balances of cash, cash equivalents and marketable securities and
potentially through the issuance of debt and/or equity or through
collaborations or license agreements with other companies. Debt or
equity financing may not be available on a timely basis on terms
acceptable to us, or at all. If we are not able to secure adequate
additional funding, we may be forced to make further reductions in
spending, extend payment terms with suppliers, liquidate assets
where possible, or suspend or curtail our planned development of
octreotide capsules. Any of these actions could materially harm our
business, results of operations and future prospects. Failure to
obtain regulatory marketing approval of octreotide capsules in
acromegaly will prevent us from commercializing the product
candidate, which could raise significant concerns about our
continued viability as a business.
Basis of Presentation
We have prepared the accompanying unaudited condensed consolidated
financial statements pursuant to the rules and regulations of the
U.S. Securities and Exchange Commission (“SEC”)
regarding interim financial reporting. Accordingly, certain
information and footnote disclosures required by accounting
principles generally accepted in the United States (“U.S.
GAAP”) for annual financial statements have been condensed or
omitted. The information included in this quarterly report on Form
10-Q 10-K year-end
Cash Equivalents
Cash equivalents consist of highly liquid instruments purchased
with an original maturity of three months or less at the date of
purchase.
Marketable Securities
Our investments primarily consist of commercial paper and corporate
and government debt securities. These marketable securities are
classified as available-for-sale,
If a decline in the fair value of a marketable security below our
cost basis is determined to be other than temporary, such
marketable security is written down to its estimated fair value as
a new cost basis and the amount of the write-down is included in
earnings as an impairment charge. The cost of securities sold is
based on the specific identification method.
Concentrations of credit risk
Financial instruments that potentially subject us to significant
concentration of credit risk consist primarily of cash, cash
equivalents, marketable securities and long-term restricted
deposits. We routinely maintain deposits in financial institutions
in excess of government insured limits. Management believes that we
are not exposed to significant credit risk as our deposits are held
at financial institutions that management believes to be of high
credit quality and we have not experienced any significant losses
in these deposits. We regularly invest excess operating cash in
deposits with major financial institutions and money market funds
and in notes issued by the U.S. government, as well as in fixed
income investments and U.S. bond funds, both of which can be
readily purchased and sold using established markets. We believe
that the market risk arising from our holdings of these financial
instruments is mitigated based on the fact that many of these
securities are either government backed or of high credit
rating.
Use of Estimates
The preparation of condensed consolidated financial statements in
conformity with U.S. GAAP requires management to make estimates and
assumptions that affect the reported amounts of assets,
liabilities, revenue, and expenses, and the disclosure of
contingent assets and liabilities as of and during the reporting
period. We base these estimates and assumptions on historical
experience when available, and on various factors that we believe
to be reasonable under the specific circumstances. Significant
estimates relied upon in preparing the accompanying condensed
consolidated financial statements include, but are not limited to,
accounting for stock-based compensation, present value of long-term
purchase obligation, income taxes, useful lives of long-lived
assets, and accounting for certain accruals. We assess the above
estimates on an ongoing basis; however, actual results could
materially differ from those estimates.
Recently Issued Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board issued
new guidance which establishes a right-of-use right-of-use |
