| 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 a clinical-stage biopharmaceutical
company 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 developing oral octreotide
capsules, conditionally trade-named “MYCAPSSA”, our
sole TPE platform-based clinical product candidate, in two Phase 3
clinical trials in adult patients for the treatment of acromegaly
to potentially support regulatory approval in the United States and
European Union. Acromegaly is a rare and debilitating condition
that results in the body’s production of excess growth
hormone. Octreotide is an analog of somatostatin, a natural
inhibitor of growth hormone secretion. Octreotide capsules have
been granted orphan designation in the United States and the
European Union for the treatment of acromegaly. We retain worldwide
rights to develop and commercialize octreotide capsules with no
royalty obligations to third parties.
In September 2017, we initiated a third Phase 3 clinical trial for
oral octreotide capsules for the maintenance therapy of adult
patients with acromegaly following our agreement with the United
States Food and Drug Administration (“FDA”) on the
design of the trial, reached through a Special Protocol Assessment
in August 2017. The trial, referred to as CHIASMA OPTIMAL, is a
randomized, double-blind, placebo-controlled, nine-month trial
expected to enroll 50 adult acromegaly patients designed to support
regulatory approval of octreotide capsules in the United States. We
are also currently conducting an international Phase 3 clinical
trial, referred to as MPOWERED, of oral octreotide capsules for the
maintenance treatment of adult patients with acromegaly to support
regulatory approval in the European Union by the European Medicines
Agency (“EMA”). The MPOWERED trial is a global,
randomized, open-label and
active-controlled 15-month run-in six-month run-in
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 European Union, both of which may never occur.
We expect to continue with our ongoing international Phase 3
CHIASMA OPTIMAL clinical trial of octreotide capsules in acromegaly
to support potential regulatory approval in the United States and
ongoing international Phase 3 MPOWERED clinical trial of octreotide
capsules in acromegaly to support potential regulatory approval in
the European Union. In June and August 2016, we announced two
separate corporate restructuring plans, which were completed in
2017, 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. 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, suspend or curtail our planned development of
octreotide capsules, or delay our commercial preparations or launch
readiness even if the CHIASMA OPTIMAL trial achieves its primary
endpoint or if octreotide capsules are approved by the FDA or EMA.
Any of these actions could materially harm our business, results of
operations and future prospects. Failure to obtain regulatory
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 and marketable securities. 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, 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
(“FASB”) issued new guidance which establishes
a right-of-use right-of-use
In June 2018, the FASB issued new guidance which changes certain
aspects of the accounting for share-based payments granted to
nonemployees. Under this guidance, most of the treatment for
share-based payments granted to nonemployees would be aligned with
the requirements for share-based payments granted to employees. The
new standard is effective beginning January 1, 2019. Early adoption
of this standard is permitted. We are currently evaluating the
impact the standard may have on our condensed consolidated
financial statements. |
