UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
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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:
Merrimack Pharmaceuticals, Inc.
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification Number) |
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(Address of principal executive offices) |
(Zip Code) |
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(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 |
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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.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Non-accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by 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
As of November 2, 2020, there were
TABLE OF CONTENTS
PART I
FINANCIAL INFORMATION
PART II
OTHER INFORMATION
Item 1A. |
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Item 6. |
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i
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 strategy, future operations, future financial position, future revenues, projected costs, prospects, plans and objectives of management, are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “predict,” “project,” “target,” “potential,” “will,” “would,” “could,” “should,” “continue” and 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:
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our rights to receive payments related to the milestone events under the asset purchase and sale agreement with Ipsen S.A.; |
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our rights to receive payments related to the milestone events under the asset purchase agreement with Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.), when expected or at all; |
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our cash runway and the sufficiency of our financial resources to fund our operations; |
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our ability to utilize our net operating loss carryforwards in future periods; |
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our plans to cease development of our product candidates and diagnostics; |
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our plans to seek to divest our product candidates and other assets; |
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our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and |
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other risks detailed from time to time in our filings with the Securities and Exchange Commission (the “SEC”), press releases and other communications, including those set forth under “Risk Factors” included in our Annual Report on Form 10-K for the year ended December 31, 2019, and in the documents incorporated by reference herein and therein. |
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. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures, collaborations or investments that we may make.
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 law.
NOTE REGARDING TRADEMARKS
ONIVYDE® is a trademark of Ipsen S.A. Any other trademarks, trade names and service marks referred to in this Quarterly Report on Form 10-Q are the property of their respective owners.
1
PART I
FINANCIAL INFORMATION
Item 1.Financial Statements.
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Balance Sheets
(unaudited)
(in thousands, except per share amounts) |
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September 30, 2020 |
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December 31, 2019 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Prepaid expenses and other current assets |
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Total current assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable, accrued expenses and other |
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$ |
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$ |
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Other current liability |
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— |
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Total current liabilities |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $ December 31, 2019; December 31, 2019 |
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Common stock, $ December 31, 2019; and December 31, 2019 |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(unaudited)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands, except per share amounts) |
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2020 |
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2019 |
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2020 |
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2019 |
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Operating expenses: |
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Research and development expenses |
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$ |
— |
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$ |
— |
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$ |
— |
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$ |
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General and administrative expenses |
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Gain on sale of assets |
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— |
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Total operating expenses |
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Loss from operations |
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Other income and expenses: |
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Interest income |
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Interest expense |
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— |
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— |
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— |
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Other income, net |
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— |
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Total other income and expenses |
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Net loss |
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$ |
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$ |
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$ |
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$ |
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Other comprehensive income: |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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Other comprehensive income |
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— |
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— |
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— |
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Comprehensive loss |
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$ |
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$ |
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$ |
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$ |
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Net loss per common share - basic and diluted |
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$ |
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$ |
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$ |
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$ |
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Weighted-average common shares used to compute basic and diluted net loss per common share |
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Cash dividend paid per common share |
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$ |
— |
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$ |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
3
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(unaudited)
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Common Stock |
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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Balance at December 31, 2019 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net income |
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— |
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— |
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— |
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— |
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Balance at March 31, 2020 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at June 30, 2020 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at September 30, 2020 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Common Stock |
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(in thousands) |
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Shares |
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Amount |
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Additional Paid-In Capital |
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Accumulated Other Comprehensive Loss |
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Accumulated Deficit |
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Total Stockholders’ Equity |
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Balance at December 31, 2018 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized gain on marketable securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2019 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at June 30, 2019 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Dividend paid |
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— |
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— |
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( |
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— |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at September 30, 2019 |
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$ |
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$ |
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$ |
— |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
Merrimack Pharmaceuticals, Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
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Nine Months Ended September 30, |
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(in thousands) |
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2020 |
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2019 |
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Cash flows from operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities |
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Non-cash interest expense |
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— |
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Loss on extinguishment of debt |
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— |
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Depreciation and amortization expense |
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— |
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Gain on sale of equipment |
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— |
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( |
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Gain on sale of in progress research and development |
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( |
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( |
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Amortization and accretion on marketable securities |
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— |
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( |
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Stock-based compensation expense |
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Gain on equity method investment |
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— |
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( |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other assets |
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Accounts payable, accrued expenses and other |
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( |
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( |
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Net cash used in operating activities |
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( |
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( |
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Cash flows from investing activities |
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Proceeds from sale of property and equipment |
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— |
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Proceeds from sale of in progress research and development |
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Proceeds from sale of equity method investment |
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— |
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Proceeds from maturities and sales of marketable securities |
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— |
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Net cash provided by investing activities |
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Cash flows from financing activities |
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Proceeds from exercise of stock options |
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— |
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Repayment of other liability |
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( |
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— |
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Repayment of debt |
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— |
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( |
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Payment of debt extinguishment costs |
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— |
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( |
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Payment of dividend |
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— |
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( |
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Net cash used in financing activities |
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( |
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( |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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( |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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Non-cash investing activities |
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Supplemental disclosure of cash flows |
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Cash paid for interest |
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$ |
— |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
5
Merrimack Pharmaceuticals, Inc.
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Nature of the Business
Merrimack Pharmaceuticals, Inc. (the “Company”) is a biopharmaceutical company based in Cambridge, Massachusetts that is eligible to receive up to $
The $
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$ |
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• |
$ |
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• |
$ |
On April 15, 2019, the Company repaid in full all principal, accrued and unpaid interest, fees, costs and expenses under its Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc. (“Hercules”) in an aggregate amount equal to $
In May 2019, the Company monetized certain assets to strengthen its cash position. This includes the sale of its entire equity position in Silver Creek Pharmaceuticals, Inc. (“Silver Creek”), resulting in $
On May 30, 2019, the Company announced the completion of its review of strategic alternatives, following which the Company’s board of directors (the “Board”) implemented a series of measures designed to extend the Company’s cash runway and preserve its ability to capture the potential milestone payments resulting from the Ipsen sale. In connection with that announcement, the Company discontinued the discovery efforts on its remaining preclinical programs: MM-401, an agonistic antibody targeting a novel immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion protein targeting death receptors 4 and 5. The Company is seeking potential acquirers for its remaining preclinical and clinical assets.
The Company’s termination of its executive management team and all other employees was substantially completed by June 28, 2019 and fully completed by July 12, 2019. As of July 12, 2019, the Company does not have any employees. The Company has engaged external consultants to run the day-to-day operations of the Company. The Company has also entered into consulting agreements with certain former members of its executive management team who are supporting the Company’s relationship with current partners, assisting with the potential sale of remaining preclinical and clinical assets, and assisting with certain legal and regulatory matters and the continued wind-down of operations.
On July 12, 2019, the Company completed the sale to Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.) (“Elevation”) of its anti-HER3 antibody programs, MM-121 (Seribantumab) and MM-111 (the “Elevation sale”). In connection with the Elevation sale, the Company received an upfront cash payment of $
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$ |
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Up to $ |
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• |
Up to $ |
6
On July 25, 2019, the Board authorized and declared a special cash dividend of $
On November 29, 2019, the Company received the remaining $
On December 3, 2019, the Board authorized and declared a special cash dividend of $
On March 27, 2020, the Company entered into an Asset Purchase Agreement (the “Celator Agreement”) with Celator Pharmaceuticals, Inc. (“Celator”), pursuant to which Celator agreed to purchase certain assets relating to certain of the Company’s preclinical nanoliposome programs (the “Celator sale”). The Company and Celator completed the Celator sale simultaneously with the execution of the Celator Agreement. Under the terms of the Celator Agreement, Celator paid to the Company a cash payment of $
The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, among other things, development by competitors of new technological innovations, protection of proprietary technology and compliance with government regulations, approval by the FDA and other foreign health agencies to approve any pharmaceutical under development, obtaining insurance reimbursement for any drug if and when approved by regulators, and its ability to secure additional capital to fund operations. None of the Company’s product candidates are approved for any indication by the FDA or any other regulatory agency. The Company operates in an environment of rapid change in technology and substantial competition from pharmaceutical and biotechnology companies, among others. In addition, the Company is dependent upon the services of its external consultants for the operation of the Company. The Company’s business strategy depends substantially upon its ability to receive future milestone payments from Ipsen and Elevation. Any failure to achieve such milestones or a perception that the milestones may not be achieved will materially and adversely affect the Company and the value of its common stock.
The recent COVID-19 outbreak has created significant volatility and economic disruption and the impact on the Company’s future consolidated results of operations is uncertain. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations – COVID-19 Update” and “Risk Factors” for further information regarding the impact of the COVID-19 pandemic on the Company’s business and financial condition.
In accordance with Accounting Standards Codification (“ASC”) 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued. As of September 30, 2020, the Company had an accumulated deficit of $
The Company expects that it would seek to finance any future cash needs through a combination of divestitures of its product candidates or other assets, equity offerings and debt financings. There can be no assurance as to the timing, terms or consummation of any divestiture or financing, and the terms of any such financing may adversely affect the holdings or the rights of the Company’s stockholders or require the Company to relinquish rights to certain of its revenue streams or product candidates.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements reflect the operations of Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries. All intercompany accounts and transactions have been eliminated.
The condensed consolidated financial statements are unaudited and have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”).
7
The accounting policies followed in the preparation of the interim condensed consolidated financial statements are consistent in all material respects with those presented in Note 1 to the financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019.
Consolidation
The accompanying condensed consolidated financial statements reflect Merrimack Pharmaceuticals, Inc. and its wholly owned subsidiaries.
Unaudited Interim Financial Information
The condensed consolidated balance sheet as of December 31, 2019 was derived from audited financial statements, but does not include all disclosures required by GAAP. The condensed consolidated balance sheet as of September 30, 2020, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the condensed consolidated statements of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited. The unaudited interim condensed consolidated financial statements have been prepared on the same basis as the audited annual financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019, its statements of stockholders’ equity for the three and nine months ended September 30, 2020 and 2019 and its statements of cash flows for the nine months ended September 30, 2020 and 2019. The financial data and other information disclosed in the notes related to the three and nine months ended September 30, 2020 and 2019 are unaudited. The results for the three and nine months ended September 30, 2020 and 2019 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.
The unaudited interim financial statements of the Company included herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted from this report, as is permitted by such rules and regulations. These unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements and the notes thereto contained in the Company’s Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 12, 2020.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates, assumptions and judgments reflected in these condensed consolidated financial statements include, but are not limited to the valuation of stock-based awards. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Actual results could differ from the Company’s estimates.
3. Fair Value of Financial Instruments
The following tables show assets measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019:
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September 30, 2020 |
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(in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Cash equivalents: |
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Money market funds |
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$ |
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|
|
$ |
— |
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$ |
— |
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Totals |
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$ |
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|
|
$ |
— |
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$ |
— |
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December 31, 2019 |
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(in thousands) |
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Level 1 |
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Level 2 |
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Level 3 |
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Cash equivalents: |
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Money market funds |
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$ |
|
|
|
$ |
— |
|
|
$ |
— |
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Totals |
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$ |
|
|
|
$ |
— |
|
|
$ |
— |
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8
The Company’s cash, prepaid expenses and other current assets, accounts payable and accrued expenses are recorded at cost, which approximates fair value due to their short-term nature.
4. Accounts Payable, Accrued Expenses and Other
Accounts payable, accrued expenses and other as of September 30, 2020 and December 31, 2019 consisted of the following:
(in thousands) |
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September 30, 2020 |
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December 31, 2019 |
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Accounts payable |
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$ |
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$ |
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Accrued goods and services |
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Accrued clinical trial costs |
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Accrued drug purchase costs |
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Accrued restructuring expenses |
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Deferred tax incentives |
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Total accounts payable, accrued expenses and other |
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$ |
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$ |
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|
5. Stock-Based Compensation
The Company’s 2011 Stock Incentive Plan (the “2011 Plan”) is administered by the Company’s Board of Directors and permits the Company to grant incentive and non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units and other stock-based awards.
The Company’s board of directors authorized and declared a special cash dividend of $
There were
The fair value of stock options granted to employees during the nine months ended September 30, 2020 and 2019 was estimated at the date of grant using the following assumptions:
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Nine Months Ended September 30, |
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2020 |
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2019 |
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Risk-free interest rate |
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Expected dividend yield |
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% |
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% |
Expected term |
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Expected volatility |
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9
The Company recognized stock-based compensation expense during the three and nine months ended September 30, 2020 and 2019 as follows:
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands) |
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2020 |
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2019 |
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2020 |
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2019 |
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Research and development expenses |
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$ |
— |
|
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$ |
— |
|
|
$ |
— |
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$ |
|
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General and administrative expenses |
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Total stock-based compensation expenses |
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$ |
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|
|
$ |
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|
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$ |
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$ |
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6. Net Loss Per Common Share
Basic net loss per share is calculated by dividing the net loss attributable to the Company by the weighted-average number of common shares outstanding during the period.
Diluted net loss per share is computed by dividing the net loss attributable to the Company by the weighted-average number of dilutive common shares outstanding during the period. Dilutive shares outstanding is calculated by adding to the weighted shares outstanding any potential (unissued) shares of common stock from outstanding stock options based on the treasury stock method. Outstanding stock options were not included in the diluted net loss per share calculation because the options were out of the money or to do so would have been antidilutive (i.e., the total proceeds upon exercise would have exceeded the market value of the underlying common shares). In a period when a net loss is reported, all common stock equivalents are excluded from the calculation because they would have an anti-dilutive effect, meaning the loss per share would be reduced. Therefore, in periods where a loss is reported, there is no difference in basic and dilutive loss per share.
Stock options are excluded from the calculation of diluted loss per share because the net loss for the three and nine months ended September 30, 2020 and 2019 causes such securities to be anti-dilutive.
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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(in thousands) |
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2020 |
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2019 |
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2020 |
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2019 |
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Outstanding options to purchase common stock |
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7. Restructuring Activities
On
The Company paid and adjusted approximately less than $
The following table summarizes the charges related to the restructuring activities as of September 30, 2020 and 2019:
(in thousands) |
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Accrued Restructuring Expenses at December 31, 2019 |
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Expenses |
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Less: Payments and Adjustments |
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Accrued Restructuring Expenses at September 30, 2020 |
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Severance, benefits and related costs due to workforce reduction |
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$ |
|
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$ |
— |
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$ |
( |
) |
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