aimt-10q_20150630.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2015

OR

o

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: 001-37519

 

AIMMUNE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

 

Delaware

45-2748244

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

8000 Marina Blvd #300

Brisbane, California  94005

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (650) 614-5220

 

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  o    No  x

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  o    No  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

o

 

Accelerated filer

o

 

 

 

 

 

Non-accelerated filer

x  (do not check if a smaller reporting company)

 

Smaller reporting company

o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No  o

As of August 11, 2015, the registrant had 42,249,431 shares of common stock, $0.0001 par value per share, outstanding.

 

 

 


Aimmune Therapeutics, Inc.

Quarterly Report on Form 10-Q

For the Quarter Ended June 30, 2015

INDEX

 

 

Page

PART I. – FINANCIAL INFORMATION

 

Item 1.

 

Condensed Consolidated Financial Statements

3

 

 

Condensed Consolidated Balance Sheets as of June 30, 2015 and December 31, 2014

3

 

 

Condensed Consolidated Statements of Comprehensive Loss for the Three and Six Months Ended June 30, 2015 and 2014

4

 

 

Condensed Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

5

 

 

Notes to Condensed Consolidated Financial Statements

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

16

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

22

Item 4.

 

Controls and Procedures

22

 

 

 

 

PART II. – OTHER INFORMATION

23

Item 1.

 

Legal Proceedings

23

Item 1A.

 

Risk Factors

23

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

55

Item 3.

 

Defaults Upon Senior Securities

55

Item 4.

 

Mine Safety Disclosures

55

Item 5.

 

Other Information

55

Item 6.

 

Exhibits

56

SIGNATURES

57

EXHIBIT INDEX

58

 

 

 

 


 

PART I. – FINANCIAL INFORMATION

Item 1. Financial Statements

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share amounts)

 

 

 

June 30,

 

 

December 31,

 

 

 

2015

 

 

2014

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

58,502

 

 

$

2,269

 

Prepaid expenses

 

 

2,105

 

 

 

106

 

Total current assets

 

 

60,607

 

 

 

2,375

 

Property and equipment, net

 

 

1,253

 

 

 

87

 

Restricted cash

 

 

100

 

 

 

40

 

Other assets

 

 

114

 

 

 

29

 

Total assets

 

$

62,074

 

 

$

2,531

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

309

 

 

$

478

 

Accrued liabilities

 

 

2,796

 

 

 

1,259

 

Other current liabilities

 

 

222

 

 

 

67

 

Total current liabilities

 

 

3,327

 

 

 

1,804

 

Other liabilities

 

 

784

 

 

 

56

 

Total liabilities

 

 

4,111

 

 

 

1,860

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Series A convertible preferred stock, par value $0.0001 per share—13,263,967 shares authorized as of June 30, 2015 (unaudited) and December 31, 2014; 11,003,261 shares issued and outstanding as of June 30, 2015 (unaudited); 13,263,967 issued and outstanding as of December 31, 2014; aggregate liquidation preference of $14,071 and $16,989 as of June 30, 2015 (unaudited) and  December 31, 2014, respectively

 

 

4,054

 

 

 

16,928

 

Series B convertible preferred stock, par value $0.0001 per share—14,245,550 and 0 shares authorized as of June 30, 2015 (unaudited) and December 31, 2014, respectively; 14,047,966 and 0 shares issued and outstanding as of June 30, 2015 (unaudited) and  December 31, 2014, respectively; aggregate liquidation preference of $80,000 and nil as of June 30, 2015 (unaudited) and December 31, 2014, respectively

 

 

79,779

 

 

 

 

Common stock, par value $0.0001 per share—50,046,000 and 32,925,000 shares authorized as of June 30, 2015 (unaudited) and December 31, 2014, respectively; 5,698,175 and 4,252,248 shares issued and outstanding as of June 30, 2015 (unaudited) and December 31, 2014, respectively (including 862,673 and 788,873 shares subject to repurchase, legally issued and outstanding as of  June 30, 2015 (unaudited) and December 31, 2014, respectively)

 

 

 

 

 

 

Additional paid-in capital

 

 

2,464

 

 

 

1,260

 

Accumulated deficit

 

 

(28,334

)

 

 

(17,517

)

Total stockholders’ equity

 

 

57,963

 

 

 

671

 

Total liabilities and stockholders’ equity

 

$

62,074

 

 

$

2,531

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

3


 

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

3,131

 

 

$

1,801

 

 

$

5,200

 

 

$

3,001

 

General and administrative

 

 

4,246

 

 

 

967

 

 

 

5,618

 

 

 

1,368

 

Total operating expenses

 

 

7,377

 

 

 

2,768

 

 

 

10,818

 

 

 

4,369

 

Loss from operations

 

 

(7,377

)

 

 

(2,768

)

 

 

(10,818

)

 

 

(4,369

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

 

5

 

 

 

1

 

 

 

12

 

Net loss and comprehensive loss

 

$

(7,376

)

 

$

(2,763

)

 

$

(10,817

)

 

$

(4,357

)

Net loss per common share, basic and diluted

 

$

(1.60

)

 

$

(0.94

)

 

$

(2.45

)

 

$

(1.49

)

Weighted average shares used in computing net loss per share,

   basic and diluted

 

 

4,618,633

 

 

 

2,926,665

 

 

 

4,422,995

 

 

 

2,926,665

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

4


 

AIMMUNE THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(10,817

)

 

$

(4,357

)

Adjustments to reconcile net loss to net cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

30

 

 

 

11

 

Stock-based compensation

 

 

989

 

 

 

31

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses

 

 

(563

)

 

 

(558

)

Other assets

 

 

(85

)

 

 

 

Accounts payable

 

 

(169

)

 

 

278

 

Accrued liabilities

 

 

1,537

 

 

 

315

 

Other

 

 

284

 

 

 

1

 

Net cash used in operating activities

 

 

(8,794

)

 

 

(4,279

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(596

)

 

 

(44

)

Restricted cash

 

 

(60

)

 

 

(40

)

Net cash used in investing activities

 

 

(656

)

 

 

(84

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Net proceeds from issuance of Series B convertible preferred stock, net of issuance

   costs

 

 

79,779

 

 

 

 

Repurchase of Series A convertible preferred stock

 

 

(12,874

)

 

 

 

Net cash proceeds from exercise of stock options, including early exercise

 

 

245

 

 

 

 

Offering costs incurred in anticipation of initial public filing

 

 

(1,436

)

 

 

 

Repurchases of common stock subject to early exercise

 

 

(31

)

 

 

 

Net cash provided by financing activities

 

 

65,683

 

 

 

 

Net increase (decrease) in cash and cash equivalents

 

 

56,233

 

 

 

(4,363

)

Cash and cash equivalents at the beginning of the period

 

 

2,269

 

 

 

11,951

 

Cash and cash equivalents at the end of the period

 

$

58,502

 

 

$

7,588

 

Supplemental schedule of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Capital expenditures funded through long term lease obligation

 

$

600

 

 

$

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

 

5


 

AIMMUNE THERAPEUTICS, INC.

NOTES TO UNAUDITED INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2015

 

1. Formation and Business of the Company

Aimmune Therapeutics, Inc. (“Aimmune Therapeutics” or the “Company”), formerly known as Allergen Research Corporation, is a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary candidates, for the treatment of peanut and other food allergies. The Company is headquartered in Brisbane, California and was incorporated in the state of Delaware on June 24, 2011. In April, 2015 the Company formed a wholly-owned subsidiary in the United Kingdom.

Since inception, the Company has incurred net losses and negative cash flows from operations. During the six months ended June 30, 2015, the Company incurred a net loss of $10.8 million and used $8.8 million of cash in operations. At June 30, 2015 the Company had an accumulated deficit of $28.3 million and does not expect to experience positive cash flows in the near future. The Company has financed operations to date primarily through private placements of equity securities. The Company’s ability to continue to meet its obligations and to achieve its business objectives is dependent upon, amongst other things, raising additional capital, obtaining U.S. Food and Drug Administration (“FDA”) and European Medicines Agency (“EMA”) approval and commercializing in the United States and Europe, generating sufficient revenue and its ability to continue to control expenses, if necessary, to meet its obligations as they become due for the foreseeable future. Failure to obtain FDA and EMA approval, commercialize its lead product candidate, manage discretionary expenditures or raise additional financing, as required, may adversely impact the Company’s ability to achieve its intended business objectives.

Initial Public Offering

On August 5, 2015, the Company’s registration statement on Form S-1 (File No. 333-205501) relating to its initial public offering (“IPO”) of common stock became effective. The IPO closed on August 11, 2015 at which time the Company issued 11,499,999 shares of its common stock at a price of $16 per share, which included 1,499,999 shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares. The Company received approximately $168 million, net of underwriting discounts and commissions, and offering expenses. In addition, upon the Company’s IPO, all outstanding shares of convertible preferred stock converted by their terms into approximately 25.1 million shares of common stock.  See Note 6, “Stockholders’ Equity.”

Stock Split

On July 30, 2015, the Company effected a 1-for-1.317 stock split of the Company’s common stock and convertible preferred stock. The par value of the authorized stock was not adjusted as a result of the stock split. In addition, the Company increased the number of authorized shares of common stock to 55,051,264 and the number of authorized shares of preferred stock to 25,051,264. All issued and outstanding common stock, convertible preferred stock, stock options and per share amounts contained in the accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements have been retroactively adjusted to give effect to the stock split for all periods presented. In conjunction with the Company’s IPO, the Company filed its amended and restated certificate of incorporation that authorizes 290,000,000 shares of common stock, $0.0001 par value per share, and 10,000,000 shares of preferred stock, $0.0001 par value per share.

2. Summary of Significant Accounting Policies

Basis of Preparation

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2014 has been derived from audited consolidated financial statements at that date but does not include all of the information required by U.S. GAAP for complete financial statements. These condensed consolidated financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments (consisting only of normal recurring adjustments) that are necessary for a fair presentation of our financial information. The results of operations for the three and six months ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December 31, 2015 or for any other interim period or for any other future year. The company operates in one reportable segment.

 

6


 

The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2014 included in our Registration Statement on Form S-1 filed with the SEC.

Basis of Consolidation

The accompanying condensed consolidated financial statements of the Company include the accounts of its wholly-owned subsidiary. All significant intercompany transactions have been eliminated.

Use of Estimates

The preparation of the accompanying condensed consolidated financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions 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 costs and expenses during the reporting period. The Company bases its estimates and assumptions on historical experience when available and on various factors that it believes to be reasonable under the circumstances. The Company evaluates its estimates and assumptions on an ongoing basis. The Company’s actual results could differ from these estimates under different assumptions or conditions.

Cash and Cash Equivalents

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. Cash equivalents consist primarily of amounts invested in a bank high yield savings account.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company’s cash and cash equivalents are held primarily in one large financial institution in the United States. Management believes that this financial institution is financially sound, and accordingly, minimal credit risk exists with respect to this financial institution. The Company is exposed to credit risk in the event of default by the financial institution holding its cash and cash equivalents to the extent recorded on the balance sheets.

Fair Value Measurement

The carrying amounts of certain financial instruments, including cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate fair value due to their relatively short maturities.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is computed using the straight-line method over the estimated useful lives of the respective assets. Maintenance and repairs are charged to operations as incurred. Upon sale or retirement of assets, the cost and related accumulated depreciation are removed from the balance sheet and the resulting gain or loss, if any, is reflected in operations.

The useful lives of property and equipment are as follows:

 

Furniture and office equipment

 

4 years

Computer equipment

 

3 years

Buildings

 

25 years

Fixtures

 

10 years

 

 

Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying value of these assets may not be recoverable. Recoverability of these assets is measured by comparison of the carrying amount of each asset to the future undiscounted cash flows expected to result from the use of the asset and its eventual disposition. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired assets. The Company has not recorded impairment of any long-lived assets in the periods presented.

 

7


 

Leases

The Company entered into lease agreements for its corporate headquarters and research facility in San Mateo, California through July 2017. In March 2015, the Company entered into a new lease for its corporate headquarters and research facility in Brisbane, California. In May 2015, the Company ceased use of its San Mateo facility and moved into its new facility.

These leases are classified as operating leases. Rent expense is recognized on a straight-line basis over the terms of the leases and, accordingly, the Company records the difference between cash rent payments and the recognition of rent expense as a deferred rent liability. Incentives granted under the Company’s facilities leases are deferred and recognized as adjustments to rental expense on a straight-line basis over the term of the lease.

In June 2015, the Company signed a new facility lease for a manufacturing facility in Clearwater, Florida. The Company was considered the deemed owner for accounting purposes. See Note 5, “Commitments and Contingencies.”

Research and Development

The Company expenses research and development costs as incurred. The Company records accrued liabilities for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of pre-clinical studies and clinical trials and contract manufacturing activities. These costs are a significant component of the Company’s research and development expenses. The Company accrues for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers under the service agreements. The Company makes significant judgments and estimates in determining the accrued liabilities balance in each reporting period. As actual costs become known, the Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued costs and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled and the rate of patient enrollments may vary from the Company’s estimates, resulting in adjustments to expense in future periods. Changes in these estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of operations.

Stock-based Compensation

Stock-based awards issued to employees, including stock options, are measured at fair value on the grant date using the Black-Scholes option-pricing model and recognized as expense on a straight-line basis over the employee’s requisite service period (generally the vesting period). Because noncash stock compensation expense is based on awards ultimately expected to vest, it is reduced by an estimate for future forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from estimates. There were 2,690,230 and 0 stock options granted during the six months ended June 30, 2015 and 2014, respectively.

Income Taxes

The Company uses the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial reporting and the tax bases of reported assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. The Company must then assess the likelihood that the resulting deferred tax assets will be realized. A valuation allowance is provided when it is more likely than not that some portion or all of a deferred tax asset will not be realized. Due to the Company’s lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

The Company has adopted Financial Accounted Standards Board Accounting Standards Codification 740, Income Taxes, regarding how uncertain tax positions should be recognized, measured, presented, and disclosed in the financial statements. As of June 30, 2015 and December 31, 2014, the Company does not have any unrecognized tax benefits.

 

Comprehensive Income or Loss

Comprehensive income or loss is defined as the change in equity during a period from transactions and other events, excluding changes resulting from investments from owners and distributions to owners. The Company currently has no components of Comprehensive Income or Loss other than net income, therefore no separate statement of comprehensive income is presented.  

 

8


 

Recent Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board, or FASB, issued Auditing Standards Update, or ASU, No. 2014-09, Revenue from Contracts with Customers  (Topic 606), which provides a framework for addressing revenue recognition issues and, upon its effective date, replaces almost all existing revenue recognition guidance, including industry-specific guidance, in current U.S. generally accepted accounting principles (“U.S. GAAP”). The ASU provides a five-step analysis of transactions to determine when and how revenue is recognized. The ASU will require many companies to use more judgment than under current U.S. GAAP. For public business entities, ASU 2014-09 is effective for annual periods beginning after December 15, 2017, however early adoption is permitted for annual periods beginning after December 15, 2016. Public business entities will be required to apply the new revenue standard to interim reporting periods beginning in the first interim period within the year of adoption.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. ASU 2014-15 requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related footnote disclosures. In doing so, companies will have reduced diversity in the timing and content of footnote disclosures than under today’s guidance. ASU 2014-15 is effective for the Company in the first quarter of 2016 with early adoption permitted. We do not believe the impact of adopting ASU 2014-15 on our consolidated financial statements will be material.

3. Fair Value Measurements

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents and accounts payable approximated their fair values due to their short maturities. Assets and liabilities recorded at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provide a framework for measuring fair value, and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.

The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

June 30, 2015

 

 

 

(unaudited)

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents

 

$

58,502

 

 

$

 

 

$

 

 

$

58,502

 

 

 

 

December 31, 2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Cash and cash equivalents

 

$

2,269

 

 

$

 

 

$

 

 

$

2,269

 

 

 

 

9


 

4. Balance Sheet Components

Property and Equipment, Net

Property and equipment, net consists of the following (in thousands):

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

 

 

Furniture and equipment

 

$

222

 

 

$

58

 

Computer equipment

 

 

162

 

 

 

67

 

Construction in progress

 

 

937

 

 

 

 

Property and equipment, gross

 

 

1,321

 

 

 

125

 

Less: accumulated depreciation

 

 

(68

)

 

 

(38

)

Property and equipment, net

 

$

1,253

 

 

$

87

 

 

Depreciation expense for the three months ended June 30, 2015 and 2014 was $19,000 and $6,000, respectively, and for the six months ended June 30, 2015 and 2014, was $30,000 and $11,000 , respectively.

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

June 30, 2015

 

 

December 31, 2014

 

 

 

(unaudited)

 

 

 

 

 

Compensation and benefits

 

$

496

 

 

$

645

 

Research and development

 

 

454

 

 

 

542

 

Professional and consulting

 

 

1,846

 

 

 

71

 

Other

 

 

 

 

 

1

 

Total

 

$

2,796

 

 

$

1,259

 

 

As of June 30, 2015, approximately $1,436,000 of accrued liabilities for professional and consulting was related to the Company’s initial public offering.

5. Commitments and Contingencies

Facility Leases

In July 2013, the Company entered into a 48-month lease for its corporate headquarters and research facility in San Mateo, California. In July 2014, the Company entered into a second lease that expanded the space and was for a term of 36 months beginning in July 2014 and coterminous with the first lease. Under both leases, the Company paid base rent plus the tenant’s proportionate share of estimated basic operating cost as defined in the leases. The leases required a $25,000 security deposit for the duration of the leases.

Rent expense under operating leases for the three months ended June 30, 2015 and 2014 was $214,000 and $24,000, respectively, and for the six months ended June 30, 2015 and 2014 was $255,000 and $49,000, respectively. In May 2015, the Company ceased use of its San Mateo facility and accrued a liability for approximately $121,000 in costs that will continue to be incurred under the San Mateo leases for the remaining term, net of estimated sublease payments.

 

10


 

New Facility Leases

In March 2015, the Company signed a new facility lease for its corporate headquarters and research facility in Brisbane, California. The new lease, which has been classified as an operating lease, commenced on May 1, 2015 with an initial term of 51 months. The Company has the right to extend the lease term for an additional 3 years at the greater of the then current base rent or the then prevailing market rent, as defined by the Renewal Option contained in the lease. The agreement required a security deposit of $85,000. The new lease calls for future aggregate minimum noncancelable lease payments as of May 1, 2015 (the inception of the lease) as follows (in thousands):

 

Year Ended December 31,

 

 

 

 

2015

 

$

190

 

2016

 

 

464

 

2017

 

 

478

 

2018

 

 

492

 

and after

 

 

294

 

Total

 

$

1,918

 

 

The Company is responsible for operating expenses over base operating expenses as defined in the headquarters lease agreement.

In June 2015, the Company signed a new facility lease for a manufacturing facility in Clearwater, Florida. The initial term of the lease is for 120 months. For accounting purposes, due to the nature and extent of the Company’s involvement with the construction of this manufacturing facility, it was considered to be the owner of the assets during the construction period through the lease commencement date, even though the lessor is responsible for funding and repairing components of the building shell and constructing a portion of the related building infrastructure. Construction to this building commenced in July 2015 and as of June 30, 2015, the Company has incurred approximately $90,000 of design costs related to the building which is recorded in Construction in progress. The Company also recorded $600,000 to Construction in progress for costs incurred by the lessor and recognized a corresponding amount included within other liabilities within the accompanying condensed consolidated balance sheet. The agreement calls for a security deposit of $35,000. The new lease calls for future aggregate minimum lease payments as of the commencement of the lease as follows (in thousands):

 

Year Ended December 31,

 

 

 

 

2015

 

$

38

 

2016

 

 

151

 

2017

 

 

156

 

2018

 

 

160

 

and after

 

 

1,198

 

Total

 

$

1,703

 

 

The Company is responsible for operating expenses including real estate taxes as defined in the manufacturing facility lease agreement.

Purchase Commitments

The Company purchases peanut flour, the source material for AR101, from the Golden Peanut Company pursuant to a long term exclusive commercial supply agreement. Pursuant to the agreement, the Company’s purchase obligation commences with the first delivery of peanut flour for commercial use, which it currently anticipates will not occur prior to 2018. Assuming the Company starts its purchase obligation of peanut flour for commercial use in 2018, which is not assured, the aggregate purchase commitment under this agreement is $1.2 million over a term of five years.

Indemnifications

The Company indemnifies each of its officers and directors for certain events or occurrences, subject to certain limits, while the officer or director is or was serving at the Company’s request in such capacity, as permitted under Delaware law and in accordance with its certificate of incorporation and bylaws. The term of the indemnification period lasts as long as an officer or a director may be subject to any proceeding arising out of acts or omissions of such officer or director in such capacity. The maximum amount of potential future indemnification is unlimited; however, the Company currently holds director and officer liability insurance. This insurance allows the transfer of risk associated with the Company’s exposure and may enable it to recover a portion of any future amounts paid. The Company believes that the fair value of these indemnification obligations is minimal. Accordingly, it has not recognized any liabilities relating to these obligations for any period.

 

11


 

Legal

During the normal course of business, the Company may be a party to legal claims that may not be covered by insurance. Management does not believe that any such claims would have a material impact on the Company’s consolidated financial statements.

6. Stockholders’ Equity

Initial Public Offering

On August 11, 2015, the Company completed its IPO, in which it sold 11,499,999 shares of common stock at a price to the public of $16 per share, raising approximately $168 million in total net proceeds to the Company. Upon the consummation of the IPO, all outstanding shares of convertible preferred stock were converted into approximately 25.1 million shares of common stock.

The following table sets forth the Company’s stockholders’ equity as of June 30, 2015, on a pro forma basis to give effect to the convertible preferred stock and on a pro forma as adjusted basis to give further effect to the sale of 11,499,999 shares of common stock in the IPO at the initial public offering price of $16.00 per share, after deducting the underwriting discounts and commissions and estimated offering expenses payable by the Company:

 

 

 

As of June 30, 2015

 

 

 

Actual

 

 

Pro Forma

 

 

Pro Forma As

Adjusted

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

 

 

 

 

Series A convertible preferred stock, par value $0.0001 per share—13,263,967 shares authorized as of June 30, 2015; 11,003,261 shares issued and outstanding actual; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

 

 

4,054

 

 

 

 

 

 

 

Series B convertible preferred stock, par value $0.0001 per share—no and 14,245,550 shares authorized as of June 30, 2015; 14,047,966 shares issued and outstanding, actual;  no shares authorized, issued and outstanding, pro forma and pro forma as adjusted

 

 

79,779

 

 

 

 

 

 

 

Preferred stock, par value $0.0001 per share, no shares authorized, issued and outstanding, actual; 10,000,000 shares authorized, no shares issued and outstanding, pro forma and pro forma as adjusted

 

 

 

 

 

 

 

 

 

Common stock, par value $0.0001 per share—50,046,000 shares authorized, 5,698,175 shares issued and outstanding, actual; 290,000,000 shares authorized, 30,749,432 shares issued and outstanding, pro forma, and 290,000,000 shares authorized, 42,249,431 shares issued and outstanding, pro forma as adjusted

 

 

 

 

 

3

 

 

 

4

 

Additional paid in capital

 

 

2,464

 

 

 

86,294

 

 

 

253,913

 

Accumulated deficit

 

 

(28,334

)

 

 

(28,334

)

 

 

(28,334

)

Total stockholders’ equity

 

 

57,963

 

 

 

57,963

 

 

 

225,583

 

 

 

 

12


 

7. Stock-based Awards

In January 2013, the Company adopted its Stock Plan (the “Plan”). Under the Plan, shares of the Company’s common stock have been reserved for the issuance of stock options and restricted stock to employees, directors, and consultants under terms and provisions established by the Board of Directors and approved by the Company’s stockholders. At June 30, 2015 and December 31, 2014 there were 1,387,838 and 639,625 and shares available for future grant, respectively. Under the terms of the Plan, options may be granted at an exercise price not less than fair market value. For employees holding more than 10% of the voting rights of all classes of stock, the exercise prices for incentive stock options may not be less than 110% of fair market value, as determined by the Board of Directors. The terms of options granted under the Plan may not exceed ten years. All options issued to date have had a ten-year life. To date, options granted generally vest in two ways: 1) over four years at a rate of 25% upon the first anniversary of the issuance date and 1/48th per month thereafter, and 2) over two years at a rate of 1/24th per month. The Plan contains certain change of control provisions and the employment offer letters of certain employees provide for varied acceleration of vesting in the event of a change of control and/or termination without cause. It also contains a net exercise provision and allows for cashless exercise upon the class of shares subject to the option becoming publicly traded in an established securities market.

The Plan allows employees to exercise a stock option in exchange for stock before the requisite service is provided (e.g., before the award is vested under its original terms); however, such arrangements permit the Company to subsequently repurchase such shares at the exercise price if the vesting conditions are not satisfied. Such an exercise is not substantive for accounting purposes. Therefore, the payment received by the Company for the exercise price is recognized as an early exercise liability on the balance sheets and will be transferred to common stock and additional paid-in capital as such shares vest. At June 30, 2015 and December 31, 2014, 862,673 and 788,873 unvested shares were legally issued and outstanding, respectively. In connection with these unvested shares, the Company has recorded an early exercise liability as of June 30, 2015 of $309,000, of which $158,000 is included in other current liabilities and $151,000 is included in other non-current liabilities in the Company’s Balance Sheet. These shares are excluded from basic net loss per share until the Company’s repurchase right lapses and the shares are no longer subject to the repurchase feature.

Activity under the Plan is set forth below:

 

 

 

 

 

 

 

 

 

 

 

Options Outstanding

 

 

 

Shares Available

for Grant

 

 

Number of Options

and Unvested

Shares

 

 

Weighted-

Average

Exercise

Price

 

 

Weighted Average

Remaining

Contractual Life

(in years)

 

Balance, December 31, 2014

 

 

639,625

 

 

 

2,566,559

 

 

$

0.14

 

 

 

9.19

 

Additional shares authorized

 

 

3,226,650

 

 

 

 

 

 

 

 

 

 

 

 

 

Options granted

 

 

(2,690,230

)

 

 

2,690,230

 

 

$

3.02

 

 

 

 

 

Options exercised and shares vested

 

 

 

 

 

 

(1,372,129

)

 

$

0.14

 

 

 

 

 

Options repurchased

 

 

211,793

 

 

 

(211,793

)

 

$

0.14

 

 

 

 

 

Options cancelled

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances – June 30, 2015

 

 

1,387,838

 

 

 

3,672,867

 

 

$

2.25

 

 

 

9.75

 

Options vested and expected to vest as of June 30, 2015 (unaudited)

 

 

 

 

 

 

3,328,871

 

 

$

1.61

 

 

 

9.51

 

Options exercisable as of June 30, 2015 (unaudited)

 

 

 

 

 

 

2,810,912

 

 

$

2.83

 

 

 

9.75

 

 

The aggregate intrinsic values of options outstanding, exercisable, and vested and expected to vest were calculated as the difference between the exercise price of the options and the estimated value of the Company common stock as determined by the Company’s Board of Directors as of December 31, 2014. The Plan provides for early exercise, therefore, all the Company’s outstanding stock options are exercisable.

Stock Options Granted to Employees

The Company did not issue any stock options during the three and six months ended June 30, 2014. Stock options granted during the three months and six months ended June 30, 2015 had a weighted-average grant-date fair value of $4.81. The fair value is being expensed over the vesting period of the options, which is either four years or two years on a straight-line basis as the services are being provided. No tax benefits were realized from options during the periods.

As of June 30, 2015 and December 31, 2014 total unrecognized employee stock-based compensation was $5,670,000 and $120,000, which is expected to be recognized over the weighted-average remaining vesting period of 3.57 years and 2.43 years respectively.

 

13


 

The fair value of employee stock options was estimated using the Black-Scholes pricing model, with the following weighted-average assumptions (unaudited):

 

 

 

Three Months Ended

June 30,

 

Six Months Ended

June 30,

 

 

2015

 

 

2014

 

2015

 

 

2014

Expected volatility

 

 

75.77

%

 

N/A

 

 

75.77

%

 

N/A

Risk free interest rate

 

 

1.69

%

 

N/A

 

 

1.69

%

 

N/A

Divided yield

 

 

 

 

N/A

 

 

 

 

N/A

Expected term (in years)

 

 

6.00

 

 

N/A

 

 

6.00

 

 

N/A

 

Determining Fair Value of Stock Options

The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. The determination of each of these inputs is subjective and generally requires significant judgment.

Expected volatility—The expected stock price volatility assumption was determined by examining the historical volatilities of a group of industry peers, as the Company did not have any trading history for the Company’s common stock. The Company will continue to analyze the historical stock price volatility and expected term assumptions as more historical data for the Company’s common stock becomes available.

Expected term—The expected term of stock options represents the weighted average period the stock options are expected to be outstanding. The Company’s option grants are considered “plain vanilla.” Therefore, the Company has opted to use the simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average time- to-vesting and the contractual life of the options.

Expected dividend—The expected dividend assumption was based on the Company’s history and expectation that it will not declare dividend payout for the near future.

Risk-free interest rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected terms.

Fair value of common stock—The fair value of the shares of common stock underlying the stock options has historically been the responsibility of and determined by the Company’s board of directors. Because there has been no public market for the Company’s common stock, the board of directors determined fair value of common stock at the time of grant of the option by considering a number of objective and subjective factors including independent third-party valuations of the Company’s common stock, sales of convertible preferred stock to unrelated third parties, operating and financial performance, the lack of liquidity of capital stock and general and industry specific economic outlook, amongst other factors.

The fair value of the underlying common stock will be determined by the Company’s board of directors until such time as the Company’s common stock is listed on an established exchange or national market system. For grants during the three months ended June 30, 2015, the Company utilized a higher fair market value, for which the increase was attributed to an increased likelihood of a public offering during the period.

Stock-based compensation expense, net of estimated forfeitures, is reflected in the statements of operations (in thousands, unaudited):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Research and development

 

$

88

 

 

$

4

 

 

$

96

 

 

$

9

 

General and administrative

 

 

875

 

 

 

11

 

 

 

893

 

 

 

22

 

Total stock-based compensation expense

 

$

963

 

 

$

15

 

 

$

989

 

 

$

31

 

 

During the three and six months ended June 30, 2015, the Company recorded approximately $562,000 of stock compensation expense related to the acceleration of certain former executives’ stock options.

 

14


 

8. Net Loss per Share

The following table sets forth the computation of the Company’s basic and diluted net loss per share during the three months and six months periods ended June 30, 2015 and 2014 (in thousands, except share and per share data, unaudited):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Numerator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(7,376

)

 

$

(2,763

)

 

$

(10,817

)

 

$

(4,357

)

Denominator:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares used in computing net loss per share, basic and

   diluted

 

 

4,618,633

 

 

 

2,926,665

 

 

 

4,422,995

 

 

 

2,926,665

 

Net loss per share basic and diluted

 

$

(1.60

)

 

$

(0.94

)

 

$

(2.45

)

 

$

(1.49

)

 

The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because their inclusion would have been antidilutive (unaudited):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Convertible preferred stock

 

 

25,051,257

 

 

 

13,263,967

 

 

 

21,713,994

 

 

 

13,263,967

 

Stock options

 

 

1,942,218

 

 

 

2,247,212

 

 

 

3,672,867

 

 

 

2,247,212

 

 

9. Subsequent Events

Income Taxes

In July 2015, the Company formed a wholly-owned foreign subsidiary to which the Company licensed certain intangible rights. The Company expects that 2015 recognized revenue in the U.S., if any, as a result of this transaction will be fully offset by prior year NOLs and current year expenses. For US tax purposes, the Company expects to recognize revenue from the license in future years, in the form of royalties, if any are received in such years.

Stock-based Compensation

In July 2015, the Company adopted a new stock plan (“the 2015 Plan”). Under the 2015 plan, shares of the Company’s common stock have been reserved for the issuance of stock options and restricted stock to employees, directors, and consultants under terms and provisions established by the Board of Directors and approved by the Company’s stockholders. 4,681,544 shares of our common stock are initially reserved for issuance.

Facility Lease Amendment

In August 2015, the Company entered into an amendment for its existing corporate headquarters and research facility in Brisbane, California. Pursuant to the amendment, the Company will lease additional office space. The term for the new space is 72 months from the delivery of the premises to the Company, which is expected to occur near the end of 2015. In addition, the term of the existing office space has been extended so that it is coterminous with the new space. As of the commencement of the amendment, future aggregate minimum lease payments for the combined space are as follows (in thousands):

 

Year ended December 31,

 

2015

 

$

190

 

2016

 

 

1,010

 

2017

 

 

1,602

 

2018

 

 

1,650

 

and after

 

 

5,265

 

Total

 

$

9,717

 

 

The Company is responsible for operating expenses over base operating expenses as defined in the headquarters lease agreement.

 

 

 

15


 

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 in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto for the year ended December 31, 2014, included in our prospectus dated August 5, 2015, filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, or the Prospectus. This discussion and other parts of this report contain forward-looking statements that involve risks and uncertainties, such as statements of our plans, objectives, expectations and intentions. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this report titled “Risk Factors.” Except as may be required by law, we assume no obligation to update these forward-looking statements or the reasons that results could differ from these forward-looking statements.

Overview

We are a clinical-stage biopharmaceutical company advancing a new therapeutic approach, including the development of proprietary product candidates, for the treatment of peanut and other food allergies. This approach, which we refer to as Characterized Oral Desensitization Immunotherapy, or CODIT, is a system designed to desensitize patients to food allergens using rigorously characterized biologic products, defined treatment protocols and tailored support services. In January, 2015, we successfully completed ARC001, a Phase 2 study of our lead CODIT product candidate, AR101, for the treatment of peanut allergy. Our ARC002 study, an open label Phase 2 follow-on study of patients who participated in ARC001, is ongoing. We intend to initiate a Phase 3 registration trial of AR101 and Phase 2 studies of other CODIT product candidates for two additional food allergies in 2016. AR101 has been granted Fast-Track designation and Breakthrough Therapy designation by the U.S. Food and Drug Administration, or FDA, and, if our planned Phase 3 trial is successful, we intend to file a Biologics License Application, or BLA, with the FDA and a Marketing Authorization Application, or MAA, with the European Medicines Agency, or EMA. We have worldwide commercial rights to all of our product candidates and, if approved, we intend to commercialize in the United States and Europe with our own specialty sales force.

Since commencing our operations in 2011, substantially all of our efforts have been focused on research, development and the advancement of our lead CODIT product candidate, AR101. We have not generated any revenue from product sales and, as a result, we have incurred significant losses. We incurred a net loss of $7.4 million and $2.8 million for the three months ended June 30, 2015 and 2014, respectively, and $10.8 million and $4.4 million for the six months ended June 30, 2015 and 2014, respectively. As of June 30, 2015 our accumulated deficit was $28.3 million. We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for, and begin to commercialize, AR101 and as we develop other product candidates.

We do not expect to generate revenue from product sales unless and until we successfully complete development of, obtain regulatory approval for, and begin to commercialize one or more of our product candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we anticipate that we will need to raise additional capital to fund our future operations. Until such time that we can generate substantial revenue from product sales, if ever, we expect to finance our operating activities through a combination of equity offerings and debt financings and we may seek to raise additional capital through strategic collaborations. However, we may be unable to raise additional funds or enter into such arrangements when needed on favorable terms, or at all, which would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our development programs or commercialization efforts or grant to others rights to develop or market product candidates that we would otherwise prefer to develop and market ourselves. Failure to receive additional funding could cause us to cease operations, in part or in full. Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

We currently utilize contract manufacturers for all of our manufacturing activities. We entered into a lease for a manufacturing facility in Clearwater, Florida, but do not expect manufacturing operations by our contract manufacturer to commence at that facility until late-2016. Additionally, we currently utilize third-party clinical research organizations, or CROs, to carry out our clinical trials and we do not yet have a sales organization. We expect to significantly increase our investment in costs relating to our manufacturing process and sales organization as we prepare for the filing of a BLA with the FDA and a MAA with the EMA and prepare for a possible commercial launch of AR101.

 

16


 

Recent Developments

In August 2015, we completed our initial public offering, or IPO, of our common stock pursuant to which we issued 11,499,999 shares of our common stock at a price of $16.00 per share, which included 1,499,999 shares sold pursuant to the exercise of the underwriters’ option to purchase additional shares. We received approximately $168 million from the IPO, net of underwriting discounts and commissions, and offering expenses.

Components of Results of Operations

Research and Development Expenses

The largest component of our total operating expenses has historically been our investment in research and development activities. Research and development expenses consist primarily of:

 

·

costs incurred to conduct research, such as the discovery and development of our product candidates;

 

·

costs related to production of clinical supplies, including fees paid to contract manufacturers and allocated facility expenses;

 

·

fees paid to clinical consultants, clinical trial sites and vendors, including clinical research organizations in conjunction with implementing and monitoring our clinical trials and acquiring and evaluating clinical trial data, including all related fees, such as for investigator grants, patient screening fees, laboratory work and statistical compilation and analysis;

 

·

salaries and related costs, including stock-based compensation expense, for personnel in our research and development functions; and

 

·

costs related to compliance with drug development regulatory requirements.

We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates in the United States and Europe. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates and technology platforms may be affected by a variety of factors including: the quality of our product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in achieving regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

General and Administrative Expenses

General and administrative expenses include personnel costs, expenses for outside professional services and other allocated expenses. Personnel costs consist of salaries, bonuses, severance, benefits and stock-based compensation. Outside professional services consist of legal, accounting and audit services and other consulting fees. Allocated expenses consist of rent expense related to our office facility. We expect to incur additional expenses as a result of operating as a public company, including expenses related to compliance with the rules and regulations of the Securities and Exchange Commission, and those of The NASDAQ Global Select Market, additional insurance expenses, investor relations activities and other administrative and professional services.

 

17


 

Results of Operations

Comparison of the Three Months Ended June 30, 2015 and 2014

 

 

 

Three Months Ended

June 30,

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

 

(in thousands, except percentages)

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

3,131

 

 

$

1,801

 

 

$

1,330

 

 

 

74

%

General and administrative

 

 

4,246

 

 

 

967

 

 

 

3,279

 

 

 

339

%

Total operating expenses

 

 

7,377

 

 

 

2,768

 

 

 

4,609

 

 

 

167

%

Loss from operations

 

 

(7,377

)

 

 

(2,768

)

 

 

(4,609

)

 

 

167

%

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1

 

 

 

5

 

 

 

(4

)

 

 

(80

%)

Other expense

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

 

$

(7,376

)

 

$

(2,763

)

 

$

(4,613

)

 

 

167

%

 

Research and Development Expenses

The following table summarizes our research and development expenses incurred during the three months ended June 30, 2015 and 2014:

 

 

 

Three Months Ended

June 30,

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

 

(in thousands, except percentages)

 

Clinical development and regulatory

 

$

1,141

 

 

$

759

 

 

$

382

 

 

 

50

%

Contract manufacturing

 

 

778

 

 

 

566

 

 

 

212

 

 

 

37

%

Compensation and related personnel costs

 

 

1,012

 

 

 

446

 

 

 

566

 

 

 

127

%

Other research and development costs

 

 

54

 

 

 

 

 

 

54

 

 

 

0

%

Facility costs

 

 

146

 

 

 

30

 

 

 

116

 

 

 

387

%

Total research and development

 

$

3,131

 

 

$

1,801

 

 

$

1,330

 

 

 

74

%

 

Research and development expenses were $3.1 million for the three months ended June 30, 2015, an increase of $1.3 million, from $1.8 million for the three months ended June 30, 2014. This increase was primarily attributable to a $0.4 million increase in clinical development expenses mainly associated with our ongoing clinical trials, a $0.2 million increase in contract manufacturing costs, and $0.6 million increase in compensation and related personnel costs to support continued AR101 development. We expect to incur additional costs in connection with our ongoing, ARC002 study and our planned ARC003 study.

General and Administrative Expenses

The following table summarizes our general and administrative expenses incurred during the three months ended June 30, 2015 and 2014:

 

 

 

Three Months Ended

June 30,

 

 

 

 

 

 

 

 

 

 

 

2015

 

 

2014

 

 

$ Change

 

 

% Change

 

 

 

(in thousands, except percentages)

 

Compensation and related personnel costs

 

$

1,457

 

 

$

595

 

 

$

862

 

 

 

145

%

Outside professional services

 

 

2,314

 

 

 

257

 

 

 

2,057

 

 

 

800

%

Facility costs

 

 

232

 

 

 

38

 

 

 

194

 

 

 

511

%

Other general and administrative

 

 

243

 

 

 

77

 

 

 

166

 

 

 

216

%

Total general and administrative

 

$

4,246

 

 

$

967

 

 

$

3,279

 

 

 

339

%

 

 

18


 

General and administrative expenses were $4.3 million for the three months ended June 30, 2015, an increase of $3.3 million, from $1.0 million for the three months ended June 30, 2014. This increase was primarily due to a $0.9 million increase in compensation expenses primarily related to additional administrative and executive personnel, and $2.1 million in consulting services incurred for pricing and marketing studies, finance, and corporate communications activities to support our commercialization strategy and our initial public offering. We expect to incur additional general and administrative costs associated with operating as a publicly traded company following our IPO and hiring additional personnel.

Comparison of the Six Months Ended June 30, 2015 and 2014

 

 

 

Six Months Ended

June 30,