ARCA BIOPHARMA, INC. This Management's Discussion and Analysis of Financial Condition and Results of
Operations contains "forward-looking statements" within the meaning of Section
27A of the Securities Act of 1933, as amended, or the Securities Act, Section
21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and
the Private Securities Litigation Reform Act of 1995. Examples of these
statements include, but are not limited to, statements regarding the following:
potential future development plans for Gencaro our ability to secure sufficient
financing to support any clinical trials for Gencaro,the likelihood that any
Phase 3 clinical trial results for Gencaro will satisfy the requirements of our
Special Protocol Assessment agreement, our likelihood to enter into an
acquisition, merger, business combination or other strategic transaction, the
expected features and characteristics of Gencaro, including the potential for
genetic variations to predict individual patient response to Gencaro, Gencaro's
potential to treat atrial fibrillation, or AF, future treatment options for
patients with AF, the potential for Gencaro to be the first genetically-targeted
AF prevention treatment, statements regarding potential Phase 3 development
plans for Gencaro, including the timing and results thereof, and the ability of
ARCA's financial resources to support its operations at the current levels
through the middle of fiscal year 2024, our ability to obtain additional funding
when needed or enter into a strategic or other transaction, the extent to which
our issued and pending patents may protect our products and technology, the
potential of such product candidates to lead to the development of safe or
effective therapies, our ability to enter into collaborations, or our ability to
maintain listing of our common stock on a national exchange. Actual results and
performance could differ materially from those projected in the forward-looking
statements as a result of many factors discussed herein and elsewhere. These and
other factors are identified and described in more detail in ARCA's filings with
the
The terms "ARCA," "the Company," "we," "us," "our" and similar terms refer to
Overview
We are a clinical-stage biopharmaceutical company applying a precision medicine approach to the development and commercialization of targeted therapies for cardiovascular diseases. Precision medicine refers to the tailoring of medical treatment to the individual characteristics of patients, using genomic, non-genomic biomarker and other information that extends beyond routine diagnostic categorization. We believe that when implemented correctly precision medicine can enhance therapeutic response, improve patient outcomes, and reduce healthcare costs.
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Our lead product candidate is Gencaro™ (bucindolol hydrochloride) for the
treatment of atrial fibrillation, or AF, in patients with chronic heart failure,
or HF. Gencaro is being developed for patients
Gencaro™ (bucindolol hydrochloride) for Atrial Fibrillation
Gencaro™ (bucindolol hydrochloride) is a pharmacogenetically-targeted beta-adrenergic receptor antagonist with mild vasodilator properties that we are developing for the treatment of atrial fibrillation in patients with heart failure. We believe the pharmacology of Gencaro is unique and its efficacy can be enhanced by prescribing it to patients with a common genotypic variant that is present in approximately 50% of the North American and European general populations. This gene can be detected with a simple genetic test.
We are developing Gencaro to treat atrial fibrillation, or AF, in patients with chronic heart failure, or HF. AF is the most common form of cardiac arrhythmia, a disruption of the heart's normal rhythm or rate. HF is a chronic condition in which the heart is unable to pump enough blood to meet the body's needs. AF and HF commonly occur together. In HF patients, the development of AF leads to worsening symptoms, and increased risk of hospitalization and death. Current treatment options for AF in HF patients are limited, and can be invasive, costly and dangerous.
Our development plan for Gencaro focuses on the treatment of AF in patients with
higher ejection fraction HF, those
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Our development plan for Gencaro is based on our recently published analysis of
the Phase 2b clinical trial of Gencaro for the prevention of AF in HF patients,
known as GENETIC-AF. This analysis showed novel results for Gencaro in patients
in the clinical trial with EF's of 40% and higher. We currently have an
agreement with the FDA, known as a Special Protocol Assessment, or SPA, for the
requirements of a Gencaro Phase 3 clinical trial that would support approval of
Gencaro if successful. The Phase 3 pivotal clinical trial of Gencaro conducted
under an SPA will include secondary endpoints that are intended to capture some
of this new information, such as a reduction in the need to deploy rhythm
control interventions including electrical cardioversion, catheter ablation and
use of anti-arrhythmic drugs and avoidance of drug-related complications such as
bradycardia. Based on these analyses, we were issued a
We believe that patients with HF and AF represent a major unmet medical need,
and this need is most pronounced in patients with EF values of 40% and above.
This EF range constitutes more than half of all chronic HF in
We believe that Gencaro, if approved, may be a safe and more effective therapy for the treatment of higher ejection fraction HF patients with AF. We believe there are several potentially important attributes that would differentiate Gencaro from existing therapies, including:
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More effective rhythm control compared to the current standard of care;
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Reduction in the need for catheter ablation, electrical cardioversion, or toxic anti-arrhythmic drugs;
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Maintenance of rhythm control after a successful AF catheter ablation;
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Effective rate control with lower risk of treatment-limiting, adverse event producing bradycardia;
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Reduction in symptoms and improvement in quality of life;
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Reduced health care burden;
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Foundational beta-blocker benefits for HF and unique evidence of efficacy in HF patients with AF;
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One of the only drug therapies approved and shown effective for AF in HF patients with EF ? 40%, and the only one in its drug class.
We have an international patent portfolio for Gencaro in
rNAPc2 (AB201) for treatment of COVID-19
Recombinant Nematode Anticoagulant Protein c2, or rNAPc2 (AB201), is a protein therapeutic in clinical development as a potential treatment for patients with COVID-19. Based on its unique mechanism of action, development history and the clinical evidence from the SARS-CoV-2 pandemic, we believe rNAPc2 has potential to be a beneficial therapy for patients with this serious viral disease. We initiated a Phase 2b clinical trial of rNAPc2 as a potential treatment for patients hospitalized with COVID-19 in the fourth quarter of 2020 and completed patient enrollment in the fourth quarter 2021. In the clinical trial, both doses of rNAPc2 demonstrated a treatment benefit for patients, however, neither dose achieved statistical significance for the primary efficacy endpoint of change in D-dimer level from Baseline to Day 8 compared to standard of care heparin.
On the secondary endpoints measuring thrombotic events and time-to-recovery, there was a numerical imbalance in favor of rNAPc2 that was non-significant. rNAPc2 was well-tolerated at both doses. There were no serious treatment-related adverse events and no dose dependent increase in adverse events was observed. There was no difference between rNAPc2 and standard-of-care heparin in major or non-major clinically relevant bleeding.
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--------------------------------------------------------------------------------To support the continued development of Gencaro and rNAPc2, we will need additional financing to fully fund any clinical trials, and our general and administrative costs through the clinical trials' projected completion and potential commercialization. Considering the substantial time and costs associated with the development of Gencaro and rNAPc2 and the risk that we may be unable to raise a significant amount of capital on acceptable terms, we are also pursuing co-development and commercialization partnering opportunities with large pharmaceutical and/or specialty pharmaceutical companies and may pursue a strategic combination or other strategic transactions. If we are unable to obtain sufficient financing or are unable to complete a strategic transaction, we may discontinue our development activities on Gencaro or rNAPc2 or discontinue our operations.
We believe our cash and cash equivalents as of
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Results of Operations
Research and Development Expenses
Research and development, or R&D, expense is comprised primarily of personnel costs, clinical development, manufacturing process development, and regulatory activities and costs.
R&D expense for the three months ended
Clinical expense decreased approximately
R&D personnel costs decreased approximately
R&D expense in 2023 is expected to be lower than 2022, as we completed our rNAPc2 (AB201) international Phase 2b clinical trial in the fourth quarter of 2021.
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--------------------------------------------------------------------------------General and Administrative Expenses
General and administrative, or G&A, expenses primarily consist of personnel costs, consulting and professional fees, insurance, facilities and depreciation expenses, and various other administrative costs.
G&A expenses were
G&A expenses in 2023 are expected to be consistent with those in 2022 as we maintain administrative activities to support our ongoing operations.
Interest and Other Income
Interest and other income was
Interest income for the remainder of 2023 is expected to be consistent with the first quarter of 2023.
Other Expense
Other expense was
Liquidity and Capital Resources
Cash and Cash Equivalents
March 31 ,December 31, 2023 2022
(in thousands)
Cash and cash equivalents $ 40,850 $ 42,445 As of
Cash Flows from Operating, Investing and Financing Activities
Three Months Ended March 31,
2023 2022
(in thousands)
Net cash used in:
Operating activities $ (1,595 ) $ (4,298 )
Investing activities - (2 )
Financing activities - -Net decrease in cash and cash equivalents$ (1,595 ) $ (4,300 )
Net cash used in operating activities for the three months ended
There were no investing activities in the three months ended
There were no financing activities in the three months ended
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--------------------------------------------------------------------------------Sources and Uses of Capital
Our primary sources of liquidity to date have been capital raised from issuances of shares of our preferred and common stock. The primary uses of our capital resources to date have been to fund operating activities, including research, clinical development and drug manufacturing expenses, license payments, and spending on capital items.
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Our ability to execute our development programs in accordance with our projected time line depends on a number of factors, including, but not limited to, the following:
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the costs and timing for the potential additional clinical trials in order to gain possible regulatory approval for Gencaro, rNAPc2 or any other product candidate;
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the market price of our stock and the availability and cost of additional equity capital from existing and potential new investors;
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our ability to retain the listing of our common stock on the Nasdaq Capital Market;
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our ability to control costs associated with its operations;
•
general economic and industry conditions affecting the availability and cost of
capital, including as a result of deteriorating market conditions due to
investor concerns regarding inflation, adverse developments affecting the
financial services industry and continued hostilities between
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the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights; and
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the terms and conditions of our existing collaborative and licensing agreements.
We believe our cash and cash equivalents as of
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Critical Accounting Policies and Estimates
A critical accounting policy is one that is both important to the portrayal of
our financial condition and results of operation and requires our management's
most difficult, subjective or complex judgments, often as a result of the need
to make estimates about the effect of matters that are inherently uncertain. Our
significant accounting policies are described in Note 1 of "Notes to Financial
Statements" included within our 2022 Annual Report on Form 10-K filed with the
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--------------------------------------------------------------------------------Accrued Outsourcing Expenses
As part of the process of preparing our financial statements, we are required to estimate accrued outsourcing expenses. This process involves identifying services that third parties have performed on our behalf and estimating the level of service performed and the associated cost incurred for these services as of the balance sheet date. Examples of estimated accrued outsourcing expenses include contract service fees, such as fees payable to contract manufacturers in connection with the production of materials related to our drug product, and service fees from clinical research organizations. We develop estimates of liabilities using our judgment based upon the facts and circumstances known at the time.
Indemnifications
In the ordinary course of business, we enter into contractual arrangements under
which we may agree to indemnify certain parties from any losses incurred
relating to the services they perform on our behalf or for losses arising from
certain events as defined within the particular contract. Such indemnification
obligations may not be subject to maximum loss clauses. We have entered into
indemnity agreements with each of our directors, officers and certain employees.
Such indemnity agreements contain provisions, which are in some respects broader
than the specific indemnification provisions contained in
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