CATALYST BIOSCIENCES Unless otherwise indicated, in this Quarterly Report on Form 10-Q, references to "Catalyst," "we," "us," "our" or the "Company" meanCatalyst Biosciences, Inc. and our subsidiary. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes that appear in this Quarterly Report on Form 10-Q (this "Report") and with the audited consolidated financial statements and related notes that are included as part of our Annual Report on Form 10-K for the year endedDecember 31, 2021 ("Annual Report"). In addition to historical information, this Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). Forward-looking statements are identified by words such as "believe," "will," "may," "estimate," "continue," "anticipate," "intend," "should," "plan," "expect," "predict," "could," "potentially" or the negative of these terms or similar expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. For example, forward-looking statements include any statements regarding the strategies, prospects, plans, expectations or objectives of management for future operations or the distribution of cash to Company stockholders, the benefits that may be derived from product candidates or the commercial or market opportunity in any target indication, our ability to protect intellectual property rights, our anticipated operations, financial position, revenues, costs or expenses, statements regarding future economic conditions or performance, statements of belief and any statement of assumptions underlying any of the foregoing. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A - "Risk Factors," elsewhere in this Report and in Part I - Item 1A - "Risk Factors" in the Annual Report. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. These statements, like all statements in this Report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.
Overview
We are a biopharmaceutical company with expertise in protease engineering. Prior to ceasing research and development activities in March of this year, we had engineered several protease assets that may address unmet medical needs in disorders of the complement or coagulation systems. OnSeptember 20, 2022 , we made a special, one-time cash dividend payment of$1.43 per share to holders of our common stock. We anticipate one or more additional special dividends in the future, although there can be no assurance as to the timing or amounts of any distributions we make. The actual amount of any distributions will depend on many factors, including, without limitation, costs and expenses for ongoing operations, directors and officers liability insurance, tax obligations including those resulting from the sale of assets to Vertex Pharmaceuticals Incorporated ("Vertex"), employee severance and other activities related to the winding down of Company operations, the Company's receipt of some or all of the$5.0 million hold-back from the Company's sale of assets to Vertex, and potential proceeds from the sale, license or other disposition of any other Company assets. 17 --------------------------------------------------------------------------------
The following table summarizes our remaining product candidates with their latest stage of development. [[Image Removed]]
Program Status InFebruary 2022 , we announced that we engaged Perella Weinberg Partners as a financial advisor to assist us in exploring strategic alternatives to monetize our assets. InMay 2022 , we entered into an asset purchase agreement with Vertex, pursuant to which Vertex purchased our complement portfolio, including CB 2782-PEG and CB 4332, as well as our complement-related intellectual property including the ProTUNETM and ImmunoTUNETM platforms for$60.0 million in cash consideration.$55.0 million was received upfront and the remaining$5.0 million was retained by Vertex as a hold-back until one year after the closing date to satisfy certain post-closing indemnification obligations. Our clinical stage coagulation assets are Marzeptacog alfa (activated) ("MarzAA"), an SQ administered next-generation engineered coagulation Factor VIIa ("FVIIa") for the treatment of episodic bleeding and prophylaxis in subjects with rare bleeding disorders, and dalcinonacog alfa ("DalcA"), a next-generation SQ FIX for prophylaxis in hemophilia B. Both MarzAA and DalcA have shown clinical efficacy and safety in mid-stage trials and are available for partnering.
Coagulation Programs
MarzAA
MarzAA is an engineered, subcutaneously administered, next-generation recombinant Factor VIIa. We commenced enrollment of Crimson-1, a Phase 3 registrational trial of MarzAA for episodic treatment of spontaneous or traumatic bleeding episodes in adolescents and adults with congenital hemophilia A or hemophilia B with inhibitors inMay 2021 . We discontinued this trial based on a number of factors, including challenges in enrollment, competition from competing approved therapies, the capital requirements to complete the trial, and other operational factors including effects of the COVID-19 pandemic. Patients enrolled in the study returned to their standard of care and completed all required safety assessments. We reported interim data collected prior to trial termination onJuly 11 at the 2022International Society on Thrombosis and Haemostasis ("ISTH")Congress inLondon . These data showed that MarzAA was well tolerated with no injection site reactions, drug-related adverse events, or thrombotic events. Efficacy data was collected on 14% (66/488) of planned, evaluable bleeds with SQ MarzAA having an 86.2% treatment success at 24 hours vs 86.5% treatment success for intravenous standard of care at 24 hours. We had initiated enrollment in a Phase 1/2 trial of MarzAA for treatment of bleeding in individuals with Factor VII Deficiency, Glanzmann Thrombasthenia, and hemophilia A with inhibitors on emicizumab prophylaxis. This trial was terminated in parallel with Crimson-1 inNovember 2021 . Despite having to discontinue these trials due to logistical, competitive and financial challenges, we believe a SQ recombinant Factor VIIa therapy, like MarzAA, has the potential to be an important treatment option for patients with various bleeding disorders and are exploring opportunities to license or sell MarzAA to another party for further development. 18 --------------------------------------------------------------------------------
DalcA
DalcA is a next-generation SQ Factor IX product candidate for the prophylactic treatment of individuals with hemophilia B. An open-label, Phase 2b study was completed in 2020, demonstrating that FIX plasma activity levels were raised from severe to mild hemophilia B levels and maintained throughout the course of the study. We have received guidance from the FDA on the design of the registrational Phase 3 clinical trial, have the necessary data to support its initiation, and are exploring opportunities to license or sell DalcA to another party for further development.
Financial Operations Overview
We have no drug products approved for commercial sale and have not generated any revenue from drug product sales.
With the exception of the three months endedJune 30, 2022 and nine months endedSeptember 30, 2022 , we have never been profitable and have incurred significant operating losses in each year since inception. We had net losses of$4.9 million and$25.2 million for the three months endedSeptember 30, 2022 and 2021, respectively, and net income of$32.2 million and net losses of$67.6 million for the nine months endedSeptember 30, 2022 and 2021, respectively. As ofSeptember 30, 2022 , we had an accumulated deficit of$370.5 million . As ofSeptember 30, 2022 , our cash and cash equivalents balance was$23.1 million . Substantially all our operating losses were incurred in our research and development programs and in our general and administrative operations.
License and Collaboration Revenue
License and collaboration revenue consists of revenue earned for performance obligations satisfied pursuant to our license and collaboration agreement with Biogen which was entered into inDecember 2019 and terminated as ofMay 2022 . We recognized collaboration revenue for reimbursable third-party vendor, out-of-pocket and personnel costs pertaining to the Biogen Agreement of$0.0 million and$0.8 million for the three and nine months endedSeptember 30, 2022 , respectively, and$2.3 million and$4.9 million for the three and nine months endedSeptember 30, 2021 , respectively.
We have not generated any revenue from the sale of any drug products and we do not expect to generate any revenue from the sale of drug products until we obtain regulatory approval of and commercialize our product candidates.
Cost of License and Collaboration Revenue
Cost of license and collaboration revenue consists of fees for research and development services payable to third-party vendors, and personnel costs, corresponding to the recognition of license and collaboration revenue from Biogen. Cost of license and collaboration revenue does not include any allocated overhead costs. We recognized third-party vendor, out-of-pocket and personnel costs, most of which were reimbursable, pertaining to the Biogen Agreement of$0.0 million and$0.8 million for the three and nine months endedSeptember 30, 2022 , respectively, and$2.3 million and$4.9 million for the three and nine months endedSeptember 30, 2021 , respectively, and recorded such costs as cost of collaboration revenue.
Research and Development Expenses
As of March this year, we ceased the development of certain programs and during the quarter endedJune 30, 2022 , we ceased all research and development activities. Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred. Nonrefundable advance payments for goods or services used in research and development are deferred and capitalized. The capitalized amounts are then expensed as the related goods are delivered or services are performed, or until it is no longer expected that the goods or services will be delivered.
Research and development expenses have traditionally consisted primarily of the following:
• employee-related expenses, which include salaries, benefits and stock-based
compensation;
• laboratory and vendor expenses, including payments to consultants and third
parties, related to the execution of preclinical, non-clinical, and
clinical studies;
• the cost of acquiring and manufacturing preclinical and clinical materials
and developing manufacturing processes;
• clinical trial expenses, including costs of third-party clinical research
organizations;
• performing toxicity and other preclinical studies; and
• facilities and other allocated expenses, which include direct and allocated
expenses for rent and maintenance of facilities, depreciation and
amortization expense and other supplies.
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The table below details our internal and external costs for research and development for the period presented (in thousands). See Overview and Program Status for further discussion of the current research and development programs.
Three Months Ended September 30 ,
Nine Months Ended
2022 2021 2022 2021
Hemophilia $ 220 $ 6,024 $ 2,301 $ 17,838
Complement - 9,924 4,139 20,449
Personnel and other 505 4,246 5,648 13,546
Stock-based compensation 78 158 289 921
Total research and development expenses
The largest component of our total operating expenses has historically been our investment in research and development activities, including the clinical and manufacturing development of our product candidates. Costs listed for our hemophilia and complement programs above consist of clinical trial, manufacturing and research costs. Our internal resources, employees and infrastructure, identified above as personnel and other, are generally not directly tied to individual product candidates or development programs. As such, we do not maintain information regarding these costs incurred for these research and development programs on a project-specific basis.
Since we have ceased our research and development activities, we expect our aggregate research and development expenses will be minimal during the next year as we continue to explore strategic opportunities for the clinical and manufacturing development of our programs.
General and Administrative Expenses
General and administrative expenses consist of personnel costs, allocated expenses, expenses for outside professional services, including legal, human resources, audit and accounting services, and other general expenses. Personnel costs consist of salaries, bonus, benefits and stock-based compensation. We incur expenses associated with operating as a public company, including expenses related to compliance with the rules and regulations of theSecurities and Exchange Commission ("SEC") andNasdaq Stock Market LLC ("Nasdaq"), insurance expenses, audit expenses, investor relations activities, Sarbanes-Oxley compliance expenses and other administrative expenses and professional services. We expect such expenses to fluctuate as we continue to explore strategic opportunities for our programs.
Results of Operations
The following table set forth our results of operations data for the periods
presented (in thousands):
Three Months Ended September 30,
2022 2021 Change ($) Change (%)
Revenue:
Collaboration $ - $ 2,299 $ (2,299 ) (100 )%
Operating expenses:
Cost of collaboration - 2,307 (2,307 ) (100 )%
Research and development 803 20,352 (19,549 ) (96 )%
General and administrative 4,363 4,869 (506 ) (10 )%
Total operating expenses 5,166 27,528 (22,362 ) *
Loss from operations (5,166 ) (25,229 ) 20,063 *
Interest and other income (expense), net 282 (9 ) 291 *
Net loss $ (4,884 ) $ (25,238 ) $ 20,354 *
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Nine Months Ended September 30,
2022 2021 Change ($) Change (%)
Revenue:
Collaboration $ 794 $ 4,898 $ (4,104 ) (84 )%
Operating expenses (income):
Cost of collaboration 798 4,926 (4,128 ) (84 )%
Research and development 12,377 52,754 (40,377 ) (77 )%
General and administrative 13,201 14,799 (1,598 ) (11 )%
Gain on disposal of assets, net (57,245 ) - (57,245 ) 100 %
Total operating expenses (income) (30,869 ) 72,479 (103,348 ) *
Income (loss) from operations 31,663 (67,581 ) 99,244 *
Interest and other income (expense), net 549 (23 ) 572 *
Net income (loss) $ 32,212 $ (67,604 ) $ 99,816 *
*Not meaningful
License and Collaboration Revenue
No license and collaboration revenue was recognized during the three months endedSeptember 30, 2022 due to the termination of our Biogen Agreement effective inMay 2022 , per Biogen's written termination notice inMarch 2022 . License and collaboration revenue for the nine months endedSeptember 30, 2022 and for the three and nine months endedSeptember 30, 2021 consisted of reimbursable collaboration expenses from our Biogen Agreement.
Cost of License and Collaboration
No cost of license and collaboration revenue was recognized during the three months endedSeptember 30, 2022 due to the termination of our Biogen Agreement. Cost of license and collaboration revenue for the nine months endedSeptember 30, 2022 and for the three and nine months endedSeptember 30, 2021 primarily related to reimbursable third-party vendor and personnel costs we incurred pertaining to the Biogen Agreement.
Research and Development Expenses
Research and development expenses were$0.8 million and$20.4 million during the three months endedSeptember 30, 2022 and 2021, respectively, a decrease of$19.6 million , or 96%. The decrease was primarily due to a decrease of$9.9 million in complement-related costs, a decrease of$5.8 million in hemophilia-related costs, a decrease of$3.8 million in personnel-related costs, and a$0.1 million decrease in stock-based compensation expense. Research and development expenses were$12.4 million and$52.8 million during the nine months endedSeptember 30, 2022 and 2021, respectively, a decrease of$40.4 million , or 77%. The decrease was due primarily to a decrease of$16.3 million in complement-related costs, a decrease of$15.6 million in hemophilia-related costs, a decrease of$7.9 million in personnel-related costs, and a$0.6 million decrease in stock-based compensation expense. Research and development expenses for the nine months endedSeptember 30, 2022 include approximately$0.6 million of severance and other costs related to our reduction-in-force.
General and Administrative Expenses
General and administrative expenses were$4.4 million and$4.9 million during the three months endedSeptember 30, 2022 and 2021, respectively, a decrease of$0.5 million , or 10%. This decrease was due primarily to a decrease of$1.2 million in personnel-related costs, partially offset by a$0.6 million increase in facilities and other administrative costs and an increase of$0.1 million in professional fees. General and administrative expenses were$13.2 million and$14.8 million during the nine months endedSeptember 30, 2022 and 2021, respectively, a decrease of$1.6 million , or 11%. The decrease was due primarily to a decrease of$2.3 million in personnel-related costs and a decrease of$0.6 million in professional fees, partially offset by an increase of$0.9 million in facilities and other administrative costs, an increase of$0.2 million related to our allowance for doubtful accounts, and a net increase of$0.2 million related to settlements reached with Biogen and certain contract service vendors. General and administrative expenses for the nine months endedSeptember 30, 2022 include approximately$0.4 million of severance and other costs related to our reduction-in-force.
Gain on Disposal of Assets, Net
Gain on disposal of assets, net was
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--------------------------------------------------------------------------------Interest and Other Income (Expense), Net
The
The$0.6 million increase in interest and other income (expense), net for the nine months endedSeptember 30, 2022 compared to the nine months endedSeptember 30, 2021 was primarily due to a$0.2 million gain recognized upon the extinguishment of a liability and an increase in interest income.
Recent Accounting Pronouncements
Refer to "Accounting Pronouncements Recently Adopted" included in Note 2, Summary of Significant Accounting Policies, in the "Notes to the Condensed Consolidated Financial Statements" in this Form 10-Q.
Liquidity and Capital Resources
OnSeptember 20, 2022 , we paid a special, one-time cash dividend of$1.43 per share to holder's of the Company's common stock. The aggregate amount of the special dividend payment was approximately$45.0 million . As ofSeptember 30, 2022 , we had$23.1 million of cash and cash equivalents. For the nine months endedSeptember 30, 2022 , we had$32.2 million in net income and$31.6 million cash used in operating activities. We have an accumulated deficit of$370.5 million as ofSeptember 30, 2022 . Our primary uses of cash are to fund operating and general and administrative expenditures. Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses. We believe that our existing capital resources, including cash and cash equivalents will be sufficient to meet our projected operating requirements for at least the next 12 months from the date of this filing. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. We plan to continue to fund losses from operations and capital funding needs through our current cash balance, as well as potential additional asset sales, licensing transactions, collaborations or strategic partnerships with other companies. We intend to make one or more special dividend payments to stockholders in the future, although there can be no assurance as to the timing or amounts of any distributions we make. The actual amount of any distributions will depend on many factors, including, without limitation, costs and expenses for ongoing operations, directors and officers liability insurance, tax obligations including those resulting from the sale of assets to Vertex, employee severance and other activities related to the winding down of Company operations, the Company's receipt of some or all of the$5.0 million hold-back from the Company's sale of assets to Vertex, and potential proceeds from the sale, license or other disposition of any other Company assets. The following table summarizes our cash flows for the periods presented (in thousands): Nine Months Ended September 30, 2022 2021 Cash used in operating activities$ (31,621 ) $ (66,079 ) Cash provided by investing activities 55,375 45,323 Cash (used in) provided by financing activities (45,011 ) 49,553
Net (decrease) increase in cash and cash equivalents
$ 28,797
Cash Flows from Operating Activities
Cash used in operating activities for the nine months endedSeptember 30, 2022 was$31.6 million . The most significant component of our cash used was a net loss of$25.0 million , excluding the net gain of$57.2 million from the sale of our complement portfolio and other assets. The net loss included non-cash expense related to stock-based compensation of$1.1 million , bad debt expense of$0.2 million , depreciation and amortization of$0.2 million , and a$0.1 million loss related to the termination of one of our operating leases. In addition, net cash outflow of$8.2 million was attributable to the change in our net operating assets and liabilities primarily as a result of a$6.4 million decrease in accounts payable, a$4.3 million decrease in accrued compensation and other accrued liabilities, and a$0.2 million decrease in deferred revenue related to the Biogen Agreement, partially offset by a$1.6 million decrease in accounts and other receivables and a$1.0 million decrease in prepaid and other current assets. Cash used in operating activities for the nine months endedSeptember 30, 2021 was$66.1 million . The most significant component of our cash used was a net loss of$67.6 million . This included non-cash expenses related to stock-based compensation of$2.7 million and depreciation and amortization of$0.2 million . In addition, cash outflow of$1.4 million was attributable to the change in our net operating assets and liability primarily as a result of a$2.0 million increase in prepaid and other assets, a$2.1 million decrease in accounts payable, 22 --------------------------------------------------------------------------------
and a
Cash Flows from Investing Activities
Cash provided by investing activities for the nine months endedSeptember 30, 2022 was$55.4 million , due primarily to$55.0 million in cash proceeds from the sale of our complement portfolio to Vertex,$2.5 million due to proceeds from maturities of investments, and$0.4 million in proceeds from the sale of property and equipment, partially offset by$2.6 million in transaction costs related to the sale of our complement portfolio to Vertex.
Cash provided by investing activities for the nine months ended
Cash Flows from Financing Activities
Cash used in financing activities for the nine months endedSeptember 30, 2022 was due to the special dividend issued and paid, offset by the issuance of stock grants and option exercises. Cash provided by financing activities for the nine months endedSeptember 30, 2021 was$49.6 million , due to$49.3 million in net proceeds from the issuance of common stock related to our public offering in the first quarter of 2021 and$0.3 million in stock grants and option exercises.
Critical Accounting Polices and Estimates
There have been no significant changes to our critical accounting policies sinceDecember 31, 2021 . For a description of critical accounting policies that affect our significant judgments and estimates used in the preparation of our unaudited condensed consolidated financial statements, refer to Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained in our Annual Report on Form 10-K. ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
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