The following discussion of our financial condition and results of operations
should be read in conjunction with our financial statements and the notes to
those financial statements appearing elsewhere in this Annual Report on Form
10-K. This discussion contains forward-looking statements that involve
significant risks and uncertainties. As a result of many factors, such as those
set forth in Part I, Item 1A. Risk Factors of this Annual Report on Form 10-K,
which are incorporated herein by reference, our actual results may differ
materially from those anticipated in these forward-looking statements.
Overview
We are a biopharmaceutical company based in Cambridge, Massachusetts that is
entitled to receive up to $450.0 million in contingent milestone payments
related to our sale of ONIVYDE® to Ipsen S.A., or Ipsen, in April 2017 and up to
$54.5 million in contingent milestone payments related to our sale of MM-121 and
MM-111 to Elevation Oncology, Inc. (formerly known as 14ner Oncology, Inc.), or
Elevation, in July 2019. We do not have any ongoing research or development
activities and are seeking potential acquirers for our remaining preclinical and
clinical assets. We do not have any employees and instead use external
consultants for the operation of our company.
On April 3, 2017, we completed the sale of ONIVYDE and MM-436 (the "commercial
business") to Ipsen (the "Ipsen sale"). In connection with the Ipsen sale, we
are eligible to receive up to $450.0 million in additional regulatory
approval-based milestone payments. We entered into a license and collaboration
agreement, or the Servier agreement, between Ipsen and Les Laboratoires Servier
SAS, or Servier (as assignee from Shire plc) in 2014, and on April 3, 2017, the
Servier agreement was assigned to Ipsen in connection with the completion of the
Ipsen sale. We have received all $33.0 million in milestone payments under the
Servier agreement.
The remaining up to $450.0 million in potential milestone payments resulting
from the Ipsen sale consist of:
•
$225.0 million upon approval by the U.S. Food and Drug Administration, or FDA,
of ONIVYDE for the first-line treatment of metastatic adenocarcinoma of the
pancreas, subject to certain conditions;
•
$150.0 million upon approval by the FDA of ONIVYDE for the treatment of
small-cell lung cancer after failure of first-line chemotherapy; and
•
$75.0 million upon approval by the FDA of ONIVYDE for an additional indication
unrelated to those described above.
Our non-commercial assets, including our clinical and preclinical development
programs, were not included in the Ipsen sale and remain assets of ours.
•
In November 2022, Ipsen announced the Phase III NAPOLI 3 trial of Onivyde®
(irinotecan liposome injection) plus 5-fluorouracil/leucovorin and oxaliplatin
(the "NALIRIFOX regimen") met its primary endpoint demonstrating clinically
meaningful and statistically significant improvement in overall survival
compared to nab-paclitaxel plus gemcitabine in 770 previously untreated patients
with metastatic pancreatic ductal adenocarcinoma ("mPDAC") and key secondary
efficacy outcome of progression-free survival (PFS) also showed significant
improvement over the comparator arm. Ipsen also announced that the safety
profile of Onivyde in the NAPOLI 3 trial was consistent with those observed in
the previous phase I/II mPDAC study. Ipsen also stated that it intends to file a
supplemental New Drug Application with the U.S. Food and Drug Administration for
Onivyde in combination with oxaliplatin plus 5-fluorouracil/leucovorin for the
treatment of patients with previously untreated mPDAC following the Fast Track
Designation granted in 2020. In January 2023, Ipsen presented clinical trial
results at the 2023 American Society of Clinical Oncology (ASCO)
Gastrointestinal Cancers Symposium. In February 2023 Ipsen provided guidance to
investors that it intends to file a supplemental New Drug Application with the
U.S. Food and Drug Administration during the first half of 2023 following the
Fast Track Designation granted in 2020 for the use of Onivyde in combination
with oxaliplatin plus 5-fluorouracil/leucovorin for the treatment of patients
with previously untreated mPDAC.
•
In August 2022, Ipsen announced that the Phase III RESILIENT trial did not meet
its primary endpoint of overall survival compared to topotecan. The trial is
evaluating Onivyde® (irinotecan liposomal injection) versus topotecan in
patients with small cell lung cancer, who have progressed on or after
platinum-based first-line therapy treatment. RESILIENT is a Phase III trial
conducted in two parts; the first part read out in 2020 confirming the safety,
dosing and efficacy of Onivyde; part two is evaluating the efficacy of Onivyde
versus topotecan. The analysis concluded that the primary endpoint overall
survival was not met in patients treated with Onivyde versus topotecan. However,
a doubling of the secondary endpoint of objective response rate in favor of
Onivyde was observed. The safety and tolerability of Onivyde was consistent with
its already-known safety profile, and no new safety concerns emerged. The
clinical study results will be communicated with the regulatory agency. Ipsen
indicated that while the results from the analysis of the RESILIENT
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trial have not demonstrated an overall survival benefit with Onivyde in patients
in second-line small cell lung cancer, Ipsen intends to analyze the data further
before decisions regarding next steps are made. To date, there have been no
further public announcements by Ipsen regarding these matters and it remains
unclear as to whether Ipsen will continue to seek approval for the use of
ONIVYDE in the small cell lung cancer application. If Ipsen elects not to
proceed with seeking regulatory approval, or if regulatory approval is not
obtained, we would not be entitled to the $150 million milestone payment tied to
approval of Onivyde for treating small cell lung cancer.
On May 30, 2019, we announced the completion of our review of strategic
alternatives, following which our board of directors implemented a series of
measures designed to extend our cash runway into 2027 and preserve our ability
to capture the potential milestone payments resulting from the Ipsen sale. We
have based this estimate on assumptions that may prove to be wrong, and we could
use our financial resources sooner than we currently expect. In connection with
that announcement, we discontinued the discovery efforts on our remaining
preclinical programs: MM-401, an agonistic antibody targeting a novel
immuno-oncology target, TNFR2; and MM-201, a highly stabilized agonist-Fc fusion
protein targeting death receptors 4 and 5. We are seeking potential acquirers
for our remaining preclinical and clinical assets.
The termination of our executive management team and all other employees was
substantially completed by June 28, 2019 and fully completed by July 12, 2019.
As of July 12, 2019, we did not have any employees. We have engaged external
consultants to run our day-to-day operations. We have also entered into
consulting agreements with certain former members of our executive management
team who are supporting our relationship with current partners, assisting with
the potential sale of remaining preclinical and clinical assets, and assisting
with certain legal and regulatory matters and the continued wind-down of
operations.
On July 12, 2019, we completed the sale to Elevation, or the Elevation sale, of
our anti-HER3 antibody programs, MM-121 (seribantumab) and MM-111. In connection
with the Elevation sale, we received an upfront cash payment of $3.5 million and
are eligible to receive up to $54.5 million in additional potential development,
regulatory approval and commercial-based milestone payments, consisting of:
•
$3.0 million for achievement of the primary endpoint in the first registrational
clinical study of either MM-121 or MM-111;
•
Up to $16.5 million in total payments for the achievement of various regulatory
approval and reimbursement-based milestones in the United States, Europe and
Japan; and
•
Up to $35.0 million in total payments for achieving various cumulative worldwide
net sales targets between $100.0 million and $300.0 million for MM-121 and
MM-111.
In January 2023, Elevation announced it is pausing further investment in the
clinical development of seribantumab and intends to pursue further development
only in collaboration with a partner. Elevation also announced that it intends
to present additional interim data from its study of seribantumab in the first
half of 2023.
On March 27, 2020, we entered into an Asset Purchase Agreement (the "Celator
Asset Purchase Agreement") with Celator Pharmaceuticals, Inc. (the "Buyer"),
pursuant to which the Buyer agreed to purchase certain assets (the "Transferred
Assets") relating to certain of our preclinical nanoliposome programs (the
"Transaction"). We completed the Transaction simultaneously with the execution
of the Celator Asset Purchase Agreement. Under the terms of the Celator Asset
Purchase Agreement, the Buyer paid to us a cash payment of $2.3 million and
reimbursed us for $0.2 million related to certain specified expenses and to
assume certain liabilities with respect to the Transferred Assets. We incurred
$0.4 million expenses related to the Transaction.
On September 15, 2021, we entered into an Asset Purchase Option Agreement (the
"Asset Purchase Option Agreement") with a third party, pursuant to which the
third party agreed to obtain an exclusive option, to purchase one of our
preclinical programs with a consideration of $0.5 million. Under the terms of
the Asset Purchase Option Agreement, the third party paid to us the option fee
of $0.1 million. The third party had the right to exercise the option within 24
months from September 15, 2021. We recognized a gain of $0.1 million related to
the option fee payment for the year ended December 31, 2021. On January 18,
2022, the third party provided written notice to us of its intent to exercise
such option. On March 1, 2022, we entered the Asset Purchase Option Agreement
with the third party. The consideration of $0.5 million was paid to us and a
gain of $0.5 million was recognized in March 2022.
On January 23, 2023, we entered into an Asset Purchase Option Agreement (the
"Option Agreement") with a third party (the "Purchaser"), pursuant to which the
Purchaser agreed to obtain an exclusive option (the "Option") to purchase one of
the Company's preclinical programs with a consideration of $0.7 million. Under
the terms of the Option Agreement, the Purchaser paid to us the Option fee of
$0.2 million in January 2023. The Purchaser may exercise the Option prior to
July 23, 2023.
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We previously devoted substantially all of our resources to our drug discovery
and development efforts, including conducting clinical trials for our product
candidates, protecting our intellectual property and providing general and
administrative support for these operations. We have financed our operations
primarily through private placements of convertible preferred stock,
collaborations, public offerings of our securities, secured debt financings,
sales of ONIVYDE and the Ipsen sale.
As of December 31, 2022, we had unrestricted cash and cash equivalents of $19.4
million. We expect that our cash and cash equivalents as of December 31, 2022
will be sufficient to continue our operations beyond 2027, which we estimate is
beyond the latest date when the longest-term potential Ipsen milestone may be
achieved.
We have a history of losses from our operations. We do not expect to be
profitable from our operations in the future unless we receive potential future
milestone payments, if any. As of December 31, 2022, we had an accumulated
deficit of $547.6 million. Our net loss was $1.5 million and $2.5 million for
years ended December 31, 2022 and 2021, respectively. We do not expect to incur
any research and development expenses going forward.
Financial Operations Overview
General and administrative expenses
General and administrative expenses consist primarily of stock-based
compensation expenses, legal, intellectual property, business development,
finance, information technology, corporate communications and investor
relations. Other general and administrative expenses include costs for board of
director's costs, insurance expenses, legal and professional fees, and
accounting and information technology services fees.
Interest income
Interest income consists primarily of interest income associated with our money
market fund.
Critical Accounting Policies and Significant Judgments and Estimates
Our management's discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which we have
prepared in accordance with the rules and regulations of the Securities and
Exchange Commission, or the SEC, and generally accepted accounting principles in
the United States, or GAAP. The preparation of these consolidated financial
statements requires us to make estimates and assumptions that affect the
reported amounts of assets and liabilities and the disclosure of contingent
assets and liabilities at the date of the financial statements, as well as the
reported expenses during the reporting periods. We evaluate our estimates and
judgments on an ongoing basis. We base our estimates on historical experience
and on various other factors that we believe are reasonable under the
circumstances, the results of which form the basis for making judgments about
the carrying value of assets and liabilities that are not readily apparent from
other sources. Our actual results may differ from these estimates under
different assumptions or conditions.
While our significant accounting policies are more fully described in Note 1,
"Nature of the Business and Summary of Significant Accounting Policies," in the
accompanying notes to the consolidated financial statements appearing at the end
of this Annual Report on Form 10-K, we believe that the following accounting
policies are the most critical to aid in fully understanding and evaluating our
financial condition and results of operations.
Accrued expenses
As part of the process of preparing financial statements, we are required to
estimate accrued expenses. This process involves identifying services that have
been performed on our behalf and estimating the level of services performed and
the associated costs incurred for such services where we have not yet been
invoiced or otherwise notified of actual cost. We record these estimates in our
consolidated financial statements as of each balance sheet date.
In accruing service fees, we estimate the time period over which services will
be provided and the level of effort in each period. If the actual timing of the
provision of services or the level of effort varies from the estimate, we will
adjust the accrual accordingly. In the event that we do not identify costs that
have been incurred or we under or overestimate the level of services performed
or the costs of such services, our actual expenses could differ from such
estimates. The date on which some services commence, the level of services
performed on or before a given date and the cost of such services are often
subjective determinations. We make estimates based on the facts and
circumstances known to us at the time and in accordance with GAAP. There have
been no material changes in estimates for the periods presented.
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Stock-based compensation expense
We account for our stock-based compensation awards in accordance with Accounting
Standards Codification, or ASC, 718, Compensation - Stock Compensation. ASC 718
requires all share-based payments to employees, including grants of employee
stock options, to be recognized in the consolidated statements of operations and
comprehensive loss based on their grant date fair values. For stock options
granted to employees and to members of our board of directors for their service
on the board of directors, we estimate the grant date fair value of each option
award using the Black-Scholes option pricing model. The use of the Black-Scholes
option pricing model requires us to make assumptions with respect to the
expected term of the option, the expected volatility of our common stock
consistent with the expected term of the option, the risk-free interest rate
consistent with the expected term of the option and the expected dividend yield
of our common stock. Stock-based compensation expense related to employee stock
options is measured using the fair value of the award at the grant date and is
adjusted quarterly to reflect actual forfeitures. Stock-based compensation
expense is then recognized on a straight-line basis over the vesting period,
which is also the requisite service period.
Results of Operations
Comparison of the years ended December 31, 2022 and 2021
Years Ended December 31,
(in thousands) 2022 2021
Operating expenses:
General and administrative expenses $ 2,174 $ 2,616
Gain on sales of assets
(445 ) (144 )
Total operating expenses 1,729 2,472
Loss from operations (1,729 ) (2,472 )
Interest income 188 20
Loss before income tax expense (1,541 ) (2,452 )
Income tax expense (3 ) (3 )
Net loss $ (1,544 ) $ (2,455 )General and administrative expenses
General and administrative expenses were $2.2 million for the year ended
December 31, 2022 compared to $2.6 million for the year ended December 31, 2021,
a decrease of $0.4 million, or 15%. This decrease was primarily attributable to
the decrease in both share-based compensation expense and patent costs.
Gain on sales of assets
Gain on sale of assets was $0.5 million for the year ended December 31, 2022,
primarily attributable to the fee to purchase one of our preclinical programs
paid by a third party pursuant to the Asset Purchase Option Agreement. Gain on
sale of assets was $0.1 million for the year ended December 31, 2021,
attributable to the sale of certain of our preclinical programs to a third
party.
Interest income
Interest income was $0.2 million for the year ended December 31, 2022 and less
than $0.1 million for the year ended December 31, 2021, primarily attributable
to the increase in our interest rate associated with our money market fund.
Liquidity and Capital Resources
Sources of liquidity
We have financed our operations from inception through December 31, 2022
primarily through private placements of convertible preferred stock,
collaborations, public offerings of our securities, secured debt financings,
sales of ONIVYDE and the Ipsen sale. Through December 31, 2022, we have received
$580.7 million from the Ipsen sale, $268.2 million from the sale of convertible
preferred stock and warrants, $126.7 million of net proceeds from the sale of
common stock in our initial public offering and a July 2013 follow-on
underwritten public offering, $38.6 million of net proceeds from our 2015 "at
the market offering" program, or the ATM offering, $39.6 million of net proceeds
from a secured debt financing, $120.6 million of net proceeds from the issuance
of the convertible notes in our July 2013 underwritten public offering, $168.5
million of net proceeds from the issuance of the 2022 notes, $492.5 million of
upfront license fees, milestone payments, reimbursement of research and
development costs and manufacturing services and other payments from our
collaborations, $68.9 million of cash receipts related to ONIVYDE sales, $33.0
million in milestone payments related to the development and commercialization
of ONIVYDE and $14.7 million in net borrowings
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pursuant to the loan agreement with Hercules. In 2022, we also received cash
proceeds of $6.5 million from the exercise of stock options. As of December 31,
2022, we had unrestricted cash and cash equivalents of $19.4 million.
Cash flows
The following table provides information regarding our cash flows for the years
ended December 31, 2022 and 2021:
Years Ended December 31,
(in thousands) 2022 2021
Net cash used in operating activities $ (1,742 ) $ (218 )
Net cash provided by investing activities
445 144
Net cash provided by financing activities 6,533 239
Net increase in cash and cash equivalents $ 5,236 $ 165
Operating activities
Cash used in operating activities was $1.7 million during the year ended
December 31, 2022. The cash used in operating activities was primarily a result
of our $1.5 million net loss and net decrease in assets and liabilities of $0.2
million. The net loss was adjusted by a net decrease in assets and liabilities
of $0.2 million, which was primarily driven by decreases in prepaid expenses and
other assets of $0.2 million. This decrease included non-cash adjustments of
$0.4 million gain on the sale of in-process research and development assets,
offset by $0.1 million of stock-based compensation expense.
Cash used in operating activities was $0.2 million during the year ended
December 31, 2021. The cash used in operating activities was primarily a result
of our $2.5 million net loss and net decrease in assets and liabilities of $0.2
million. The net loss was adjusted by a net decrease in assets and liabilities
of $2.0 million, which was primarily driven by decreases in prepaid expenses and
other assets of $2.2 million, partially offset by a decrease in accounts
payable, accrued expenses and other of $0.2 million. This decrease included
non-cash adjustments of $0.1 million gain on the sale of in-process research and
development assets, offset by $0.4 million of stock-based compensation expense.
Investing activities
Cash provided by investing activities of $0.4 million and $0.1 million during
the years ended December 31, 2022 and 2021, respectively, was due to proceeds
from the sale of in-process research and development.
Financing activities
Cash provided by financing activities of $6.5 million and $0.2 million during
the years ended December 31, 2022 and 2021, respectively, was due to proceeds
from the exercise of stock options.
Funding requirements
We have incurred significant expenses and operating losses to date. On May 30,
2019, we announced the completion of our review of strategic alternatives,
following which our board of directors implemented a series of measures designed
to extend our cash runway into 2027 and preserve our ability to capture the
potential milestone payments resulting from the Ipsen sale. In connection with
that announcement, we discontinued the discovery efforts on our remaining
preclinical programs and implemented a reduction in headcount resulting in the
termination of all remaining employees as of July 12, 2019. Our future capital
requirements will depend on many factors, including:
•
the timing and amount of potential milestone payments related to ONIVYDE that we
may receive from Ipsen;
•
the timing and amount of potential milestone payments that we may receive from
Elevation;
•
the timing and amount of any special dividend to our stockholders that our board
of directors may declare;
•
the timing and amount of general and administrative expenses required to
continue to operate our company;
•
the extent to which we owe any taxes for current, future or prior periods,
including as a result of any audits by taxing authorities;
•
the extent to which we invest in any future research or development activities
of our product candidates;
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•
the costs of preparing, filing and prosecuting patent applications and
maintaining, enforcing and defending intellectual property-related claims;
•
the extent to which we acquire or invest in businesses, products and
technologies; and
•
the costs associated with operating as a public company and maintaining
compliance with exchange listing and SEC requirements.
We do not believe that we will be able to raise a material amount of capital
through the sale of our equity securities or debt financing. Rather, our goal is
to judiciously expend our remaining cash until such time, if ever, as we receive
additional milestone payments from Ipsen and Elevation. There can be no
assurance as to the timing, terms or consummation of any financing or
divestiture of our few remaining intellectual property assets. We do not have
any committed external sources of funds. In the unlikely event that we raise
additional capital through the sale of equity or convertible debt securities,
the ownership interest of our stockholders will be diluted, and the terms of
these securities may include liquidation or other preferences that adversely
affect the rights of our stockholders. Debt financing, if available, may involve
agreements that include covenants limiting or restricting our ability to take
specific actions, such as incurring additional debt, making capital expenditures
or declaring dividends. If we raise additional funds through arrangements with
third parties, we may have to relinquish valuable rights to our future revenue
streams or product candidates.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined under SEC rules.
Tax Loss Carryforwards
At December 31, 2022, we had net operating loss carryforwards for federal and
state income tax purposes of $215.0 million and $300.4 million, respectively.
Our existing federal and state net operating loss carryforwards begin to expire
in 2033. We also had available research and development credits for federal and
state income tax purposes of approximately $28.7 million and $20.3 million,
respectively. The federal and state research and development credits will begin
to expire in 2022 and 2025, respectively. As of December 31, 2022, we also had
available investment tax credits for state income tax purposes of less than $0.1
million which do not expire. We have orphan drug credits of $122.7 million,
which begin to expire in 2031.
We have evaluated the positive and negative evidence bearing upon the
realizability of our deferred tax assets, which are comprised principally of net
operating loss carryforwards and research and development credits. Under the
applicable accounting standards, we have considered our history of losses and
concluded that it is more likely than not that we will not recognize the
benefits of federal and state deferred tax assets. Accordingly, a full valuation
allowance has been established against the deferred tax assets.
Utilization of the net operating loss and tax credit carryforwards may be
subject to a substantial annual limitation under Section 382 of the Internal
Revenue Code due to ownership change limitations that have occurred previously
or that could occur in the future. These ownership changes may limit the amount
of net operating loss and tax credit carryforwards that can be utilized annually
to offset future taxable income and tax. We completed an evaluation of ownership
changes through November 16, 2022 to assess whether utilization of our net
operating loss or tax credit carryforwards would be subject to an annual
limitation under Section 382 of the Internal Revenue Code. We believe we can
utilize our tax attributes generated through November 16, 2022 as a result of
the analysis. To the extent an ownership change has occurred after November 16,
2022 or occurs in the future, the net operating loss and tax credit
carryforwards may be subject to limitation.
We have not, as of yet, conducted a study of our domestic research and
development credit carryforwards and Orphan Drug Credits. This study may result
in an increase or decrease to our credit carryforwards; however, until a study
is completed and any adjustment is known, no amounts are being presented as an
uncertain tax position. A full valuation allowance has been provided against our
credits, and if an adjustment is required, this adjustment would be offset by an
adjustment to the valuation allowance. As a result, there would be no impact to
the statement of operations and comprehensive loss, balance sheet or cash flows
if an adjustment were required.
382 Rights Agreement
On December 3, 2019, we entered into a Section 382 Rights Agreement, or the
Rights Agreement, with Computershare Trust Company, N.A., a federally chartered
trust company, as Rights Agent. Pursuant to the Rights Agreement, on December
13, 2019, we issued a dividend of one preferred share purchase right, or a
Right, for each share of our common stock to the stockholders of record
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on that date. Each Right entitles the registered holder to purchase from us one
one-thousandth of a share of Series Z Junior Preferred Stock, par value $0.01
per share, or the Preferred Shares, at a price of $18.00 per one one-thousandth
of a Preferred Share represented by a Right, subject to adjustment. The
description and terms of the Rights are set forth in the Rights Agreement. In
December 2022, we extended the term of the Rights Plan through December 2, 2025.
Recent Accounting Pronouncements
See Note 1, "Nature of the Business and Summary of Significant Accounting
Policies," in the accompanying notes to the consolidated financial statements
for a description of recent accounting pronouncements applicable to our
business.
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