MOMENTA PHARMACEUTICALS, INC. The following discussion of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form 10-Q and the audited consolidated financial statements and notes thereto included in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many important factors, such as those set forth under "Risk Factors" in Part II., Item 1A. of this Quarterly Report on Form 10-Q, our actual results may differ materially from those anticipated in these forward-looking statements. Overview We are a biotechnology company focused on the discovery and development of novel biologic therapies for the treatment of rare immune-mediated diseases. Prior to 2018, we had the dual focus of developing novel drug candidates and nurturing a portfolio of biosimilar and complex generic products and product candidates. In the beginning of 2018, we engaged in a strategic review of our business and made the decision that shareholder value could be enhanced by shifting our future investments to fully support our promising novel drug portfolio. Following this strategic review, we made the decision inSeptember 2018 to restructure the company. While we have terminated all future development of any new or early stage biosimilar and complex generic products, we have retained our commercial partnership withSandoz AG , or Sandoz, for our generic versions of COPAXONE and LOVENOX, which are approved products. We believe that Sandoz's sales of GLATOPA, our generic version of COPAXONE, can generate cash flow to help fund our novel pipeline. Enoxaparin Sodium Injection, our generic version of LOVENOX, is not currently marketed by Sandoz. In addition, we are developing an EYLEA biosimilar, in collaboration withMylan Ireland Limited , or Mylan, a wholly-owned indirect subsidiary of Mylan N.V., which is currently conducting a clinical trial in patients. If the results from this study are supportive, we believe this program has the potential to launch in the 2023 time frame and help fund our novel portfolio. To date, we have devoted substantially all of our capital resource expenditures to the research and development of our product candidates. Although we were profitable in fiscal years 2010 and 2011, since that time we have been incurring operating losses and we expect to incur annual operating losses over the next several years as we advance our drug development portfolio. As ofJune 30, 2020 , we had an accumulated deficit of approximately$1.1 billion . We will need to generate significant revenue to return to profitability. We expect that our return to profitability, if at all, will most likely come from the commercialization of the products in our drug development portfolio. Novel Therapeutics We believe our novel product candidates could be capable of treating a large number of immune-mediated disorders whose pathogenesis is driven in whole or in part by autoantibodies, immune complexes, and Fc receptor biology. M281 (Nipocalimab) - Anti-FcRn Candidate M281 is a fully-human anti-neonatal Fc receptor, or anti FcRn, aglycosylated immunoglobulin G, or IgG1, monoclonal antibody, engineered to reduce circulating IgG antibodies, by completely blocking endogenous IgG recycling via FcRn. A Phase 1 randomized, double-blind, placebo-controlled study to evaluate the safety, tolerability, pharmacokinetics and pharmacodynamics of M281 in 114 normal healthy volunteers was initiated inJune 2016 . The full results of the Phase 1 study were published onNovember 7, 2018 . A total of 50 patients were enrolled in both the single ascending dose and multiple ascending dose portions of the study, both of which showed predictable pharmacokinetics, and commensurate, controllable and reproducible reductions in circulating IgG. The data showed M281 could achieve a full receptor occupancy with a single dose and a greater than 80% reduction in circulating IgG antibodies, with a mean reduction of 84%. M281 was well tolerated at all dose levels and no serious adverse events or unexpected safety findings were observed in either portion of the study. In the fourth quarter of 2018, we commenced Vivacity-MG, our Phase 2 proof-of-concept clinical trial for the treatment of patients with generalized myasthenia gravis, or gMG, who have insufficient clinical response to the standard-of-care treatment. 26 -------------------------------------------------------------------------------- Table of Contents Also in the fourth quarter of 2018, we commenced Unity, our Phase 2 proof-of-concept clinical trial for the treatment of women at high risk for early onset hemolytic disease of the fetus and newborn, or HDFN. In the third quarter of 2019, we commenced Energy Study, our Phase 2/3 clinical trial in warm autoimmune hemolytic anemia, or wAIHA. InJuly 2019 , theFood and Drug Administration , or FDA, granted Fast Track designation for our HDFN and wAIHA indications, which is a process designed to facilitate the development and expedite the review of drugs to treat serious conditions and fill unmet medical need. InJuly 2020 , we announced that the FDA granted Rare Pediatric Disease and Orphan Drug designations for our HDFN indication. M254 - Hyper-sialylated IgG Candidate M254 is a hyper-sialylated immunoglobulin designed as a high potency alternative to IVIg, a therapeutic drug product that contains pooled, human immunoglobulin G, or IgG, antibodies purified from blood plasma. IVIg is used to treat many inflammatory diseases, including idiopathic thrombocytopenic purpura, or ITP, and chronic inflammatory demyelinating polyneuropathy, or CIDP. In nonclinical studies, M254 has been shown to have up to ten times more enhanced anti-inflammatory activity than IVIg in a variety of animal models of autoimmune disease. We initiated a multi-part Phase 1/2 proof of concept clinical study in normal, healthy volunteers and patients with ITP in early 2019. M230 (CSL730) - Recombinant Fc Multimer Candidate M230 is a novel recombinant trivalent human IgG1 Fc multimer containing three IgG Fc regions joined to maximize activity. Nonclinical data have shown that M230 has enhanced avidity for the Fc receptors, matching the potency and efficacy of IVIg at significantly lower doses. Pursuant to the License and Option Agreement, effectiveFebruary 17, 2017 , withCSL Behring Recombinant Facility AG , or CSL, a wholly-owned indirect subsidiary of CSL Limited, we granted CSL an exclusive worldwide license to research, develop, manufacture and commercialize M230. InAugust 2017 , we exercised our 50% co-funding option, which is discussed further in Note 8, "License Agreements and Collaborative Arrangements" to our condensed consolidated financial statements. CSL's Phase 1 clinical study in healthy volunteers to evaluate the safety and tolerability of M230 is continuing and CSL anticipates introducing a subcutaneous formulation into the Phase 1 clinical study in 2020. Legacy Products M710-Biosimilar EYLEA® (aflibercept) Candidate M710 is being developed as a biosimilar of EYLEA in collaboration with Mylan. InAugust 2018 , Mylan initiated dosing of patients inthe United States in our pivotal clinical trial. InDecember 2018 andFebruary 2019 , Mylan initiated dosing of patients in theEuropean Union andJapan , respectively. This trial is a randomized, double-blind, active-control, multi-center study in patients with diabetic macular edema to compare the safety, efficacy and immunogenicity of M710 to EYLEA. Subject to development, marketing approval, patent considerations and litigation timelines, we expect U.S. market formation for biosimilar versions of EYLEA to be in the 2023 time frame. GLATOPA® (glatiramer acetate injection) 20 mg/mL-Generic Once-daily COPAXONE® (glatiramer acetate injection) 20 mg/mL InApril 2015 , the FDA approved the ANDA for GLATOPA 20 mg/mL, a generic equivalent of once-daily COPAXONE 20 mg/mL. GLATOPA 20 mg/mL was the first "AP" rated, substitutable generic equivalent of once-daily COPAXONE. Sandoz commenced sales of GLATOPA 20 mg/mL inJune 2015 . Under our collaboration agreement with Sandoz, we earn 50% of contractually defined profits on GLATOPA 20 mg/mL worldwide net sales. InOctober 2017 , Mylan N.V. announced the launch of its generic equivalents of once-daily COPAXONE 20 mg/mL and three-times-weekly COPAXONE 40 mg/mL. Following Mylan N.V.'s entry into the market, Sandoz has defended GLATOPA's share of the 20 mg/mL glatiramer acetate injection market by using one or more contracting strategies, including but not limited to, lowering its GLATOPA 20 mg/mL price or increasing the discounts or rebates it offers for GLATOPA 20 mg/mL, which has decreased contractual profit share revenue. We estimate that the number of prescriptions for GLATOPA 20 mg/mL currently represents approximately 36% of the once-daily 20 mg/mLU.S. glatiramer acetate market. 27
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GLATOPA® (glatiramer acetate injection) 40 mg/mL-Generic Three-times-weekly COPAXONE® (glatiramer acetate injection) 40 mg/mL
In
Since Sandoz's launch of GLATOPA 40mg/mL inFebruary 2018 , we believe Sandoz has encountered aggressive pricing and contracting tactics from competitors, which has limited uptake of the product and as a result we expect modest revenues for this product in the future. As ofJune 30, 2020 , 40 mg/mL glatiramer acetate injection accounted for approximately 85% of the overallU.S. glatiramer acetate injection market (20 mg/mL and 40 mg/mL) based on volume prescribed.
GLATOPA refers to GLATOPA 20 mg/mL and GLATOPA 40 mg/mL, collectively.
Enoxaparin Sodium Injection-Generic LOVENOX®
Under the 2003 Sandoz Agreement, Sandoz is obligated to pay us 50% of contractually defined profits on sales of Enoxaparin Sodium Injection. InJuly 2018 , Sandoz notified its customers and the FDA that it will discontinue supplying Enoxaparin Sodium Injection. Sandoz continues to evaluate alternate acceptable contract manufacturers at a price point that will allow for profitable and competitive sales and may decide to relaunch Enoxaparin Sodium Injection at a later date following regulatory approval. We expect future revenues from Sandoz' sales of Enoxaparin Sodium Injection, if any, to be minimal. OnJuly 10, 2020 we and Sandoz entered into an agreement pursuant to which we will (i) transfer all of our right, title and interest in the Enoxaparin product to Sandoz and (ii) terminate the 2003 Sandoz Agreement as described under Note 12, "Subsequent Events" to our condensed consolidated financial statements. Legal proceedings related to Enoxaparin Sodium Injection are described under Note 11, "Commitments and Contingencies" to our condensed consolidated financial statements. Impact of COVID-19 We are closely monitoring how the spread of the novel coronavirus, COVID-19, is affecting our employees, business, preclinical studies and clinical trials. In response to the spread of COVID-19, our employees are working remotely, and we have suspended all business travel. InApril 2020 , we announced that we have temporarily suspended patient enrollment in our Energy Study, an adaptive Phase 2/3 clinical study of nipocalimab in wAIHA. We also announced that we expect to launch our Phase 2 study of M254 in CIDP in 2021, as opposed to the fourth quarter of 2020, as previously disclosed. Disruptions caused by the COVID-19 pandemic may result in further difficulties or delays in initiating, enrolling, conducting or completing our planned and ongoing clinical trials and the incurrence of unforeseen costs as a result of preclinical study or clinical trial delays. As a result, we expect that the COVID-19 pandemic may impact our business, revenues, results of operations and financial condition. At this time, there is significant uncertainty relating to the trajectory of the COVID-19 pandemic and impact of related responses. The impact of COVID-19 on our future results will largely depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, the ultimate impact of the pandemic on financial markets and the global economy, travel restrictions and social distancing inthe United States and other countries, business closures or business disruptions and the effectiveness of actions taken inthe United States and other countries to contain and treat the disease. See Risk Factors, "The outbreak of the novel coronavirus disease, COVID-19, could adversely impact our business, including our preclinical studies and clinical trials." in Part II, Item 1A of this Quarterly Report on Form 10-Q. 28
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Results of Operations
Comparison of Three Months Ended
Product revenue includes our contractually defined profits earned on Sandoz' sales of GLATOPA.
The following data summarizes our collaboration revenues for the periods
indicated:
Three Months Ended June 30 , Change period over period
% of Total % of Total
2020 Collaboration Revenue 2019 Collaboration Revenue 2020 compared to 2019
Collaboration revenue: (in thousands) (%) (in thousands) (%) (in thousands) (%)
Product revenue $ 6,588 100 % $ 3,333 64 % $ 3,255 98 %
Research and development
revenue 22 - % 1,849 36 % (1,827) (99) %
Total collaboration revenue $ 6,610 100 % $ 5,182 100 % $ 1,428 28 %
Product Revenue
Sandoz commenced sales of GLATOPA 20 mg/mL in the United States in June 2015 and
GLATOPA 40 mg/mL in February 2018 . We earn 50% of contractually defined profits
on Sandoz' worldwide net sales of GLATOPA.
We estimate that the number of prescriptions for GLATOPA 20 mg/mL represented
approximately 36% of the once-daily 20 mg/mL U.S. glatiramer acetate market as
of June 30, 2020 .
Since Sandoz' launch of GLATOPA 40mg/mL in February 2018 , we believe Sandoz has
encountered aggressive pricing and contracting tactics from competitors, which
has limited uptake of the product, and, as a result, we expect modest sales for
the product in the future. As of June 30, 2020 , 40 mg/mL glatiramer acetate
injection accounted for approximately 85% of the overall U.S. glatiramer acetate
injection market (20 mg/mL and 40 mg/mL) based on volume prescribed.
The increase in product revenue of $3.3 million , or 98%, from the three months
ended June 30, 2019 to the three months ended June 30, 2020 was due to higher
net sales of GLATOPA.
Research and Development Revenue
Research and development revenue generally consists of amounts earned by us under our collaborations for technical development, regulatory and commercial milestones, reimbursement of research and development services and reimbursement of development costs under our collaborative arrangements, and recognition of upfront arrangement consideration.
We expect to recognize revenue from the remaining balance of
The decrease in research and development revenue of$1.8 million , or 99%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 was due to lower reimbursement revenue for GLATOPA expenses and lower revenue recognized from Mylan's upfront payment due to the partial termination of the Mylan Collaboration Agreement. 29 -------------------------------------------------------------------------------- Table of Contents Operating Expenses The following table summarizes our operating expenses for the periods indicated: Three Months EndedJune 30 , Change period over period % of Total % of Total Operating Operating 2020 Expenses 2019 Expenses 2020 compared to 2019 (in thousands) (%) (in thousands) (%) (in thousands) (%) Operating expenses: Research and development$ 38,842 60 %$ 32,131 26 %$ 6,711 21 % General and administrative 25,339 40 % 46,609 38 % (21,270) (46) % Other operating expense (193) - % 42,936 36 % (43,129) (100) % Restructuring - - % 132 - % (132) (100) % Total operating expenses$ 63,988 100 %$ 121,808 100 %$ (57,820) (47) %
Research and Development Expense
Research and development expenses consist of 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. We track the external
research and development costs incurred for each of our product candidates. Our
external research and development expenses consist primarily of:
•expenses incurred under agreements with consultants, third-party contract
research organizations, or CROs, and investigative sites where all of our
nonclinical studies and clinical trials are conducted;
•costs of manufacturing clinical trial material, acquiring reference comparator
materials and manufacturing nonclinical study supplies and other materials from
contract manufacturing organizations, or CMOs, and related costs associated with
release and stability testing; and
•costs associated with process development activities.
Internal research and development costs are associated with activities performed
by our research and development organization and consist primarily of:
•personnel-related expenses, which include salaries, benefits and share-based
compensation; and
•facilities and other allocated expenses, which include direct and allocated
expenses for rent and maintenance of facilities, depreciation and amortization
of leasehold improvements and equipment and laboratory and other supplies.
For our collaboration arrangements in which the parties share in collaboration
expenses for products under the arrangement (cost sharing arrangements), we
record the reimbursement by the collaborator for its share of the development
effort as a reduction of research and development expense. Our share of costs
incurred by collaborators is recorded as research and development expense.
The lengthy process of securing FDA approval for new drugs, generics and
biosimilars requires the expenditure of substantial resources. Any failure by us
to obtain, or any delay in obtaining, regulatory approvals would materially
adversely affect our product development efforts and our business overall.
Accordingly, we cannot currently estimate with any degree of certainty the
amount of time or money that we will be required to expend in the future on our
product candidates prior to their regulatory approval, if such approval is ever
granted. As a result of these uncertainties surrounding the timing and outcome
of any approvals, we are currently unable to estimate when, if ever, our product
candidates will generate revenues and cash flows.
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The following table sets forth the primary components of our research and
development external expenditures, including the amortization of our intangible
assets, for each of our principal development programs for the three months
ended June 30, 2020 and 2019. The figures in the table include project
expenditures incurred by us and reimbursed by our collaborators, but exclude
project expenditures incurred by our collaborators. Although we track and
accumulate personnel effort by percentage of time spent on our programs, a
significant portion of our internal research and development costs, including
salaries and benefits, share-based compensation, facilities, depreciation and
laboratory supplies are not directly charged to programs. Therefore, our methods
for accounting for internal research and development costs preclude us from
reporting these costs on a project-by-project basis.
Three Months Ended
June 30,
Phase of Development 2020 2019
External Costs Incurred by Product Area: (in thousands)
Novel Therapeutics Various (1) $ 19,734 $ 16,130
Biosimilars Various (2) 2,326 4,295
Complex Generics (3) 47 122
Internal Costs 16,735 11,584
Total Research and Development Expenses $ 38,842 $ 32,131 _______________________________________
(1)Our novel therapeutic programs include M281, for which we commenced two Phase 2 clinical trials during the fourth quarter of 2018 and announced inAugust 2019 that we commenced an additional Phase 2/3 clinical trial; M230, for which our licensee's, CSL's, Phase 1 study in healthy volunteers to evaluate safety and tolerability of M230 is ongoing; M254, for which we have initiated a Phase 1/2 clinical study in early 2019; as well as other discovery and nonclinical stage programs. (2)Biosimilars include M710, a biosimilar candidate of EYLEA® (aflibercept). Mylan initiated a pivotal clinical trial in patients inthe United States inAugust 2018 , and inDecember 2018 andFebruary 2019 , initiated dosing of patients in theEuropean Union andJapan , respectively. InNovember 2018 , we provided notice to Mylan terminating our participation in the development of our biosimilar programs other than M710. (3)Includes external costs for GLATOPA and Enoxaparin Sodium Injection. InJuly 2010 , the first ANDA for Enoxaparin Sodium Injection was approved by the FDA, and Sandoz launched the product. InApril 2015 , the FDA approved the ANDA for once-daily GLATOPA 20 mg/mL. Sandoz launched GLATOPA 20 mg/mL inJune 2015 . InFebruary 2018 , the FDA approved the ANDA for three-times-weekly GLATOPA 40 mg/mL, and Sandoz launched the product. For more information on GLATOPA, see "Legacy Products" section above. We expect research and development expense to increase for the foreseeable future as our current development programs progress and new programs are added. External costs of our novel therapeutic programs increased by$3.6 million , or 22%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 , and were primarily driven by an increase in manufacturing and clinical trial activity for M254 as described in Note 1 in the above table, partially offset by a decrease in our share of CSL collaboration costs for M230. External expenditures for our biosimilars programs decreased by$2.0 million , or 46%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 , primarily due to a decrease in spending on M710 and M923. Internal costs increased by$5.2 million , or 44%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 primarily due to an increase in share-based compensation expense related to PSUs, partially offset by a reduction in lease costs. General and Administrative General and administrative expenses consist primarily of salaries, share-based compensation and other related costs for personnel in general and administrative functions, professional fees for legal and accounting services, legal settlements, insurance costs, and allocated rent, facility and lab supplies, and depreciation expense. For our collaboration arrangements in which the parties share in collaboration expenses for products under the arrangement (cost sharing arrangements), we record the reimbursement by the collaborator for its share of the development effort as a reduction of general and administrative expense. Our share of costs incurred by collaborators is recorded as general and administrative expense. 31 -------------------------------------------------------------------------------- Table of Contents We expect our general and administrative expenses, including internal and external legal and business development costs that support our various product development efforts, to vary from period to period in relation to our commercial, litigation and development activities. The decrease of$21.3 million , or 46%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 was primarily due to a payment of$21.0 million to Amphastar inJune 2019 reflecting our portion of the settlement payment; lower legal fees and lower depreciation and rent costs due to the modification to the Bent lease in 2019; partially offset by an increase in share-based compensation expense related to PSUs. Other Operating Expense Other operating expense for the three months endedJune 30, 2020 included a$0.2 million adjustment due to changes in the estimated fair value of the future contractual obligations under our manufacturing services agreement withHuman Genome Sciences, Inc. , or GSK. Other operating expense was$42.9 million for the three months endedJune 30, 2019 and included a take-or-pay purchase obligation under our manufacturing agreement with GSK. Consistent with our decision to cease active development of M923, we canceled our manufacturing runs scheduled through 2020 and recorded a charge of$20.9 million in the three months endedJune 30, 2019 , representing the minimum purchase obligation. Since the utility of the remaining minimum purchase commitments for the calendar years 2021 through 2022 was deemed impaired atJune 30, 2019 , we recorded an additional charge of$22.0 million during the six months endedJune 30, 2019 .
Restructuring
Restructuring charges consist of severance, bonus, share-based compensation, and
impairment of equipment associated with our workforce reduction in
Other Income, Net
Other income, net includes other items of non-operating income and expense. Other income, net was$0.3 million and$2.7 million for the three months endedJune 30, 2020 and 2019, respectively. The decrease of$2.4 million , or 89%, from the three months endedJune 30, 2019 to the three months endedJune 30, 2020 was primarily the result of interest expense recognized on the purchase commitments under our manufacturing agreement with GSK and lower interest income due to lower market yields on our investments.
Comparison of Six Months Ended
Product revenue includes our contractually defined profits earned on Sandoz' sales of GLATOPA.
The following data summarizes our collaboration revenues for the periods
indicated:
Six Months Ended June 30 , Change period over period
% of Total % of Total
2020 Collaboration Revenue 2019 Collaboration Revenue 2020 compared to 2019
Collaboration revenue: (in thousands) (%) (in thousands) (%) (in thousands) (%)
Product revenue $ 15,280 99 % $ 5,685 61 % $ 9,595 169 %
Research and development
revenue 219 1 % 3,610 39 % (3,391) (94) %
Total collaboration revenue $ 15,499 100 % $ 9,295 100 % $ 6,204 67 %
Product Revenue
The increase in product revenue of $9.6 million , or 169%, from the six months
ended June 30, 2019 to the six months ended June 30, 2020 was due to higher net
sales of GLATOPA.
Research and Development Revenue
The decrease in research and development revenue of$3.4 million , or 94%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 was due to lower reimbursement revenue for GLATOPA expenses and lower revenue recognized from Mylan's upfront payment due to the partial termination of the Mylan Collaboration Agreement. 32 -------------------------------------------------------------------------------- Table of Contents Operating Expenses The following table summarizes our operating expenses for the periods indicated: Six Months EndedJune 30 , Change period over period % of Total % of Total Operating Operating 2020 Expenses 2019 Expenses 2020 compared to 2019 (in thousands) (%) (in thousands) (%) (in thousands) (%) Operating expenses: Research and development$ 73,049 64 %$ 60,103 35 %$ 12,946 22 % General and administrative 39,903 35 % 70,815 40 % (30,912) (44) % Other operating expense 593 1 % 42,936 25 % (42,343) (99) % Restructuring - - % 158 - % (158) (100) % Total operating expenses$ 113,545 100 %$ 174,012 100 %$ (60,467) (35) % Research and Development Expense The following table sets forth the primary components of our research and development external expenditures, including the amortization of our intangible assets, for each of our principal development programs for the six months endedJune 30, 2020 and 2019. The figures in the table include project expenditures incurred by us and reimbursed by our collaborators, but exclude project expenditures incurred by our collaborators. Although we track and accumulate personnel effort by percentage of time spent on our programs, a significant portion of our internal research and development costs, including salaries and benefits, share-based compensation, facilities, depreciation and laboratory supplies are not directly charged to programs. Therefore, our methods for accounting for internal research and development costs preclude us from reporting these costs on a project-by-project basis. Six Months Ended June 30, Phase of Development 2020 2019 External Costs Incurred by Product Area: (in thousands) Novel Therapeutics Various (1)$ 37,480 $ 28,893 Biosimilars Various (2) 7,308 7,174 Complex Generics (3) 43 176 Internal Costs 28,218 23,860Total Research and Development Expenses$ 73,049 $ 60,103 33 -------------------------------------------------------------------------------- Table of Contents _______________________________________ (1)Our novel therapeutic programs include M281, for which we commenced two Phase 2 clinical trials during the fourth quarter of 2018 and announced inAugust 2019 that we commenced an additional Phase 2/3 clinical trial; M230, for which our licensee's, CSL's, Phase 1 study in healthy volunteers to evaluate safety and tolerability of M230 is ongoing; M254, for which we have initiated a Phase 1/2 clinical study in early 2019; as well as other discovery and nonclinical stage programs. (2)Biosimilars include M710, a biosimilar candidate of EYLEA® (aflibercept). Mylan initiated a pivotal clinical trial in patients inthe United States inAugust 2018 , and inDecember 2018 andFebruary 2019 , initiated dosing of patients in theEuropean Union andJapan , respectively. InNovember 2018 , we provided notice to Mylan terminating our participation in the development of our biosimilar programs other than M710. (3)Includes external costs for GLATOPA and Enoxaparin Sodium Injection. InJuly 2010 , the first ANDA for Enoxaparin Sodium Injection was approved by the FDA, and Sandoz launched the product. InApril 2015 , the FDA approved the ANDA for once-daily GLATOPA 20 mg/mL. Sandoz launched GLATOPA 20 mg/mL inJune 2015 . InFebruary 2018 , the FDA approved the ANDA for three-times-weekly GLATOPA 40 mg/mL, and Sandoz launched the product. For more information on GLATOPA, see "Legacy Products" section above. We expect research and development expense to increase for the foreseeable future as our current development programs progress and new programs are added. External costs of our novel therapeutic programs increased by$8.6 million , or 30%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 , and were primarily driven by an increase in manufacturing and clinical trial activity for M254 and M281 as described in Note 1 in the above table, partially offset by a decrease in our share of CSL collaboration costs for M230. External expenditures for our biosimilars programs increased by$0.1 million , or 2%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 , primarily due to an increase in spending on M710, partially offset by a reduction in M923 costs. Internal costs increased by$4.4 million , or 18%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 primarily due to an increase in share-based compensation expense related to PSUs, partially offset by a reduction in lease costs. General and Administrative The decrease of$30.9 million , or 44%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 was primarily due to a payment of$21.0 million to Amphastar inJune 2019 reflecting our portion of the settlement payment; lower legal fees and lower depreciation and rent costs due to the modification to the Bent lease in 2019; partially offset by an increase in share-based compensation expense related to PSUs. Other Operating Expense Other operating expense for the six months endedJune 30, 2020 included a$0.6 million adjustment due to changes in the estimated fair value of the future contractual obligations under our manufacturing services agreement withHuman Genome Sciences, Inc. , or GSK. Other operating expense was$42.9 million for the six months endedJune 30, 2019 and included a take-or-pay purchase obligation under our manufacturing agreement with GSK. Consistent with our decision to cease active development of M923, we canceled our manufacturing runs scheduled through 2020 and recorded a charge of$20.9 million in the three months endedJune 30, 2019 , representing the minimum purchase obligation. Since the utility of the remaining minimum purchase commitments for the calendar years 2021 through 2022 was deemed impaired atJune 30, 2019 , we recorded an additional charge of$22.0 million during the six months endedJune 30, 2019 .
Restructuring
Restructuring charges consist of severance, bonus, share-based compensation, and
impairment of equipment associated with our workforce reduction in
Other Income, Net
Other income, net includes other items of non-operating income and expense. Other income, net was$1.5 million and$5.9 million for the six months endedJune 30, 2020 and 2019, respectively. The decrease of$4.4 million , or 75%, from the six months endedJune 30, 2019 to the six months endedJune 30, 2020 was primarily the result of interest expense recognized on the purchase commitments under our manufacturing agreement with GSK and lower interest income due to lower market yields on our investments. 34
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Equity Financings
InDecember 2019 , we sold an aggregate of approximately 16.7 million shares of our common stock through an underwritten public offering at a price to the public of$15.50 per share. As a result of the offering, which includes the exercise in full of the underwriter's option to purchase additional shares of common stock, we received aggregate net proceeds of approximately$244.2 million , after deducting underwriting discounts and commissions and other offering expenses. InAugust 2019 , we entered into a sales agreement, or Sales Agreement, withStifel, Nicolaus & Company, Incorporated , or Stifel, pursuant to which we may sell from time to time, at our option, up to an aggregate of$100.0 million of shares of our common stock through Stifel, as sales agent or principal. Sales of the common stock, if any, will be made by methods deemed to be "at the market offerings." We have agreed to pay Stifel a commission of up to 3% of the gross proceeds from the sale of the shares of our common stock, if any. The Sales Agreement will terminate upon the earliest of: (a) the sale of$100.0 million of shares of our common stock or (b) the termination of the Sales Agreement by us or Stifel. As ofJune 30, 2020 , we have not sold any shares of common stock under this program. InDecember 2018 , we sold an aggregate of 20.0 million shares of common stock through an underwritten public offering at a price to the public of$11.50 per share. As a result of the offering, which includes the exercise in full of the underwriter's option to purchase additional shares of common stock, we received aggregate net proceeds of approximately$217.8 million , after deducting underwriting discounts and commissions and other offering expenses.
Liquidity and Capital Resources
At
We have funded our operations primarily through the sale of equity securities and payments received under our collaboration and license agreements, including our share of profits from Sandoz' sales of Enoxaparin Sodium Injection and GLATOPA. We expect to fund our planned operating and expenditure requirements through a combination of current cash, cash equivalents and marketable securities; equity financings; and milestone payments and product revenues under existing collaboration agreements. We may also seek funding from new collaborations and strategic alliances, debt financings and other financial arrangements. Future funding transactions may or may not be similar to our prior funding transactions. There can be no assurance that future funding transactions will be available on favorable terms, or at all. We currently believe that our current capital resources and projected milestone payments and product revenues will be sufficient to meet our operating requirements through at least the third quarter of 2021. Cash,Cash Equivalents and Marketable Securities Our funds atJune 30, 2020 were primarily invested in commercial paper, overnight repurchase agreements, asset-backed securities,United States treasury securities, corporate debt securities andUnited States money market funds, directly or through managed funds, with remaining maturities of 12 months or less. Our cash is deposited in and invested through highly rated financial institutions inNorth America . The composition and mix of cash, cash equivalents and marketable securities may change frequently as a result of our evaluation of conditions in the financial markets, the maturity of specific investments, and our near term liquidity needs. We do not believe that our cash equivalents and marketable securities were subject to significant market risk atJune 30, 2020 . Six Months Ended June 30, 2020 2019 (in thousands) Net cash used in operating activities$ (105,692) $ (111,262) Net cash used in investing activities$ (97,841) $ (16,345) Net cash provided by financing activities$ 12,142 $ 2,781 Net decrease in cash, cash equivalents, and restricted cash$ (191,391) $ (124,826) 35
-------------------------------------------------------------------------------- Table of Contents Cash used in operating activities
The cash used in operating activities generally approximates our net loss adjusted for non-cash items and changes in operating assets and liabilities.
Cash used in operating activities was$105.7 million for the six months endedJune 30, 2020 reflecting a net loss of$96.6 million , partially offset by non-cash charges of$2.1 million for depreciation and amortization of property, equipment and intangible assets and$24.2 million in share-based compensation. The net change in our operating assets and liabilities used cash of$35.4 million and resulted primarily from a$1.9 million decrease in collaboration liability, a$31.6 million decrease in accounts payable and accrued expenses, and$1.9 million in other net changes in our operating assets and liabilities. Cash used in operating activities was$111.3 million for the six months endedJune 30, 2019 reflecting a net loss of$158.8 million , which was partially offset by non-cash charges of$10.6 million for depreciation and amortization of property, equipment and intangible assets and$7.1 million in share-based compensation. The net change in our operating assets and liabilities used cash of$31.4 million and resulted primarily from$7.0 million in receivables due from Sandoz for our profit share interest and a$42.9 million increase in liabilities due to contractual obligations payable to GSK in 2020 through 2022, partially offset by$2.3 million in payments of termination benefits from our Workforce Reduction, recognition of$2.8 million in revenue on the upfront payment from Mylan, and payment of our$15.0 million contractual liability to GSK in respect to theJune 2018 agreement amendment.
Cash used in investing activities
Cash used in investing activities of$97.8 million for the six months endedJune 30, 2020 includes cash outflows of$225.7 million for purchases of marketable securities and$1.7 million for purchases of property and equipment, partially offset by cash inflows of$129.5 million from maturities of marketable securities and proceeds of less than$0.1 million from the disposal of equipment. Cash used in investing activities of$16.3 million for the six months endedJune 30, 2019 includes cash outflows of$194.5 million for purchases of marketable securities and$1.1 million for purchases of property and equipment, partially offset by cash inflows of$176.8 million from maturities of marketable securities and$2.4 million in proceeds from the disposal of equipment.
Cash provided by financing activities
Cash provided by financing activities of$12.1 million for the six months endedJune 30, 2020 includes proceeds of$12.4 million from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan, partially offset by a$0.3 million payment of financing fees related to theDecember 2019 public offering of common stock. Cash provided by financing activities of$2.8 million for the six months endedJune 30, 2019 consists solely of proceeds from stock option exercises and purchases of shares of our common stock through our employee stock purchase plan.
Contractual Obligations
Our contractual obligations in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSecurities and Exchange Commission onFebruary 27, 2020 , have not materially changed since we filed that report. 36 -------------------------------------------------------------------------------- Table of Contents Critical Accounting Policies and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance withUnited States generally accepted accounting principles. 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 consolidated financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our 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. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed in Part II, Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations" of our Annual Report on Form 10-K for the year endedDecember 31, 2019 are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. There have been no material changes to our critical accounting policies since the filing of such Form 10-K. New Accounting Standards Please refer to Note 1 "Nature of Business and Basis of Presentation" to our condensed consolidated financial statements contained in Part I, Item I of this Quarterly Report on Form 10-Q for a discussion of new accounting standards.
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