PIERIS PHARMACEUTICALS, INC. The interim financial statements and this Management's Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with the financial statements and notes thereto for the year endedDecember 31, 2021 , and the related Management's Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 , filed with theSEC onMarch 2, 2022 . In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of certain factors, including but not limited to those set forth under the caption "Risk Factors" in the Annual Report on Form 10-K for the fiscal year endedDecember 31, 2021 . As used in this Quarterly Report on Form 10-Q, unless the context indicates or otherwise requires, "our Company", "the Company", "Pieris", "we", "us" and "our" refer toPieris Pharmaceuticals, Inc. , aNevada corporation, and its consolidated subsidiaries. We have registered trademarks for Pieris, Anticalin, and others. All other trademarks, trade names and service marks included in this Quarterly Report on Form 10-Q are the property of their respective owners. Use or display by us of other parties' trademarks, trade dress or products is not intended to and does not imply a relationship with, or endorsements or sponsorship of, us by the trademark or trade dress owner. Overview We are a clinical-stage biotechnology company that discovers and develops Anticalin-based drugs to target validated disease pathways in unique and transformative ways. Our clinical pipeline includes inhaled Anticalin proteins and IO bispecifics. Proprietary to us, Anticalin proteins are a novel class of therapeutics validated in the clinic and through partnerships with leading pharmaceutical companies. Our core Anticalin technology and platform were developed inGermany , and we have collaborations with major multi-national pharmaceutical companies. In particular, we have alliances with AstraZeneca andGenentech to treat respiratory diseases, withGenentech also in ophthalmology and withServier , Seagen, andBoston Pharmaceuticals in IO. Our discovery and development programs are in varying stages and include:
• Elarekibep, our lead respiratory program partnered with AstraZeneca for the
treatment of asthma, is a drug candidate that antagonizes IL-4R?, thereby
inhibiting the downstream action of IL-4 and IL-13, two cytokines known to be
key mediators in the inflammatory cascade that drive the pathogenesis of
asthma and other inflammatory diseases.
• Elarekibep was tested in a nebulized formulation and an IV arm forpharmacokinetic, or PK, assessment in 54 healthy volunteers at nominal dose
levels ranging from 0.25 mg to 400 mg in a phase 1 single-ascending dose, or
SAD, study. Data from that study were presented at the American Thoracic
well-tolerated when given as single inhaled or intravenous doses to healthy
volunteers and there was systemic target engagement (as measured by pSTAT6
inhibition). Elarekibep was also tested in a phase 1 multiple-ascending dose,
or MAD, study in 30 patients that were randomized to receive delivered doses
via nebulizer ranging from 2 mg to 60 mg (5 mg to 150 mg nominal dose) twice
daily for nine consecutive days and one final dose on the 10th day, and 12
patients were randomized to receive placebo at the same intervals. We
presented interim data from the elarekibep phase 1 MAD study at the European
elarekibep was well-tolerated at all doses, led to a statistically significant
reduction in FeNO, a validated biomarker for eosinophilic airway inflammation,
and showed dose-dependent systemic target engagement in patients with mild
asthma and elevated levels of FeNO (? 35ppb).
• The phase 2a asthma study is ongoing at multiple sites globally. This phase 2a
study is a two-part, multi-center, placebo-controlled clinical study of
elarekibep that will evaluate elarekibep at up to three dose levels using a
dry powder formulation administered twice daily. In part 1a (1 mg and 3 mg
dose safety) of the study, 31 asthma patients, controlled on standard of care
(medium dose inhaled corticosteroids, or ICS, with long-acting beta agonists,
or LABA), received elarekibep twice daily over four weeks to establish the
safety profile and pharmacokinetics of the dry powder formulation of
elarekibep. A safety review following completion of part 1a included an
evaluation, compared to placebo, of the incidence of adverse events, changes
in laboratory markers (immuno-biomarkers, clinical chemistry, and hematology),
and forced expiratory volume in one second, or FEV1. Following the safety
review, AstraZeneca began enrollment of part 2a (1 mg and 3 mg dose efficacy)
of the study to evaluate efficacy, safety, and pharmacokinetics of elarekibep
administered twice daily to asthma patients, uncontrolled on medium dose ICS
with LABA, that have a blood eosinophil count of ? 150 cells/?L and FeNO ? 25
ppb in the 1 mg and 3 mg arms and a placebo arm. Following a four-week run-in
period, patients will be dosed and monitored over four weeks. FEV1 improvement
at four weeks compared to placebo will be the primary endpoint in this portion
of the study. Also following the safety review, AstraZeneca initiated part 1b
(10 mg dose safety) of the study to evaluate the safety of the 10 mg dose in
asthma patients controlled on standard of care who will receive elarekibep
twice daily over four weeks, and has completed enrollment in part 1b. In the
second quarter of 2022, AstraZeneca conducted a reforecast of the study, which
has taken into account the global challenges of recruiting for respiratory
clinical trials caused by the continued impact of the COVID-19 pandemic, and
is broadening enrollment criteria in part 2 (previously referenced as part
2a) of the study to facilitate recruitment of the study. AstraZeneca also now
plans to focus part 2 on the 3 mg cohort for the efficacy readout and plans to
stop enrollment for the 1 mg cohort. AstraZeneca also no longer plans to
enroll the 10 mg cohort for the efficacy readout (previously referenced as
part 2b).
Topline results from part 2 of this study are expected to be reported by the
third quarter of 2023.
• Upon receipt of the topline data and notice from AstraZeneca, including a
product development plan and budget, we will have 30 days to opt into
co-development of the program with AstraZeneca at one of two levels, neither
of which includes an option exercise fee. If we do not choose to participate
in co-development, we would still be entitled to sales royalties from
single-digit up to the mid-teens, plus the potential for more than
in sales milestones. At the first opt-in level, we would be responsible for
25% of the cost-share through regulatory approval with a predetermined cost
cap. At this level, for the lifetime of this product, we would receive sales
royalties from single-digit up to the high teens, plus the potential for
multi-billion dollar sales milestones. The second opt-in level would be at a
50% cost share without a cost cap which, instead of sales royalties and
milestones, would result in a gross margin share in the mid-twenty percent
range for the lifetime of the product. We also have a separate option to
co-commercialize elarekibep with AstraZeneca in
of the co-development opt-in decision.
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• Four discovery-stage respiratory programs were originally included in the
AstraZeneca alliance beyond elarekibep, the targets and disease areas of which
are undisclosed. In
one of the four discovery-stage programs in the collaboration beyond
elarekibep, for which an exploratory target was not able to be validated. In
Agreement and extended the research term for two of the then remaining three
discovery-stage programs. Pieris retains co-development and U.S.
co-commercialization options for both of those programs.
• Our lead fully proprietary respiratory asset, PRS-220, an oral inhaled
Anticalin protein targeting connective tissue growth factor, or CTGF, is being
developed as a local treatment for idiopathic pulmonary fibrosis, or IPF, and
other forms of fibrotic lung disease. CTGF, a matricellular protein, is a
driver of fibrotic tissue remodeling and the protein has been found
over-expressed in lung tissue from patients suffering from IPF. Clinical data
from a Phase 2 study with pamrevlumab conducted by Fibrogen indicated that
inhibition of CTGF reduced the decline in lung function in patients, thus
demonstrating clinical Proof of Concept for this target.
• In 2021, we received a €14.2 million grant from the
Economic Affairs,
development of the program for post-acute sequelae of SARS-CoV-2 infection
(PASC) pulmonary fibrosis, or PASC-PF, also known as post-COVID-19 syndrome
pulmonary fibrosis, or "long COVID".
• We presented initial preclinical data for PRS-220 at the European Respiratory
target engagement profile compared to a clinical-stage, systemically delivered
anti-CTGF antibody benchmark. Additionally, the targeting of CTGF locally in
the lung showed increased attenuation of fibrotic lung remodeling in vivo
compared to the systemically delivered antibody. This outcome correlates with
superior lung tissue exposure of PRS-220 compared to that of the systemically
administered antibody in head-to-head studies, where intratracheally
administered PRS-220 efficiently penetrates the fibrotic, interstitial lung
tissue of mice.
• We recently dosed the first subject in the phase 1 study of PRS-220 in healthy
volunteers in
• In
license agreement with
develop and commercialize locally delivered respiratory and ophthalmology
therapies. We are currently conducting joint discovery activities in each of
the two committed programs.
• PRS-400 is a fully proprietary Anticalin protein targeting Jagged-1 and is
being developed as a local treatment for muco-obstructive lung diseases.
Jagged-1 is one of five cell surface ligands interacting with Notch receptors.
It has been demonstrated that Jagged-1/Notch signaling drives secretory cell
trans-differentiation in the airways and that blocking Jagged-1/Notch
signaling reduces secretory cell number, mucin expression and mucus plugging
in vivo. In
molecules inhibit Jagged-1-induced Notch 2 signaling in a dose-dependent
manner and also demonstrate that PRS-400 reduces mucin expression ex vivo.
Additionally, PRS-400 was found in vivo to reduce mucin gene expression and
goblet cells in mice with IL-13-induced airway inflammation. These findings
suggest that PRS-400 represents a promising opportunity to address
muco-obstructive respiratory diseases locally with an attractive therapeutic
index.
• Cinrebafusp alfa is a bispecific Mabcalin compound comprising a HER2-targeting
antibody genetically linked to 4-1BB-targeting Anticalin proteins. Cinrebafusp
alfa is designed to drive tumor localized T cell activation through
tumor-targeted drug clustering mediated by HER2 expressed on tumor cells. This
program was the first 4-1BB bispecific T cell co-stimulatory agonist to enter
clinical development.
• In
two-arm, multicenter, open-label phase 2 study of cinrebafusp alfa as part of
a strategic pipeline prioritization to focus our resources. Cinrebafusp alfa
has demonstrated clinical benefit in phase 1 studies, including single agent
activity in a monotherapy setting, and in the phase 2 study in HER2-expressing
gastric cancer, giving the Company confidence in its broader 4-1BB franchise.
• PRS-344/S095012 is a bispecific Mabcalin compound comprising a PD-L1-targeting
antibody genetically linked to 4-1BB-targeting Anticalin proteins.
PRS-344/S095012 is being developed as part of our IO collaboration with
Servier .
• The first patient in phase 1/2 study of PRS-344/S095012 was dosed in November
2021 and the study is being conducted in multiple countries, including the
United States .
• The first-in-human phase 1/2 multicenter open-label dose escalation study is
designed to determine the safety and preliminary activity of PRS-344/S095012
in patients with advanced and/or metastatic solid tumors. We plan to present
the escalation data at a medical meeting in 2023.
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• Pieris and
at the
April 2022 .
• We expect to initiate the expansion cohorts in a select number of jointly
vetted indications in 2023.
• Our IO portfolio also includes additional drug candidates beyond
PRS-344/S095012 that are multi-specific Anticalin-based fusion proteins
designed to engage immunomodulatory targets, comprising a variety ofmultifunctional biotherapeutics. Other IO drug candidates are being developed
as part of our collaborations with Servier , Seagen, and Boston
Pharmaceuticals .
• Servier has obtained in vivo proof of concept for PRS-352/S095025, a
bispecific Mabcalin compound comprising an PD-L1-targeting antibody
genetically fused to Anticalin proteins specific for OX40, triggering an
undisclosed milestone payment to Pieris in 2021. Servier is continuing
development of PRS-352/S095025, for which the companies recently presented
preclinical data at the AACR Annual Meeting 2022. PRS-352/S095025 has
demonstrated superior potency to the combination of OX40 and PD-L1 therapy
benchmarks in different in vitro assays, inhibits the PD-1/PD-L1 pathway with
comparable potency to anti-PD-L1 benchmark antibodies, stimulates human CD4+ T
cells, drives T cell stimulation in ex vivo cynomolgus monkey assays, and
demonstrated an antibody-like PK profile in vivo.
• We have already handed one of the programs in the Seagen collaboration,
PRS-346/SGN-BB228, a 4-1BB/CD228 bispecific Mabcalin compound, over to Seagen,
who is responsible for further advancement and funding of the asset. The IND
for this program has recently been accepted and Seagen plans to initiate a
phase 1 study for this program in the coming months. Additionally, Seagen will
present preclinical data for this program at the
Cancer 37th Annual Meeting. The program is one of three programs in the Seagen
alliance, and we believe the previous achievement of a key development
milestone for this program validates our approach and leadership in IO
bispecifics, complementing the encouraging clinical data seen with cinrebafusp
alfa. During the third quarter of 2021, we initiated the second program within
the collaboration with Seagen. We retain a co-promotion option for one program
in the Seagen collaboration in the United States .
• PRS-342/BOS-342 is a 4-1BB/GPC3 bispecific Mabcalin compound that we have
exclusively licensed to
continues to advance PRS-342/BOS-342 towards the clinic, with phase 1 expected
to begin in the first half of 2023.
Since inception, we have devoted nearly all of our efforts and resources to our
research and development activities and have incurred significant net losses.
For the three and nine months ended September 30, 2022 , we reported net losses
of $9.7 million and $25.2 million , respectively. For the three and nine months
ended September 30, 2021 , we reported net losses of $16.5 million
and $36.2 million , respectively. As of September 30, 2022 , we had an accumulated
deficit of $282.3 million . We expect to continue incurring substantial losses
for the next several years as we continue to develop our clinical and
preclinical drug candidates and programs. Our operating expenses are comprised
of research and development expenses and general and administrative expenses.
We have not generated any revenues from product sales to date and we do not
expect to generate revenues from product sales for the foreseeable future. Our
revenues for the three and nine months ended September 30, 2022 and 2021 were
from license and collaboration agreements with our partners.
A significant portion of our operations are conducted in countries other than
the United States . Since we conduct our business in U.S. dollars, our main
exposure, if any, results from changes in the exchange rates between the euro
and the U.S. dollar. At each period end, we remeasure assets and liabilities to
the functional currency of that entity (for example, U.S. dollar payables
recorded by Pieris Pharmaceuticals GmbH ). Remeasurement gains and losses are
recorded in the statement of operations line item "Other income (expense), net."
All assets and liabilities denominated in euros are translated into U.S. dollars
at the exchange rate on the balance sheet date. Revenues and expenses are
translated at the weighted average rate during the period. Equity transactions
are translated using historical exchange rates. All adjustments resulting from
translating foreign currency financial statements into U.S. dollars are included
in accumulated other comprehensive loss.
Key Financial Terms and Metrics
The following discussion summarizes the key factors our management believes are necessary for an understanding of our consolidated financial statements.
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Table of Contents Revenues
We have not generated any revenues from product sales to date and we do not expect to generate revenues from product sales for the foreseeable future. Our revenues for the last two years have been primarily from the license and collaboration agreements with our partners.
The revenues from our partners have been comprised primarily of upfront payments, research and development services and milestone payments. For additional information about our revenue recognition policy, see "Note 2- Summary of Significant Accounting Policies."
Research and Development Expenses
The process of researching and developing drugs for human use is lengthy, unpredictable and subject to many risks. We expect to continue incurring substantial expenses for the next several years as we continue to develop our clinical and preclinical drug candidates and programs. We are unable, with any certainty, to estimate either the costs or the timelines in which those expenses will be incurred. Our current development plans focus on the following programs: our lead respiratory program, elarekibep and our other respiratory programs, our IO programs, as well as multiple additional proprietary and partnered programs, including PRS-344/S095012. These programs consume a large proportion of our current, as well as projected, resources. Our research and development costs include costs that are directly attributable to the creation of certain of our Anticalin protein based drug candidates and are comprised of:
• internal recurring costs, such as personnel-related costs (salaries, employee
benefits, equity compensation and other costs), materials and supplies,
facilities and maintenance costs attributable to research and development
functions; and
• fees paid to external parties who provide us with contract services, such as
preclinical testing, manufacturing and related testing and clinical trial
activities.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, employee benefits, equity compensation and other personnel-related costs associated with executive, administrative and other support staff. Other significant general and administrative expenses include the costs associated with professional fees for accounting, auditing, insurance costs, consulting and legal services along with facility and maintenance costs attributable to general and administrative functions. Results of Operations
Comparison of the three and nine months ended
The following table sets forth our revenues and operating expenses (in
thousands):
Nine Months Ended September
Three Months Ended September 30, 30,
2022 2021 2022 2021
Revenues $ 5,370 $ 4,057 $ 20,056 $ 22,975
Research and development expenses 13,589 18,937 39,602 51,299
General and administrative expenses 3,949 4,132 12,409 12,508
Total operating expenses 17,538 23,069 52,011 63,807
Other (expense) income
Interest income 241 4 370 10
Grant income 1,468 1,794 4,782 2,590
Other income 723 678 1,628 2,026
Net loss $ (9,736 ) $ (16,536 ) $ (25,175 ) $ (36,206 )
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The following table provides a comparison of revenues for the three months ended
Three Months Ended September 30,
2022 2021 Increase/(Decrease)Customer revenue $ 5,112 $ 2,783 $ 2,329 Collaboration revenue 258 1,274 (1,016 ) Total Revenue $ 5,370 $ 4,057 1,313
• The
driven by acceleration of revenue related to a performance obligation for the
license of an early-stage program under the AstraZeneca collaboration that
ceased with the discontinuation of this program (approximately
million), partially offset by lower AstraZeneca collaboration
reimbursable revenue and lower milestone revenue on the
given a prior year achievement.
• The
due to higher collaboration revenue recorded under the
in prior year period due to increased activities managed by
phase 1 study which offset our revenue generating activities.
The following table provides a comparison of revenues for the nine months ended
Nine Months Ended September 30,
2022 2021 Increase/(Decrease)
Customer revenue $ 19,760 $ 20,189 $ (429 )
Collaboration revenue 296 2,786 (2,490 )
Total Revenue $ 20,056 $ 22,975 (2,919 )
• The
combination of offsetting items. In the current period, higher amounts of
revenue were recorded due to the discontinuation of two early-stage programs
under the AstraZeneca collaboration (approximately
of the performance obligation related to the material right for PRS-352
(approximately
related to the expiration of the target swap for the second program under the
Seagen collaboration (approximately
on the Seagen and
primarily consisted of a phase 2a milestone (
elarekibep under the AstraZeneca collaboration and higher reimbursable costs
for AstraZeneca and Servier .
• The
relates to an updated estimate of project completion for PRS-344/S095012 under
the
period along with increased activities managed by Servier for the phase 1
study which offset our revenue generating activities.
Research and Development Expenses
The following table provides a comparison of the research and development expenses for the three months endedSeptember 30, 2022 and 2021 (in thousands): Three Months Ended September 30, 2022 2021 Increase/(Decrease) Respiratory $ 2,976 $ 4,313 $ (1,337 ) Immuno-oncology 4,183 7,940 (3,757 ) Other R&D activities 6,430 6,684 (254 ) Total$ 13,589 $ 18,937 (5,348 ) 31
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• The
ended
is due to lower program costs for elarekibep as work related to the phase 1
trial was largely complete in 2021, as well as lower manufacturing costs for
PRS-220, partially offset by higher preclinical and clinical costs for PRS-220
and higher pre-clinical costs for discovery-stage programs in the current
period.
• The
due primarily to a decrease in overall costs for cinrebafusp alfa, decreased
manufacturing costs for PRS-344/S095012 and lower preclinical costs for other
discovery stage work.
• The
expenses for the three months ended
months ended
fees professional services and facilities allocation offset partially by
higher personnel costs due to higher headcount and slightly higher travel
costs.
The following table provides a comparison of the research and development
expenses for the nine months ended September 30, 2022 and 2021 (in thousands):
Nine Months Ended September 30,
2022 2021 Increase/(Decrease)
Respiratory $ 7,109 $ 12,946 $ (5,837 )
Immuno-oncology 11,632 18,360 (6,728 )
Other R&D activities 20,861 19,993 868
Total $ 39,602 $ 51,299 (11,697 )
• The
ended
is due to lower program costs for elarekibep as work related to the phase 1
trial was largely complete in 2021, lower manufacturing costs for PRS-220 and
lower license fees in 2022, partially offset by higher clinical costs for
PRS-220.
• The
primarily to a decrease in overall costs for cinrebafusp alfa, decreased
manufacturing costs for PRS-344/S095012 and PRS-342, partially offset by
higher clinical costs for PRS-344/S095012 and slightly higher pre-clinical
costs for discovery stage programs.
• The
expenses for the nine months ended
months ended
to higher headcount, partially offset by slightly by lower overall license
fees and lower external consulting expenses.
General and Administrative Expenses
General and administrative expenses were$3.9 million for the three months endedSeptember 30, 2022 and$4.1 million for the three months endedSeptember 30, 2021 . The slight period-over-period decrease was driven primarily by lower personnel and legal costs, partially offset by higher professional services and travel costs. General and administrative expenses were$12.4 million for the nine months endedSeptember 30, 2022 and$12.5 million for the nine months endedSeptember 30, 2021 . The slight period-over-period decrease was driven primarily by lower personnel costs, facilities and IT costs, legal, and audit and tax costs, partially offset by higher professional services and travel costs. 32
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Table of Contents Other Income (Expense) Our other income (expense) was$2.4 million for the three months endedSeptember 30, 2022 and$2.5 million for the three months endedSeptember 30, 2021 . This period over period decrease was primarily due to slightly lower grant income recorded for PRS-220, partially offset by interest income on investments in the current year as well as a strengthening US dollar. Our other income (expense) was$6.8 million for the nine months endedSeptember 30, 2022 and$4.6 million for the nine months endedSeptember 30, 2021 . This period over period increase was primarily due to three quarters of grant income recorded for PRS-220 in the current period as compared to two quarters in the same period in the prior year, interest income on investments in the current year as well as a strengthening US dollar, partially offset by higher foreign exchange realized losses in the current year as compared to the same period in the prior year.
Liquidity and Capital Resources
We are subject to risks common to companies in the biotechnology industry, including but not limited to, the need for additional capital, risks of failure of preclinical studies and clinical trials, the need to obtain marketing approval and reimbursement for any drug product candidate that we may identify and develop, the need to successfully commercialize and gain market acceptance of our product candidates, dependence on key personnel, protection of proprietary technology, compliance with government regulations, development of technological innovations by competitors, reliance on third-party manufacturers and the ability to transition from pilot-scale production to large-scale manufacturing of products.
Through
As of
We have several research and development programs underway in varying stages of development, and we expect they will continue to require increasing amounts of cash for development, conducting clinical trials and testing and manufacturing of product material. We expect cash necessary to fund operations will increase significantly over the next several years as we continue to conduct these activities necessary to pursue governmental regulatory approval of clinical-stage programs and our other product candidates.
The following table provides a summary of operating, investing and financing cash flows (in thousands):
Nine Months Ended September 30,
2022 2021
Net cash provided by (used in) operating activities
(22,343 ) (607 )
Net cash provided by financing activities 7,121 54,226
Net cash used in operating activities for the nine months ended September 30,
2022 was $47.0 million compared to net cash provided by operations
of $3.3 million for the nine months ended September 30, 2021 . Cash used in the
current period is impacted by lower deferred revenue, primarily driven by higher
revenue recognized for AstraZeneca, Servier and Seagen out of the deferred
balance, lower accounts payable and accrued expenses and higher prepaid
expenses, offset partially by lower accounts receivables. This compares to the
impact of higher deferred revenue, primarily driven by the new collaboration
agreements with Boston Pharmaceuticals and Genentech and higher accounts payable
and accrued expenses, offset partially by higher accounts receivables and
prepaid expenses in the prior period.
Cash used in investing activities for the nine months ended September 30, 2022
was $22.3 million as compared to $0.6 million for the same period in 2021. The
change in net cash used is solely attributable to the impact of net investments
changes (purchase of investments as a result of rising interest rates in 2022)
for which there is no activity in the comparable prior year period.
Cash provided by financing activities for the nine months ended September 30,
2022 was $7.1 million as compared to $54.2 million for the same period in 2021.
The decrease in the current period compared to the prior period is driven by
significantly lower sales under the ATM program in the current period as well as
two separate private placement equity transactions with our partners, Seagen and
AstraZeneca in 2021, which resulted in net proceeds of $18.9 million in the
prior period.
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InAugust 2021 , we established the ATM Program under a sales agreement withJefferies LLC , pursuant to which we may offer and sell shares of our common stock, from time to time, up to an aggregate amount of gross sales proceeds of$50.0 million . The ATM Program is offered under a shelf registration statement on Form S-3 that was filed with and declared effective by theSEC inAugust 2021 . For the nine months endedSeptember 30, 2022 , we sold 2.1 million shares for gross proceeds of$7.2 million under the ATM program at an average stock price of$3.46 . Our future success is dependent on our ability to identify and develop our product candidates, expand our corporate infrastructure and, ultimately, upon our ability to attain profitable operations. We have devoted substantially all of our financial resources and efforts to research and development and general and administrative expenses to support such research and development. We have several research and development programs underway in varying stages of development, and we expect that these programs will continue to require increasing amounts of cash for development, conducting clinical trials and testing and manufacturing of product material. Cash necessary to fund operations will increase significantly over the next several years as we continue to conduct these activities necessary to pursue governmental regulatory approval of clinical-stage programs and other product candidates.
Any requirements for additional capital will depend on many factors, including the following:
• the scope, rate of progress, results and cost of our clinical studies,
preclinical testing and other related activities;
• the cost of manufacturing clinical supplies, and establishing commercial
supplies, of our drug candidates and any products that we may develop;
• the number and characteristics of drug candidates that we pursue;
• the cost, timing and outcomes of regulatory approvals;
• the cost and timing of establishing sales, marketing and distribution
capabilities;
• the terms and timing of any collaborative, licensing and other arrangements
that we may establish;
• the timing, receipt and amount of sales, profit sharing or royalties, if any,
from our potential products;
• the cost of preparing, filing, prosecuting, defending and enforcing any patent
claims and other intellectual property rights;
• the extent to which we acquire or invest in businesses, products ortechnologies, although we currently have no commitments or agreements relating
to any of these types of transactions; and
• the effects of the COVID-19 pandemic and the cost and timing of actions taken
to contain it.
In addition, any unfavorable development or delay in the progress of our core
clinical-stage programs including elarekibep, PRS-344/S095012 and PRS-220 could
have a material adverse impact on our ability to raise additional capital.
We plan to raise additional capital to fulfill our operating and capital
requirements through public or private equity financings, utilization of our ATM
Program, strategic collaborations, licensing arrangements and/or the achievement
of milestones under our collaborative agreements. The funding requirements of
our operating plans, however, are based on estimates that are subject to risks
and uncertainties and may change as a result of many factors currently unknown.
Although we continue to pursue these funding plans, there is no assurance that
we will be successful in obtaining sufficient funding on terms acceptable to us
to fund continuing operations, if at all. Until such time as we can generate
substantial product revenues, if ever, we expect to finance our cash needs
through a combination of equity offerings, debt financings, strategic
partnerships, licensing arrangements and government grants. The terms of any
future financing may adversely affect the holdings or the rights of our existing
stockholders.
We believe that our currently available funds will be sufficient to fund our
operations through at least the next 12 months from the issuance of this
Quarterly Report on Form 10-Q. Our belief with respect to our ability to fund
operations is based on estimates that are subject to risks and uncertainties. If
actual results are different from our estimates, we may need to seek additional
funding. If we are unable to obtain additional funding on acceptable terms when
needed, we may be required to defer or limit some or all of our research,
development and/or clinical projects, or may reduce discretionary expenditures
such as additional headcount, new R&D projects, and other variable costs to
alleviate the substantial doubt as to the Company's ability to continue as a
going concern.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as defined under applicable
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Critical Accounting Policies and Estimates
Refer to Part II, Item 7, "Critical Accounting Policies and Estimates" of our Annual Report on Form 10-K for the fiscal year ended onDecember 31, 2021 for a discussion of our critical accounting policies and estimates. This discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance withU.S. GAAP. We believe that several accounting policies are important to understanding our historical and future performance. We refer to these policies as critical because these specific areas generally require us to make judgments and estimates about matters that are uncertain at the time we make the estimate, and different estimates-which also would have been reasonable-could have been used. On an ongoing basis, we evaluate our estimates and judgments, including those described in greater detail below. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be 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 our most critical accounting policies are those relating to revenue recognition, contingencies, research and development expense and income taxes, and there have not been significant changes to our accounting policies discussed in the Annual Report on Form 10-K for the fiscal year ended onDecember 31, 2021 .
Recently Issued Accounting Pronouncements
We review new accounting standards to determine the expected financial impact, if any, that the adoption of each standard will have. For the recently issued accounting standards that we believe may have an impact on our consolidated financial statements, see "Note 2-Summary of Significant Accounting Policies" in our consolidated financial statements.
Smaller Reporting Company Status
Currently, we qualify as a smaller reporting company.
As a smaller reporting company, we are eligible for, and have taken advantage of certain exemptions from various reporting requirements that are not available to public reporting companies that do not qualify for this classification, including, but not limited to:
• An opportunity for reduced disclosure obligations regarding executive
compensation in its periodic and annual reports, including without limitation
exemption from the requirement to provide a compensation discussion and
analysis describing compensation practices and procedures.
• An opportunity for reduced financial statement disclosure in registration
statements, which must include two years of audited financial statements
rather than the three years of audited financial statements that are required
for other public reporting companies.
• An opportunity for reduced audit and other compliance expenses as we are not
subject to the requirement to obtain an auditor's report on internal control
over financial reporting under Section 404(b) of the Sarbanes-Oxley Act of
2002.
• An opportunity to continue utilizing the non-accelerated filer time-line
requirements, which became applicable to us at the time of filing of our
annual report for the year ending December 31, 2021 .
For as long as we continue to be a smaller reporting company, we expect that we
will take advantage of both the reduced internal control audit requirements and
the disclosure obligations available to us as a result of this classification.
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