UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _____________________ to _____________________
Commission File Number:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer |
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Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes
As of May 6, 2022, the registrant had
FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements, which reflect our current views with respect to, among other things, our operations and financial performance. All statements, other than statements of historical fact, contained in this Quarterly Report on Form 10-Q, including statements regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans, objectives of management and expected market growth, are forward-looking statements. The words “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “outlook,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” and the negative version of these words and other similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Such forward-looking statements are subject to various risks and uncertainties. Accordingly, there are or will be important factors that could cause actual outcomes or results to differ materially from those indicated in these statements. We believe these factors include but are not limited to those described in the “Risk Factors” section in our most recent Annual Report on Form 10-K and include, among other things:
We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. We have included important factors in the cautionary statements included in our most recent Annual Report on Form 10-K, particularly in the “Risk Factors” section, that we believe could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, collaborations, joint ventures or investments we may make or enter into.
You should read this Quarterly Report on Form 10-Q and the documents that we have filed as exhibits to this Quarterly Report on Form 10-Q completely and with the understanding that our actual future results may be materially different from what we expect. The forward-looking statements contained in this Quarterly Report on Form 10-Q are made as of the date of this Quarterly Report on Form 10-Q, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.
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Table of Contents
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PART I. |
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Item 1. |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1A. |
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Item 2. |
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Item 6. |
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ii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
INOZYME PHARMA, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(amounts in thousands, except share and per share data)
(Unaudited)
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March 31, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Right-of-use assets |
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Restricted cash |
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Prepaid expenses, net of current portion |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Operating lease liabilities |
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Total current liabilities |
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Operating lease liabilities, net of current portion |
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Total liabilities |
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Stockholders’ equity: |
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Preferred Stock, $ |
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Common Stock, $ |
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Additional paid in-capital |
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Accumulated other comprehensive (loss) income |
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Accumulated deficit |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
1
INOZYME PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(amounts in thousands, except share and per share data)
(Unaudited)
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Three Months Ended March 31, |
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2022 |
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2021 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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Other income (expense): |
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Interest income |
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Other expenses |
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Other expenses, net |
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Net loss |
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$ |
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$ |
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Other comprehensive (loss) income: |
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Unrealized (losses) gains on available-for-sale securities |
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Foreign currency translation adjustment |
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Total other comprehensive (loss) income |
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Comprehensive loss |
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$ |
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$ |
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Net loss attributable to common stockholders—basic |
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$ |
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$ |
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Net loss per share attributable to common |
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$ |
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$ |
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Weighted-average common shares outstanding—basic |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
2
INOZYME PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(amounts in thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Income (Loss) |
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Deficit |
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Balance at December 31, 2021 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Comprehensive loss: |
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Unrealized loss on investments |
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— |
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— |
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— |
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( |
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— |
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( |
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Foreign currency translation adjustment |
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— |
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— |
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— |
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( |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance at March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Balance at December 31, 2020 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Exercise of stock options |
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— |
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— |
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— |
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Comprehensive income: |
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Unrealized gain on investments |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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( |
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Balance at March 31, 2021 |
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$ |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3
INOZYME PHARMA, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(amounts in thousands)
(Unaudited)
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Three Months Ended |
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2022 |
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2021 |
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Operating activities |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Depreciation and amortization |
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Stock-based compensation expense |
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Amortization of premiums and discounts on marketable securities |
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Reduction in the carrying value of right-of-use assets |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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Accounts payable |
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( |
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( |
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Accrued expenses |
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( |
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Operating lease liabilities |
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( |
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Prepaid expenses - noncurrent |
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( |
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Net cash used in operating activities |
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Investing activities |
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Purchases of marketable securities |
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Maturities of marketable securities |
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Purchases of property and equipment |
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Net cash provided by investing activities |
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Financing activities |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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Net (decrease) increase in cash, cash equivalents and restricted cash |
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Effect of foreign currency exchange rate in cash |
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Cash, cash equivalents and restricted cash at beginning of period |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Supplemental cash flow information: |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Cash, cash equivalents and restricted cash at end of period |
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$ |
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$ |
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Property and equipment unpaid at end of period |
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$ |
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$ |
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Right-of-use asset at adoption of Topic 842 |
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$ |
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$ |
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Operating lease liabilities at adoption of Topic 842 |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statement.
4
Inozyme Pharma, Inc.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Organization and Basis of Presentation
Inozyme Pharma, Inc. (the “Company”) is a clinical-stage rare disease biopharmaceutical company developing novel therapeutics for the treatment of diseases of abnormal mineralization impacting the vasculature, soft tissue and skeleton.
The Company is pursuing the development of therapeutics to address the underlying causes of these debilitating diseases. It is well established that two genes, ENPP1 and ABCC6, play key roles in a critical mineralization pathway and that defects in these genes lead to abnormal mineralization. The Company is initially focused on developing a novel therapy to treat rare genetic diseases of ENPP1 Deficiency and ABCC6 Deficiency.
The Company’s lead product candidate, INZ-701, is a soluble, recombinant, or genetically engineered, fusion protein that is designed to correct a defect in the mineralization pathway caused by ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with neointimal proliferation, or the overgrowth of smooth muscle cells inside blood vessels.
Basis of Presentation
Liquidity, Capital Resources, and Going Concern
Since the Company’s incorporation in 2017 and through March 31, 2022, the Company has devoted substantially all of its efforts to raising capital, building infrastructure, developing intellectual property and conducting research and development activities. The Company incurred net losses of $
The Company has incurred recurring losses and negative cash flows from operations since inception and has primarily funded its operations with proceeds from the issuance of convertible preferred stock and offerings of common stock and pre-funded warrants. The Company expects its operating losses and negative operating cash flows to continue into the foreseeable future as it continues to expand its research and development efforts.
The accompanying condensed consolidated financial statements have been prepared on the basis of continuity of operations, realization of assets, and the satisfaction of liabilities and commitments in the ordinary course of business. The Company believes its available cash, cash equivalents, and short-term investments as of March 31, 2022, together with the net proceeds from its sale of common stock and pre-funded warrants in April 2022, will be sufficient to fund its operating expenses and capital expenditure requirements for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. Management’s expectations with respect to its ability to fund current and long term planned operations are based on estimates that are subject to risks and uncertainties. If actual results are different from management’s estimates, the Company may need to seek additional strategic or financing
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opportunities sooner than would otherwise be expected. However, there is no guarantee that any of these strategic or financing opportunities will be executed on favorable terms, or at all, and some could be dilutive to existing stockholders. If the Company is unable to obtain additional funding on a timely basis, it may be forced to delay, reduce or eliminate some or all of its research and development programs, portfolio expansion or commercialization efforts, which could adversely affect its business.
2. Summary of Significant Accounting Policies
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, Inozyme Securities Corp., which is a Massachusetts subsidiary created to buy, sell, and hold securities, Inozyme Ireland Limited, and Inozyme Pharma Switzerland GmbH. All intercompany transactions and balances have been eliminated.
Summary of Significant Accounting Policies
The significant accounting policies and estimates used in the preparation of the accompanying consolidated financial statements are described in the Company’s audited consolidated financial statements for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes in the Company’s significant accounting policies during the three months ended March 31, 2022.
Use of Estimates
The preparation of the Company’s financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates and judgments are based on historical information and other market-specific or various relevant assumptions, including, in certain circumstances, future projections that management believes to be reasonable under the circumstances. Actual results could differ materially from estimates. Significant estimates and assumptions are used for, but not limited to, the accruals for research and development expenses. The Company evaluates its estimates and assumptions on an ongoing basis. All revisions to accounting estimates are recognized in the period in which the estimates are revised and in any future periods affected.
Accrued Research and Development Costs
The Company records accrued liabilities for estimated costs of research and development activities conducted by service providers for sponsored research, preclinical studies, clinical trials, and contract manufacturing activities. The Company records the estimated costs of research and development activities based upon the estimated amount of services provided but not yet invoiced and includes these costs in accrued expenses in the accompanying consolidated balance sheets and within research and development expense in the accompanying consolidated statements of operations and comprehensive loss.
Research and Development Costs
Research and development costs are expensed as incurred. Research and development costs consist of direct and indirect internal costs related to specific projects as well as fees paid to other entities that conduct certain research and development activities on the Company’s behalf.
Net Loss Per Share
The Company follows the two-class method when computing net loss allocable to common securities per share as the Company had previously issued shares that meet the definition of participating securities. The two-class method requires a portion of net income to be allocated to the participating securities to determine net income allocable to the common securities. During periods of loss, there is no allocation required under the two-class method since the participating securities do not have a contractual obligation to fund the losses of the Company.
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Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock and potentially dilutive securities outstanding using the treasury-stock and if-converted methods. The Company has generated a net loss in all periods presented, therefore the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive.
Fair Value Measurements
The Company categorizes its assets and liabilities measured at fair value in accordance with the authoritative accounting guidance that establishes a consistent framework for measuring fair value and expands disclosures for each major asset and liability category measured at fair value on either a recurring or nonrecurring basis. Fair value is defined as the exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, the guidance establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows:
Concentration of Credit Risk and Off-Balance Sheet Risk
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist primarily of cash, cash equivalents and short-term investments and, from time to time, long-term investments. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits and limits its exposure to credit risk by placing its cash with high credit quality financial institutions. The Company’s investments are comprised of U.S. Treasury securities and commercial paper of corporations. The Company mitigates credit risk by maintaining a diversified portfolio and limiting the amount of investment exposure as to institution, maturity and investment type.
3. Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies that are adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.
Recently Issued and Adopted Accounting Standards
In December 2019, the FASB issued ASU 2019-12, Income Taxes – Simplifying the Accounting for Income Taxes. The new guidance simplifies the accounting for income taxes by removing several exceptions in the current standard and adding guidance to reduce complexity in certain areas, such as requiring that an entity reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation in the interim period that includes the enactment date. The new standard is effective for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022 for non-public entities, with early adoption permitted. The Company adopted this standard effective January 1, 2022. There was no material impact to the Company's financial statements upon adoption.
Recently Issued Accounting Standards Not Yet Adopted
In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 and its subsequent related updates establish a new forward-looking “expected loss model” that requires entities to estimate current expected credit losses on accounts receivable and financial instruments by using
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all practical and relevant information. The new standard and its subsequent related updates are effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, with early adoption permitted. The Company is currently assessing the impact that adopting this standard will have on its consolidated financial statements but does not expect it to be material.
4. Balance Sheet Details
Short-term investments consisted of the following (dollar amounts in thousands):
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March 31, 2022 |
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Description |
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Maturity |
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Amortized |
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Gross |
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Gross |
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Estimated |
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Commercial paper |
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$ |
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$ |
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$ |
( |
) |
|
$ |
|
||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
|
|
December 31, 2021 |
|
|||||||||||||||
Description |
|
Maturity |
|
Amortized |
|
|
Gross |
|
|
Gross |
|
|
Estimated |
|
||||
Commercial paper |
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
U.S. government agency debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
The Company concluded that the declines in market value of available-for-sale securities were temporary in nature and did not consider any of the investments to be other-than-temporarily impaired. In accordance with its investment policy, the Company invests in investment grade securities with high credit quality issuers, and generally limits the amount of credit exposure to any one issuer. The Company evaluates securities for other-than-temporary impairment at the end of each reporting period. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include the length of time and extent to which fair value has been less than the cost basis, the financial condition and near-term prospects of the issuer, and the Company’s intent and ability to hold the investment to allow for an anticipated recovery in fair value. Furthermore, the aggregate of individual unrealized losses that had been outstanding for 12 months or less was not significant as of March 31, 2022 and December 31, 2021. The Company does not intend to sell these investments and it is not more likely than not that the Company will be required to sell the investments before a recovery of their amortized cost bases, which may be maturity. The Company also believes that it will be able to collect both principal and interest amounts due at maturity.
Prepaid expenses and other current assets consisted of the following (dollar amounts in thousands):
|
|
At March 31, |
|
|
At December 31, |
|
||
Interest receivable |
|
$ |
|
|
$ |
|
||
Prepaid insurance |
|
|
|
|
|
|
||
Prepaid research studies |
|
|
|
|
|
|
||
Prepaid other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Prepaid expenses, net of current portion, consisted of the following (dollar amounts in thousands):
|
|
At March 31, |
|
|
At December 31, |
|
||
Prepaid clinical trial and other |
|
$ |
|
|
$ |
|
||
|
|
$ |
|
|
$ |
|
||
8
Property and equipment consisted of the following (dollar amounts in thousands):
|
|
At March 31, |
|
|
At December 31, |
|
||
Laboratory equipment and manufacturing equipment |
|
$ |
|
|
$ |
|
||
Furniture and fixtures |
|
|
|
|
|
|
||
Computer equipment and software |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
Less accumulated depreciation |
|
|
( |
) |
|
|
( |
) |
Total |
|
$ |
|
|
$ |
|
||
Depreciation expense for the three months ended March 31, 2022 and 2021 was $
Accrued expenses consisted of the following (dollar amounts in thousands):
|
|
At March 31, |
|
|
At December 31, |
|
||
Payroll and related liabilities |
|
$ |
|
|
$ |
|
||
Professional fees |
|
|
|
|
|
|
||
Research and development costs |
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
5. Fair Value Measurement
The following table represents the Company’s financial assets measured at fair value on a recurring basis and indicate the level of fair value hierarchy utilized to determine such fair values (in thousands):
|
|
|
|
|
Fair Value Measurements at Reporting Date |
|
||||||||||
Description |
|
March 31, |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (included in cash and cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
9
|
|
|
|
|
Fair Value Measurements at Reporting Date |
|
||||||||||
Description |
|
December 31, |
|
|
Quoted |
|
|
Significant |
|
|
Significant |
|
||||
Assets: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market funds (included in cash and cash |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Commercial paper |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. Treasury securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government agency debt securities |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total assets |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
There have been
6. License and Sponsored Research Agreements
In January 2017, the Company entered into a license agreement with Yale University (“Yale”), which was amended in May 2020 and July 2020, under which the Company licensed certain intellectual property related to ectonucleotide pyrophosphatase/phosphodiesterase enzymes, that is the basis for the Company’s INZ-701 development program. Pursuant to the license agreement, as partial upfront consideration, the Company made a payment of approximately $
In January 2017, the Company also entered into a corporate sponsored research agreement with Yale (the "Sponsored Research Agreement"), which was amended in February 2019, under which the Company agreed to provide research support funding in the aggregate amount of $
10
7. Commitments and Contingencies
Operating Leases
The Company held the following significant operating leases of office and laboratory space as of March 31, 2022:
During the three months ended March 31, 2022, cash paid for amounts included for the measurement of lease liabilities was $
Future lease payments under non-cancelable leases as of March 31, 2022 are as follows (dollar amounts in thousands):
Year Ending December 31, |
|
|
|
|
2022 (remaining 9 months) |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Thereafter |
|
|
|
|
|
|
$ |
|
|
Indemnification Agreements
In the ordinary course of business, the Company may provide indemnification of varying scope and terms to vendors, lessors, business partners and other parties with respect to certain matters arising out of the relationship between such parties and the Company. In addition, the Company has entered into indemnification agreements with members of its board of directors and senior management that will require the Company, among other things, to indemnify them against certain liabilities that may arise by reason of their status or service as directors or officers. The maximum potential amount of future payments the Company could be required to make under these indemnification agreements is, in many cases, unlimited. To date, the Company has not incurred any material costs as a result of such indemnifications. The Company is not aware of any claims under indemnification arrangements, and it has not accrued any liabilities related to such obligations as of March 31, 2022 or December 31, 2021.
Legal Proceedings
The Company is not currently a party to any material legal proceedings. At each reporting date, the Company evaluates whether or not a potential loss amount or a potential range of loss is probable and reasonably estimable under the provisions of the authoritative guidance that addresses accounting for contingencies. The Company expenses the costs related to its legal proceedings as they are incurred.
8. Stockholders’ Equity
Equity Incentive Plans
In January 2017, the Company’s board of directors and stockholders adopted the 2017 Equity Incentive Plan, which was amended and restated in July 2017, (as so amended and restated, the “2017 Plan”), which provided for the grant of incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and other stock awards. The maximum number of shares of common stock that were authorized for issuance under the 2017 Plan was
11
As of the effective date of the 2020 Plan,
The following table summarizes stock option activity under the Company’s equity incentive plans since December 31, 2021:
|
|
Options |
|
|
Weighted- |
|
|
Weighted- |
|
|
Aggregate |
|
||||
|
|
|
|
|
|
|
|
(in years) |
|
|
(in thousands) |
|
||||
Outstanding at December 31, 2021 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Granted |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Exercised |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Forfeited |
|
|
( |
) |
|
|
|
|
|
|
|
|
|
|||
Outstanding at March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Exercisable at March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
Vested and expected to vest at March 31, 2022 |
|
|
|
|
$ |
|
|
|
|
|
$ |
|
||||
(1) The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s common stock for those stock options that had exercise prices lower than the fair value of the Company’s common stock.
The weighted-average grant date fair value of options granted during the three months ended March 31, 2022 was $
For purposes of calculating stock-based compensation expense, the Company estimates the fair value of stock options using the Black-Scholes option-pricing model. This model incorporates various assumptions, including the expected volatility, expected term, and interest rates. The underlying assumptions used to value stock options granted to participants using the Black-Scholes option-pricing were as follows:
|
|
For the Three Months Ended March 31, |
||
|
|
2022 |
|
2021 |
Risk-free interest rate range |
|
|
||
Dividend yield |
|
|
||
Expected term of options (years) |
|
|
||
Volatility rate range |
|
|
||
The total compensation cost recognized in the statements of operations associated with all the stock-based compensation awards granted by the Company is as follows (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Research and development |
|
$ |
|
|
$ |
|
||
General and administrative |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
The total unrecognized compensation cost related to outstanding employee awards as of March 31, 2022 was $
12
Employee Stock Purchase Plan
On July 17, 2020, the Company’s stockholders approved the 2020 Employee Stock Purchase Plan (the “ESPP”), which became effective on July 23, 2020. The ESPP initially provides participating employees with the opportunity to purchase up to an aggregate of
The Company activated its first offering period under the ESPP on April 1, 2022. The offering period ends on September 30, 2022.
9. Net Loss per Share
Net Loss per Share Attributable to Common Stockholders
The following table sets forth the computation of basic and diluted net loss per share for the three months ended March 31, 2022 and 2021 (in thousands, except share and per share amounts):
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net loss attributable to common stockholders—basic |
|
$ |
( |
) |
|
$ |
( |
) |
Net loss per share attributable to common |
|
$ |
( |
) |
|
$ |
( |
) |
Weighted-average common shares outstanding—basic |
|
|
|
|
|
|
||
The Company has generated a net loss in all periods presented, therefore the basic and diluted net loss per share attributable to common stockholders are the same as the inclusion of the potentially dilutive securities would be anti-dilutive. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share attributable to common stockholders for the periods indicated:
|
|
Three Months Ended March 31, |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Options to purchase common stock |
|
|
|
|
|
|
||
|
|
|
|
|
|
|
||
10. Employee Benefit Plans
The Company established a defined contribution savings plan in 2018 for all eligible U.S. employees under Section 401(k) of the Internal Revenue Code. Employees can designate the investment of their 401(k) accounts into several mutual funds. Effective January 1, 2021, the Company implemented a matching policy under which the Company matches
11. Related Party Transactions
On May 6, 2021, the Company entered into an amended and restated consulting agreement (the “Consulting Agreement”) with Danforth Advisors, LLC (“Danforth”), pursuant to which Danforth, in addition to providing finance, accounting and administrative functions, provided interim chief financial officer services provided to the Company by Stephen J. DiPalma, managing director of Danforth. The Company pays Danforth an agreed upon hourly rate for such services and reimburses Danforth for expenses. The Consulting Agreement may be terminated by the Company or Danforth with cause, upon
13
2022 in connection with the appointment of Sanjay S. Subramanian as the Company's Chief Financial Officer. The Company has incurred $
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read together with our consolidated financial statements and the related notes appearing elsewhere in the Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Securities and Exchange Commission, or SEC, on March 15, 2022. This discussion contains forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the “Risk Factors” section of our most recent Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by these forward-looking statements. For convenience of presentation some of the numbers have been rounded in the text below.
Overview
We are a clinical-stage rare disease biopharmaceutical company developing novel therapeutics for the treatment of diseases of abnormal mineralization impacting the vasculature, soft tissue and skeleton. Through our in-depth understanding of the biological pathways involved in mineralization, we are pursuing the development of therapeutics to address the underlying causes of these debilitating diseases. It is well established that two genes, ENPP1 and ABCC6, play key roles in a critical mineralization pathway and that defects in these genes lead to abnormal mineralization. We are initially focused on developing a novel therapy to treat the rare genetic diseases of ENPP1 and ABCC6 Deficiencies.
Our lead product candidate, INZ-701, is a soluble, recombinant, genetically engineered, fusion protein that is designed to correct a defect in the mineralization pathway caused by ENPP1 and ABCC6 Deficiencies. This pathway is central to the regulation of calcium deposition throughout the body and is further associated with neointimal proliferation, or the overgrowth of smooth muscle cells inside blood vessels. We have generated robust preclinical proof of concept data demonstrating that in animal models INZ-701 prevented pathological calcification, led to improvements in overall health and survival and prevented neointimal proliferation. In addition, INZ-701 achieved survival benefit in a mouse model of ENPP1 Deficiency.
We are currently conducting Phase 1/2 clinical trials of INZ-701 for the treatment of ENPP1 Deficiency and ABCC6 Deficiency. These clinical trials are being, and will be, conducted in both North America and in Europe. The U.S. Food and Drug Administration, or FDA, and the European Medicines Agency have granted orphan drug designation to INZ-701 for the treatment of ENPP1 Deficiency and ABCC6 Deficiency. The FDA has also granted fast track designation for INZ-701 for the treatment of ENPP1 Deficiency, and rare pediatric disease designation for INZ-701 for the treatment of ENPP1 Deficiency.
In November 2021, we initiated our Phase 1/2 clinical trial of INZ-701 in adult patients with ENPP1 Deficiency. This trial is currently ongoing in North America and the United Kingdom. In the Phase 1 dose-escalation portion of the clinical trial, we are assessing INZ-701 for 32-days at doses of 0.2 mg/kg, 0.6 mg/kg, and 1.8 mg/kg administered via subcutaneous injection twice weekly, with three patients per dose cohort.
In April 2022, we announced preliminary biomarker, safety and pharmacokinetic, or PK, data from the 0.2 mg/kg cohort of this trial. At the 0.2 mg/kg dose level of INZ-701, all three patients showed rapid, significant, and sustained increases in plasma pyrophosphate, or PPi, levels. Preclinical findings demonstrated PPi as a key predictive biomarker of therapeutic benefit in ENPP1 Deficiency. At the 0.2 mg/kg dose level of INZ-701, the range of peak PPi levels observed during the 32-day dose evaluation period across the three patients was 1082-2416 nM, and was comparable to data from our study of healthy subjects (n=10), which showed PPi levels between 1002 nM and 2169 nM. PPi levels observed after dosing of INZ-701 correlated to systemic exposure and activity of INZ-701. PK analysis showed INZ-701 nearing steady-state by Day 29 with an approximately 4-fold accumulation from Day 1, based on AUC0-72. We believe that the half-life of INZ-701 observed in this trial suggests the potential for once-weekly dosing. INZ-701 was generally well-tolerated, with no serious adverse events reported, and otherwise exhibited a favorable initial safety profile. All three patients from the first cohort enrolled in the open-label Phase 2 48-week extension portion of the trial. At Week 12, low titers of anti-drug antibodies were observed in two out of three patients. The significantly increased PPi levels observed during the 32-day dose evaluation period were sustained in all three patients through Week 12 of the extension portion of the trial. In April 2022, we announced that the 0.6 mg/kg cohort of this trial has been fully enrolled and dosing is underway. We plan to report topline data from this trial in the second half of 2022.
In April 2022, we initiated our Phase 1/2 clinical trial of INZ-701 in adult patients with ABCC6 Deficiency. The trial is currently ongoing in the United States and Europe. We plan to report preliminary safety and biomarker data from this trial in the second quarter of 2022.
15
Subject to successfully completing clinical development of INZ-701 in ENPP1 and ABCC6 Deficiencies, we plan to seek marketing approvals for INZ-701 on a worldwide basis. Beyond our development focus on INZ-701, we believe that our therapeutic approach has the potential to benefit patients suffering from additional diseases of abnormal mineralization, including those without a clear genetic basis, such as calciphylaxis. We are also exploring the potential for development of a gene therapy for ENPP1 Deficiency.
Our Operations
We have not yet commercialized any products or generated any revenue from product sales. Our operations to date have been limited to organizing and staffing our company, business planning, raising capital, securing intellectual property rights, conducting research and development activities, including preclinical studies and early-stage clinical trials, establishing arrangements for the manufacture of INZ-701 and longer term planning for potential commercialization. To date, we have funded our operations primarily with proceeds from the sales of convertible preferred stock and offerings of common stock and pre-funded warrants.
Uncertainty remains as to the potential impact of COVID-19 on our future research and development activities and the potential for a material impact on the Company increases the longer the virus impacts certain aspects of economic activity around the world. The full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition, including our ability to fulfill our clinical trial enrollment needs, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain it or treat COVID-19, as well as the economic impact on local, regional, national and international markets, the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions, the ultimate impact on financial markets and the global economy, the effectiveness of vaccines and vaccine distribution efforts and the effectiveness of other actions taken in the United States and other countries to contain and treat the disease.
Since inception, we have incurred significant operating losses. Our ability to generate revenue from product sales sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of INZ-701 or one or more of our future product candidates and programs. Our net losses were $16.9 million for the three months ended March 31, 2022 and $56.6 million for the year ended December 31, 2021. As of March 31, 2022, we had an accumulated deficit of $164.6 million.
Our operating expenses were $16.8 million for the three months ended March 31, 2022 and $56.6 million for the year ended December 31, 2021. We expect to continue to incur significant expenses for the foreseeable future. We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our preclinical activities and clinical trials. In addition, if we obtain marketing approval for INZ-701 or any other product candidate we develop, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. We have incurred and expect to continue to incur additional costs associated with operating as a public company.
As a result, we will need to obtain substantial additional funding to support our continuing operations. Until such time, if ever, as we can generate significant revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution and licensing arrangements. We do not have any committed external source of funds. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our research and development efforts.
Because of the numerous risks and uncertainties associated with pharmaceutical product development, we are unable to accurately predict the timing or amount of increased expenses or when, or if, we will be able to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would depress the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of product candidates or even continue our operations.
As of March 31, 2022, we had cash, cash equivalents and short-term investments of approximately $97.8 million.
16
On April 14, 2022, we entered into an underwriting agreement, or Underwriting Agreement, with Jefferies LLC and Cowen and Company, LLC, relating to an underwritten offering of 16,276,987 shares of our common stock or the Shares, and, in lieu of common stock to certain investors, pre-funded warrants to purchase 3,523,013 shares of common stock. The closing of the offering took place on April 19, 2022. The offering price of the Shares was $3.69 per share and the offering price of the pre-funded warrants was $3.6899 per share underlying each pre-funded warrant. Net proceeds from the offering were approximately $68.3 million, after deducting underwriting discounts and commissions and estimated offering expenses.
We believe that our existing cash, cash equivalents and short-term investments as of March 31, 2022, together with the net proceeds from our sale of common stock and pre-funded warrants in April 2022, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. See “—Liquidity and Capital Resources.”
To finance our operations beyond that point, we will need to raise additional capital, which cannot be assured.
We anticipate that our expenses will increase substantially if and as we:
Financial Operations Overview
Revenue
To date, we have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the foreseeable future. If development efforts for our product candidates are successful and result in regulatory approval or we enter into collaboration or similar agreements with third parties, we may generate revenue from those product candidates.
17
Research and Development Expenses
Research and development expenses primarily consist of costs incurred in connection with the discovery and development of our lead product candidate, INZ-701.
We expense research and development costs as incurred. These expenses include:
We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our service providers.
Research and development activities are central to our business model. We are still in the early stages of development of INZ-701. We are currently conducting our Phase 1/2 clinical trials of INZ-701 for ENPP1 Deficiency and ABCC6 Deficiency. Product candidates in later stages of clinical development generally have higher development costs than those in preclinical development or in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. From inception through March 31, 2022, we have incurred $106.1 million of research and development costs for INZ-701. We expect that our research and development costs will continue to increase substantially for the foreseeable future as we conduct the ongoing clinical trials of INZ-701, prepare for, initiate and conduct later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies, further scale our manufacturing processes and advance development of INZ-701 for additional indications and potentially additional product candidates.
The successful development of INZ-701 and other potential future product candidates is highly uncertain. Accordingly, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any product candidate. We are also unable to predict when, if ever, we will generate revenue and material net cash inflows from the commercialization and sale of any of our product candidates for which we may obtain marketing approval. We may never succeed in achieving marketing approval for any of our product candidates. The success of INZ-701 and any other product candidate we develop will depend on a variety of factors, including:
18
A change in the outcome of any of these variables with respect to the development, manufacture or commercialization activities of any of our product candidates could mean a significant change in the costs, timing and viability associated with the development of that product candidate. For example, if we are required to conduct additional clinical trials or other testing beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant delays in our clinical trials due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries, related benefits, travel and stock-based compensation expense for personnel in executive, finance and administrative functions. General and administrative expenses also include professional fees for legal, consulting, accounting, tax and audit services, and information technology infrastructure costs. We anticipate that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research activities and development of our product candidates. We incur and anticipate that we will continue to incur costs associated with being a public company, including costs of accounting, audit, legal, regulatory, compliance and tax-related services related to maintaining compliance with requirements of Nasdaq and the SEC; director and officer insurance costs; and investor and public relations costs. We may experience an increase in payroll and expense as a result of our preparation for potential commercial operations, especially as it relates to sales and marketing costs.
Interest Income
Interest income consists of income from bank deposits and investments.
Other Income (Expense), net
Other income (expense), net primarily consists of foreign exchange gains or losses.
19
Results of Operations
Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes our results of operations for the three months ended March 31, 2022 and 2021 (in thousands):
|
|
Three Months Ended |
|
|
|
|
||||||
|
|
2022 |
|
|
2021 |
|
|
Increase |
|
|||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|||
Research and development |
|
$ |
11,814 |
|
|
$ |
6,603 |
|
|
$ |
5,211 |
|
General and administrative |
|
|
5,025 |
|
|
|
4,369 |
|
|
|
656 |
|
Total operating expenses |
|
|
16,839 |
|
|
|
10,972 |
|
|
|
5,867 |
|
Loss from operations |
|
|
(16,839 |
) |
|
|
(10,972 |
) |
|
|
5,867 |
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|||
Interest income |
|
|
60 |
|
|
|
63 |
|
|
|
(3 |
) |
Other expenses |
|
|
(105 |
) |
|
|
(141 |
) |
|
|
36 |
|
Other expenses, net |
|
|
(45 |
) |
|
|
(78 |
) |
|
|
33 |
|
Net loss |
|
$ |
(16,884 |
) |
|
$ |
(11,050 |
) |
|
$ |
5,834 |
|
Research and Development Expense
Research and development expense increased by $5.2 million to $11.8 million for the three months ended March 31, 2022 from $6.6 million for the three months ended March 31, 2021. The increase in research and development expense was primarily attributable to the following:
We expect that our research and development expenses will increase for the foreseeable future as we conduct clinical trials of INZ-701, prepare for, initiate and conduct later stage clinical trials of INZ-701 for patients with ENPP1 and ABCC6 Deficiencies, further scale our manufacturing processes and advance development of INZ-701 for additional indications or potentially additional product candidates.
General and Administrative Expense
General and administrative expense increased by $0.6 million to $5.0 million for the three months ended March 31, 2022 from $4.4 million for the three months ended March 31, 2021. The increase in general and administrative expense was attributable to an increase in the number of general and administrative employees, consulting expenses, and expenses to support our operations as a public company. We expect that our general and administrative expenses will increase in future periods as we expand our operations and incur additional costs in connection with being a public company.
20
Interest Income
Interest income for the three months ended March 31, 2022 was approximately $0.1 million which is consistent with interest income for the three months ended March 31, 2021.
Other Expenses
Other expenses, consisting primarily of foreign exchange gains and losses, for the three months ended March 31, 2022 decreased by less than $0.1 million as compared to the three months ended March 31, 2021. This decrease was driven by cash balances we hold which are denominated in Euros and their related appreciation compared to the U.S. Dollar in the three months ended March 31, 2022 compared to the three months ended March 31, 2021.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have not generated any revenue and have incurred significant operating losses and negative cash flows from our operations. To date, we have funded our operations primarily with proceeds from the sales of convertible preferred stock and offerings of common stock and pre-funded warrants. Through March 31, 2022, we had received net cash proceeds of approximately $227.4 million from sales of our convertible preferred stock and common stock, after deducting underwriting discounts and commissions and offering expenses. As of March 31, 2022, we had cash, cash equivalents and short-term investments of approximately $97.8 million.
On August 11, 2021, we filed a universal shelf registration statement on Form S-3, which was declared effective on August 23, 2021, or the Registration Statement. Under the Registration Statement, we may offer and sell up to $200.0 million of a variety of securities, including common stock, preferred stock, depositary shares, debt securities, warrants, subscription rights or units from time to time pursuant to one or more offerings at prices and terms to be determined at the time of the sale. In connection with the filing of the Registration Statement, we entered into an Open Market Sale Agreement with Jefferies LLC, as sales agent, pursuant to which we may offer and sell shares of our common stock with an aggregate offering price of up to $50.0 million under an “at-the-market” offering program. To date, we have not sold any securities pursuant to the Open Market Sale Agreement.
In April 2022, we closed an underwritten offering in which we sold 16,276,987 shares of common stock and pre-funded warrants to purchase 3,523,013 shares of common stock under the Registration Statement. Net proceeds from the offering were approximately $68.3 million, after deducting underwriting discounts and commissions and estimated offering expenses.
Cash in excess of immediate requirements is invested primarily with a view to liquidity and capital preservation. The following table provides information regarding our total cash, cash equivalents and short-term investments at March 31, 2022 and December 31, 2021 (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
Cash and cash equivalents |
|
$ |
31,943 |
|
|
$ |
23,316 |
|
Short-term investments |
|
|
65,830 |
|
|
|
88,485 |
|
Total cash, cash equivalents and short-term investments |
|
$ |
97,773 |
|
|
$ |
111,801 |
|
Cash Flows
The following table provides information regarding our cash flows for the three months ended March 31, 2022 and 2021 (in thousands):
|
|
Three Months Ended |
|
|||||
|
|
2022 |
|
|
2021 |
|
||
Net cash used in operating activities |
|
$ |
(14,160 |
) |
|
$ |
(12,376 |
) |
Net cash provided by investing activities |
|
|
22,562 |
|
|
|
573 |
|
Net cash provided by financing activities |
|
|
240 |
|
|
|
249 |
|
Net increase (decrease) in cash, cash equivalents and restricted cash |
|
$ |
8,642 |
|
|
$ |
(11,554 |
) |
21
Net Cash Used in Operating Activities
The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital.
Net cash used in operating activities was $14.2 million for the three months ended March 31, 2022 compared to $12.4 million for the three months ended March 31, 2021. The increase in cash used in operating activities of $1.8 million was primarily due to an increase in net loss adjusted for non-cash items of $5.8 million as well as a decrease in the use of cash for accounts payable and a decrease in the use of cash for accrued expenses.
Net Cash Provided by Investing Activities
Net cash provided by investing activities was $22.6 million for the three months ended March 31, 2022 compared to $0.6 million for the three months ended March 31, 2021. Proceeds from the maturity of our investments during the three months ended March 31, 2022 were used to fund our operations and not reinvested as they were during the three months ended March 31, 2021.
Net Cash Provided by Financing Activities
Net cash provided by financing activities of $0.2 million for the three months ended March 31, 2022 reflects the cash proceeds from the exercise of stock options and was consistent with the net cash provided by financing activities for the three months ended March 31, 2021.
Funding Requirements
We expect to devote substantial financial resources to our ongoing and planned activities, particularly as we conduct our ongoing Phase 1/2 clinical trials of INZ-701 for ENPP1 and ABCC6 Deficiencies, and continue research and development and initiate additional clinical trials of, and seek marketing approval for, INZ-701 and any other product candidate we develop. We expect our expenses to increase substantially in connection with our ongoing and planned activities, particularly as we advance our preclinical activities and clinical trials. In addition, if we obtain marketing approval for INZ-701 or any other product candidates we develop, we expect to incur significant commercialization expenses related to product manufacturing, sales, marketing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations. If we are unable to raise capital or obtain adequate funds when needed or on acceptable terms, we may be required to delay, limit, reduce or terminate our research and development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. In addition, attempting to secure additional financing may divert the time and attention of our management from day-to-day activities and distract from our research and development efforts.
Our future capital requirements will depend on many factors, including:
22
As of March 31, 2022, we had cash, cash equivalents and short-term investments of approximately $97.8 million. We believe that our existing cash, cash equivalents and short-term investments as of March 31, 2022, together with the net proceeds from our sale of common stock and pre-funded warrants in April 2022, will enable us to fund our operating expenses and capital expenditure requirements into the fourth quarter of 2023. However, we have based this estimate on assumptions that may prove to be wrong, and our operating plan may change as a result of many factors currently unknown to us. In addition, changing circumstances could cause us to consume capital significantly faster than we currently anticipate, and we may need to spend more than currently expected because of circumstances beyond our control. As a result, we could deplete our capital resources sooner than we currently expect. In addition, because the successful development of INZ-701 and any other product candidates that we pursue is highly uncertain, at this time we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of any product candidate.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. We will not generate commercial revenues unless and until we can achieve sales of products, which we do not anticipate for a number of years, if at all. Accordingly, we will need to obtain substantial additional financing to achieve our business objectives. Adequate additional financing may not be available to us on acceptable terms, or at all, and may be impacted by the economic climate and market conditions.
Until such time, if ever, as we can generate substantial revenues from product sales, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and marketing, distribution or licensing arrangements. We do not have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests 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 existing common stockholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our operations and ability to take specific actions, such as incurring additional debt, making acquisitions, engaging in acquisition, merger or collaboration transactions, selling or licensing our assets, making capital expenditures, redeeming our stock, making certain investments or declaring dividends.
If we raise additional funds through collaborations, strategic alliances or marketing, distribution or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us.
Critical Accounting 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 with generally accepted accounting principles in the United States. 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 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. During the three months ended March 31, 2022, there were no material changes to our critical accounting estimates from those described in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 15, 2022.
23
Contractual Obligations, Commitments and Contingencies
During the three months ended March 31, 2022, there were no material changes to our contractual obligations and commitments from those described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.
Recently Issued Accounting Pronouncements
A description of recently issued accounting pronouncements that may potentially impact our financial position and results of operations is disclosed in Note 3 to our consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Emerging Growth Company Status
The Jumpstart Our Business Startups Act of 2012 permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have elected to use the extended transition period for complying with new or revised accounting standards and will do so until such time that we either (1) irrevocably elect to “opt out” of such extended transition period or (2) no longer qualify as an emerging growth company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
We are exposed to market risk related to changes in interest rates. As of March 31, 2022, our cash equivalents consisted of primarily of short-term money market funds. As of March 31, 2022, our short-term investments consisted of commercial paper, and U.S. Treasury securities. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates. Due to the primarily short-term nature of the investments in our portfolio and the low risk profile of our investments, an immediate change of 100 basis points in interest rates would not have a material effect on the fair market value of our investment portfolio or on our financial position. An immediate increase (decrease) of 100 basis points would result in an increase (decrease) in interest income of approximately $0.9 million annually.
We are not currently exposed to significant market risk related to changes in foreign currency exchange rates; however, we have contracted with and may continue to contract with foreign vendors that are located in Europe. Our operations may be subject to fluctuations in foreign currency exchange rates in the future.
Inflation generally affects us by increasing our cost of labor and clinical trial costs. We do not believe that inflation had a material effect on our business, financial condition or results of operations during three months ended March 31, 2022 and 2021.
24
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and our Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2022. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of March 31, 2022, our Chief Executive Officer and our Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) that occurred during the period covered by this Quarterly Report on Form 10-Q that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
25
PART II—OTHER INFORMATION
Item 1A. Risk Factors.
In addition to the other information set forth in this Quarterly Report on Form 10-Q, you should carefully consider the factors discussed in Part I, “Item 1A. Risk Factors” in our Annual Report on Form 10–K for the year ended December 31, 2021, which could materially affect our business, financial condition or results of operations. The risk factors disclosure in our Annual Report on Form 10-K for the year ended December 31, 2021 is qualified by the information that is described in this Quarterly Report on Form 10-Q. The risks described in our Annual Report on Form 10–K for the year ended December 31, 2021 are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
Recent Sales of Unregistered Equity Securities
We did not issue any securities that were not registered under the Securities Act of 1933, as amended, or the Securities Act, during the three months ended March 31, 2022.
Use of Proceeds from Initial Public Offering
On July 28, 2020, we completed our IPO, pursuant to which we issued and sold 7,000,000 shares of our common stock at a public offering price of $16.00 per share, and on July 30, 2020, we sold an additional 1,050,000 shares of our common stock at a price of $16.00 per share pursuant to the exercise by the underwriters of their option to purchase additional shares.
The offer and sale of all of the shares of our common stock in our IPO were registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-239648), which was declared effective by the SEC on July 23, 2020. BofA Securities, Inc., Cowen and Company, LLC and Piper Sandler & Co. acted as joint book-running managers for our IPO. Wedbush Securities Inc. acted as lead manager for our IPO. The offering commenced on July 23, 2020 and did not terminate until the sale of all of the shares offered.
We received aggregate gross proceeds from our IPO, inclusive of the exercise by the underwriters of their option to purchase additional shares, of approximately $128.8 million, or aggregate net proceeds of approximately $115.9 million after deducting underwriting discounts and commissions and offering expenses. None of the underwriting discounts and commissions or offering expenses were incurred or paid to directors or officers of ours or their associates or to persons owning 10% or more of our common stock or to any of our affiliates.
We have used approximately $18.7 million of the net proceeds from the IPO as of March 31, 2022 to fund clinical development of INZ-701, to fund our preclinical research and development activities, and for working capital and other general corporate purposes. There has been no material change in our planned use of the net proceeds from our IPO as described in our final prospectus filed pursuant to Rule 424(b)(4) under the Securities Act with the SEC on July 24, 2020.
26
Item 6. Exhibits.
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1* |
|
Employment Agreement, dated March 2, 2022, by and between the Registrant and Sanjay Subramanian. |
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1+ |
|
|
|
|
|
32.2+ |
|
|
|
|
|
101.INS |
|
Inline XBRL Instance Document |
|
|
|
101.SCH |
|
Inline XBRL Taxonomy Extension Schema Document |
|
|
|
101.CAL |
|
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|
|
|
101.DEF |
|
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|
|
|
101.LAB |
|
Inline XBRL Taxonomy Extension Label Linkbase Document |
|
|
|
101.PRE |
|
Inline XBRL Taxonomy Extension Presentation Linkbase Document
|
104 |
|
Cover Page Interactive Data File (formatted as Inline XBRL with applicable taxonomy extension information contained in Exhibits 101). |
|
|
|
* Filed herewith.
+ Furnished herewith.
27
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
INOZYME PHARMA, INC. |
|
|
|
|
|
Date: May 10, 2022 |
|
By: |
/s/ Axel Bolte |
|
|
|
Axel Bolte |
|
|
|
President and Chief Executive Officer, Director (Principal Executive Officer) |
|
|
|
|
Date: May 10, 2022 |
|
By: |
/s/ Sanjay Subramanian |
|
|
|
Sanjay Subramaniam |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
28
Exhibit 10.1
March 2, 2022
Sanjay S. Subramanian
Dear Sanjay:
On behalf of Inozyme Pharma Inc. (the “Company”), I am pleased to offer you employment with the Company. The purpose of this letter (the “Letter Agreement”) is to summarize the terms of your employment with the Company, should you accept our offer:
IF " DOCVARIABLE "SWDocIDLocation" " = "1" " DOCPROPERTY "SWDocID" ACTIVEUS 182392205v.2" ""
(a) the acquisition by an individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership of any
capital stock of the Company if, after such acquisition, such Person beneficially owns (within the meaning of Rule 13d-3 under the Exchange Act) 50% or more of either (x) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (y) the combined voting power of the then-outstanding securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (A), the following acquisitions shall not constitute a Change in Control Event: (1) any acquisition directly from the Company (excluding an acquisition pursuant to the exercise, conversion or exchange of any security exercisable for, convertible into or exchangeable for common stock or voting securities of the Company, unless the Person exercising, converting or exchanging such security acquired such security directly from the Company or an underwriter or agent of the Company), (2) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company, or (3) any acquisition by any corporation pursuant to a Business Combination (as defined below) which complies with clauses (x) and (y) of subsection (C) of this definition; or
(b) a change in the composition of the Board that results in the Continuing Directors (as defined below) no longer constituting a majority of the Board (or, if applicable, the Board of Directors of a successor corporation to the Company), where the term “Continuing Director” means at any date a member of the Board (x) who was a member of the Board on the date of the initial adoption of the Plan by the Board or (y) who was nominated or elected subsequent to such date by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election; provided, however, that there shall be excluded from this clause (y) any individual whose initial assumption of office occurred as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents, by or on behalf of a person other than the Board; or
(c) the consummation of a merger, consolidation, reorganization, recapitalization or share exchange involving the Company or a sale or other disposition of all or substantially all of the assets of the Company (a “Business Combination”), unless, immediately following such Business Combination, each of the following two conditions is satisfied: (x) all or substantially all of the individuals and entities who were the beneficial owners of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the then-outstanding shares of common stock and the combined voting power of the then-outstanding securities entitled to vote generally in the election of directors, respectively, of the resulting or acquiring corporation in such Business Combination (which shall include, without limitation, a corporation which as a result of such transaction owns the Company or substantially all of the Company’s assets either directly or through one or more subsidiaries) (such resulting or acquiring corporation is referred to herein as the “Acquiring Corporation”) in substantially the same proportions as their ownership of the Outstanding Company Common Stock and Outstanding
Company Voting Securities, respectively, immediately prior to such Business Combination and (y) no Person (excluding any employee benefit plan (or related trust) maintained or sponsored by the Company or by the Acquiring Corporation) beneficially owns, directly or indirectly, 50% or more of the then-outstanding shares of common stock of the Acquiring Corporation, or of the combined voting power of the then-outstanding securities of such corporation entitled to vote generally in the election of directors (except to the extent that such ownership existed prior to the Business Combination); or
(d) the liquidation or dissolution of the Company.
For the avoidance of doubt, you will not be eligible for, nor shall you have a right to receive, any payments or benefits from the Company following your termination from employment other than as set forth in this Section 7.
(I) "Change in Ownership or Control" shall mean a change in the ownership or effective control of the Company or in the ownership of a substantial portion of the assets of the Company determined in accordance with Section 280G(b)(2) of the Code.
(II) "Contingent Compensation Payment" shall mean any payment (or benefit) in the nature of compensation that is made or made available (under this letter agreement or otherwise) to a "disqualified individual" (as defined in Section 280G(c) of the Code) and that is contingent (within the meaning of Section 280G(b)(2)(A)(i) of the Code) on a Change in Ownership or Control of the Company.
* * *
If you would like to accept this offer of employment on the terms set forth herein, please sign and return this Letter Agreement on or before March 15, 2022.
We look forward to you becoming a part of the Inozyme team and helping to build what we hope will be an exceptional organization.
Very Truly Yours,
By: __/s/ Axel Bolte_________________________
Name: Axel Bolte
Title: Chief Executive Officer
The foregoing correctly sets forth the terms of my employment by Inozyme Pharma, Inc. I am not relying on any representations other than those set forth above.
_/s/ Sanjay Subramanian_________________ Date:_3/2/2022
Name: Sanjay Subramanian
Payments Subject to Section 409A
Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Axel Bolte, certify that:
Date: May 10, 2022 |
|
By: |
/s/ Axel Bolte |
|
|
|
Axel Bolte |
|
|
|
President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Sanjay Subramanian, certify that:
Date: May 10, 2022 |
|
By: |
/s/ Sanjay Subramanian |
|
|
|
Sanjay Subramanian |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |
Exhibit 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Inozyme Pharma, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: May 10, 2022 |
|
By: |
/s/ Axel Bolte |
|
|
|
Axel Bolte |
|
|
|
President and Chief Executive Officer (Principal Executive Officer) |
Exhibit 32.2
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Inozyme Pharma, Inc. (the “Company”) on Form 10-Q for the period ended March 31, 2022 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I certify, pursuant to 18 U.S.C. § 1350, as adopted pursuant to § 906 of the Sarbanes-Oxley Act of 2002, that, to my knowledge:
Date: May 10, 2022 |
|
By: |
/s/ Sanjay Subramanian |
|
|
|
Sanjay Subramanian |
|
|
|
Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) |