vie-10q_20200331.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2020

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: 001-39067

 

VIELA BIO, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

82-4187338

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

 

 

One MedImmune Way

 

First Floor, Area Two

 

Gaithersburg, MD

20878

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (240) 558-0038

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.001 par value per share

 

VIE

 

The Nasdaq Global Select Market

 

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.     Yes      No  

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).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a 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.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

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      No  

As of May 13, 2020, the registrant had 50,997,300 shares of common stock, $0.001 par value per share, outstanding.

 

 

 

 


Table of Contents

 

 

 

Page

 

Special Note Regarding Forward-Looking Statements

1

PART I.

FINANCIAL INFORMATION

3

Item 1.

Financial Statements (Unaudited)

3

 

Balance Sheets

3

 

Statements of Operations and Comprehensive Loss

4

 

Statements of Redeemable Convertible Preferred Stock and Stockholder’s Equity (Deficit)

5

 

Statements of Cash Flows

6

 

Notes to Unaudited Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

13

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

20

Item 4.

Controls and Procedures

21

 

 

 

PART II.

OTHER INFORMATION

22

Item 1.

Legal Proceedings

22

Item 1A.

Risk Factors

22

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

64

Item 3.

Defaults Upon Senior Securities

64

Item 4.

Mine Safety Disclosures

64

Item 5.

Other Information

65

Item 6.

Exhibits

66

Signatures

67

 

 

 

 

All brand names, trademarks or service marks appearing in this quarterly report are the property of their respective owners. Registrant’s use or display of another party’s trademark, service mark, trade dress or product in this quarterly report is not intended to, and does not, imply a relationship with, or endorsement or sponsorship of, the registrant by such other party.

 

 

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in in this Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

 

our ability to successfully commercialize and market inebilizumab and/or our other product candidates, if approved;

 

our ability to contract with third-party suppliers, manufacturers and other service providers and their ability to perform adequately;

 

the potential market size, opportunity and growth potential for inebilizumab and/or our other product candidates, if approved;

 

our ability to build our own sales and marketing capabilities, or seek collaborative partners, to commercialize inebilizumab and/or our other product candidates, if approved;

 

our ability to obtain funding for our operations;

 

the initiation, timing, progress and results of our pre-clinical studies and clinical trials, and our research and development programs;

 

our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;

 

our ability to advance product candidates into, and successfully complete, clinical trials;

 

our ability to recruit and enroll suitable patients in our clinical trials;

 

the timing or likelihood of the accomplishment of various scientific, clinical, regulatory filings and approvals and other product development objectives;

 

the pricing and reimbursement of our product candidates, if approved;

 

the degree of market acceptance of inebilizumab and/or our other product candidates by physicians, patients, third-party payors and others in the medical community;

 

the rate and degree of market acceptance of our product candidates, if approved;

 

the implementation of our business model, strategic plans for our business, product candidates and technology;

 

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and technology;

 

developments relating to our competitors and our industry;

 

the accuracy of our estimates regarding expenses, capital requirements and needs for additional financing;

 

the development of major public health concerns, including the novel coronavirus outbreak or other pandemics arising globally, and the current and future impact of it and COVID-19 on our clinical trials, business operations and funding requirements; and

 

our financial performance.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in the “Risk Factors” section and elsewhere in this Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Form 10-Q may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable as of the date of this Form 10-Q, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking

1


statements for any reason after the date of this Form 10-Q to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

You should read this Form 10-Q and the documents that we reference in this Form 10-Q and have filed with the Securities and Exchange Commission, or SEC, as exhibits to this Form 10-Q with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

2


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

VIELA BIO, INC.

BALANCE SHEETS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

163,575

 

 

$

200,851

 

Marketable securities

 

 

151,255

 

 

 

113,945

 

Accounts receivable

 

 

 

 

 

30,000

 

Prepaid and other current assets

 

 

6,475

 

 

 

6,242

 

Total current assets

 

 

321,305

 

 

 

351,038

 

Marketable securities, non-current

 

 

20,355

 

 

 

31,415

 

Property and equipment, net

 

 

1,495

 

 

 

1,499

 

Other assets

 

 

102

 

 

 

102

 

Total assets

 

$

343,257

 

 

$

384,054

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,380

 

 

$

7,459

 

Accrued expenses and other current liabilities

 

 

9,527

 

 

 

9,192

 

Related party liability

 

 

9,929

 

 

 

12,892

 

Total current liabilities

 

 

26,836

 

 

 

29,543

 

Commitments and contingencies (Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 5,000,000 shares authorized as of

    March 31, 2020 and December 31, 2019; no shares issued or outstanding

    as of March 31, 2020 and December 31, 2019

 

 

 

 

 

 

Common stock, $.001 par value; 200,000,000 shares authorized as of

    March 31, 2020 and December 31, 2019; 50,997,300 and 50,617,868

    shares issued and outstanding as of March 31, 2020 and December 31, 2019,

    respectively

 

 

51

 

 

 

51

 

Additional paid-in capital

 

 

633,967

 

 

 

631,154

 

Accumulated other comprehensive income (loss)

 

 

(121

)

 

 

5

 

Accumulated deficit

 

 

(317,476

)

 

 

(276,699

)

Total stockholders’ equity

 

 

316,421

 

 

 

354,511

 

Total liabilities and stockholders’ equity

 

$

343,257

 

 

$

384,054

 

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

3


 

VIELA BIO, INC.

STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

26,829

 

 

$

16,615

 

General and administrative

 

 

15,282

 

 

 

5,037

 

Total operating expenses

 

 

42,111

 

 

 

21,652

 

Loss from operations

 

 

(42,111

)

 

 

(21,652

)

Other income:

 

 

 

 

 

 

 

 

Interest income

 

 

1,334

 

 

 

676

 

Total other income

 

 

1,334

 

 

 

676

 

Net loss

 

$

(40,777

)

 

$

(20,976

)

Net loss per share attributable to common stockholders—basic and diluted

 

$

(0.80

)

 

$

(167.38

)

Weighted average common shares outstanding—basic and diluted

 

 

50,752,998

 

 

 

125,315

 

Other comprehensive loss

 

 

 

 

 

 

 

 

Unrealized gains (losses) on marketable securities, net

 

$

(126

)

 

$

 

Total other comprehensive loss

 

 

(126

)

 

 

 

Total comprehensive loss

 

$

(40,903

)

 

$

(20,976

)

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

4


 

 

VIELA BIO, INC. STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)

(In thousands, except share and per share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

Redeemable convertible preferred stock

 

 

 

 

 

 

 

 

Additional

 

 

other

 

 

 

 

 

 

stockholders'

 

 

 

Series A-1

 

 

Series A-2

 

 

Common stock

 

 

paid-in

 

 

comprehensive

 

 

Accumulated

 

 

equity

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

capital

 

 

income (loss)

 

 

deficit

 

 

(deficit)

 

Balances at January 1, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

50,617,868

 

 

$

51

 

 

$

631,154

 

 

$

5

 

 

$

(276,699

)

 

$

354,511

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,711

 

 

 

 

 

 

 

 

 

2,711

 

Issuance of common stock for stock

   options exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,275

 

 

 

 

 

 

102

 

 

 

 

 

 

 

 

 

102

 

Issuance of common stock upon

   vesting of RSAs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

357,157

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(126

)

 

 

 

 

 

(126

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(40,777

)

 

 

(40,777

)

Balances at March 31, 2020

 

 

 

 

$

 

 

 

 

 

$

 

 

 

50,997,300

 

 

$

51

 

 

$

633,967

 

 

$

(121

)

 

$

(317,476

)

 

$

316,421

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at January 1, 2019

 

 

14,225,324

 

 

$

142,253

 

 

 

17,000,000

 

 

$

170,000

 

 

 

10

 

 

$

 

 

$

1,879

 

 

$

 

 

$

(190,270

)

 

$

(188,391

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

639

 

 

 

 

 

 

 

 

 

639

 

Issuance of common stock upon

   vesting of RSAs

 

 

 

 

 

 

 

 

 

 

 

 

 

 

363,789

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(20,976

)

 

 

(20,976

)

Balances at March 31, 2019

 

 

14,225,324

 

 

$

142,253

 

 

 

17,000,000

 

 

$

170,000

 

 

 

363,799

 

 

$

 

 

$

2,518

 

 

$

 

 

$

(211,246

)

 

$

(208,728

)

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

 

 

 

 

 

 

5


 

 

VIELA BIO, INC.

STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(40,777

)

 

$

(20,976

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

106

 

 

 

46

 

Stock-based compensation expense

 

 

2,711

 

 

 

639

 

Amortization of premium (discount) on marketable securities, net

 

 

(18

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

30,000

 

 

 

 

Prepaid and other current assets

 

 

(233

)

 

 

(73

)

Accounts payable, accrued expenses and related party liability

 

 

(2,660

)

 

 

1,460

 

Net cash used in operating activities

 

 

(10,871

)

 

 

(18,904

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of marketable securities

 

 

(46,242

)

 

 

 

Sales and maturities of marketable securities

 

 

19,884

 

 

 

 

Purchase of property and equipment

 

 

(149

)

 

 

(26

)

Net cash used in investing activities

 

 

(26,507

)

 

 

(26

)

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

102

 

 

 

 

Proceeds from issuance of redeemable convertible preferred stock

 

 

 

 

 

12,000

 

Net cash provided by financing activities

 

 

102

 

 

 

12,000

 

Net decrease in cash and cash equivalents

 

 

(37,276

)

 

 

(6,930

)

Cash and cash equivalents at beginning of period

 

 

200,851

 

 

 

126,898

 

Cash and cash equivalents at end of period

 

$

163,575

 

 

$

119,968

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of non-cash financing and investing activities:

 

 

 

 

 

 

 

 

Purchases of property and equipment included in accounts payable

 

 

62

 

 

 

 

 

 

 

 

The accompanying notes are an integral part of these unaudited financial statements.

 

6


 

VIELA BIO, INC.

NOTES TO UNAUDITED FINANCIAL STATEMENTS

(Amounts in thousands, except share and per share amounts)

1. Nature of the business and basis of presentation

Viela Bio, Inc. (“Viela” or the “Company”) is a clinical-stage biotechnology research and development company pioneering and advancing treatments for severe inflammation and autoimmune diseases by selectively targeting shared critical pathways that are the root cause of disease. The Company was incorporated on December 11, 2017 under the laws of the State of Delaware. The Company’s lead product candidate, inebilizumab, is a humanized mAb designed to target CD19, a molecule expressed on the surface of a broad range of immune system B cells. In January 2019, the Company reported positive pivotal clinical trial data for inebilizumab in patients with NMOSD. NMOSD is a rare, devastating condition that attacks the optic nerve, spinal cord and brain stem, and often leads to irreversible blindness and paralysis. The Company received Breakthrough Therapy Designation for the treatment of this disease from the FDA in April 2019 and in August 2019, the FDA accepted for review the Company’s BLA for inebilizumab. The FDA set a PDUFA date of June 11, 2020. In addition, the Company has a broad pipeline of two additional clinical-stage and two pre-clinical product candidates focused on a number of other autoimmune diseases with high unmet medical needs, including myasthenia gravis, IgG4-related disease, Sjögren’s syndrome and lupus, as well as other conditions such as kidney transplant rejection. A Phase 2b trial in Sjögren’s syndrome, which is designed as Phase 3-enabling, is ongoing and in 2019, the Company initiated a separate Phase 2 trial in kidney transplant rejection. In light of the COVID-19 pandemic, in order to prioritize patient health and that of the investigators at clinical trial sites, the Company has paused enrollment of new patients in certain of its clinical trials, including its Phase 2b trial of VIB4920 in Sjogren’s syndrome and its Phase 2 trial of VIB4920 in kidney transplant rejection.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, ability to secure additional capital to fund operations, completion and success of clinical testing, compliance with applicable governmental regulations, development by competitors of new technological innovations, dependence on key personnel and protection of proprietary technology. Drug candidates currently under development will require extensive clinical testing prior to regulatory approval and commercialization. These efforts require significant amounts of additional capital, adequate personnel, and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s drug development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

In October, 2019, the Company completed an initial public offering (the “IPO”) of its common stock and issued and sold 9,085,000 shares of common stock, which included 1,185,000 shares issued in pursuant to the underwriters’ option to purchase additional shares, at a public offering price of $19.00 per share, for aggregate gross proceeds of $172,615 and net proceeds after deducting underwriting discounts and commissions and other offering costs of $156,927. Upon the closing of the IPO, the outstanding shares of series A redeemable convertible preferred stock (the “Series A Preferred Stock”), and series B redeemable convertible preferred stock (the “Series B Preferred Stock” and together with the Series A Preferred Stock, the “Preferred Stock”)  converted into an aggregate of 40,618,706 shares of common stock.

Basis of Presentation

The accompanying unaudited interim financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”), and pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial statements. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP are omitted. In the opinion of our management, all adjustments (consisting solely of normal recurring accruals) necessary for the fair statement of financial statements for the interim period have been included. The interim financial statements and accompanying notes should be read in conjunction with the financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31. 2019, as filed with the SEC on March 25, 2020 (the “Form 10-K”) . The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods or any future year or period.

7


 

2. Summary of significant accounting policies

Use of estimates

The preparation of the Company’s financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of expenses during the reporting period. Significant estimates and assumptions reflected in these financial statements include, but are not limited to, the recognition of research and development expenses based on when services are performed, the valuations of share based compensation arrangements, and the valuation allowance for deferred tax assets. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ from those estimates.

Net loss per share

Basic net loss per share is computed by dividing the net loss by the weighted average number of common shares outstanding during the period.

Prior to the IPO, the Company followed the two-class method when computing net loss per share, which is an earnings allocation formula that determines net loss per share for the holders of the Company’s common shares and participating securities. The Company’s Preferred Stock contained participating rights in any dividend paid by the Company and were deemed to be participating securities. Net income attributable to common stockholders and participating preferred shares is allocated to each share on an as-converted basis as if all of the earnings for the period had been distributed. The participating securities do not include a contractual obligation to share in the losses of the Company and are not included in the calculation of net loss per share in the periods that have a net loss. Common equivalent shares are excluded from the computation in periods in which they have an anti-dilutive effect on net loss per share.

Diluted net loss per share is computed using the more dilutive of (a) the two-class method or (b) the if-converted method. In periods in which the Company reports a net loss attributable to common stockholders, diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. Diluted net loss per share is equivalent to basic net loss per share for the periods presented herein because common stock equivalent shares from the Series A and Series B Preferred Stock were anti-dilutive. Due to their anti-dilutive effect, the calculation of diluted net loss per share for the three months ended March 31, 2019 does not include 31,225,324 shares of Series A Preferred Stock.

Subsequent to the IPO, basic net loss per common share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. Diluted net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period, including potential dilutive common shares assuming the dilutive effect of outstanding stock options. Accordingly, in periods in which the Company reported a net loss, dilutive common shares were not included in the calculation as their affect was anti-dilutive, and as a result, diluted net loss per common share was the same as basic net loss per common share for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019, there were no reconciling items between basic and diluted net loss per share

Recently adopted accounting pronouncements

In August 2018, the FASB issued No. ASU 2018-13, Fair Value Measurement (Topic 820)—Disclosure Framework (“ASU 2018-13”), which improves the disclosure requirements for fair value measurements. The Company adopted this guidance effective January 1, 2020. The adoption of the standard did not have an impact on the Company’s financial statements.

8


 

Recently issued accounting pronouncements

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors). The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less at lease inception may be accounted for similar to existing guidance for operating leases today. For public entities, ASU 2016-02 is effective for annual reporting periods beginning after December 15, 2018, including interim periods within those fiscal years. For all other entities, the ASU is effective for annual periods beginning after December 15, 2020, including interim periods within those fiscal years. The Company is currently evaluating the impact the adoption of the guidance will have on its financial statements.

3. Cash, cash equivalents and marketable securities

The following is a summary of the Company’s cash, cash equivalents and available-for-sale marketable securities by significant investment category (unaudited):

 

 

March 31, 2020

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

Cash and

Cash

Equivalents

 

 

Current

Marketable

Securities

 

 

Non-Current

Marketable

Securities

 

Cash

 

$

28,972

 

 

$

 

 

$

 

 

$

28,972

 

 

$

28,972

 

 

$

 

 

$

 

Level 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

126,131

 

 

 

 

 

 

 

 

 

126,131

 

 

 

126,131

 

 

 

 

 

 

 

Subtotal

 

 

126,131

 

 

 

 

 

 

 

 

 

126,131

 

 

 

126,131

 

 

 

 

 

 

 

Level 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

17,702

 

 

 

164

 

 

 

 

 

 

17,866

 

 

 

 

 

 

8,119

 

 

 

9,747

 

Commercial paper

 

 

53,614

 

 

 

43

 

 

 

(4

)

 

 

53,653

 

 

 

8,472

 

 

 

45,181

 

 

 

 

Corporate debt securities

 

 

108,887

 

 

 

38

 

 

 

(362

)

 

 

108,563

 

 

 

 

 

 

97,955

 

 

 

10,608

 

Subtotal

 

 

180,203

 

 

 

245

 

 

 

(366

)

 

 

180,082

 

 

 

8,472

 

 

 

151,255

 

 

 

20,355

 

Total

 

$

335,306

 

 

$

245

 

 

$

(366

)

 

$

335,185

 

 

$

163,575

 

 

$

151,255

 

 

$

20,355

 

 

 

 

December 31, 2019

 

 

 

Amortized

Cost

 

 

Unrealized

Gains

 

 

Unrealized

Losses

 

 

Fair

Value

 

 

Cash and

Cash

Equivalents

 

 

Current

Marketable

Securities

 

 

Non-Current

Marketable

Securities

 

Cash

 

$

26,821

 

 

$

 

 

$

 

 

$

26,821

 

 

$

26,821

 

 

$

 

 

$

 

Level 1

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

 

157,777

 

 

 

 

 

 

 

 

 

157,777

 

 

 

157,777

 

 

 

 

 

 

 

Subtotal

 

 

157,777

 

 

 

 

 

 

 

 

 

157,777

 

 

 

157,777

 

 

 

 

 

 

 

Level 2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury securities

 

 

9,623

 

 

 

7

 

 

 

 

 

 

9,630

 

 

 

 

 

 

4,805

 

 

 

4,825

 

Commercial paper

 

 

55,021

 

 

 

4

 

 

 

(9

)

 

 

55,016

 

 

 

13,050

 

 

 

41,966

 

 

 

 

Corporate debt securities

 

 

96,964

 

 

 

28

 

 

 

(25

)

 

 

96,967

 

 

 

3,203

 

 

 

67,174

 

 

 

26,590

 

Subtotal

 

 

161,608

 

 

 

39

 

 

 

(34

)

 

 

161,613

 

 

 

16,253

 

 

 

113,945

 

 

 

31,415

 

Total

 

$

346,206

 

 

$

39

 

 

$

(34

)

 

$

346,211

 

 

$

200,851

 

 

$

113,945

 

 

$

31,415

 

The maturities of the Company’s long-term marketable securities ranges from one to two years.

4. Common stock

Each share of common stock entitles the holder to one vote on all matters submitted to a vote of the Company’s stockholders, provided, however, that except as otherwise required by law, holders of common stock shall not be entitled to vote on any amendment to the Company’s certificate of incorporation that relates solely to the terms of one or more outstanding series of preferred stock, if the holders of the affected series are entitled to vote thereon. Common

9


 

stockholders are entitled to receive dividends, as may be declared by the board of directors, if any, subject to the preferential dividend rights of preferred stock. Through March 31, 2020, no cash dividends had been declared or paid.

5. Redeemable convertible preferred stock

Prior to the IPO, the authorized capital stock of the Company included 40,618,706 shares of Preferred Stock, of which 35,931,206 shares were designated as Series A Preferred Stock and, 4,687,500 shares were designated as Series B Preferred Stock. Upon the closing of the IPO, the Company’s outstanding Preferred Stock converted into 40,618,706 shares of common stock.

6. Stock-based compensation

During the three months ended March 31, 2020, the Company granted 1,390,357 stock options with a weighted average exercise price of $40.79 per share and a weighted average grant date fair value of $22.39 per share that vest over four years and have a maximum contractual term of ten years. Vesting is subject to the holder’s continuous service with the Company. The Company reserved 7,565,938 shares of common stock for issuance under the Equity Incentive Plan.

As of March 31, 2020, there was approximately $42,628 total unrecognized compensation expense, related to the unvested stock options, which is expected to be recognized over a weighted average period of 3.64 years.

During the three months ended March 31, 2020, 357,157 restricted stock awards were vested.

As of March 31, 2020, there was approximately $20 of total unrecognized compensation expense, related to the restricted stock awards, which is expected to be recognized over a weighted average period of 0.48 years.

Stock-based compensation

Stock-based compensation expense for the three months ended March 31, 2020 and 2019 was comprised of the following (unaudited):

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

Research and development

 

$

1,643

 

 

$

334

 

General and administrative

 

 

1,068

 

 

 

305

 

Total

 

$

2,711

 

 

$

639

 

 

7. Income taxes

During the three months ended March 31, 2020 and 2019, the Company recorded no income tax benefits for the net operating losses incurred or for the research and development tax credits generated in each period due to its uncertainty of realizing a benefit from those items. All of the Company’s operating losses since inception have been generated in the United States.

The Company has evaluated the positive and negative evidence bearing upon its ability to realize the deferred tax assets. Management has considered the Company’s history of cumulative net losses incurred since inception and its lack of commercialization of any products or generation of any revenue from product sales since inception and has concluded that it is more likely than not that the Company will not realize the benefits of the deferred tax assets. Management reevaluates the positive and negative evidence at each reporting period. As of March 31, 2020 and December 31, 2019, no facts or circumstances arose that affected the Company’s determination as to the full valuation allowance established against the net deferred tax assets. Accordingly, a full valuation allowance has been established against the net deferred tax assets as of March 31, 2020 and December 31, 2019.

As of March 31, 2020 and December 31, 2019, the Company had not recorded any amounts for unrecognized tax benefits. The Company’s policy is to record interest and penalties related to income taxes as part of its income tax provision. As of March 31, 2020 and December 31, 2019, the Company had no accrued interest or penalties related to uncertain tax positions and no amounts had been recognized in the Company’s statements of operations and comprehensive loss. The Company files income tax returns in the U.S., Maryland and certain other states, as prescribed by the tax laws of the jurisdictions in which it operates. In the normal course of business, the Company is subject to examination by federal and state jurisdictions, where applicable. There are currently no pending tax examinations. The Company is open to future tax examination under statute from 2018 to the present.

10


 

On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”). The CARES Act, among other things, includes provisions relating to refundable payroll tax credits, deferment of employer side social security payments, net operating loss carryback periods, alternative minimum tax credit refunds, modifications to the net interest deduction limitations, increased limitations on qualified charitable contributions, and technical corrections to tax depreciation methods for qualified improvement property. The Company is examining the impact that the CARES Act may have on its business. The Company is also evaluating its ability to use the refundable payroll tax credits and deferment of employer side social security payments. The Company does not believe that the income tax modifications mentioned above will affect its deferred tax assets or liabilities based on the Company’s facts and circumstances.

8. Benefit plan

The Company maintains a defined contribution 401(k) plan, under which employee contributions are voluntary and are determined on an individual basis, limited by the maximum amounts allowable under federal tax regulations. The Company provides an automatic matching contribution of $1.00 per $1.00 of employee contribution into the plan up to a maximum of 4% of employee deferral. The Company’s matching contributions to employees totaled approximately $339 and $156, during the three months ended March 31, 2020 and 2019, respectively.

9. Commitments and contingencies

Contingencies

In the ordinary course of business, the Company may become a party to lawsuits involving various matters. The Company is not currently a party, and its properties are not currently subject, to any legal proceedings that, in the opinion of management, are expected to have a material adverse effect on the Company’s business, financial condition or results of operations.

Milestone and Royalty Payments

At the inception of each license and collaboration agreement with third parties, which may require the Company to make milestone payments, the Company evaluates whether each milestone and royalty payments are substantive and at risk to both parties on the basis of the contingent nature of the milestone and royalty. The Company aggregates milestones into three categories (i) research milestones, (ii) development milestones and (iii) commercial milestones and royalties. Research milestones are typically achieved upon reaching certain criteria as defined in each agreement related to developing a molecule against the specified target. Development milestones are typically reached when a molecule reaches a defined phase of clinical research or passes such phase, or upon gaining regulatory approvals. Commercial milestones and royalties are typically achieved when an approved pharmaceutical product reaches the status for commercial sale or certain defined levels of net sales by the licensee, such as when a product first achieves global sales or annual sales of a specified amount. The Company expects to pay approximately $20,000 if the Biologics License Application (“BLA”) is approved by the U.S. Food and Drug Administration (the “FDA”) for NMOSD.

Employment Agreements

The Company has entered into employment agreements with certain of its executive officers. Generally, the terms of these agreements provide that, if the Company terminates the officer other than for cause, death or disability, or if the officer terminates his or her employment with the Company for good cause, the officer shall be entitled to receive certain severance compensation and benefits as described in each such agreement.

Office Leases

In July 2018, the Company entered into an operating lease agreement with a related party for its headquarters in Gaithersburg, Maryland. The lease became effective July 1, 2018 and expires in June 2021 with the option to extend it by one year. Total lease payments under the lease are: $365 for the year ended December 31, 2019; $376 for the year ending December 31, 2020; and $191 for the remainder of the lease.

In October 2019, the Company entered into an operating lease agreement with a third party for an additional office space in Rockville, Maryland. The lease became effective October 1, 2019 and expires in June 2021. Total lease payments under the lease are: $101 for the year ended December 31, 2019; $407 for the year ending December 31, 2020; and $208 for the remainder of the lease.

In October 2019, the Company entered into an operating lease agreement with a third party for an additional lab space in Rockville, Maryland. The lease became effective October 15, 2019 and expires in February 2025. Total lease

11


 

payments under the lease are: $11 for the year ended December 31, 2019, $103 for the year ending December 31, 2020; and $573 for the remainder of the lease.

Rent expense was $154 and $51 for the three months ended March 31, 2020 and 2019, respectively.

Lab Equipment Lease

During December 2019, the Company entered into a non-cancelable lease agreement for lab equipment for payments totaling $1,193 over 60 months. The lease commencement date is subject to the delivery and acceptance of the equipment which is anticipated in the second quarter of 2020.

10. Related party transactions

In connection with the acquisition of a portfolio of clinical molecules and pre-clinical molecules for potential therapies for autoimmune diseases and inflammation from MedImmune, LLC, MedImmune Limited (collectively, “MedImmune”), and AstraZeneca Collaboration Ventures, LLC (together with MedImmune, the “AZ Parties”), the Company also entered into certain other agreements with the AZ Parties, including transition services agreement, a clinical supply agreement, a commercial supply agreement, a master supply and development services agreement, and a long-term lease agreement. During the three months ended March 31, 2020, the Company incurred $9,062 of costs under these agreements. As of March 31, 2020, $9,929 is recorded as a related party liability on the Company’s balance sheet. During the three months ended March 31, 2019, the Company incurred $9,831 of costs under these agreements.

11. Collaboration agreements

Commercial license and collaboration agreement with Hansoh

On May 24, 2019 (the “Hansoh Effective Date”), the Company entered into an exclusive commercial license and collaboration agreement with Hansoh Pharmaceutical Group Company Limited (“Hansoh”). By entering into this agreement, among other things, the Company promised to deliver to Hansoh an exclusive, sub-licensable, license to commercialize any pharmaceutical product that includes inebilizumab, the Company’s lead product candidate, in the mainland of the People’s Republic of China, Hong Kong and Macau.

The Company received a non-refundable upfront payment of $15,000 in June 2019 and an additional $5,000 in December 31, 2019. In addition, the Company has the ability to receive additional payments under the agreement of up to approximately $203,000, including up to $180,000 in commercial milestone payments and development milestone payments ranging from $2,000 to $5,000 on an indication-by-indication basis and is also entitled to receive tiered royalties ranging from the low double-digit percentages to the upper-teen percentages on aggregate net sales of any products developed and commercialized in the Hansoh Territory, subject to customary potential reductions.

As a result of the Hansoh transaction, the Company recognized the associated revenue of $20,000 at the Hansoh Effective Date. As noted previously, approximately $15,000 of the total upfront payment was received within 30 days after the Hansoh Effective Date. The remaining $5,000 was received within six months after the Hansoh Effective Date.

Commercial license and collaboration agreement with Mitsubishi Tanabe Pharma Corporation

On October 8, 2019 (“MTPC Transaction Date”), the Company entered into an exclusive commercial license agreement with Mitsubishi Tanabe Pharma Corporation (“MTPC”). By entering into this agreement, among other things, the Company promised to transfer to MTPC an exclusive, sub-licensable, license to develop and commercialize any pharmaceutical product that includes inebilizumab, in Japan, Thailand, South Korea, Indonesia, Vietnam, Malaysia, Philippines, Singapore and Taiwan.

The agreement required MTPC to pay to the Company a non-refundable upfront payment of $30,000. The entire upfront payment was received in January 2020 and was included within accounts receivable as of December 31, 2019 as the Company had a contractual right to bill for the entire amount as of December 31, 2019 and the Company recognized the associated revenue of $30,000 at the MTPC Transaction Date. In addition, the Company can receive additional payments upon achieving certain sales milestones related to other LCM indications. 

12


 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our Annual Report on Form 10-K for the year ended December 31, 2019 filed with Securities and Exchange Commission, or SEC, on March 25, 2020 (the “Annual Report”). Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, includes 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 this Quarterly Report on Form 10-Q, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

We are a clinical-stage biotechnology company pioneering treatments for autoimmune disease. Our approach seeks to redefine the treatment of autoimmune diseases by focusing on critical biological pathways shared across multiple indications. We believe this approach, which targets the underlying molecular pathogenesis of the disease allows us to develop more precise therapies, identify patients more likely to respond to treatment and pursue multiple diseases for each of our product candidates. Our lead product candidate, inebilizumab, is a humanized mAb designed to target CD19, a molecule expressed on the surface of a broad range of immune system B cells. In January 2019, we reported positive pivotal clinical trial data for inebilizumab in patients with NMOSD. NMOSD is a rare, devastating condition that attacks the optic nerve, spinal cord and brain stem, and often leads to irreversible blindness and paralysis. We received Breakthrough Therapy Designation for the treatment of this disease from the FDA in April 2019 and in August 2019, the FDA accepted for review our BLA for inebilizumab. The FDA set a PDUFA date of June 11, 2020. In addition, we have a broad pipeline of two additional clinical-stage and two pre-clinical product candidates focused on a number of other autoimmune diseases with high unmet medical needs, including myasthenia gravis, IgG4-related disease, Sjögren’s syndrome and lupus, as well as other conditions such as kidney transplant rejection. A Phase 2b trial in Sjögren’s syndrome, which is designed as Phase 3-enabling, is ongoing and in 2019, we initiated a separate Phase 2 trial in kidney transplant rejection.

We incorporated on December 11, 2017 under the laws of the State of Delaware. In February 2018, we acquired six molecules from MedImmune, of which five constitute our current product candidates, for a purchase price of approximately $142.3 million financed by AstraZeneca’s purchase of our Series A preferred stock. Following the asset purchase, we entered into several agreements with AstraZeneca and MedImmune, including a license agreement, a master supply and development services agreement, sublicense agreements, a transition services agreement, a clinical supply agreement and a commercial supply agreement.

To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, identifying and developing product candidates, enhancing our intellectual property portfolio, undertaking research, conducting pre-clinical studies and clinical trials, conducting pre-commercial and commercial launch activities, and securing manufacturing for our development programs. We do not have any products approved for sale and have not generated any revenue from product sales. To date, we have funded our operations primarily with proceeds from private placement of convertible preferred stock, the initial public offering of our common stock (the “IPO”) and collaboration agreements.

We have incurred significant operating losses since our inception, which are mainly attributed to research and development costs, and employee payroll expense, professional services expense and other administrative expenses included in general and administrative expenses. Our net loss was $40.8 million and $21.0 million for the three months ended March 31, 2020 and 2019, respectively. Our operating losses may fluctuate significantly from quarter-to-quarter and year-to-year as a result of several factors, including the timing of our clinical trials and our expenditures related to other research and development activities, as well as the timing of collaboration agreements and any future commercialization success. We expect to continue to incur operating losses for the foreseeable future. We anticipate these losses will increase substantially as we advance our product candidates through pre-clinical and clinical development, develop additional product candidates and seek regulatory approvals for our product candidates. We do not expect to generate any revenues from product sales unless and until we successfully complete development and obtain regulatory approval for one or more product candidates. In addition, if we obtain marketing approval for any product candidate, we expect to incur pre-commercialization expenses and significant commercialization expenses related to marketing, sales, manufacturing and distribution. We may also incur expenses in connection with the in-licensing of additional product candidates. Furthermore, we expect to incur additional costs associated with operating as a public company, including significant legal, accounting, investor relations, compliance and other expenses that we did not incur as a private company.

13


 

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from sales of our product candidates, if ever, we expect to finance our cash needs through public or private equity offerings, debt financings, collaborations and licensing arrangements or other capital sources. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Our failure to raise capital or enter into such other arrangements as and when needed would have a negative impact on our financial condition and could force us to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our product candidates that we would otherwise prefer to develop and market ourselves.

In May 2020, we announced positive interim results from our Phase 1b trial of VIB7734 in patients with cutaneous lupus erythematosus (“CLE”). This Phase 1b clinical trial enrolled a total of 31 patients in three cohorts of patients and is designed to evaluate the safety and tolerability of VIB7734 when given by three monthly subcutaneous doses at escalating dose levels. Cohort 1 enrolled patients with several autoimmune diseases thought to be driven by plasmacytoid dendritic cell (“pDCs”). Cohorts 2 and 3 enrolled patients with CLE. In cohorts 2 and 3, skin biopsies were taken before and after treatment to enumerate pDCs and measure interferon mediated gene expression. A clinical disease activity score was also periodically measured in cohorts 2 and 3. The primary endpoint was safety and tolerability. Additional endpoints included pDC depletion in peripheral blood and skin lesions of patients with CLE, and Cutaneous Lupus Erythematosus Disease Area and Severity Index (CLASI) scores. Interim results included safety data from cohorts 1, 2 and a subset of patients in cohort 3, pharmacodynamics results from cohort 2, and CLASI results from cohort 2 and a subset of patients in cohort 3. As of the date of database lock (April 24, 2020), which occurred after all skin biopsies in cohort 2 had been analyzed, we observed rates of adverse events comparable to placebo control across all cohorts and consistent with the Phase 1a trial of VIB7734. Results also indicated potent depletion of pDC both in peripheral blood and in inflamed CLE skin lesion biopsies in cohort 2, and a dose-dependent, increased proportion of subjects with reductions in CLASI scores of 4 points or more compared to placebo in cohorts 2 and 3. While the trial was not powered to detect statistically significant changes in pDC depletion or the CLASI scores between placebo and treatment arms, reductions in CLASI scores of 4 points or more compared to baseline are considered to be clinically meaningful.  Based on these positive interim results, we intend, subject to regulatory feedback, to progress to Phase 2 clinical trials in other diseases that are also driven by interferons and other pro inflammatory cytokines secreted by pDCs. These data are preliminary and subject to change as further analyses are conducted.  In addition, the clinical trial in cohort 3 is ongoing and the interim data from this cohort represents only a subset of the patients enrolled in the cohort. The interim data from cohort 3 are expected to change as further patient follow up occurs and more patient data become available. 

In April 2020, our board of directors (the “Board”) elected Rachelle Jacques to the Board as a Class I director, effective May 1, 2020, for a term to continue until the 2020 annual meeting of our stockholders and thereafter until Ms. Jacques’ successor has been elected and qualified or until her earlier death, resignation or removal. Ms. Jacques currently serves as the Chief Executive Officer at Enzyvant Therapeutics, Inc., a biopharmaceutical company focused on developing therapies for patients with rare diseases.

In December 2019 an outbreak of a novel strain of coronavirus was identified in Wuhan, China. This virus continues to spread globally, has been declared a pandemic by the World Health Organization and has spread to over 100 countries, including the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. The extent to which the coronavirus impacts us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and the actions to contain the coronavirus or treat its impact, among others. At present, we are not experiencing significant impact or delays from COVID-19 on our business, operations and, if approved, commercialization plans. However, in order to prioritize patient health and that of the investigators at clinical trial sites, we have paused enrollment of new patients in certain of our clinical trials, including our Phase 2b trial of VIB4920 in Sjogren’s syndrome, our Phase 2 trial of VIB4920 in kidney transplant rejection, our Phase 2 trial of VIB4920 in rheumatoid arthritis and our Phase 2 trial of inebilizumab in kidney transplant desensitization. Our ability to re-open enrollment in these clinical trials will be dependent on many factors, including the progression of the pandemic and its impact on patients and the investigators at our clinical trial sites. Furthermore, our ability to re-open enrollment in each of these clinical trials will require collaboration with, and permission from, each of the clinical trial sites. Over the coming weeks and months, we will continue to monitor carefully the situation with respect to each of our clinical trials and follow guidance from local and federal health authorities.

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 or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

14


 

Components of our Results of Operations

Revenue

We have not generated any revenue from the sale of products since our inception and do not expect to generate substantial revenue from the sale of products in the near future, if at all. We have generated revenue from commercial license and collaboration agreements related to the treatment of NMOSD with inebilizumab. In addition, if our development efforts for our product portfolio, including inebilizumab, are successful and result in marketing approval or if we enter into collaboration or license agreements with third parties, we may generate revenue in the future from product sales or payments from such collaboration or license agreements, or a combination of product sales and payments from such agreements.

Research and Development Expenses

To date, our research and development expenses, net of the acquisition of IPR&D that is disclosed separately, have related primarily to development of inebilizumab, VIB4920 and VIB7734, pre-clinical studies and other pre-clinical activities related to our portfolio. Research and development expenses are recognized as incurred, and payments made prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.

Research and development expenses include:

 

salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in research and development efforts;

 

external research and development expenses incurred under agreements with contract research organizations and consultants to conduct our pre-clinical, toxicology and other pre-clinical studies, as well as clinical trials of our product candidates;

 

laboratory supplies;

 

costs related to manufacturing product candidates, including fees paid to third-party manufacturers and raw material suppliers;

 

license fees and research funding; and

 

facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent, maintenance of facilities, insurance, equipment and other supplies.

Clinical trial costs are a significant component of research and development expenses and include costs associated with third-party contractors. A majority of these payments are pass-through payments that are made to MedImmune and AstraZeneca pursuant to the existing contracts in place associated with the IPR&D assets acquired. Through our agreements with MedImmune and AstraZeneca, we outsource a substantial portion of our clinical trial activities, utilizing external entities such as CROs, independent clinical investigators and other third-party service providers to assist us with the execution of our clinical trials. We also expect to incur additional expenses related to milestone and royalty payments payable to third parties with whom we have entered into license agreements relating to our product candidates.

We plan to substantially increase our research and development expenses for the foreseeable future, as we continue the development of our product candidates and seek to discover and develop new product candidates. Due to the inherently unpredictable nature of pre-clinical and clinical development, we cannot determine with certainty the timing of the initiation, duration or costs of future clinical trials and pre-clinical studies of product candidates. Clinical and pre-clinical development timelines, the probability of success and the amount of associated development costs can differ materially from expectations. We anticipate that we will make determinations as to which product candidates and development programs to pursue and how much funding to direct to each product candidate or program on an ongoing basis in response to the results of ongoing and future pre-clinical studies and clinical trials, regulatory developments and our ongoing assessments as to each product candidate’s commercial potential. In addition, we cannot forecast which product candidates may be subject to future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our development plans and capital requirements.

Our future clinical development costs may vary significantly based on factors such as:

 

per patient trial costs;

 

the number of patients needed to determine a recommended dose;

 

the number of trials required for regulatory approval;

15


 

 

the number of sites included in the trials;

 

the countries in which the trials are conducted;

 

the length of time required to enroll eligible patients;

 

the number of patients who participate in the trials;

 

the number of doses that patients receive;

 

the drop-out or discontinuation rates of patients;

 

potential additional safety monitoring requested by regulatory agencies;

 

the duration of patient participation in the trials and follow-up;

 

the phase of development of the product candidate;  

 

the efficacy and safety profile of the product candidate; and

 

developments related to the coronavirus outbreak and impact of it and COVID-19 on the costs and timing associated with the conduct of our clinical trials and other related activities.

General and Administrative Expenses

General and administrative expenses consist primarily of salaries and employee-related costs, including stock-based compensation for personnel in our executive, finance and other administrative functions. Other significant costs include facility and/or rent-related costs, legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services and insurance costs. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities, pre-commercialization and, if any product candidates receive marketing approval, commercialization activities. We also anticipate increased expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with stock exchange listing and SEC requirements, director and officer insurance premiums and investor relations costs associated with operating as a public company.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents and marketable securities.

Results of Operations

Comparison of the Three Month Ended March 31, 2020 and 2019

The following table summarizes our results of operations for the three months ended March 31, 2020 and 2019:

 

 

Three Months Ended

March 31,

 

 

 

 

 

 

 

2020

 

 

2019

 

 

Change

 

 

 

(in thousands)

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

26,829

 

 

$

16,615

 

 

$

10,214

 

General and administrative

 

 

15,282

 

 

 

5,037

 

 

 

10,245

 

Total operating expenses

 

 

42,111

 

 

 

21,652

 

 

 

20,459

 

Loss from operations

 

 

(42,111

)

 

 

(21,652

)

 

 

(20,459

)

Other income

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

1,334

 

 

 

676

 

 

 

658

 

Total other income

 

 

1,334

 

 

 

676

 

 

 

658

 

Net loss

 

$

(40,777

)

 

$

(20,976

)

 

$

(19,801

)

 

Research and Development Expenses.    Research and development expenses were $26.8 million and $16.6 million for the three months ended March 31, 2020 and 2019, respectively. The increase of $10.2 million was primarily driven by an increases of $4.2 million in personnel related costs due to an increase in headcount, and $6.0 million of direct program and external costs for payments to our research and development contractors driven primarily by manufacturing activities to support the BLA filing and pending approval process, potential U.S. commercial launch and clinical trials for other potential indications for inebilizumab, as well as increased clinical material supplies for VIB4920.

16


 

General and Administrative Expenses.    General and administrative expenses were $15.3 million and $5.0 million for the three months ended March 31, 2020 and 2019, respectively. The increase of $10.2 million was due primarily to increases of $5.2 million in personnel related expenses, including stock-based compensation, due to an increase in headcount, $3.1 million in professional services related to accounting services, corporate legal fees and patent legal fees, and $2.0 million of facility related and other administrative expenses

Interest Income.    Interest income was $1.3 million and $0.7 million for the three months ended March 31, 2020 and 2019, respectively. The increase of $0.7 million was due primarily to higher cash and cash equivalents and marketable securities held during the three months ended March 31, 2020 compared to the corresponding period in 2019.

Liquidity and Capital Resources

Cash Flows

We have incurred net losses and negative cash flows from operations since our inception and anticipate we will continue to incur net losses for the foreseeable future. As of March 31, 2020, we had cash and cash equivalents of $163.6 million.

The following table sets forth a summary of the net cash flow activity for each period presented:

 

 

 

Three Months Ended

March 31,

 

 

 

2020

 

 

2019

 

 

 

(in thousands)

 

Net cash provided by (used in):

 

 

 

 

 

 

 

 

Operating activities

 

$

(10,871

)

 

$