lrmr-10q_20210630.htm
false 2021 Q2 0001374690 --12-31 P5Y P3Y P2Y P8Y1M6D P7Y P10Y P4Y P4Y 0.79 1.21 1.54 2.33 15996133 9381412 15996133 7736331 75485000 P6Y2M8D P6Y29D P7Y10M24D P8Y1M6D P4Y3M18D P8Y1M6D 0001374690 2021-01-01 2021-06-30 xbrli:shares 0001374690 2021-08-10 iso4217:USD 0001374690 2021-06-30 0001374690 2020-12-31 iso4217:USD xbrli:shares 0001374690 2021-04-01 2021-06-30 0001374690 2020-04-01 2020-06-30 0001374690 2020-01-01 2020-06-30 0001374690 us-gaap:CommonStockMember 2020-12-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2020-12-31 0001374690 us-gaap:RetainedEarningsMember 2020-12-31 0001374690 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-12-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2021-01-01 2021-03-31 0001374690 2021-01-01 2021-03-31 0001374690 us-gaap:RetainedEarningsMember 2021-01-01 2021-03-31 0001374690 us-gaap:CommonStockMember 2021-03-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2021-03-31 0001374690 us-gaap:RetainedEarningsMember 2021-03-31 0001374690 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-03-31 0001374690 2021-03-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2021-04-01 2021-06-30 0001374690 us-gaap:RetainedEarningsMember 2021-04-01 2021-06-30 0001374690 us-gaap:CommonStockMember 2021-06-30 0001374690 us-gaap:AdditionalPaidInCapitalMember 2021-06-30 0001374690 us-gaap:RetainedEarningsMember 2021-06-30 0001374690 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2021-06-30 0001374690 us-gaap:CommonStockMember 2019-12-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2019-12-31 0001374690 us-gaap:RetainedEarningsMember 2019-12-31 0001374690 2019-12-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2020-01-01 2020-03-31 0001374690 2020-01-01 2020-03-31 0001374690 us-gaap:RetainedEarningsMember 2020-01-01 2020-03-31 0001374690 us-gaap:CommonStockMember 2020-03-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2020-03-31 0001374690 us-gaap:RetainedEarningsMember 2020-03-31 0001374690 2020-03-31 0001374690 us-gaap:AdditionalPaidInCapitalMember 2020-04-01 2020-06-30 0001374690 us-gaap:CommonStockMember 2020-04-01 2020-06-30 0001374690 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-04-01 2020-06-30 0001374690 us-gaap:RetainedEarningsMember 2020-04-01 2020-06-30 0001374690 us-gaap:CommonStockMember 2020-06-30 0001374690 us-gaap:AdditionalPaidInCapitalMember 2020-06-30 0001374690 us-gaap:RetainedEarningsMember 2020-06-30 0001374690 us-gaap:AccumulatedOtherComprehensiveIncomeMember 2020-06-30 0001374690 2020-06-30 0001374690 lrmr:ZafgenMember 2020-05-27 2020-05-28 xbrli:pure 0001374690 lrmr:ZafgenMember lrmr:MergerAgreementMember 2020-05-27 2020-05-28 0001374690 lrmr:ChondrialMember lrmr:MergerAgreementMember 2020-05-28 0001374690 lrmr:ZafgenMember 2020-05-28 0001374690 lrmr:ZafgenMember lrmr:MergerAgreementMember 2020-05-28 0001374690 lrmr:ZafgenMember 2020-06-01 2020-06-30 0001374690 lrmr:PrivateOfferingMember 2020-06-01 2020-06-30 0001374690 lrmr:AtTheMarketOfferingMember srt:MaximumMember us-gaap:CommonStockMember 2020-08-14 2020-08-14 0001374690 lrmr:AtTheMarketOfferingMember us-gaap:CommonStockMember 2021-07-01 2021-07-31 0001374690 lrmr:AtTheMarketOfferingMember us-gaap:CommonStockMember 2021-08-09 2021-08-10 0001374690 srt:MaximumMember 2021-01-01 2021-06-30 0001374690 srt:MinimumMember 2021-01-01 2021-06-30 0001374690 lrmr:CommonStockEquivalentsMember 2021-04-01 2021-06-30 0001374690 lrmr:CommonStockEquivalentsMember 2021-01-01 2021-06-30 0001374690 lrmr:CommonStockEquivalentsMember 2020-04-01 2020-06-30 0001374690 lrmr:CommonStockEquivalentsMember 2020-01-01 2020-06-30 0001374690 lrmr:ZafgenMember 2020-05-28 0001374690 lrmr:ChondrialTherapeuticsIncMember 2020-05-28 0001374690 lrmr:ZafgenMember lrmr:MergerAgreementMember 2020-05-28 0001374690 lrmr:ZafgenMember us-gaap:EmployeeStockOptionMember 2020-05-28 2020-05-28 0001374690 lrmr:ZafgenMember 2020-05-28 2020-05-28 0001374690 lrmr:ZafgenMember 2020-05-28 0001374690 lrmr:ZafgenMember 2020-05-27 0001374690 2020-05-28 0001374690 us-gaap:MoneyMarketFundsMember 2021-06-30 0001374690 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2021-06-30 0001374690 us-gaap:CommercialPaperMember 2021-06-30 0001374690 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2021-06-30 0001374690 us-gaap:CorporateBondSecuritiesMember 2021-06-30 0001374690 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueInputsLevel2Member 2021-06-30 0001374690 us-gaap:FairValueInputsLevel1Member 2021-06-30 0001374690 us-gaap:FairValueInputsLevel2Member 2021-06-30 0001374690 us-gaap:MoneyMarketFundsMember 2020-12-31 0001374690 us-gaap:MoneyMarketFundsMember us-gaap:FairValueInputsLevel1Member 2020-12-31 0001374690 us-gaap:CommercialPaperMember 2020-12-31 0001374690 us-gaap:CommercialPaperMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001374690 us-gaap:CorporateBondSecuritiesMember 2020-12-31 0001374690 us-gaap:CorporateBondSecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001374690 us-gaap:FairValueInputsLevel1Member 2020-12-31 0001374690 us-gaap:FairValueInputsLevel2Member 2020-12-31 0001374690 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember 2020-12-31 0001374690 us-gaap:USGovernmentCorporationsAndAgenciesSecuritiesMember us-gaap:FairValueInputsLevel2Member 2020-12-31 0001374690 us-gaap:ComputerEquipmentMember 2021-03-31 0001374690 us-gaap:ComputerEquipmentMember 2020-12-31 0001374690 us-gaap:EquipmentMember 2021-03-31 0001374690 us-gaap:EquipmentMember 2020-12-31 0001374690 us-gaap:FurnitureAndFixturesMember 2021-03-31 0001374690 us-gaap:FurnitureAndFixturesMember 2020-12-31 0001374690 us-gaap:LeaseholdImprovementsMember 2021-03-31 0001374690 us-gaap:ComputerEquipmentMember 2021-01-01 2021-03-31 0001374690 us-gaap:EquipmentMember 2021-01-01 2021-03-31 0001374690 us-gaap:FurnitureAndFixturesMember 2021-01-01 2021-03-31 0001374690 us-gaap:LeaseholdImprovementsMember 2021-01-01 2021-03-31 0001374690 srt:MaximumMember 2020-01-01 2020-06-30 0001374690 us-gaap:PrivatePlacementMember 2020-05-26 2020-05-28 0001374690 us-gaap:PrivatePlacementMember 2020-05-28 0001374690 us-gaap:PrivatePlacementMember lrmr:MTSHealthPartnersMember us-gaap:CommonStockMember 2020-05-26 2020-05-28 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember srt:MaximumMember 2020-08-14 2020-08-14 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2020-08-14 2020-08-14 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2021-06-30 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2021-01-01 2021-06-30 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2021-07-31 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2021-07-01 2021-07-31 0001374690 lrmr:AtTheMarketEquityOfferingProgramMember us-gaap:CommonStockMember 2021-08-09 2021-08-10 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember 2021-01-01 2021-03-31 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember 2021-06-30 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember 2021-01-01 2021-06-30 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember 2021-01-01 2021-01-01 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember lrmr:MergerMember 2021-05-28 2021-05-28 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember 2021-01-01 0001374690 lrmr:TwoThousandFourteenStockOptionAndIncentivePlanMember 2014-12-31 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2016-11-30 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2018-03-23 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2016-11-01 2016-11-30 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2019-04-28 2019-04-29 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2019-04-29 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2020-01-02 2020-05-28 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2020-05-28 0001374690 lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2020-05-28 2020-05-28 0001374690 lrmr:VestedRecognizedImmediatelyMember lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2020-05-28 2020-05-28 0001374690 lrmr:NonvestedRecognizeOverRemainingTermMember lrmr:TwoThousandSixteenEquityAndIncentivePlanMember 2020-05-28 2020-05-28 0001374690 2020-01-01 2020-12-31 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember lrmr:VestOverFourYearsMember us-gaap:CommonStockMember 2021-01-01 2021-06-30 0001374690 lrmr:TwoThousandTwentyEquityIncentivePlanMember us-gaap:CommonStockMember srt:DirectorMember 2021-01-01 2021-06-30 0001374690 us-gaap:ResearchAndDevelopmentExpenseMember 2021-04-01 2021-06-30 0001374690 us-gaap:ResearchAndDevelopmentExpenseMember 2020-04-01 2020-06-30 0001374690 us-gaap:ResearchAndDevelopmentExpenseMember 2021-01-01 2021-06-30 0001374690 us-gaap:ResearchAndDevelopmentExpenseMember 2020-01-01 2020-06-30 0001374690 us-gaap:GeneralAndAdministrativeExpenseMember 2021-04-01 2021-06-30 0001374690 us-gaap:GeneralAndAdministrativeExpenseMember 2020-04-01 2020-06-30 0001374690 us-gaap:GeneralAndAdministrativeExpenseMember 2021-01-01 2021-06-30 0001374690 us-gaap:GeneralAndAdministrativeExpenseMember 2020-01-01 2020-06-30 0001374690 lrmr:WakeForestUniversityHealthSciencesMember srt:MaximumMember 2021-06-30 0001374690 lrmr:IndianaUniversityResearchAndTechnologyCorporationMember srt:MaximumMember 2021-06-30 0001374690 lrmr:WakeForestUniversityHealthSciencesMember 2021-06-30 0001374690 lrmr:IndianaUniversityResearchAndTechnologyCorporationMember 2021-06-30 0001374690 lrmr:OfficeMember stpr:PA 2019-08-08 0001374690 lrmr:OfficeMember stpr:PA 2020-03-31 0001374690 lrmr:OfficeMember stpr:PA 2019-08-07 2019-08-08 0001374690 country:MA lrmr:OfficeMember us-gaap:LetterOfCreditMember 2020-05-28 utr:sqft 0001374690 country:MA lrmr:OfficeMember 2020-05-28 2020-05-28 0001374690 country:MA lrmr:OfficeSubleaseMember 2020-10-27 2020-10-27 0001374690 lrmr:FirstSubleaseYearMember lrmr:OfficeSubleaseMember country:MA 2021-06-30 0001374690 lrmr:FinalSubleaseYearMember lrmr:OfficeSubleaseMember country:MA 2021-06-30 0001374690 lrmr:FirstSubleaseYearMember lrmr:OfficeSubleaseMember country:MA us-gaap:LetterOfCreditMember 2021-06-30 0001374690 lrmr:SixthSubleaseYearMember lrmr:OfficeSubleaseMember country:MA us-gaap:LetterOfCreditMember 2021-06-30 0001374690 stpr:PA lrmr:OfficeAndLabMember 2018-11-05 2018-11-05 0001374690 stpr:PA lrmr:OfficeAndLabMember 2018-11-05 0001374690 stpr:PA lrmr:OfficeAndLabMember 2020-08-04 2020-08-04 0001374690 lrmr:ConsultingAgreementMember 2016-11-01 2016-11-30 0001374690 lrmr:ConsultingAgreementMember srt:MaximumMember 2021-04-01 2021-06-30 0001374690 lrmr:ConsultingAgreementMember srt:MaximumMember 2020-04-01 2020-06-30 0001374690 lrmr:ConsultingAgreementMember 2021-01-01 2021-06-30 0001374690 lrmr:ConsultingAgreementMember 2020-01-01 2020-06-30 0001374690 lrmr:ConsultingAgreementMember lrmr:HoldingsMember 2016-11-01 2016-11-30 0001374690 lrmr:ConsultingAgreementMember lrmr:HoldingsMember 2016-11-29 2016-11-30 0001374690 lrmr:ConsultingAgreementMember lrmr:FutureServicesMember lrmr:VestsOverFortyEightMonthsMember 2016-11-29 2016-11-30 0001374690 lrmr:ConsultingAgreementMember lrmr:FutureServicesMember lrmr:RemainingRestrictedCommonUnitsMember 2016-11-29 2016-11-30 0001374690 lrmr:ConsultingAgreementMember 2016-11-29 2016-11-30 0001374690 lrmr:ConsultingAgreementMember 2020-11-01 2020-11-30 0001374690 lrmr:NewConsultingAgreementMember 2021-01-01 2021-01-01 0001374690 lrmr:SeriesAPreferredUnitPurchaseAgreementMember lrmr:HoldingsMember 2016-11-01 2016-11-30 0001374690 lrmr:SeriesBBridgeUnitPurchaseAgreementMember lrmr:HoldingsMember srt:MaximumMember 2019-11-20 2019-11-21 0001374690 lrmr:SeriesBBridgeUnitPurchaseAgreementMember lrmr:HoldingsMember 2019-11-20 2019-11-21 0001374690 lrmr:SecondSeriesBBridgeUnitPurchaseAgreementMember lrmr:HoldingsMember srt:MaximumMember 2020-01-14 2020-01-16 0001374690 lrmr:SecondSeriesBBridgeUnitPurchaseAgreementMember lrmr:HoldingsMember 2020-01-14 2020-01-16 0001374690 lrmr:HoldingsMember lrmr:SeriesAAndSeriesBMember 2020-01-01 2020-06-30

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 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 June 30, 2021

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 001-36510

LARIMAR THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

20-3857670

(State or other jurisdiction of

incorporation or organization)

(IRS Employer

Identification No.)

 

 

Three Bala Plaza East, Suite 506

19004

Bala Cynwyd, PA

(zip code)

(Address of principal executive offices)

 

 

(844) 511-9056

(Registrant’s telephone number, including area code)

 

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, par value $0.001 per share

LRMR

The Nasdaq Global 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

 

Emerging growth company

Smaller reporting 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 August 10, 2021, there were 17,710,450 shares of the registrant’s Common Stock, $0.001 par value per share, outstanding.

 

 

 


 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

Statements made in this Quarterly Report on Form 10-Q that are not statements of historical or current facts are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements discuss our business, operations and financial performance and conditions, as well as our plans, objectives and expectations for our business operations and financial performance and condition. In some cases, you can identify forward-looking statements by terminology such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “design,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “positioned,” “potential,” “seek,” “should,” “target,” “will,” “would” and other similar expressions that are predictions of or indicate future events and future trends, or the negative of these terms or other comparable terminology. In addition, statements that “we believe” or similar statements reflect our beliefs and opinions on the relevant subject. These forward-looking statements, which are subject to risks, uncertainties and assumptions about us, may include projections of our future financial performance, our anticipated growth strategies and anticipated trends in our business.

You should understand that the following important factors could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in our forward-looking statements:

 

our ability to successfully engage with the FDA concerning the clinical hold on the investigational new drug application (IND) for CTI-1601 and the timing and outcomes of our planned interactions with the FDA and submission of a clinical hold complete response with further information and data regarding CTI-1601 requested by FDA to lift the clinical hold and allow initiation of interventional clinical studies;

 

our estimates regarding future results of operations, financial position, research and development costs, capital requirements and our needs for additional financing;

 

how long we can continue to fund our operations with our existing cash, cash equivalents and marketable debt securities;

 

our ability to optimize and scale CTI-1601 or any other product candidate’s manufacturing process and to manufacture sufficient quantities of clinical and, if approved, commercial supplies of CTI-1601;

 

our ability to realize any value from CTI-1601 and any other product candidate we may develop in the future in light of inherent risks and difficulties involved in successfully bringing product candidates to market and the risk that products will not achieve broad market acceptance;

 

delays or changes in our anticipated clinical timelines, including as a result of patient recruitment, clinical and non-clinical results, changes in clinical protocols and milestones for CTI-1601, including those associated with COVID-19;

 

uncertainties in obtaining successful non-clinical or clinical trial results that reliably and meaningfully demonstrate safety, tolerability and efficacy profiles that are satisfactory to the FDA, EMA, and other comparable regulatory authorities for marketing approval for CTI-1601 or any other product candidate that we may develop in the future and unexpected costs that may result therefrom;

 

our ability to comply with regulatory requirements applicable to our business and other regulatory developments in the United States and foreign countries;

 

uncertainties associated with the clinical development and regulatory approval for CTI-1601 or any other product candidate that we may develop in the future, including potential delays in the commencement, enrollment, and completion of clinical trials;

 

the difficulties and expenses associated with obtaining and maintaining regulatory approval for CTI‑1601 or any other product candidate we may develop in the future, and the indication and labeling under any such approval;

 


 

 

the size and growth of the potential markets for CTI-1601 or any other product candidate that we may develop in the future, the rate and degree of market acceptance of CTI-1601 or any other product candidate that we may develop in the future and our ability to serve those markets;

 

the success of competing therapies and products that are or become available;

 

our ability to obtain and maintain patent protection and defend our intellectual property rights against third parties;

 

the performance of third parties upon which we depend, including third-party CROs, and third-party suppliers, manufacturers, distributors, and logistics providers;

 

our ability to maintain our relationships, and contracts with our key vendors;

 

our ability to recruit or retain key scientific, technical, commercial, and management personnel or to retain our executive officers;

 

our ability to maintain proper functionality and security of our internal computer and information systems and prevent or avoid cyber-attacks, malicious intrusion, breakdown, destruction, loss of data privacy or other significant disruption; and

 

the extent to which health epidemics and other outbreaks of communicable diseases, including the ongoing COVID-19 pandemic, disrupt our operations, the operations of third parties on which we rely or the operations of regulatory agencies we interact with in the development of CTI-1601.

These forward-looking statements are based on management’s current expectations, estimates, forecasts and projections about our business and the industry in which we operate, and management’s beliefs and assumptions are not guarantees of future performance or development and involve known and unknown risks, uncertainties and other factors that are in some cases beyond our control. In light of the significant uncertainties in these forward-looking statements, you should not rely upon forward-looking statements as predictions of future events. Although we believe the expectations reflected in the forward-looking statements are reasonable, the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements may not be achieved or occur at all. The factors that could cause or contribute to such differences include, but are not limited to, those discussed in our Annual Report on Form 10-K filed on March 4, 2021 and subsequent reports on Form 10-Q filed thereafter. Except as required by law, we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise after the date of this Quarterly Report on Form 10-Q or to reflect the occurrence of any unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends on indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

 

 

 


 

 

Larimar Therapeutics, Inc.

INDEX

 

 

 

Page

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1

 

Financial Statements (unaudited)

 

3

 

 

 

 

 

 

 

Condensed Consolidated Balance Sheets as of June 30, 2021 and December 31, 2020

 

3

 

 

 

 

 

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2021 and 2020

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders Equity for the three and six months ended June 30, 2021 and 2020

 

5

 

 

 

 

 

 

 

Condensed Consolidated Statements of Cash Flows for the three and six months ended June 30, 2021 and 2020

 

6

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

7

 

 

 

 

 

Item 2.

 

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

 

22

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

31

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

31

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

32

 

 

 

 

 

Item 1A.

 

Risk Factors

 

32

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

32

Item 3.

  

Defaults Upon Senior Securities

 

32

Item 4.

  

Mine Safety Disclosures

 

32

Item 5.

 

Other Information

 

32

 

 

 

 

 

Item 6.

 

Exhibits

 

33

 

 

 

 

 

Signatures

 

 

 

As previously disclosed, on May 28, 2020, Zafgen, Inc., a Delaware corporation (“Zafgen”), completed a Merger with Chondrial Therapeutics, Inc., a Delaware corporation (“Chondrial”), in accordance with the terms of the Agreement and Plan of Merger (the “Merger Agreement”) entered into on December 17, 2019. Pursuant to the Merger Agreement, (i) a subsidiary of Zafgen merged with and into Chondrial, with Chondrial continuing as a wholly owned subsidiary of Zafgen and the surviving corporation of the merger and (ii) Zafgen was renamed as “Larimar Therapeutics, Inc.” (the “Merger”).

 

For accounting purposes, the Merger is treated as a “reverse asset acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Chondrial is considered the accounting acquirer. Accordingly, Chondrial’s historical results of operations replace Larimar’s historical results of operations for all periods prior to the Merger and, for all periods following the Merger, the results of operations of the combined company are included in the Company’s financial statements.

 

 

Unless the context otherwise requires, references to the “Company,” the “combined company” “we,” “our” or “us” in this report refer to Larimar Therapeutics, Inc. and its subsidiaries, references to “Larimar” refer to the Company following the completion of the Merger, and references to “Zafgen” refer to the Company prior to the completion of the Merger.

2


 

PART I-FINANCIAL INFORMATION

Item 1.

Financial Statements

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

June 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

70,630

 

 

$

68,148

 

Marketable debt securities

 

 

 

 

 

24,490

 

Prepaid expenses and other current assets

 

 

3,406

 

 

 

5,314

 

Total current assets

 

 

74,036

 

 

 

97,952

 

Property and equipment, net

 

 

1,211

 

 

 

1,040

 

Operating lease right-of-use assets

 

 

3,673

 

 

 

3,936

 

Restricted cash

 

 

1,339

 

 

 

1,339

 

Other assets

 

 

672

 

 

 

419

 

Total assets

 

$

80,931

 

 

$

104,686

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,463

 

 

$

2,634

 

Accrued expenses

 

 

5,675

 

 

 

5,843

 

Operating lease liabilities, current

 

 

553

 

 

 

515

 

Total current liabilities

 

 

7,691

 

 

 

8,992

 

Operating lease liabilities

 

 

5,715

 

 

 

6,002

 

Total liabilities

 

 

13,406

 

 

 

14,994

 

Commitments and contingencies (See Note 9)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock; $0.001 par value per share; 5,000,000 shares authorized

   as of June 30, 2021 and December 31, 2020; no shares issued and

   outstanding as of June 30, 2021 and December 31, 2020

 

 

 

 

 

 

Common stock, $0.001 par value per share; 115,000,000 shares

   authorized as of June 30, 2021 and December 31, 2020;

   15,367,730 shares issued and outstanding as of June 30, 2021

   and December 31, 2020, respectively

 

 

15

 

 

 

15

 

Additional paid-in capital

 

 

157,820

 

 

 

155,290

 

Accumulated deficit

 

 

(90,311

)

 

 

(65,614

)

Accumulated other comprehensive loss

 

 

1

 

 

 

1

 

Total stockholders’ equity

 

 

67,525

 

 

 

89,692

 

Total liabilities and stockholders’ equity

 

$

80,931

 

 

$

104,686

 

 

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

 

3


 

 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

9,102

 

 

$

8,907

 

 

$

18,076

 

 

$

13,914

 

General and administrative

 

 

3,441

 

 

 

2,492

 

 

 

6,573

 

 

 

4,159

 

Total operating expenses

 

 

12,543

 

 

 

11,399

 

 

 

24,649

 

 

 

18,073

 

Loss from operations

 

 

(12,543

)

 

 

(11,399

)

 

 

(24,649

)

 

 

(18,073

)

Other income (expense), net

 

 

(66

)

 

 

69

 

 

 

(48

)

 

 

69

 

Net loss

 

$

(12,609

)

 

$

(11,330

)

 

$

(24,697

)

 

$

(18,004

)

Net loss per share, basic and diluted

 

$

(0.79

)

 

$

(1.21

)

 

$

(1.54

)

 

$

(2.33

)

Weighted average common shares outstanding, basic and diluted

 

 

15,996,133

 

 

 

9,381,412

 

 

 

15,996,133

 

 

 

7,736,331

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,609

)

 

$

(11,330

)

 

$

(24,697

)

 

$

(18,004

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable debt securities

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Total other comprehensive loss

 

 

 

 

 

(3

)

 

 

 

 

 

(3

)

Total comprehensive loss

 

$

(12,609

)

 

$

(11,333

)

 

$

(24,697

)

 

$

(18,007

)

 

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


4


 

 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances as of December 31, 2020

 

 

15,367,730

 

 

$

15

 

 

$

155,290

 

 

$

(65,614

)

 

$

1

 

 

$

89,692

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,180

 

 

 

 

 

 

 

 

 

1,180

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,088

)

 

 

 

 

 

(12,088

)

Balances as of March 31, 2021

 

 

15,367,730

 

 

$

15

 

 

$

156,470

 

 

$

(77,702

)

 

$

1

 

 

$

78,784

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,350

 

 

 

 

 

 

 

 

 

1,350

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(12,609

)

 

 

 

 

 

(12,609

)

Balances as of June 30, 2021

 

 

15,367,730

 

 

$

15

 

 

$

157,820

 

 

$

(90,311

)

 

$

1

 

 

$

67,525

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Other

 

 

Total

 

 

 

Common Stock

 

 

Paid-in

 

 

Accumulated

 

 

Comprehensive

 

 

Stockholders’

 

 

 

Shares

 

 

Par Value

 

 

Capital

 

 

Deficit

 

 

Loss

 

 

Equity

 

Balances as of December 31, 2019

 

 

6,091,250

 

 

$

6

 

 

$

22,432

 

 

$

(23,132

)

 

$

 

 

$

(694

)

Capital contributions from related party

 

 

 

 

 

 

 

 

9,595

 

 

 

 

 

 

 

 

 

9,595

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

29

 

 

 

 

 

 

 

 

 

29

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(6,674

)

 

 

 

 

 

(6,674

)

Balances as of March 31, 2020

 

 

6,091,250

 

 

$

6

 

 

$

32,056

 

 

$

(29,806

)

 

$

 

 

$

2,256

 

Capital contributions from related party

 

 

 

 

 

 

 

 

8,400

 

 

 

 

 

 

 

 

 

8,400

 

Merger with Zafgen Inc.

 

 

3,124,337

 

 

 

3

 

 

 

37,116

 

 

 

 

 

 

 

 

 

37,119

 

Private Placement of common shares and pre-funded warrants, net of transaction costs

 

 

6,140,619

 

 

 

6

 

 

 

75,344

 

 

 

 

 

 

 

 

 

75,350

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

752

 

 

 

 

 

 

 

 

 

752

 

Unrealized loss on marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

(3

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(11,330

)

 

 

 

 

 

(11,330

)

Balances as of June 30, 2020

 

 

15,356,206

 

 

$

15

 

 

$

153,668

 

 

$

(41,136

)

 

$

(3

)

 

$

112,544

 

 

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

 

5


 

 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(24,697

)

 

$

(18,004

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

2,530

 

 

 

781

 

Loss on disposal of fixed asset

 

 

5

 

 

 

 

Depreciation expense

 

 

150

 

 

 

55

 

Amortization of premium on marketable securities

 

 

(11

)

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

1,908

 

 

 

(1,760

)

Accounts payable

 

 

(1,466

)

 

 

(3,284

)

Accrued expenses

 

 

(168

)

 

 

1,067

 

Right-of-use assets

 

 

263

 

 

 

89

 

Operating lease liabilities

 

 

(249

)

 

 

(85

)

Other assets

 

 

(253

)

 

 

21

 

Net cash used in operating activities:

 

 

(21,988

)

 

 

(21,120

)

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(31

)

 

 

(58

)

Purchase of marketable securities

 

 

(1,749

)

 

 

 

Maturities and sales of marketable securities

 

 

26,250

 

 

 

 

Cash, cash equivalents, and restricted cash acquired in connection with the Merger

 

 

 

 

 

41,934

 

Merger transaction costs

 

 

 

 

 

(1,233

)

Net cash provided by investing activities

 

 

24,470

 

 

 

40,643

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Capital contribution from related party

 

 

 

 

 

17,995

 

Proceeds from sale of common stock and prefunded warrants, net of issuance costs

 

 

 

 

 

 

 

  75,485

 

Net cash provided by financing activities

 

 

 

 

 

93,480

 

Net increase in cash, cash equivalents and restricted cash

 

 

2,482

 

 

 

113,003

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

69,487

 

 

 

1,009

 

Cash, cash equivalents and restricted cash at end of period

 

$

71,969

 

 

$

114,012

 

Supplemental disclosure of non-cash investing and financing activities:

 

 

 

 

 

 

 

 

Fair value of net assets acquired in the Merger, including $1.0 million of marketable debt securities and excluding cash acquired

 

$

 

 

$

(4,815

)

Property and equipment included in accounts payable and accrued expenses

 

$

295

 

 

$

 

Offering costs included in accounts payable and accrued expense

 

$

 

 

$

135

 

Merger transaction costs included in accounts payable and accrued expenses

 

$

 

 

$

65

 

Leased assets obtained in exchange for new operating lease liabilities

 

$

 

 

$

448

 

 

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

6


 

LARIMAR THERAPEUTICS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1.

Organization, Clinical Development, Nature of the Business, COVID-19 Risk and Basis of Presentation

Larimar Therapeutics, Inc., together with its subsidiaries (the “Company” or “Larimar”), is a clinical-stage biotechnology company focused on developing treatments for patients suffering from complex rare diseases using its novel cell penetrating peptide technology platform. Larimar’s lead product candidate, CTI-1601, is a subcutaneously administered, recombinant fusion protein intended to deliver human frataxin, or FXN, an essential protein, to the mitochondria of patients with Friedreich’s ataxia. Friedreich’s ataxia is a rare, progressive, and fatal disease in which patients are unable to produce sufficient FXN due to a genetic abnormality.

In May 2021, Larimar reported positive topline data from its Phase 1 Friedreich’s ataxia (FA) program after completing dosing of the single ascending dose (SAD) trial in December 2020 and of the multiple ascending dose (MAD) trial in March 2021. Data from these trials demonstrate proof-of-concept by showing that daily subcutaneous injections of CTI-1601 for up to 13 days resulted in dose-dependent increases in frataxin levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets). Frataxin levels achieved in peripheral tissues (buccal cells) following daily 50 mg and 100 mg subcutaneous injections of CTI-1601 were at or in excess of frataxin levels that would be expected in phenotypically normal heterozygous carriers. There were no serious adverse events (SAEs) associated with either the MAD or SAD trials.

On May 25, 2021 the United States Food and Drug Administration (FDA) placed a clinical hold on the CTI-1601 clinical program following the Company’s notification to the FDA of mortalities which occurred at the highest dose levels in an ongoing 180-day non-human primate (NHP) toxicology study, which is designed to support extended dosing of patients with CTI-1601. In the clinical hold letter, the FDA stated that it needs a full study report from the ongoing NHP study and Larimar may not initiate additional clinical trials until the company has submitted the report and received notification from the FDA that additional clinical trials may commence.  At the time of this notice, the Company had no interventional clinical trials with patients enrolled or enrolling.

In July 2021, the Company completed dosing in the non-human primate toxicology study discussed above. The Company is currently collecting and analyzing data from the study.  While there is no way to predict the FDA’s response or whether they will require additional data or testing before lifting the clinical hold on CTI-1601 in full or in part, the Company expects to initiate its Jive open-label extension and pediatric MAD trials in the first half of next year.

The Company is subject to risks and uncertainties common to pre-commercialization companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with governmental regulations, failure to secure regulatory approval for its drug candidates or any other product candidates and the ability to secure additional capital to fund operations. Drug candidates currently under development will require extensive non-clinical and clinical testing and regulatory approval prior to 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 March 2020, the World Health Organization declared the outbreak of COVID-19, a novel strain of Coronavirus, a global pandemic. The pandemic resulted in the temporary stoppage of the Company’s CTI-1601 Phase 1 clinical trials in patients with Friedreich’s ataxia in March 2020. In July 2020, the Company resumed these clinical trials, and have since completed dosing of both its single ascending dose and multiple ascending dose clinical trials. Vaccines manufactured by Moderna, Pfizer and Johnson & Johnson were introduced late in the fourth quarter of 2020 and became widely available by the end of the first quarter of 2021.  While the vaccines have proven effective in reducing the severity and mortality of COVID-19 including the variants that have evolved to date, the overall vaccination rate in the United States has not reached the level required for herd immunity in some states, particularly in some areas of the country. The incidence of variants of COVID-19, has been increasing particularly among unvaccinated individuals and the variant is proving to be more easily spread than earlier variants.  The low vaccination rate, the spread of variants, the evolution of furthermore deadly mutations against which the current vaccines may prove ineffective could again result in major disruptions to businesses and markets worldwide. The

7


 

Company’s business, results of operations, financial condition and cash flows could be materially and adversely affected. Specifically, the Company could experience additional delays in future clinical trial timelines as a result of additional travel and hospital restrictions related to the COVID-19 pandemic which may be imposed or experience supply shortages or manufacturer shutdowns impacting the manufacture of drug substance or drug product. The financial statements do not reflect any adjustments as a result of the pandemic.  

Merger with Zafgen

On December 17, 2019, Zafgen, Inc. (“Zafgen”), Chondrial Therapeutics Inc. (“Chondrial”), Zordich Merger Sub, Inc. (“Merger Sub”) and Chondrial Holdings, LLC (“Holdings”), the sole stockholder of Chondrial, entered into an Agreement and Plan of Merger, as amended on March 9, 2020 (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Chondrial, with Chondrial surviving as a wholly owned subsidiary of the Company and the surviving corporation of the merger (the “Merger”).

The transaction was accounted for as a reverse acquisition in accordance with accounting principles generally accepted in the United States of America ("GAAP"). Under this method of accounting, Chondrial was deemed to be the accounting acquirer for financial reporting purposes. This determination was primarily based on the facts that, immediately following the Merger: (1) former shareholders of Chondrial own a substantial majority of the voting rights of the combined company; (2) the majority of the board of directors of the combined company is composed of directors designated by Chondrial under the terms of the Merger Agreement; and (3) existing members of Chondrial management constituted the management of the combined company. Because Chondrial has been determined to be the accounting acquirer in the Merger, but not the legal acquirer, the Merger is deemed a reverse acquisition under the guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 805, Business Combinations. As a result, the historical financial statements of Chondrial are the historical financial statements of the combined company. As the Merger has been accounted for as an asset acquisition, goodwill has not been recorded within the condensed combined balance sheet.

The Merger was completed on May 28, 2020 pursuant to the terms of the Merger Agreement. In addition, immediately prior to the closing of the Merger, Zafgen effected a 1-for-12 reverse stock split (the “Reverse Stock Split”) of Zafgen’s common stock, par value $0.001 per share (the “Zafgen Common Stock”). At the effective time of the Merger (the “Effective Time”), each share of Chondrial’s common stock, par value $0.001 per share (“Chondrial Common Stock”), outstanding immediately prior to the Effective Time was converted into the right to receive shares of Zafgen Common Stock based on an exchange ratio set forth in the Merger Agreement. At the Effective Time following the Reverse Stock Split, the exchange ratio was determined to be 60,912.5005 shares of Zafgen Common Stock for each share of Chondrial Common Stock (the “Exchange Ratio”). At the closing of the Merger on May 28, 2020, Zafgen issued an aggregate of 6,091,250 shares of its common stock to Holdings (the “Merger Shares”), based on the Exchange Ratio after giving effect to the Reverse Stock Split described below. Holdings subsequently distributed the Merger Shares to its members.

In addition, all outstanding options exercisable for common units of Holdings became options exercisable for the shares of common stock of Zafgen based on the conversion factor discussed within the Merger Agreement. In connection with the Merger, Zafgen changed its name to Larimar Therapeutics, Inc. Following the closing of the Merger, Chondrial Therapeutics, Inc. became a wholly owned subsidiary of the Company. In December 2020, Chondrial Therapeutics was legally merged into Larimar Therapeutics, Inc. As used herein, the words “the Company” refers to, for periods following the Merger, Larimar, together with its subsidiaries, and for periods prior to the Merger, Chondrial Therapeutics Inc., and its direct and indirect subsidiaries, as applicable.

Basis of Presentation

The condensed consolidated financial statements include the accounts of Larimar and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. The accompanying condensed consolidated financial statements have been prepared in conformity with GAAP. Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the Exchange Ratio.

Reverse Stock Split

On May 28, 2020, immediately prior to the closing of the Merger, Zafgen effected the Reverse Stock Split. Accordingly, all share and per share amounts for all periods presented in the accompanying condensed consolidated financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect the Reverse Stock Split. No fractional shares were issued in connection with the Reverse Stock Split. Unless otherwise noted, all references to common stock share and per share amounts have also been adjusted to reflect the Exchange Ratio.

8


 

Going Concern Assessment

In accordance with Accounting Standards Update (“ASU”) No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, the Company has evaluated whether there are certain conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the condensed consolidated financial statements are issued.

As of the issuance date of these condensed consolidated financial statements, the Company expects that its cash, cash equivalents and marketable debt securities will be sufficient to fund its forecasted operating expenses and capital expenditure requirements for at least the next twelve months from the issuance date of these financial statements.

The Company has funded its operations to date primarily with proceeds from sales of common stock, prefunded warrants for the purchase of common stock and, prior to the merger with Zafgen described above, contributions from Holdings. In June 2020, the Company completed the Merger and acquired $42.9 million of cash, cash equivalents, restricted cash and marketable debt securities that were held by Zafgen immediately prior to the Merger. The Company also raised $75.4 million, net of offering costs, through a private offering of common stock and prefunded warrants to purchase shares of common stock in connection with and immediately after the closing of the Merger in June 2020.

In August 2020, the Company entered into an Equity Distribution Agreement (the “ATM Agreement”) with an investment bank in connection with the establishment of an “at-the-market” offering program under which the Company may sell up to an aggregate of $50,000,000 of shares of its common stock from time to time through this investment bank as sales agent. In July 2021, the Company sold 2,342,720 shares pursuant to the ATM Agreement for gross proceeds of $20.5 million.  As of August 10, 2021, the Company may sell up to $29.2 million of common stock under the ATM Agreement.

Since its inception, the Company has incurred significant operating losses and negative cash flows from operations. The Company has incurred recurring losses since inception, including net losses of $24.7 million and $18.0 million for six months ended June 30, 2021 and 2020, respectively. In addition, as of June 30, 2021, the Company had an accumulated deficit of $90.3 million. The Company expects to continue to generate operating losses for the foreseeable future. As of June 30, 2021, the Company had approximately $70.6 million of cash and cash equivalents available for use to fund its operations.

The Company has not yet commercialized any products and does not expect to generate revenue from the commercial sale of any products for several years, if at all. The Company expects that its research and development and general and administrative expenses will continue to increase and, as a result, will need additional capital to fund its future operations, which it may raise through a combination of equity offerings, debt financings, other third-party funding, marketing and distribution arrangements, and other collaborations, strategic alliances and licensing arrangements.

 If the Company is unable to obtain future funding when needed, the Company may be forced to delay, reduce or eliminate some or all of its research and development programs, product portfolio expansion or pre‑commercialization efforts, which could adversely affect its business prospects, or the Company may be unable to continue operations. There is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all.        

 

2.

Summary of Significant Accounting Policies

Unaudited Interim Financial Information

The condensed consolidated balance sheet as of December 31, 2020 was derived from the Company’s audited financial statements but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of June 30, 2021 and for the three and six months ended June 30, 2021 and 2020, have been prepared by the Company, pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”), for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed on March 4, 2021.

9


 

In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s condensed consolidated financial position as of June 30, 2021 and condensed consolidated results of operations and cash flows for the three and six months ended June 30, 2021 and 2020 have been made. The results of operations for the three and six months ended June 30, 2021 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2021.

Use of Estimates

The preparation of financial statements in conformity with GAAP 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. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the accrual of research and development expense, valuation of stock-based awards and valuation of leases. Due to inherent uncertainty involved in making estimates, actual results reported in future periods may be affected by changes in these estimates. On an ongoing basis, the Company evaluates its estimates and assumptions.

Concentrations of Credit Risk and Significant Suppliers

Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents. The Company generally maintains cash balances in various operating accounts at financial institutions that management believes to be of high credit quality in amounts that may exceed federally insured limits. The Company has not experienced losses related to its cash and cash equivalents.

The Company is highly dependent on third-party manufacturers to supply products for research and development activities in its programs. The Company relies and expects to continue to rely on a small number of manufacturers to supply it with its requirements for drug substance and formulated drugs related to these programs. The drug substance which is in frozen liquid form for CTI-1601 is currently manufactured for us by a third-party manufacturer, and the frozen liquid form of drug product is made at another manufacturer.  The Company is undertaking a program with a third manufacturer to begin to produce a lyophilized version of the drug product from the same drug substance, that, once available, we intend to use in certain of our future planned clinical trials. The Company’s research and development programs could be adversely affected by a significant interruption in these manufacturing services or in the supply of drug substance and formulated drugs.

Cash and Cash Equivalents

The Company considers all highly liquid investments with maturities of three months or less at the date of purchase to be cash equivalents. At June 30, 2021 and December 31, 2020, cash equivalents consisted of commercial paper and corporate bonds with maturity dates of less than three months at the date of acquisition and money market funds.   

Marketable debt securities

Marketable debt securities consist of debt investments with original maturities greater than ninety days. The Company classifies its marketable debt securities as available-for-sale. Accordingly, these investments are recorded at fair value, which is based on quoted market prices. When the fair value is below the amortized cost, the amount of the expected credit loss is estimated. The credit-related impairment amount is recognized in net income; the remaining impairment amount and unrealized gains are reported as a component of accumulated other comprehensive income in stockholders’ equity. Credit losses are recognized through the use of an allowance for credit losses account and subsequent improvements in expected credit losses are recognized as a reversal of the allowance account. If the Company has the intent to sell the security or it is more likely than not that the Company will be required to sell the security prior to recovery of its amortized cost basis, the allowance for credit loss is written off and the excess of the amortized cost basis of the asset over its fair value is recorded in net income.

 

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation expense is recognized using the straight-line method over a five or seven-year estimated useful life for equipment, furniture and fixtures and office equipment. Leasehold improvements are amortized over the shorter of the asset life or the term of the lease agreement. Expenditures for repairs and maintenance of assets are charged to expense as incurred. Upon retirement or sale, the cost and related accumulated depreciation of assets disposed of are removed from the accounts and any resulting gain or loss is included in loss from operations.

 

10


 

 

Impairment of Long-Lived Assets

Long-lived assets consist of property and equipment, net¸ and the net operating lease asset. Long-lived assets to be held and used are tested for recoverability whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Factors that the Company considers in deciding when to perform an impairment review include significant underperformance of the business in relation to expectations, significant negative industry or economic trends, and significant changes or planned changes in the use of the assets. If an impairment review is performed to evaluate a long-lived asset for recoverability, the Company compares forecasts of undiscounted cash flows expected to result from the use and eventual disposition of the long-lived asset to its carrying value. Any impairment loss, if indicated, is measured as the amount by which the carrying amount of the asset exceeds the estimated fair value of the asset.

 

Segment Information

The Company manages its operations as a single operating segment for the purposes of assessing performance and making operating decisions. The Company’s focus is on the research, development, and commercialization of novel therapeutics for the treatment of rare diseases.

Research and Development Costs

Costs associated with internal research and development and external research and development services, including drug development and non-clinical studies, are expensed as incurred. Research and development expenses include costs for salaries, employee benefits, subcontractors, facility-related expenses, depreciation, stock-based compensation, third-party license fees, laboratory supplies, and external costs of outside vendors engaged to conduct discovery, non-clinical and clinical development activities, and clinical trials as well as to manufacture clinical trial materials, and other costs. The Company recognizes external research and development costs based on an evaluation of the progress to completion of specific tasks using information provided to the Company by its service providers.

Nonrefundable advance payments for goods or services to be received in the future for use in research and development activities are recorded as prepaid expenses. Such prepaid expenses are recognized as an expense when the goods have been delivered or the related services have been performed, or when it is no longer expected that the goods will be delivered, or the services rendered.

Upfront payments, milestone payments and annual maintenance fees under license agreements are currently expensed in the period in which they are incurred.

Patent Costs

All patent-related costs incurred in connection with filing and prosecuting patent applications are expensed as incurred due to the uncertainty about the recovery of the expenditure. Amounts incurred are classified as general and administrative expenses.

Stock-Based Compensation

 

The Company measures all stock-based awards granted to employees, non-employee consultants and directors based on the fair value on the date of grant using the Black-Scholes option-pricing model. Compensation expense of those awards is recognized over the requisite service period, which is the vesting period of the respective award. Typically, the Company issues awards with only service-based and market-based vesting conditions and records the expense for these awards using the straight-line method. The Company accounts for forfeitures as they occur.

 

The Company classifies stock-based compensation expense in its condensed consolidated statements of operations and comprehensive loss in the same manner in which the award recipient’s payroll costs are classified or in which the award recipient’s service payments are classified.

Prior to May 28, 2020, the Company had been a private company and lacked company-specific historical and implied volatility information for its common stock. Therefore, the Company estimates its expected common stock price volatility based on the historical volatility of publicly traded peer companies and expects to continue to do so until it has adequate historical data regarding the volatility of its own traded stock price. The expected term of the Company’s stock options has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options. The risk-free interest rate is determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award. Expected dividend yield considers the fact that the Company has never paid cash dividends on common stock and does not expect to pay any cash dividends in the foreseeable future.

11


 

Income Taxes

The Company accounts for income taxes using the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the condensed consolidated financial statements or in the Company’s tax returns. Deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. Changes in deferred tax assets and liabilities are recorded in the provision for income taxes. The Company assesses the likelihood that its deferred tax assets will be recovered from future taxable income and, to the extent it believes, based upon the weight of available evidence, that it is more likely than not that all or a portion of the deferred tax assets will not be realized, a valuation allowance is established through a charge to income tax expense. Potential for recovery of deferred tax assets is evaluated by estimating the future taxable profits expected and considering prudent and feasible tax planning strategies.

The Company accounts for uncertainty in income taxes recognized in the consolidated financial statements by applying a two-step process to determine the amount of tax benefit to be recognized. First, the tax position must be evaluated to determine the likelihood that it will be sustained upon external examination by the taxing authorities. If the tax position is deemed more-likely-than-not to be sustained, the tax position is then assessed to determine the amount of benefit to recognize in the consolidated financial statements. The amount of the benefit that may be recognized is the largest amount that has a greater than 50% likelihood of being realized upon ultimate settlement. The provision for income taxes includes the effects of any resulting tax reserves, or unrecognized tax benefits, that are considered appropriate as well as the related net interest and penalties.

Net Loss Per Share

Basic net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted average number of common shares outstanding for the period. Basic shares outstanding includes the weighted average effect of the Company’s prefunded warrants issued in June 2020, the exercise of which requires little or no consideration for the delivery of shares of common stock. Basic and diluted weighted average shares of common stock outstanding for the three and six months ended June 30, 2021 and 2020 includes the weighted average effect of 628,403 prefunded warrants for the purchase of shares of common stock, which were issued in June 2020, and for which the remaining unfunded exercise price is $0.01 per share.

Diluted net loss per share attributable to common stockholders is computed by dividing the diluted net loss attributable to common stockholders by the weighted average number of common shares, including potential dilutive common shares assuming the dilutive effect of outstanding stock options and unvested restricted common shares, as determined using the treasury stock method. For periods in which the Company has reported net losses, diluted net loss per common share attributable to common stockholders is the same as basic net loss per common share attributable to common stockholders, since dilutive common shares are not assumed to have been issued if their effect is antidilutive.

The Company excluded 2,546,962 and 727,024 common stock equivalents, outstanding as of June 30, 2021 and 2020, respectively, from the computation of diluted net loss per share for the three and six months ended June 30, 2021 and 2020 because they had an anti-dilutive impact due to the net loss incurred for the periods.

 

Prior to the Merger the Company did not have options to purchase common stock or unvested restricted common stock to exclude from the calculation of earnings per share as all outstanding options were for common units of Holdings that upon the Merger converted into options exercisable for the shares of common stock of the Company.   

Recently Issued and Adopted Accounting Pronouncements

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The FASB subsequently issued amendments to ASU 2016-13. This standard requires entities to estimate an expected lifetime credit loss on financial assets ranging from short-term trade accounts receivable to long-term financings and report credit losses using an expected losses model rather than the incurred losses model that was previously used, and establishes additional disclosures related to credit risks. For available-for-sale debt securities with unrealized losses, the standard now requires allowances to be recorded instead of reducing the amortized cost of the investment. This standard limits the amount of credit losses to be recognized for available-for-sale debt securities to the amount by which carrying value exceeds fair value and requires the reversal of previously recognized credit losses if fair value increases. The Company adopted the standard on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s condensed consolidated financial statements and related disclosures.

12


 

In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement. This standard modifies certain disclosure requirements on fair value measurements. This standard became effective for the Company on January 1, 2020. The adoption of this standard did not have a material impact on the Company’s disclosures.

 

3.

Merger Accounting

On May 28, 2020, the Company completed its merger with Zafgen. Based on the Exchange Ratio, immediately following the Merger, former Zafgen stockholders, Zafgen option holders and other persons holding securities or other rights directly or indirectly convertible, exercisable or exchangeable for Zafgen Common Stock (collectively, the “Zafgen Securityholders”) owned approximately 34% of the outstanding capital stock of the combined company, and Holdings, the former Chondrial stockholder, owned approximately 66% of the outstanding capital stock of the combined company. At the closing of the Merger, all shares of Chondrial Common Stock were exchanged for an aggregate of 6,091,250 shares of Zafgen Common Stock, after giving effect to the Reverse Stock Split.

In addition, pursuant to the terms of the Merger Agreement, the Company assumed all outstanding stock options to purchase shares of Zafgen common stock at the closing of the Merger. At the closing of the Merger, such stock options became options to purchase an aggregate of 328,770 shares of the Company’s common stock after giving effect to the Reverse Stock Split.

The total purchase price paid in the Merger has been allocated to the tangible and intangible assets acquired and liabilities assumed of Zafgen based on their fair values as of the completion of the Merger. Transaction costs primarily included bank fees and professional fees associated with legal counsel, auditors, and printers. The following summarizes the purchase price paid in the Merger (in thousands, except share and per share amounts):

 

Number of shares of the combined organization owned by Zafgen stockholders(1)

 

 

3,124,337

 

Multiplied by the fair value per share of Zafgen common stock(2)

 

$

11.88

 

Fair value of consideration issued in effect of the Merger

 

$

37,119

 

Transaction costs

 

$

1,715

 

Purchase price:

 

$

38,834

 

 

 

(1)

The number of shares of 3,124,337 represents the historical 37,492,044 shares of Zafgen common stock outstanding immediately prior to the closing of the Merger, adjusted for the Reverse Stock Split.

 

(2)

Based on the last reported sale price of Zafgen common stock on the Nasdaq Global Market on May 28, 2020, the closing date of the Merger, and after giving effect to the Reverse Stock Split.

The allocation of the purchase price for the Merger was based on estimates of the fair value of the net assets acquired, which was then adjusted for the difference between the purchase price and the fair value of the assets acquired. The following summarizes the allocation of the purchase price to the net tangible and intangible assets acquired (in thousands):

 

Cash and cash equivalents

 

$

40,595

 

Marketable debt securities

 

 

1,014

 

Other current and noncurrent assets

 

 

357

 

Property and equipment, net

 

 

398

 

Restricted cash

 

 

1,339

 

Right-of-use asset

 

 

3,806

 

Current liabilities

 

 

(2,685

)

Lease liability, net of current portion

 

 

(5,990

)

Purchase price

 

$

38,834

 

 

13


 

 

4.

Fair Value Measurements and Marketable Debt Securities

Fair Value Measurements

The Company’s assets and liabilities that are measured at fair value on a recurring basis as of June 30, 2021 and December 31, 2020 are measured in accordance with the standards of ASC 820, Fair Value Measurements and Disclosures, which establishes a three-level valuation hierarchy for measuring fair value and expands financial statement disclosures about fair value measurements. The valuation hierarchy is based on the transparency of inputs to the valuation of an asset or liability as of the measurement date. The three levels are defined as follows:

 

Level – 1

Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

 

Level – 2

Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

 

Level – 3

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The Company’s financial instruments consist primarily of cash, cash equivalents, marketable debt securities, accounts payable and accrued liabilities. For accounts payable and accrued liabilities, the carrying amounts of these financial instruments as of June 30, 2021 and December 31, 2020 were considered representative of their fair values due to their short term to maturity.

The following tables summarize the Company’s cash equivalents and marketable debt securities as of June 30, 2021 and December 31, 2020:

 

 

 

Total

 

 

Quoted

Prices in

Active

Markets

(Level 1)

 

 

Significant

Other

Observable

Inputs

(Level 2)

 

 

Significant

Unobservable

Inputs

(Level 3)

 

 

 

(in thousands)

 

June 30, 2021