10-Q
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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 September 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 November 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 only. 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, and satisfactorily respond to, requests for additional information from the U.S. Food and Drug Administration ("FDA") concerning the clinical hold on our investigational new drug application ("IND") for CTI-1601 and the timing and outcomes of such interactions, including our plans to submit a complete response to the clinical hold to the FDA in order to lift the clinical hold, in full or in part, and allow re-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, and the ability of third-party manufacturers we engage, to optimize and scale CTI-1601 or any other product candidate’s manufacturing process and to manufacture sufficient quantities of clinical supplies 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, regulatory restrictions 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, European Medicines Agency ("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 other 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 availability of competing therapies and products including those that are still in clinical development and their impact on our ability to recruit and retain clinical trial patients, to obtain and maintain potential expedited regulatory pathways, and to commercialize current and future product candidates, if approved., (including the impact of potential barriers to entry if a competitor is able to establish a strong market position before we are able to commercialize our products;
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 contract research organizations ("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 and 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 quarterly reports on Form 10-Q filed thereafter. All forward-looking statements are applicable only as of the date on which they were made and, 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 or 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 September 30, 2021 and December 31, 2020

 

3

 

 

 

 

 

 

 

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

 

4

 

 

 

 

 

 

 

Condensed Consolidated Statements of Changes in Stockholders' Equity for the three and nine months ended September 30, 2021 and 2020

 

5

 

 

 

 

 

 

 

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

 

7

 

 

 

 

 

 

 

Notes to Condensed Consolidated Financial Statements

 

8

 

 

 

 

 

Item 2.

 

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

 

24

 

 

 

 

 

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

34

 

 

 

 

 

Item 4.

 

Controls and Procedures

 

34

 

 

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 1.

 

Legal Proceedings

 

35

 

 

 

 

 

Item 1A.

 

Risk Factors

 

35

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

35

Item 3.

 

Defaults Upon Senior Securities

 

35

Item 4.

 

Mine Safety Disclosures

 

35

Item 5.

 

Other Information

 

35

 

 

 

 

 

Item 6.

 

Exhibits

 

36

 

 

 

 

 

Signatures

 

37

 

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 has been treated as a “reverse asset acquisition” under generally accepted accounting principles in the United States (“U.S. GAAP”) and Chondrial was 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 condensed, consolidated 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)

 

 

 

September 30,

 

 

December 31,

 

 

 

2021

 

 

2020

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

71,525

 

 

$

68,148

 

Marketable debt securities

 

 

6,499

 

 

 

24,490

 

Prepaid expenses and other current assets

 

 

3,229

 

 

 

5,314

 

Total current assets

 

 

81,253

 

 

 

97,952

 

Property and equipment, net

 

 

1,135

 

 

 

1,040

 

Operating lease right-of-use assets

 

 

3,540

 

 

 

3,936

 

Restricted cash

 

 

1,339

 

 

 

1,339

 

Other assets

 

 

671

 

 

 

419

 

Total assets

 

$

87,938

 

 

$

104,686

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

1,766

 

 

$

2,634

 

Accrued expenses

 

 

7,966

 

 

 

5,843

 

Operating lease liabilities, current

 

 

574

 

 

 

515

 

Total current liabilities

 

 

10,306

 

 

 

8,992

 

Operating lease liabilities

 

 

5,565

 

 

 

6,002

 

Total liabilities

 

 

15,871

 

 

 

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

 

 

 

 

 

 

Common stock, $0.001 par value per share; 115,000,000 shares
   authorized as of September 30, 2021 and December 31, 2020;
   
17,710,450 and 15,367,730 shares issued and outstanding as of
   September 30, 2021 and December 31, 2020, respectively

 

 

18

 

 

 

15

 

Additional paid-in capital

 

 

179,165

 

 

 

155,290

 

Accumulated deficit

 

 

(107,116

)

 

 

(65,614

)

Accumulated other comprehensive loss

 

 

 

 

 

1

 

Total stockholders’ equity

 

 

72,067

 

 

 

89,692

 

Total liabilities and stockholders’ equity

 

$

87,938

 

 

$

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 September 30,

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

14,028

 

 

$

6,919

 

 

$

32,104

 

 

$

20,833

 

General and administrative

 

 

2,702

 

 

 

3,416

 

 

 

9,275

 

 

 

7,575

 

Total operating expenses

 

 

16,730

 

 

 

10,335

 

 

 

41,379

 

 

 

28,408

 

Loss from operations

 

 

(16,730

)

 

 

(10,335

)

 

 

(41,379

)

 

 

(28,408

)

Other income (expense), net

 

 

(75

)

 

 

61

 

 

 

(123

)

 

 

130

 

Net loss

 

$

(16,805

)

 

$

(10,274

)

 

$

(41,502

)

 

$

(28,278

)

Net loss per share, basic and diluted

 

$

(0.92

)

 

$

(0.64

)

 

$

(2.48

)

 

$

(2.69

)

Weighted average common shares outstanding, basic and diluted

 

 

18,287,924

 

 

 

15,984,609

 

 

 

16,768,458

 

 

 

10,505,826

 

Comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,805

)

 

$

(10,274

)

 

$

(41,502

)

 

$

(28,278

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on marketable debt securities

 

 

(1

)

 

 

1

 

 

 

(1

)

 

 

(2

)

Total other comprehensive loss

 

 

(1

)

 

 

1

 

 

 

(1

)

 

 

(2

)

Total comprehensive loss

 

$

(16,806

)

 

$

(10,273

)

 

$

(41,503

)

 

$

(28,280

)

 

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

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

1,463

 

 

 

 

 

 

 

 

 

1,463

 

Issuance of Common Stock, net

 

 

2,342,720

 

 

 

3

 

 

 

19,882

 

 

 

 

 

 

 

 

 

19,885

 

Unrealized gain on marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

(16,805

)

 

 

 

 

 

(16,805

)

Balances as of September 30, 2021

 

 

17,710,450

 

 

$

18

 

 

$

179,165

 

 

$

(107,116

)

 

$

 

 

$

72,067

 

 

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

 

5


 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN

STOCKHOLDERS’ EQUITY (CONTINUED)

(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, 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

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

370

 

 

 

 

 

 

 

 

 

370

 

Unrealized gain on marketable debt securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

 

 

 

1

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,274

)

 

 

 

 

 

(10,274

)

Balances as of September 30, 2020

 

 

15,356,206

 

 

$

15

 

 

$

154,038

 

 

$

(51,410

)

 

$

(2

)

 

$

102,641

 

 

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

6


 

LARIMAR THERAPEUTICS, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)

 

 

 

Nine Months Ended September 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(41,502

)

 

$

(28,278

)

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

 

 

 

 

 

 

Stock-based compensation expense

 

 

3,993

 

 

 

1,151

 

Loss on disposal of fixed asset

 

 

(1

)

 

 

 

Depreciation expense

 

 

238

 

 

 

105

 

Amortization of premium on marketable securities

 

 

(12

)

 

 

11

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

2,085

 

 

 

(1,840

)

Accounts payable

 

 

(877

)

 

 

(4,193

)

Accrued expenses

 

 

2,123

 

 

 

713

 

Right-of-use assets

 

 

396

 

 

 

247

 

Operating lease liabilities

 

 

(378

)

 

 

(281

)

Other assets

 

 

(252

)

 

 

23

 

Net cash used in operating activities:

 

 

(34,187

)

 

 

(32,342

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchase of property and equipment

 

 

(324

)

 

 

(63

)

Purchase of marketable debt securities

 

 

(8,247

)

 

 

 

Maturities and sales of marketable debt securities

 

 

26,250

 

 

 

 

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

 

 

 

 

 

41,934

 

Merger transaction costs

 

 

 

 

 

(1,236

)

Net cash provided by investing activities

 

 

17,679

 

 

 

40,635

 

Cash flows from financing activities:

 

 

 

 

 

 

Capital contribution from related party

 

 

 

 

 

17,995

 

Proceeds from issuance of equity securities, net of issuance costs

 

 

19,885

 

 

 

75,350

 

Net cash provided by financing activities

 

 

19,885

 

 

 

93,345

 

Net increase in cash, cash equivalents and restricted cash

 

 

3,377

 

 

 

101,638

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

69,487

 

 

 

1,009

 

Cash, cash equivalents and restricted cash at end of period

 

$

72,864

 

 

$

102,647

 

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

 

$

9

 

 

$

 

Merger transaction costs included in accounts payable and accrued expenses

 

$

 

 

$

60

 

Leased assets obtained in exchange for new operating lease liabilities

 

$

 

 

$

448

 

 

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

7


 

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 ("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 FXN levels from baseline compared to placebo in all evaluated tissues (buccal cells, skin, and platelets). FXN 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 FXN 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 that 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 the FDA clinical hold, the Company had no interventional clinical trials with patients enrolled or enrolling.

In July 2021, the Company completed dosing in the NHP toxicology study discussed above. The Company is currently collecting and analyzing data from the study. There is no way to predict the timing of the FDA’s response (which the Company anticipates will not be received prior to the first quarter of 2022) or whether the FDA will require additional data or testing before lifting the clinical hold on CTI-1601 in full or in part. While the Company expects to initiate its Jive open-label extension and pediatric MAD trials in the first half of 2022, the timing of these trials could be delayed or modified depending on the results of the NHP toxicology study and/or the FDA's response to these results and any other data the Company will provide in its complete response to the clinical hold.

The Company is subject to risks and uncertainties common to pre-commercial 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 its 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 has 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 regions of the country. The incidence of variants of COVID-19, has been increasing particularly among unvaccinated individuals and the recent delta variant is proving to be more easily spread than earlier variants.

8


 

The low vaccination rate, the spread of variants, the evolution of additional mutations against which the current vaccines may prove ineffective could again result in major disruptions to businesses and markets worldwide. Furthermore, the incidence of "breakthrough" infections even among vaccinated individuals have been increasing resulting in the need for additional booster doses which could make COVID-19 a long-term infectious disease concern. The 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 could experience supply shortages or manufacturer shutdowns impacting the manufacture of drug substance or drug product, which could also impact clinical trial timelines. 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 owned a substantial majority of the voting rights of the combined company; (2) the majority of the board of directors of the combined company was 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 consolidated 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