The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this quarterly report on Form 10Q for the quarter ended
March 31, 2023(this "Quarterly Report"). This Quarterly Report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended, and the Private Securities Litigation Reform Act of 1995, such statements are subject to the "safe harbor" created by those sections and involve risks and uncertainties. Forward-looking statements are based on our management's beliefs and assumptions and on information available to our management as of the date hereof. As a result of many factors, such as those set forth under "Item 1A. Risk Factors" included in our 2022 Annual Report and Part II, "Item 1A. Risk Factors" in this Quarterly Report, our actual results may differ materially from those anticipated in these forward-looking statements, accordingly, you should not place undue reliance on these forward-looking statements. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future. Such factors may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy.
Lumos Pharma, Inc.is a clinical-stage biopharmaceutical company. References in this Quarterly Report to "us," "we," "our," the "Company," or "Lumos" are to Lumos Pharma, Inc.and its wholly-owned subsidiaries. With our principal executive offices located in Austin, Texasand additional executive and administrative offices located in Ames, Iowa, we are engaged in advancing our clinical program and focused on identifying, acquiring, developing, and commercializing novel products and new therapies for people with rare diseases on a global level, for which there is currently a significant unmet need for safe and effective therapies. Our common stock is listed on the Nasdaq Global Market ("Nasdaq") and trades under the ticker symbol "LUMO." We have focused our efforts on the development of our sole product candidate, growth hormone secretagogue ibutamoren ("LUM-201"), a potential oral therapy for idiopathic pediatric growth hormone deficiency ("PGHD") and other rare endocrine disorders. PGHD is a rare endocrine disorder occurring in approximately one in 3,500 persons aged birth to 17 years. Causes of PGHD can be congenital (children are born with the condition), acquired (radiation therapy for a brain tumor, head injuries or other causes), iatrogenic (induced by medical treatment) or idiopathic (of unknown cause). Children with untreated PGHD will have significant growth failure, potential adult heights significantly less than five feet, and may have abnormal body composition with decreased bone mineralization, decreased lean body mass, and increased fat mass. The main therapeutic goal in PGHD is to restore growth and improve body composition, enabling short children to achieve normal height and prevent complications that could involve metabolic abnormalities, cognitive deficits and reduced quality of life. The current standard of care for PGHD is limited to daily subcutaneous injections of rhGH with a treatment cycle lasting up to an average of seven years. Poor compliance with daily rhGH injections during treatment can result in an adverse impact on growth and body composition. In August 2021, the FDA approved a new treatment, Skytrofa, a once-weekly injection that would reduce the number of injections over the course of treatment for a patient; however, based on our market research, we believe that many providers and patients will have a preference for an orally administered treatment, when available. On March 18, 2020, we closed the business combination (the "Merger") among the Company, formerly known as NewLink Genetics Corporation("NewLink"), Cyclone Merger Sub, Inc.("Merger Sub"), a wholly owned subsidiary of NewLink, and Lumos Pharma, Inc., ("Private Lumos") which has since been renamed " Lumos Pharma Sub, Inc." whereby Merger Sub merged with and into Private Lumos, with Private Lumos surviving as a wholly-owned subsidiary of the Company.
LUM-201 Growth hormone secretagogue
Our pipeline is focused on the development of an orally administered small molecule, LUM-201, which is a growth hormone ("GH") secretagogue, also called ibutamoren, for rare endocrine disorders where injectable recombinant human growth hormone ("rhGH") is currently approved. LUM-201 is a tablet formulation that will be administered once daily. Lumos acquired LUM-201 from
Ammonett Pharma LLC("Ammonett") in July 2018. LUM-201 received an Orphan Drug Designation ("ODD") in the United Statesand the European Union for Growth Hormone Deficiency("GHD") in 2017. The United Statespatent "Detecting and Treating Growth Hormone Deficiency" has been issued with an expiration in 2036. Related patents have been issued in the European Union, Australia, Israel, Japan, South Korea, Hong Kong, and Ukrainewith related patent applications pending in multiple other jurisdictions. In November 2022, we filed a patent application titled "Compactable
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Oral Formulations of Ibutamoren," which contains claims directed to certain improved LUM-201 drug product formulations we intend to utilize in our Phase III trial and ultimately commercialize. The novel formulation takes advantage of unique properties of LUM-201 to provide a commercial product offering well suited for the full range of potential patient preferences and will result in a reduced treatment burden for the patient population. The application is currently pending and if granted, would provide composition of matter protection through
November 2042for the commercialized version of LUM-201. If approved, LUM-201 has the potential to become the first approved oral GH secretagogue to treat rare endocrine disorders associated with GH deficiencies, starting with PGHD, providing an alternative to the current standard regimen of recombinant growth hormone product injections. A secretagogue is a substance that stimulates the secretion or release of another substance. LUM-201 stimulates the release of GH and is referred to as a GH secretagogue. LUM-201 stimulates GH via the GH secretagogue receptor (GHSR1a), also known as the ghrelin receptor, and also suppresses the release of somatostatin, thus providing a differentiated mechanism of action to treat some rare endocrine disorders (involving a deficiency of GH) by increasing the amplitude of endogenous, pulsatile GH secretion. LUM-201's stimulatory effect is regulated by both circulating levels of GH and its down-stream mediator insulin-like growth factor ("IGF-1") which at supraphysiological levels feedbacks or negatively regulates additional release of GH from the pituitary, hence protecting against hyperstimulation of the pituitary. The PGHD population consists of patients diagnosed with organic PGHD (a more severe GH deficiency) and idiopathic PGHD (a less severe GH deficiency). LUM-201 has been observed to stimulate endogenous GH secretion in patients who have a functional but reduced hypothalamic pituitary GH axis, also known as moderate or idiopathic PGHD patients. We believe that patients with idiopathic PGHD (i.e., those who have a functional but reduced hypothalamic pituitary GH axis) represent approximately 60% of PGHD patients and are expected to respond to LUM-201. During the fourth quarter of 2020, we launched a program to study the effects of LUM-201 in PGHD and initiated our Phase 2 clinical trial ("OraGrowtH210 Trial" or the "Phase 2 Trial") with the opening of the initial sites participating in this study. The OraGrowtH210 Trial is a global multi-site randomized study evaluating orally administered LUM-201 at three dose levels (0.8, 1.6 and 3.2 mg/kg/day) against a standard dose of daily injectable rhGH in approximately 80 subjects diagnosed with idiopathic PGHD. The primary endpoint of the study is preliminary validation of our predictive enrichment marker ("PEM") patient selection strategy as evidenced by the percentage of selected patients who grow in response to LUM-201. Each patient enrolled in our Phase 2 clinical trials is given a single dose of LUM-201 at the 0.8 mg/kg/day dose to determine if they meet the cut-off criteria for enrollment, which is a baseline IGF-1 > 30 ng/ml and stimulated GH ?5 ng/ml. The primary efficacy endpoint is annualized height velocity ("AHV"). Secondary endpoints include selection of a pediatric dose of LUM-201 for future studies including Phase 3 and determination of the degree of repeatability of the PEM selection process in PEM positive patients screened for participation in OraGrowtH210. We announced on February 28, 2023, that we completed enrollment for our OraGrowtH210 Trial with 82 subjects and that we anticipate the complete set of six-month annualized height velocity, primary outcome data on all 82 subjects in the fourth quarter of 2023. A second concurrent trial of LUM-201 in PGHD exploring the effects of the novel mechanism of action of LUM-201 in amplifying the pulsatile secretion of growth hormone (the "OraGrowtH212 Trial") was initiated in the second quarter of 2021. The OraGrowtH212 Trial in PGHD is being run in parallel with the OraGrowtH210 Trial. The OraGrowtH212 Trial is a single site, open-label trial evaluating the pharmacokinetic and pharmacodynamic ("PK/PD") effects of LUM-201 in up to 24 PGHD subjects at two different dose levels, 1.6 and 3.2 mg/kg/day. The objective of the OraGrowtH212 Trial is to confirm prior clinical data illustrating the increased pulsatile release of endogenous growth hormone unique to LUM-201 and its potential for this mechanism of action to contribute to efficacy in PGHD. Our OraGrowtH212 Trial is being conducted at a single specialized pediatric center with the capacity to conduct the more frequent sample acquisition and monitoring required for this type of clinical trial. Data from the OraGrowtH212 Trial may be supportive in future regulatory filings; however, this trial is not required for regulatory approval of LUM-201. The primary endpoint for this trial is six months of PK/PD and height velocity data in up to 24 subjects. As we announced on February 28, 2023, we completed enrollment for this trial with 22 subjects and the primary data readout for all 22 subjects is anticipated in the fourth quarter of 2023. In May 2022, we announced that the OraGrowtH210 Trial had been extended to 24 months to allow subjects to continue LUM-201 therapy uninterrupted. Additionally, during the second quarter of 2022, the protocol for the OraGrowtH212 Trial was amended to allow treatment until subjects reach a bone age of 14 for females and 16 for males, reflecting near-adult height.
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The extension of the treatment period will not impact the primary outcome data read out for the OraGrowtH210 or OraGrowtH212 trials, which will be based on the annualized data from the first six months of treatment. We do not anticipate these protocol changes, on a stand-alone basis, will extend the time to the initiation of our Phase 3 clinical trial. During the first quarter of 2022, we initiated our OraGrowtH213 Trial (the "OraGrowtH213 Trial," and together with the OraGrowtH210 Trial, the OraGrowtH211 Trial, and the OraGrowtH212 Trial, the "OraGrowtH Trials"), an open-label, multi-center, Phase 2 study evaluating the growth effects and safety of LUM-201 following 12 months of daily rhGH in up to 20 idiopathic PGHD subjects who have completed the OraGrowtH210 Trial. Subjects will be administered LUM-201 at a dose level of 3.2 mg/kg/day for up to 12 months. On
November 14, 2022, we announced that our interim analyses for our OraGrowtH210 and OraGrowtH212 Trials had met expectations. The interim analysis for OraGrowtH210 was performed after 41 patients, randomized into four treatment arms of approximately 10 patients, completed six months of treatment. The six-month AHV on 1.6 mg/kg/day LUM-201 met our expectations for growth. The mean (median) AHV at six months is shown below for each of the four treatment arms:
7.26 (7.71) cm/year in the 0.8 mg/kg group (n=11) 8.57 (8.61) cm/year in the 1.6 mg/kg group (n=10) 7.77 (8.11) cm/year 3.2 mg/kg arm (n=10) 11.05 (10.48) cm/year in rhGH arm (n=10)
The mean AHV of 8.6 cm/year at six months observed in the 1.6mg/kg dose arm was in line with our expectations for 8.3 cm/year AHV, which was observed after 12 months of recombinant growth hormone (rhGH) treatment in a moderate naïve-to-treatment PGHD patient population derived from the large 20-year Phase 4 Eli Lilly GeNeSIS database.1 This was also comparable to the first-year height velocity observed for similar moderate PGHD subjects treated with rhGH in three other large historical databases.2,3,4 The rhGH control arm produced an AHV of 11.05 cm at six months, an unexpected growth response for the idiopathic PGHD population. We believe this unexpected growth was likely due both to the presence of two of the youngest subjects in the rhGH cohort, which showed a robust growth response (15.6 and 12.7 cm/yr), growing at rates greatly above the 50th percentile for subjects this age, and due to other imbalances in several baseline characteristics also documented as predictors of greater growth response to rhGH.2,4,5 The higher than anticipated AHV seen in this idiopathic PGHD population treated in the rhGH control arm was inconsistent with multiple historical trials in similarly characterized populations, which predicted growth in the 8.3-8.6 cm/year range.2-5 Baseline characteristics other than age which are predictive of greater growth on therapy include: height (shorter stature), lower height and IGF-1 standard deviation scores (SDS), greater distance from mid-parental height (MPH), and higher body mass index standard deviation score (BMI SDS). The imbalanced baseline parameters of the 1.6 mg/kg LUM-201 arm compared to the rhGH arm are shown in the table below.
An imbalance in the five baseline parameters predicts higher growth of the rhGH arm.
1.6 mg LUM-201 Mean (SD) rhGH Baseline metrics N=10 Mean (SD) N=10 Age in months 99.3 (28.3) 90.3 (26.7) Height in cm 114.6 (9.6) 111.6 (11.9) IGF-1 SDS -1.17 (0.72) -1.37 (0.48) MPH in cm 166.98 (7.15) 168.78 (8.85) BMI SDS -0.35 (0.79) +0.31 (1.05) We believe the imbalance in age should even out as enrollment progresses since age is a stratification factor. Two of the three subjects under five years are in the rhGH cohort and are growth outliers, growing at rates greatly above the 50th percentile for subjects this age. With higher enrollment, we believe the imbalance of predictors favoring faster growth in response to rhGH treatment in the control arm is likely to resolve, resulting in greater balance across all cohorts. 1 Blum et
al JES2021 2 Lechuga-Sancho et al JPEM 2009 3 Ranke et al JCEM 2010 4 Bright et al JES2021 5 Yang et al Nature Sci Rep 2019
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With enrollment completed in our OraGrowtH210 Trial, there is greater balance in the baseline parameters known to be predictive of higher growth between the 1.6 mg/kg/day arm and the rhGH arm. The baseline characteristics in the fully enrolled cohorts, as shown below, represent a better balance, which we anticipate will result in diminishing the effect of outliers. LUM-201 1.6 mg rhGH Mean (SD) Mean (SD) N=22 N=20 Age (months) 95.2 (27.3) 91.4 (23.3) Height (cm) 113.0 (11.0) 112.3 (10.5) Height SDS -2.42 (0.68) -2.23 (0.41) IGF-1 SDS -1.40 (0.57) -1.39 (0.47) MPH (cm) 165.4 (7.4) 169.1 (8.26) MPH SDS 1.69 (0.81) 1.91 (0.65) BA Delay (yrs) 1.8 (0.9) 1.9 (0.9) BMI SDS -0.27 (0.90) +0.01 (0.95)
OraGrowtH210 Interim Analysis Months 9 and 12 Highlights
The nine and twelve-month interim data available for a subset of the subjects demonstrated the durability of the growth response for LUM-201 at these later treatment intervals, albeit with a smaller number of patients. The decline in the AHV rate for the rhGH arm was more pronounced over time (11.05 cm/yr at six months to 9.93 cm/yr at 12 months) compared to the LUM-201 1.6 mg/kg arm (8.57 cm/yr at six months to 8.14 cm/yr at 12 months).
LUM-201 shows sustained growth over 12 months.
OraGrowtH210 AHV (mean) 6 months 9 months 12 months cm/year n cm/year n cm/year n 0.8 mg/kg/day LUM-201 7.26 11 6.17 5 6.74 4 1.6 mg/kg/day LUM-201 8.57 10 8.48 6 8.14 4 3.2 mg/kg/day LUM-201 7.77 10 6.80 6 6.94 3 34 ?g/kg/day rhGH 11.05 10 10.46 7 9.93 4
OraGrowtH212 Interim Analysis Highlights
The OraGrowtH212 Trial is a single site, open-label trial evaluating the pharmacokinetic (PK) and pharmacodynamic (PD) effects of oral LUM-201 in up to 24 treatment-naïve PGHD subjects at two dose levels, 1.6 and 3.2 mg/kg/day. Every subject in the OraGrowtH212 Trial was PEM-positive and, therefore, enriched for responsiveness to LUM-201. The interim analysis of the OraGrowtH212 Trial was performed after ten subjects randomized to one of two LUM-201 treatment arms had completed six months of treatment. The AHV for each arm was comparable to that observed in the OraGrowtH210 Trial. The data also demonstrate the growth is durable out to 12 months, albeit in a more limited number of subjects. This separate study also supports the narrowing of the AHV difference between LUM-201 and rhGH seen in the OraGrowtH210 Trial as subjects approach 12 months on treatment.
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LUM-201 in GraGrowtH212 Demonstrates Comparable Growth Rates to OraGrowtH210: OraGrowtH212 6 months 9 months 12 months cm/year N cm/year n cm/year n 1.6 mg/kg/day LUM-201 7.14 5 6.85 4 7.21 2 3.2 mg/kg/day LUM-201 8.60 5 8.00 4 7.78 3 Additional data for the OraGrowtH212 Trial was presented on
March 5, 2023at the International Meeting of Pediatric Endocrinology in an oral presentation. The presentation included the results of analysis of 15 subjects, or five additional subjects (three in the 1.6 mg/kg treatment arm and two in the 3.2 mg/kg treatment arm) since the interim analysis. Results showed that across the dose range of 1.6 to 3.2 mg/kg/day for six months, LUM-201 is well-tolerated and produces dose-dependent and substantial increases in GH AUC0-12h. The presentation showed that increased GH pulse amplitude was associated with improved height velocity compared to baseline, and that effects on annualized height velocity were durable through 12 months.
Post hoc analysis combining OraGrowtH210 and OraGrowtH212
In an effort to determine an optimal dose for a Phase 3 trial, a post-hoc analysis was conducted, combining growth data from OraGrowtH210 and OraGrowtH212 Trials to increase the sample size. This analysis demonstrated comparable mean AHVs at six, nine, twelve months between the two higher doses of LUM-201. While there are some baseline characteristic differences between studies, all subjects enrolled to date are PEM-positive and are, therefore, representative of the broader moderate PGHD population. This post-hoc analysis of the combined 1.6 mg/kg and 3.2 mg/kg cohorts from both trials confirmed very similar growth rates between the top two LUM-201 doses and supports the selection of 1.6 mg/kg as an optimal dose for the Phase 3 trial. Based on historical research, we did not expect a dose-response between 1.6 mg/kg and 3.2 mg/kg compared to 0.8 to 1.6 mg/kg based on the previously generated PK/PD data in normal healthy volunteers that showed a PD plateau at 2.8 mg/kg.6 OraGrowtH210 + OraGrowtH212 6 months 9 months
cm/year N cm/year n
1.6 mg/kg/day LUM-201 8.09 15 7.83 10 7.83 6 3.2 mg/kg/day LUM-201 8.05 15 7.28 10 7.36 6
Safety and Tolerability Highlights
We believe LUM-201 will demonstrate a favorable safety profile as data from both OraGrowtH trials to date show comparable safety and tolerability to the rhGH subjects in the trials. In the interim data, there were no treatment-related Serious Adverse Events (SAEs), no drop-outs due to SAE's and no meaningful safety signals observed in either laboratory values, adverse event data, or in electrocardiogram values. The safety data for the OraGrowtH212 Trial is consistent with the data in the OraGrowtH210 Trial.
6 Merck 001 test
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The figure below shows the clinical development plan for LUM-201.
[[Image Removed: Pipeline slide.jpg]]
Potential expansion of LUM-201 indications
May 2022, we announced a clinical collaboration with Massachusetts General Hospital("MGH") to evaluate oral LUM-201 in nonalcoholic fatty liver disease ("NAFLD") in an investigator-initiated trial. This trial will evaluate a dose of 25 mg/day of LUM-201 in 10 men and women with NAFLD; this dose is supported by the large Phase 2 database of treatment of adults with LUM-201 by Merck, showing increases in growth hormone and IGF-1 from baseline through as long as 24 months, along with improvements in body composition. Enrollment in the trial has begun and the first subject has been dosed. GH is a critical stimulator of lipolysis, and preclinical data suggest that amplifying GH secretion has the potential to reduce hepatic steatosis and prevent NAFLD progression. Enhancing the natural pulsatile release of GH has been shown clinically in short-term studies to be more efficacious in inducing lipolysis than continuous infusions of GH. The primary endpoints will be to determine the changes in intrahepatic lipid content, hepatic inflammation and fibrosis with GH augmentation as measured by H-MRS and Perspectum's LiverMultiScan®. Biopsies will be conducted on a subset of subjects to obtain additional information at the genetic and cellular level in this indication.
We have approved an unsolicited grant application for this study and are providing LUM-201 for this pilot study. Lumos has pending application for a method-of-use patent for LUM-201 in NAFLD and retains his LUM-201 intellectual property rights in this indication.
We continue to explore our development path to expand into additional indications for LUM-201. We are actively reviewing the mechanism of action of LUM-201 in a subset of affected patients in other potential indications. Based on our initial review to date, we have narrowed our focus for the next indications to include Idiopathic Short Stature, with a focus on the
Asiamarkets, and Prader Willi Syndrome, where we see an attractive global opportunity. We have prioritized our resources for PGHD and currently plan to advance planning for Prader Willi Syndrome and Idiopathic Short Stature indications subsequent to the data read-out for OraGrowtH210.
November 2014, NewLink entered into the NewLink Merck Agreement with Merck to develop and potentially commercialize its Ebola vaccine rVSV?G-ZEBOV that it licensed from PHAC. rVSV?G-ZEBOV was also eligible to receive a PRV if approval was granted by the FDA, with the Company entitled to 60% of the PRV value obtained through sale, transfer or other disposition of the PRV. On December 20, 2019, Merck announced that the FDA approved its application for ERVEBO® (Ebola Zaire Vaccine, Live) for the prevention of disease caused by Zaire Ebola virus in individuals 18 years of age and older. Pursuant to the asset purchase agreement, Merck agreed, among other things, to pay us for the PRV in two installments. As required by the agreement, Merck paid us $34.0 millionon September 1, 2020and $26.0 millionon January 11, 2021. We have received and have the potential to continue to earn royalties on sales of the vaccine in certain countries. However, we believe that the market for the vaccine will be limited primarily to areas in the developing world that are excluded
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from royalty payment or where the vaccine is donated or sold at low or no margin and, therefore, we do not expect to receive material royalty payments from Merck in the foreseeable future. Oncology Candidates We have three small-molecule product candidates, which we acquired from NewLink in the merger. These product candidates include two indoleamine-2, 3-dioxygenase pathway inhibitors, indoximod and
NLG802(a prodrug of indoximod), and one direct IDO1 enzymatic inhibitor, NLG919. Two U.S.patents covering both the salt and prodrug formulations of indoximod were issued in the United Stateson August 15, 2017and February 19, 2019, respectively, providing exclusivity until at least 2036. We are continuing to pursue international patent coverage for these formulations in some countries. We may explore the potential for further development and licensing opportunities for these product candidates; however, we currently do not have any active program for these acquired small molecule product candidates.
We have no products approved for commercial sale and have not generated any revenue from product sales. In the future, we may generate revenue from product sales, or license fees, milestones, or other upfront payments if we enter into any collaborations or license agreements. We may also continue to generate revenue from royalties on product sales. We expect that our future revenue will fluctuate from quarter to quarter for many reasons, including the uncertain timing and amount of any such payments and sales.
Research and development expenses consist primarily of costs incurred to advance our product candidate, LUM-201. Our research and development expenses include internal personnel expenditures along with external research and development expenses incurred under arrangements with third parties, such as contract research and manufacturing organizations, consultants, and our scientific advisors. We expense research and development costs as incurred. Nonrefundable advance payments for goods and services that will be used in future research and development activities are capitalized as an asset and expensed when the service has been performed or when the goods have been received. We expect our research and development expenses to increase for the foreseeable future as we continue to conduct our clinical trial programs for our product candidates develop our pipeline and pursue regulatory approval of our product candidates.
General and administrative expenses
General and administrative expenses consist primarily of professional fees for legal, auditing, tax and business consulting services, personnel expenses and travel costs. We expect that general and administrative expenses will increase in the future as we expand our operating activities.
Significant Accounting Policies and Significant Judgments and Estimates
We have prepared our condensed consolidated financial statements in accordance with
U.S.GAAP, which requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, expenses. On an ongoing basis, we evaluate these estimates and judgments. We based our estimates on historical experience and on various assumptions that we believe to be reasonable under the circumstances. These estimates and assumptions form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results could, therefore, differ materially from these estimates under different assumptions or conditions. Management believes there have been no material changes to the critical accounting policies from those discussed in "Note 2 - Summary of Significant Accounting Policies and Recent Accounting Pronouncements" of our consolidated financial statements included in our 2022 Annual Report.
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Ended 3-month comparison
Three Months Ended March 31, 2023 2022 Change in $ Change in % (in thousands) (in thousands) Revenues: Royalty revenue $ 691
$ 111580 523 % Total revenues 691 111 Operating expenses: Research and development 4,369 4,221 148 4 % General and administrative 4,357 3,621 736 20 % Total operating expenses 8,726 7,842 Other income, net 689 11 678 6164 % Net loss $ (7,346) $ (7,720)
Research and Development Expenses. Research and development expenses increased by
$0.1 millionfor the three months ended March 31, 2023compared to the same period in 2022 primarily due to increases of $0.5 millionin clinical trial expenses and $0.1 millionin legal and consulting expenses, offset by a decrease of $0.5 millionin contract manufacturing expenses. General and Administrative Expenses. General and administrative expenses increased by $0.7 millionfor the three months ended March 31, 2023compared to the same period in 2022 primarily due to increases of $0.4 millionin licensing expenses, $0.1 millionin personnel-related expenses and $0.2 millionin travel expenses. Other Income, net. Other income, net increased by $0.7 millionfor the three months ended March 31, 2023compared to the same period in 2022 primarily due to an increase in interest income driven by an increase in interest rates and short-term investments.
Liquidity and funding sources
We have historically devoted substantially all our efforts toward research and development and have never earned revenue from commercial sales of our products. We expect to continue to incur additional substantial losses in the foreseeable future as a result of our research and development programs and from general and administrative costs associated with our operations. However, we believe that our existing cash, cash equivalents and short-term investment balance of approximately
$58.0 millionas of March 31, 2023will be sufficient to allow us to fund our operations into the third quarter of 2024, inclusive of the primary read out of the OraGrowtH210 and OraGrowtH212 Trials for patients with idiopathic (moderate) PGHD and for at least 12 months from the filing date of this Quarterly Report. We may seek to sell additional equity or debt securities or obtain a credit facility from time to time if our available cash and cash equivalents are insufficient to satisfy our liquidity requirements or if we develop additional opportunities to do so. The sale of additional equity or convertible debt securities would result in additional ownership dilution to our stockholders. If we raise additional funds through the issuance of debt securities or preferred stock, these securities could have rights senior to those of our common stock and could contain covenants that would restrict our operations. We may require additional capital beyond our currently forecasted amounts. Any such required additional capital may not be available on reasonable terms, if at all. If we are unable to obtain additional financing, we may be required to reduce the scope of, delay or eliminate some or all of our planned research and development activities, which could harm our business. Because of the numerous risks and uncertainties associated with the research and development of our product candidates, we are unable to estimate the exact amounts of our working capital requirements. Our future funding requirements will depend on many factors, including, but not limited to:
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• Primary data analysis of a Phase 2 study expected to be released in Q4 2023.
• The extent, progress, results and costs of our product candidates’ clinical trials, as well as discovery and development activities related to new product candidates.
• The timing and associated costs of obtaining regulatory approval for our product candidates;
• costs of commercialization activities if any of our product candidates are approved for sale; This includes marketing, sales, equipment and distribution costs.
• The cost of manufacturing our product candidates and the products we commercialize;
• our ability to establish and maintain strategic collaborations, licensing or other arrangements, and the financial terms of such agreements;
• Whether and to what extent any outstanding loans provided by the government will need to be repaid.
•the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation; •changes in domestic and global business or macro-economic conditions, including any further adverse impacts from the COVID-19 pandemic or the military conflict in
Ukraine, resulting labor shortages, supply chain disruptions, and inflation; and
• Timing, receipts and amounts of our future product sales or royalties, if any.
December 30, 2020, we entered into a Controlled Equity OfferingSM Sales Agreement (the "Sales Agreement") with Cantor Fitzgerald & Co., as agent (the "Agent"), pursuant to which we may offer and sell from time to time through the Agent up to $50.0 millionof shares of our common stock (the "Shares"). The offering and sale of the Shares has been registered under the Securities Act. Under the Sales Agreement, the Agent may sell the Shares by any method permitted by law and deemed to be an "at-the-market" offering as defined in Rule 415(a)(4) promulgated under the Securities Act, including sales made directly on or through the Nasdaq, on any other existing trading market for the Shares, in negotiated transactions at market prices prevailing at the time of sale or at prices related to such prevailing market prices and/or any other method permitted by law. We will notify the Agent of the number of Shares to be issued, the time period during which sales are requested to be made, any limitation on the number of Shares that may be sold in any one day and any minimum price below which sales may not be made. We intend to use the net proceeds from this offering for working capital and general corporate purposes, which include, but are not limited to, expanding clinical development opportunities for our product candidate into potential additional indications, and general and administrative expenses. We may also use a portion of the net proceeds to invest in future strategic transactions to expand and diversify our product pipeline through the acquisition or licensing of product candidates or technologies that are complementary to our own. We will pay the Agent a commission of up to 3.0% of the gross sales price of the Shares sold through it under the Sales Agreement. In addition, we have agreed to reimburse certain expenses incurred by the Agent in connection with the offering. The Sales Agreement may be terminated by the Agent or by us at any time upon notice to the other party, as set forth in the Sales Agreement, or by the Agent at any time in certain circumstances, including the occurrence of a material and adverse change in our business or financial condition that makes it impractical or inadvisable to market the shares or to enforce contracts for the sale of the Shares. As of March 31, 2023, no shares had been issued under the Sales Agreement. So long as our public float is less than $75 million, we will be subject to the restrictions set forth in General Instruction I.B.6 to Form S-3, which limit our ability to conduct primary offerings under a Form S-3 registration statement, including with respect to issuances under our at-the-market program under the Sales Agreement. Under such limitations, we may not sell, during any 12-month period, securities on Form S-3 having an aggregate market value of more than one-third of our public float. As of May 1, 2023, our public float calculated in accordance with General Instruction I.B.6 of Form S-3 was $20.1 million. On August 16, 2022, we announced that our board of directors had authorized a share repurchase program, under which we may purchase up to $3.0 millionshares of our outstanding common stock. During the first quarter of 2023, we repurchased 87,694 shares for approximately $305,000. All such purchases were made through open-market transactions with such repurchased shares effectively retired upon repurchase.
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The following table shows the primary sources of funds and uses of cash for each period shown below (in thousands).
Three Months Ended
2023 2022 Net cash used in operating activities $ (9,197)
$ (8,033)Net cash used in investing activities (2,463) - Net cash used in financing activities (309) (18) Net decrease in cash and equivalents $ (11,969) $ (8,051)For the three months ended March 31, 2023and 2022, our operating activities used cash of $9.2 millionand $8.0 million, respectively. The increase in cash used was primarily due to increases of $1.5 millionin the change in working capital and a $0.1 milliondecrease in adjustments to reconcile net loss to net cash used in operating activities, offset by a decrease of $0.4 millionin losses from operations. For the three months ended March 31, 2023and 2022, our investing activities used cash of $2.5 millionand $0, respectively. The increase is due to $2.5 millionof cash used for purchases of short-term investments during the three months ended March 31, 2023. For the three months ended March 31, 2023and 2022, our financing activities used net cash of $0.3 millionand $18,000, respectively. The increase was primarily due to $0.3 millionin cash paid for common stock repurchases during the three months ended March 31, 2023.
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