UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the quarterly period ended
or
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. |
For the transition period from to
Commission File Number:
(Exact name of registrant as specified in its charter)
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(State or other jurisdiction of |
(IRS Employer |
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(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
Securities registered pursuant to Section 12(b) of the Act:
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Trading symbol(s) |
Name of Each Exchange on Which Registered: |
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The |
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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.:
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Large accelerated filer |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Exchange Act Rule 12b-2) Yes
As of August 7, 2024, the number of outstanding shares of the registrant’s common stock was
TALPHERA, INC.
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2024
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION |
5 |
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Item 1. |
Financial Statements |
5 |
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Condensed Consolidated Balance Sheets as of June 30, 2024 and December 31, 2023 (unaudited) |
5 |
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Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2024 and 2023 (unaudited) |
6 |
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Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2024 and 2023 (unaudited) |
7 |
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Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2024 and 2023 (unaudited) |
8 |
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Notes to Condensed Consolidated Financial Statements (unaudited) |
9 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
20 |
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Item 3. |
Quantitative and Qualitative Disclosures About Market Risk |
29 |
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Item 4. |
Controls and Procedures |
29 |
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PART II. OTHER INFORMATION |
29 |
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Item 1. |
Legal Proceedings |
29 |
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Item 1A. |
Risk Factors |
29 |
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Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds |
54 |
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Item 3. |
Defaults Upon Senior Securities |
54 |
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Item 4. |
Mine Safety Disclosures |
54 |
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Item 5. |
Other Information |
54 |
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Item 6. |
Exhibits |
55 |
Unless the context indicates otherwise, the terms “Talphera,” “we,” “us” and “our” refer to Talphera, Inc., and its consolidated subsidiary. “Niyad” and “Fedsyra” are trademarks, and “Zalviso” are registered trademarks, all owned by Talphera, Inc. This Quarterly Report also contains trademarks and trade names that are the property of their respective owners.
Forward-Looking Statements
This Quarterly Report on Form 10-Q, or Form 10-Q, contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by that section. The forward-looking statements in this Form 10-Q are contained principally under “Part I. Financial Information - Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Part II. Other Information - Item 1A. Risk Factors”. In some cases, you can identify forward-looking statements by the following words: “may,” “will,” “could,” “would,” “should,” “expect,” “intend,” “plan,” “anticipate,” “believe,” “estimate,” “predict,” “project,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain these words. These statements involve risks, uncertainties and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that these statements are based on a combination of facts and factors currently known by us and our projections of the future, about which we cannot be certain. Many important factors affect our ability to achieve our objectives, including:
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our ability to obtain additional required financing and to continue as a going concern; |
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our ability to manage our operating costs and reduce our cash burn; |
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the accuracy of our estimates regarding the sufficiency of our cash resources, future revenues, expenses, and capital requirements; |
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our ability to maintain listing of our securities trading on the Nasdaq exchange; |
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the historical performance and high volatility in the market price of our common stock; |
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macroeconomic uncertainties, including inflationary pressures, domestic and global supply chain disruptions, labor shortages, significant volatility in global markets, and recession risks; |
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our ability to conduct ourselves, or through a contract research organization, clinical trials in a timely and effective manner to advance the development of our product candidates, including our lead nafamostat developmental product candidate, Niyad™; |
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our ability to successfully file for and obtain regulatory approval for, and then successfully launch and commercialize our developmental product candidates; |
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the success of our corporate partner, Vertical Pharmaceuticals LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, in integrating and commercializing the DSUVIA asset in the United States, including their effectiveness in marketing, sales, and distribution of the DSUVIA product, itself or with potential collaborators; |
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the extent of future sales of DSUVIA by Alora to the Department of Defense, or DoD; |
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the size and growth potential of the potential markets for our developmental product candidates in the United States and in other jurisdictions, and our ability to serve those markets; |
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our estimates of the existence of and commercial potential for markets for our developmental product candidates, if approved; |
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our ability to develop sales and marketing capabilities in a timely fashion, whether alone through recruiting qualified employees, by engaging a contract sales organization, or with potential future collaborators; |
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successfully establishing and maintaining commercial manufacturing and supply chain relationships with domestic and global third-party service providers, including single sources of supply for Niyad active pharmaceutical ingredients and finished goods located outside the U.S.; |
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our ability to manage effectively, and the impact of any costs associated with, potential governmental investigations, inquiries, regulatory actions or lawsuits that may be, or have been, brought against us; |
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our ability to obtain adequate government or third-party payer reimbursement for our developmental product candidates, if approved; |
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our ability to gain access to formularies and establish and then maintain effective relationships with pharmaceutical benefit managers and/or group purchasing organizations for our developmental product candidates, if approved; |
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our ability to attract additional collaborators with development, regulatory and commercialization expertise; |
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our ability to identify and secure potential strategic partners to develop, secure regulatory approval for and then commercialize our developmental product candidates; |
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our ability to successfully retain our key commercial, scientific, engineering, medical or management personnel and hire new personnel as needed; |
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existing and future legislation and other regulatory developments in the United States and foreign countries; |
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the performance of our third-party suppliers and manufacturers, including any supply chain impacts or work limitations; |
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the success of competing therapies that are or become available; and |
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our ability to obtain and maintain intellectual property protection for our approved products and product candidates. |
In addition, you should refer to “Part II. Other Information - Item 1A. Risk Factors” in this Form 10-Q for a discussion of these and other important factors that may cause our actual results to differ materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you that the forward-looking statements in this Form 10-Q will prove to be accurate. Furthermore, if our forward-looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified time frame, or at all. Also, forward-looking statements represent our estimates and assumptions only as of the date of this Form 10-Q. We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Talphera, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share data)
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June 30, 2024 |
December 31, 2023(1) |
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Assets |
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Current Assets: |
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Cash and cash equivalents |
$ | $ | ||||||
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Short-term investments |
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Prepaid expenses and other current assets |
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Total current assets |
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In-process research and development asset |
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Total assets |
$ | $ | ||||||
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Liabilities and Stockholders’ Equity |
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Current Liabilities: |
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Accounts payable |
$ | $ | ||||||
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Accrued and other liabilities |
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Liabilities of discontinued operations, current portion |
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Total current liabilities |
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Warrant liability |
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Liability related to the sale of future payments |
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Total liabilities |
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Commitments and Contingencies |
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Stockholders’ Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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Total stockholders’ equity |
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Total Liabilities and Stockholders’ Equity |
$ | $ | ||||||
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(1) |
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See notes to condensed consolidated financial statements.
Talphera, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
(In thousands, except share and per share data)
| Three Months Ended June 30, |
Six Months Ended June 30, |
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| 2024 | 2023 |
2024 |
2023 | |||||||||||||
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Revenue |
$ | $ | $ | $ | ||||||||||||
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Operating costs and expenses: |
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Research and development |
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Selling, general and administrative |
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Total operating costs and expenses |
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Loss from operations |
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Other income (expense), net: |
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Interest expense |
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Interest income and other income, net |
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Gain on sale of future payments |
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Change in fair value of warrant liability |
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Non-cash interest expense on liability related to the sale of future payments |
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Total other income (expense), net |
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Net loss before income taxes |
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Provision for income taxes |
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Net loss from continuing operations |
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Net income (loss) from discontinued operations – See Note 3 |
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Net loss |
$ | ( |
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Net (loss) income per share attributable to stockholders: |
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Basic and diluted, continuing operations |
$ | ( |
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Basic and diluted, discontinued operations |
$ | $ | $ | $ | ( |
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Basic and diluted loss per share |
$ | ( |
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$ | ( |
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$ | ( |
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Shares used in computing net (loss) income per share of common stock, basic and diluted – See Note 10 |
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See notes to condensed consolidated financial statements.
Talphera, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(in thousands, except share data)
| Common Stock | Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity |
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Shares |
Amount |
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Balance as of January 1, 2024 |
$ | $ | $ | ( |
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Stock-based compensation |
— | |||||||||||||||||||
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Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes |
( |
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Net proceeds from issuance of prefunded warrants in connection with equity financing |
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Issuance of common stock upon ESPP purchase |
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Net loss |
— | ( |
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Balance as of March 31, 2024 |
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Stock-based compensation |
— | — | — | |||||||||||||||||
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Issuance of common stock upon vesting of restricted stock units |
— | — | — | |||||||||||||||||
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Net loss |
— | — | — | ( |
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Balance as of June 30, 2024 |
$ | $ | $ | ( |
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| Common Stock | Additional Paid-in Capital |
Accumulated Deficit |
Total Stockholders’ Equity |
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Shares |
Amount |
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Balance as of January 1, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
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Stock-based compensation |
— | 569 | ||||||||||||||||||
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Issuance of common stock upon vesting of restricted stock units, net of shares withheld for employee taxes |
( |
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Exercise of prefunded warrants |
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Issuance of common stock upon ESPP purchase |
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Net loss |
— | — | ( |
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Balance as of March 31, 2023 |
( |
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Stock-based compensation |
— | — | — | |||||||||||||||||
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Issuance of hold back common stock in connection with asset acquisition |
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Net loss |
— | — | — | ( |
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Balance as of June 30, 2023 |
$ | $ | $ | ( |
) | $ | ||||||||||||||
See notes to condensed consolidated financial statements.
Talphera, Inc.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In thousands)
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Six Months |
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2024 |
2023 |
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Cash flows from operating activities: |
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Net loss |
$ | ( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Non-cash interest expense on liability related to sale of future payments |
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Depreciation and amortization |
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| Net amortization of discount on short term investments | ( |
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Non-cash interest expense related to debt financing |
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Revaluation of liability for Lowell holdback shares |
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Stock-based compensation |
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Revaluation of warrant liability |
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Impairment of net assets held for sale |
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Impairment of fixed assets |
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Gain on termination of lease liabilities |
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Gain on extinguishment of debt liability |
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Changes in operating assets and liabilities: |
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Inventories |
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Prepaid expenses and other current assets |
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Accounts payable |
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Accrued liabilities |
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Operating lease liabilities |
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Deferred revenue |
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Net cash used in operating activities |
( |
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Cash flows from investing activities: |
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Purchase of property and equipment |
( |
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Sale of the DSUVIA assets |
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Purchase of investments |
( |
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Proceeds from maturities of investments |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Payment of long-term debt |
( |
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Gross proceeds from sale of future payments |
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Issuance costs related to sale of future payments |
( |
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Net proceeds from issuance of common stock in connection with exercise of prefunded warrants |
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Net proceeds from issuance of common stock through equity plans |
( |
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Net cash provided by (used in) financing activities |
( |
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Net change in cash and cash equivalents |
( |
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Cash and cash equivalents—Beginning of period |
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Cash and cash equivalents—End of period |
$ | $ | ||||||
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NONCASH INVESTING AND FINANCING ACTIVITIES: |
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Equity issuance costs from warrant modification |
$ | $ | ||||||
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Settlement for held back shares issued in connection with asset acquisition |
$ | $ | ( |
) | ||||
See notes to condensed consolidated financial statements.
Talphera, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
(In thousands, except where otherwise noted)
1. Organization and Summary of Significant Accounting Policies
The Company
Talphera, Inc., or the Company, or Talphera, was incorporated in Delaware on July 13, 2005 as SuRx, Inc. The Company subsequently changed its name to AcelRx Pharmaceuticals, Inc. and, on January 9, 2024 to Talphera, Inc. The Company’s operations are based in San Mateo, California.
Talphera is a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings. The Company’s product development portfolio features Niyad™ (a regional anticoagulant for the dialysis circuit), LTX-608 (a nafamostat formulation for direct IV infusion) that the Company intends to develop for one or more of the following indications: disseminated intravascular coagulation, or DIC, acute respiratory distress syndrome, or ARDS, acute pancreatitis, or as an anti-viral treatment.
On January 12, 2024, the Company and XOMA (US) LLC, or XOMA, entered into a Payment Interest Purchase Agreement, or the Purchase Agreement, for the sale by the Company to XOMA, in exchange for $
On March 12, 2023, the Company entered into an Asset Purchase Agreement, or the DSUVIA Agreement, with Vertical Pharmaceuticals, LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, pursuant to which Alora agreed to acquire certain assets and assume certain liabilities of the Company relating to its sufentanil sublingual tablet product referred to as DSUVIA or DZUVEO, or any other single-dose pharmaceutical product for use in medically supervised settings containing a sublingual tablet that includes sufentanil as the sole active ingredient, as a 30 mcg tablet or other dosage form or strength as reasonably necessary for lifecycle management, or the Product. The closing of the DSUVIA Agreement occurred on April 3, 2023 (see Note 3, “Discontinued Operations” below).
On January 7, 2022, the Company acquired Lowell Therapeutics, Inc., or Lowell, a privately held company (see Note 4, “Asset Acquisition” to the consolidated financial statements in the Company’s 2023 Annual Report on Form 10-K for additional information) and, as a result acquired the Niyad™ developmental product, a regional anticoagulant for the dialysis circuit during continuous renal replacement therapy for acute kidney injury patients in the hospital, that the Company is studying under an investigational device exemption, or IDE, and which has received Breakthrough Device Designation status from the FDA. While not approved for commercial use in the United States, the active drug component of Niyad, nafamostat, has been approved in Japan and South Korea as a regional anticoagulant for the dialysis circuit, disseminated intravascular coagulation, and acute pancreatitis. Niyad is a lyophilized formulation of nafamostat, a broad-spectrum, synthetic serine protease inhibitor, with anticoagulant, anti-inflammatory, and potential anti-viral activities. The second intended indication for Niyad is as a regional anticoagulant for the dialysis circuit for chronic kidney disease patients undergoing intermittent hemodialysis in dialysis centers. In addition, the Company acquired LTX-608, a nafamostat formulation for direct IV infusion, that it intends to develop for the treatment of one or more of the following indications: ARDS, DIC, acute pancreatitis or as an anti-viral agent.
On July 14, 2021, the Company entered into a License and Commercialization Agreement, or the PFS Agreement, with Aguettant, pursuant to which the Company obtained the exclusive right to develop and, subject to FDA approval, commercialize in the United States an ephedrine pre-filled syringe for injection, and (ii) a phenylephrine PFS for injection. Aguettant will supply the Company with the products for use in commercialization, if they are approved in the U.S. See Note 5, “In-License Agreement” to the consolidated financial statements in the Company’s 2023 Annual Report on Form 10-K for additional information.
Liquidity and Going Concern
The condensed consolidated financial statements for the three and six months ended June 30, 2024 were prepared on the basis of a going concern, which contemplates that the Company will be able to realize assets and discharge liabilities in the normal course of business. The Company has incurred recurring operating losses and negative cash flows from operating activities since inception and expects to continue to incur operating losses and negative cash flows in the future. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Considering the Company’s current cash resources and its current and expected levels of operating expenses for the next twelve months, management expects to need additional capital to fund its planned operations prior to the 12-month anniversary of the date this Quarterly Report on Form 10-Q is filed with the United States Securities and Exchange Commission, or the SEC.
Management may seek to raise such additional capital through public or private equity offerings, including under the Controlled Equity OfferingSM Sales Agreement, or the ATM Agreement, as described below, with Cantor Fitzgerald & Co., or Cantor, debt securities, a new debt facility, monetizing or securitizing certain assets, entering into product development, license or distribution agreements with third parties, or divesting any of the Company’s remaining product candidates. While management believes its plans to raise additional funds will alleviate the conditions that raise substantial doubt about the Company’s ability to continue as a going concern, these plans are not entirely within the Company’s control and cannot be assessed as being probable of occurring.
Additional funds may not be available when the Company needs them on terms that are acceptable to the Company, or at all. If adequate funds are not available, the Company may be required to further reduce its workforce or delay the development of its regulatory filing plans for its product candidates in advance of the date on which the Company’s cash resources are exhausted to ensure that the Company has sufficient capital to meet its obligations and continue on a path designed to preserve stockholder value. In addition, if additional funds are raised through collaborations, strategic alliances or licensing arrangements with third parties, the Company may have to relinquish rights to its technologies, future revenue streams or product candidates, or to grant licenses on terms that may not be favorable to the Company.
Basis of Presentation
The preparation of financial statements in conformity with accounting principles generally accepted in the United States, or GAAP, requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and the accompanying notes. Actual results could differ from those estimates.
Reclassifications
Certain prior year amounts in the condensed consolidated financial statements have been reclassified to conform to the current year's presentation. In particular, other assets has been reclassified as prepaid expenses and other current assets in the condensed consolidated balance sheets, the portion of interest income and other income, net related to the revaluation of liability-classified warrants has been reclassified to change in fair value of warrants in the condensed consolidated statements of operations, and accounts receivable has been reclassified as prepaid expenses and other current assets and payment of employee tax obligations related to vesting of restricted stock units has been reclassified to net proceeds from issuance of common stock through equity plans in the condensed consolidated statement of cash flows.
Principles of Consolidation
The condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany accounts and transactions have been eliminated in consolidation.
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Management believes its most significant accounting estimates relate to fair value of warrants, impairment of long-lived assets, management’s assessment of going concern, revenue recognition, liability related to the sale of future payments and accrued clinical trial liabilities. Management evaluates its estimates on an ongoing basis including critical accounting policies. Estimates are based on historical experience and on various other market-specific and other relevant assumptions that the Company believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from those estimates.
Significant Accounting Policies
The Company’s significant accounting policies are detailed in its Annual Report on Form 10-K for the year ended December 31, 2023. There have been no significant changes to the Company’s significant accounting policies during the three and six months ended June 30, 2024, from those previously disclosed in its 2023 Annual Report on Form 10-K, except as follows:
Sale of Future Payments
On January 12, 2024, the Company entered into the Purchase Agreement with XOMA to monetize a portion of its future payments for commercial sales of DSUVIA and services performed by the Company to support sales of DSUVIA to the Department of Defense, or DoD, by Alora under the Marketing Agreement, and sales milestones under the DSUVIA Agreement. Refer to Note 4, “Sale of Future Payments” for further details on the Purchase Agreement.
The Company recorded approximately $
The liability related to the sale of future payments is recorded as debt and will be amortized under the effective interest rate method over the estimated life of the Purchase Agreement. The Company estimates the effective interest rate based on its estimate of total payments to be received by XOMA under the Purchase Agreement. The Company reassesses these estimates at each reporting date and adjusts the effective interest rate and amortization of the liability on a prospective basis, as necessary. The Company records the payments to XOMA as a reduction of the liability when paid. As such payments are made to XOMA, the balance of the liability will be effectively repaid over the life of the Purchase Agreement.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07, which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The guidance in this update is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. The Company is evaluating the disclosure impact of ASU 2023-07; however, the adoption of ASU 2023-07 will not have a material impact on the Company’s consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. The Company is evaluating the disclosure impact of ASU 2023-09; however, the adoption of ASU 2023-09 will not have a material impact on the Company’s consolidated financial statements.
The Company does not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on the condensed consolidated financial statements.
2. Investments and Fair Value Measurement
Investments
The Company classifies its marketable securities as available for sale and records its investments at fair value. Available-for-sale securities are carried at estimated fair value based on quoted market prices or observable market inputs of almost identical assets, with the unrealized holding gains and losses included in accumulated other comprehensive income (loss).
As of June 30, 2024, and December 31, 2023, the contractual maturity of all investments held was less than one year.
The tables below summarize the Company’s cash, cash equivalents and short-term investments (in thousands):
|
As of June 30, 2024 |
||||||||||||||||
|
Amortized Cost |
Gross Unrealized |
Gross Unrealized |
Fair |
|||||||||||||
|
Cash and cash equivalents: |
||||||||||||||||
|
Cash |
$ | $ | — | $ | — | $ | ||||||||||
|
Money market funds |
— | — | ||||||||||||||
|
U.S. government agency securities |
— | — | ||||||||||||||
|
Commercial paper |
— | — | ||||||||||||||
|
Total cash and cash equivalents |
— | — | ||||||||||||||
|
Short-term investments: |
||||||||||||||||
|
U.S. government agency securities |
— | — | ||||||||||||||
|
Total short-term investments |
— | — | ||||||||||||||
|
Total cash, cash equivalents, and short-term investments |
$ | $ | — | $ | — | $ | ||||||||||
|
As of December 31, 2023 |
||||||||||||||||
|
Amortized Cost |
Gross Unrealized |
Gross Unrealized |
Fair |
|||||||||||||
|
Cash and cash equivalents: |
||||||||||||||||
|
Cash |
$ | $ | — | $ | — | $ | ||||||||||
|
Money market funds |
— | — | ||||||||||||||
|
U.S. government agency securities |
— | — | ||||||||||||||
|
Commercial paper |
— | — | ||||||||||||||
|
Total cash and cash equivalents |
— | — | ||||||||||||||
|
Short-term investments: |
||||||||||||||||
|
U.S. government agency securities |
— | — | ||||||||||||||
|
Commercial paper |
||||||||||||||||
|
Total short-term investments |
||||||||||||||||
|
Total cash, cash equivalents, and short-term investments |
$ | $ | — | $ | — | $ | ||||||||||
At each reporting date, the Company performs an evaluation of impairment to determine if any unrealized losses are the result of credit losses. Impairment is assessed at the individual security level. Factors considered in determining whether a loss resulted from a credit loss or other factors include the Company’s intent and ability to hold the investment until the recovery of its amortized cost basis, the extent to which the fair value is less than the amortized cost basis, the length of time and extent to which fair value has been less than the cost basis, the financial condition of the issuer, any historical failure of the issuer to make scheduled interest or principal payments, any changes to the rating of the security by a rating agency, any adverse legal or regulatory events affecting the issuer or issuer’s industry, any significant deterioration in economic conditions. There were no material realized or unrealized gains or losses on marketable securities for the three and six months ended June 30, 2024 or the twelve months ended December 31, 2023. As such, the Company did not record a credit allowance for the three and six months ended June 30, 2024 or the twelve months ended December 31, 2023.
Fair Value Measurement
The Company’s financial instruments consist of Level I and II assets. Money market funds are highly liquid investments and are actively traded. The pricing information on these investment instruments is readily available and can be independently validated as of the measurement date. This approach results in the classification of these securities as Level 1 of the fair value hierarchy. For Level II instruments, the Company estimates fair value by utilizing third-party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. Such Level II instruments typically include U.S. Treasury, U.S. government agency securities and commercial paper. As of June 30, 2024 and December 31, 2023, the Company held, in addition to Level II assets, a warrant liability related to the December 2022 Common Stock Warrants. The fair value of the warrant liability was estimated using the Black Scholes Model which uses as inputs the following weighted average assumptions: dividend yield, expected term in years; equity volatility; and risk-free interest rate. The Company follows the guidance in ASC 820 for its financial assets and liabilities that are re-measured and reported at fair value at each reporting period. The estimated fair value of the warrant liability represents a Level III measurement. Changes to the estimated fair value of these liabilities are recorded in change in fair value of warrant liability in the condensed consolidated statements of operations.
The following tables set forth the fair value of the Company’s financial assets by level within the fair value hierarchy (in thousands):
|
As of June 30, 2024 |
||||||||||||||||
|
Fair Value |
Level I |
Level II |
Level III |
|||||||||||||
|
Assets |
||||||||||||||||
|
Money market funds |
$ | $ | $ | $ | ||||||||||||
|
U.S. government agency securities |
||||||||||||||||
|
Commercial paper |
||||||||||||||||
|
Total assets measured at fair value |
$ | $ | $ | $ | ||||||||||||
|
Liabilities |
||||||||||||||||
|
Warrant liability |
$ | $ | $ | $ | ||||||||||||
|
Total liabilities measured at fair value |
$ | $ | $ | $ | ||||||||||||
|
As of December 31, 2023 |
||||||||||||||||
|
Fair Value |
Level I |
Level II |
Level III |
|||||||||||||
|
Assets |
||||||||||||||||
|
Money market funds |
$ | $ | $ | $ | ||||||||||||
|
U.S. government agency securities |
||||||||||||||||
|
Commercial paper |
||||||||||||||||
|
Total assets measured at fair value |
$ | $ | $ | $ | ||||||||||||
|
Liabilities |
||||||||||||||||
|
Warrant liability |
$ | $ | $ | $ | ||||||||||||
|
Total liabilities measured at fair value |
$ | $ | $ | $ | ||||||||||||
The following tables set forth a summary of the changes in the fair value of the Company’s Level III warrant liability for the three and six months ended June 30, 2024 and 2023 (in thousands):
|
|
Three Months Ended June 30, 2024 |
Six Months Ended June 30, 2024 |
||||||||
|
Fair value—beginning of period |
|
$ |
|
$ | ||||||
|
Change in fair value of December 2022 Common Stock Warrants liability |
|
( |
) |
|
||||||
|
Fair value—end of period |
|
$ |
|
$ | ||||||
|
|
Three Months Ended June 30, 2023 |
Six Months Ended June 30, 2023 |
||||||||
|
Fair value—beginning of period |
|
$ |
|
$ | ||||||
|
Change in fair value of December 2022 Common Stock Warrants liability |
|
|
( |
) | ||||||
|
Fair value—end of period |
|
$ |
|
$ | ||||||
The common warrants issued in December 2022 to purchase an aggregate of
There were no transfers between Level I, Level II or Level III of the fair value hierarchy during the three and six months ended June 30, 2024 and the year ended December 31, 2023.
3. Discontinued Operations
On March 12, 2023, the Company entered into the Asset Purchase Agreement with Alora for Alora’s acquisition of all assets related to DSUVIA, including inventories, equipment and intellectual property in exchange for consideration at closing of $
The following table presents the results of the discontinued operations for the three- and six-month periods ended June 30, 2024 and 2023 (in thousands):
|
Three months ended June 30, |
Six months ended June 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Total revenues |
$ | $ | $ | $ | ||||||||||||
|
Cost of goods sold |
||||||||||||||||
|
Selling, general and administrative expense |
||||||||||||||||
|
Impairment of net assets held for sale |
( |
) | ||||||||||||||
|
Impairment of fixed assets |
||||||||||||||||
|
Gain on termination of lease liabilities |
( |
) | ||||||||||||||
|
Research and development expenses |
||||||||||||||||
|
Net income (loss) from discontinued operations |
$ | $ | $ | $ | ( |
) | ||||||||||
The following table summarizes the carrying amounts of major classes of assets and liabilities of discontinued operations for each of the periods presented (in thousands).
|
|
June 30, 2024 |
December 31, 2023 |
||||||
|
Accrued liabilities |
$ | $ | ||||||
|
Total current liabilities of discontinued operations |
||||||||
|
Net assets (liabilities) of discontinued operations |
$ | ( |
) | $ | ( |
) | ||
The following table presents the significant non-cash items and purchases of property, plant and equipment for the discontinued operations that are included in the accompanying unaudited condensed consolidated statements of cash flows (in thousands):
|
|
Six months ended |
|||||||
|
|
June 30, |
|||||||
|
|
2024 |
2023 |
||||||
|
Cash flows from operating activities: |
||||||||
|
Depreciation and amortization |
$ | $ | ||||||
|
Stock-based compensation |
||||||||
|
Impairment of net assets held for sale |
||||||||
|
Impairment of fixed assets |
||||||||
|
Gain on termination of lease liabilities |
( |
) | ||||||
|
Gain on extinguishment of debt |
( |
) | ||||||
|
Purchases of property and equipment |
( |
) | ||||||
4. Sale of Future Payments
In January 2024, the Company and XOMA entered into the Purchase Agreement for the sale by the Company to XOMA, in exchange for $
The Purchased Receivables include:
(i)
(ii) following the Stepdown Date, (A)
The Company has retained its right, title and interest in and to, following the Stepdown Date,
The Purchase Agreement contains customary representations, warranties and agreements by the Company and XOMA, indemnification obligations of the parties and other obligations of the parties.
The allocation of the consideration for the Purchase Agreement resulted in proceeds of $
The Company evaluated the terms of the Purchase Agreement and concluded that the features of the Purchased Receivables are similar to those of a debt instrument. Accordingly, the Company recorded the allocated proceeds of approximately $
The Company periodically assesses the expected payments for services performed to support sales of DSUVIA to the DoD by Alora under the Marketing Agreement and milestone payments under the DSUVIA Agreement using a combination of historical results, internal projections, and forecasts from external sources. To the extent such payments are greater or less than the Company’s initial estimates or the timing of such payments is materially different than its original estimates, the Company will prospectively adjust the amortization of the liability and the effective interest rate. Due to the significant judgments and factors related to the estimates of future payments under the Purchase Agreement, there are significant uncertainties surrounding the amount and timing of future payments.
As the payments are remitted to XOMA, the liability will be effectively repaid over the life of the agreement. In order to determine the amortization of the liability related to the sale of future payments, the Company is required to estimate the total amount of future payments to XOMA over the life of the Purchase Agreement. For the three and six months ended June 30, 2024, the estimated effective interest rate under the agreement was approximately
The Company did not recognize any non-cash payment interest revenue and recognized non-cash interest expense of approximately $
The following table shows the activity within the liability account during the six months ended June 30, 2024 and the period from inception to June 30, 2024 (in thousands):
|
Six months ended |
Period from |
|||||||
|
Liability related to sale of future payments — beginning balance |
$ | $ | ||||||
|
Proceeds from sale of future payments, net of issuance costs |
||||||||
|
Payments to XOMA |
||||||||
|
Non-cash interest expense recognized |
||||||||
|
Liability related to sale of future payments as of June 30, 2024 |
$ | $ | ||||||
5. Long-Term Debt
Loan Agreement with Oxford
On May 30, 2019, the Company entered into the Loan Agreement with Oxford Finance LLC, or Oxford, as the Lender. Under the Loan Agreement, the Lender made a term loan to the Company in an aggregate principal amount of $
In connection with the closing of the divestment of DSUVIA to Alora, on April 3, 2023, the Company paid Oxford the remaining amount due of approximately $
6. Commitments and Contingencies
Litigation
On June 8, 2021, a securities class action complaint was filed in the U.S. District Court for the Northern District of California against the Company and of its officers. The plaintiff is a purported stockholder of the Company. The complaint alleged that defendants violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by making false and misleading statements and omissions of material fact about the Company’s disclosure controls and procedures with respect to its marketing of DSUVIA. The complaint sought unspecified damages, interest, attorneys’ fees, and other costs. On December 16, 2021, the Court appointed co-lead plaintiffs. Plaintiffs’ amended complaint was filed on March 7, 2022. The amended complaint named the Company and three of its officers and continued to allege that defendants violated Sections 10(b) and 20(a) of the Exchange Act and SEC Rule 10b-5 by making false and misleading statements and omissions of material fact about the Company’s disclosure controls and procedures with respect to its marketing of DSUVIA. The amended complaint also asserted a violation of Section 20A of the Exchange Act against the individual defendants for alleged insider trading. The amended complaint sought unspecified damages, interest, attorneys’ fees, and other costs. On September 1, 2022, the Court held oral hearings on the Company’s motion to dismiss the amended complaint with prejudice that was filed on July 21, 2022. On September 28, 2022, the Court issued a formal written opinion, or the First Opinion, dismissing all of the plaintiff’s claims against the Company and the named defendants with leave for plaintiffs to amend their complaint. On November 28, 2022, the plaintiffs filed their second amended complaint. On July 7, 2023, the Court issued a formal written opinion, or the Second Opinion, dismissing all of the plaintiff’s claims against the Company and the named defendants with leave for plaintiffs to amend their complaint in part and without leave to amend in part. On September 5, 2023, the plaintiffs filed a third amended complaint. On May 7, 2024, the Court granted defendants’ motion to dismiss the third amended complaint, with prejudice, and entered judgment for defendants on plaintiffs’ claims. On June 5, 2024, plaintiffs filed a notice of appeal in the United States Court of Appeals
for the Ninth Circuit. The deadline for plaintiffs to file their appellate opening brief is September 27, 2024.
On July 6, 2021, a purported shareholder derivative complaint was filed in the U.S. District Court for the Northern District of California. The complaint names ten of the Company’s officers and directors and asserts state and federal claims based on the same alleged misstatements as the securities class action complaint. On September 30, 2021, October 26, 2021, and November 17, 2021, three additional purported shareholder derivative complaints were filed in the U.S. District Court for the Northern District of California. The complaints name nine of the Company’s officers and directors and also assert state and federal claims based on the same alleged misstatements as the securities class action complaint. All four complaints seek unspecified damages, attorneys’ fees, and other costs. On December 6, 2021, the Court entered an order consolidating all four actions and staying the consolidated action pending the outcome of any motion to dismiss the securities class action.
On February 16, 2024, another purported shareholder derivative complaint was filed in the Court of Chancery of the State of Delaware, asserting the same claims as those in the previously filed derivative actions. The case has been stayed pending the outcome of any motion to dismiss the securities class action.
Please see “Part II., Item 1A. Risk Factors—Risks of a General Nature—Litigation may substantially increase our costs and harm our business.”
The Company believes that these lawsuits are without merit and intends to vigorously defend against them. Given the uncertainty of litigation, the preliminary stage of the cases, and the legal standards that must be met for, among other things, class certification and success on the merits, the Company cannot estimate the reasonably possible loss or range of loss that may result from these actions. It is reasonably possible that this estimate may change in the near term. An adverse outcome regarding these matters could materially adversely affect the Company’s financial condition, results of operations, and cash flows.
7. Stockholders’ Equity
Common Stock
January 2024 Private Placement
On January 17, 2024, the Company entered into a private placement with certain institutional investors for aggregate gross proceeds of $
The terms of the Private Placement include:
|
(i) |
the first tranche of the Private Placement, which closed on January 22, 2024, resulted in the aggregate gross proceeds to the Company of approximately $ |
|
(ii) |
the second tranche of the Private Placement, which is a conditional purchase by the Purchasers subject to either (a) the satisfaction or waiver of achieving, by September 30, 2024, the NEPHRO CRRT primary and one of the secondary clinical trial endpoints, resulting in the Company issuing pre-funded warrants to purchase up to |
Any of the conditions in the second tranche can be waived by each Purchaser. The Company determined that the conditional tranche right is equity classified as it is indexed to the Company's own shares and meets all other conditions for equity classification and that the fair value of the right was immaterial at issuance.
The Securities Purchase Agreements contain customary representations, warranties and agreements by the Company and the Purchasers, indemnification rights and other obligations of the parties.
Stock Plans
Amended and Restated 2020 Equity Incentive Plan
On June 24, 2024, at the 2024 Annual Meeting of Stockholders of the Company, upon the recommendation of the Company’s Board of Directors, the Company’s stockholders approved an amendment and restatement of the Company’s 2020 Equity Incentive Plan, or the Amended 2020 Plan, to increase the number of authorized shares reserved for issuance thereunder by
Inducement Grant
In May 2024, the Company granted stock-based awards outside of the existing stock plans to one new employee, or the Inducement Grant. These awards were granted as a material inducement for accepting employment with the Company, in accordance with Nasdaq Listing Rule 5635(c)(4). The inducement awards consisted of a total of
Amended and Restated 2011 Employee Stock Purchase Plan
Also on June 24, 2024, at the 2024 Annual Meeting of Stockholders of the Company, upon the recommendation of the Company’s Board of Directors, the Company’s stockholders approved an amendment and restatement of the Company’s 2011 Employee Stock Purchase Plan, or the Amended 2011 ESPP, to increase the number of authorized shares reserved for issuance thereunder by
8. Warrants
The activity related to warrants during the six months ended June 30, 2024, is summarized as follows:
|
Common Stock from Warrants |
Weighted-average |
|||||||
|
Outstanding at December 31, 2023 |
$ | |||||||
|
Granted |
$ | |||||||
|
Outstanding at June 30, 2024 |
$ | |||||||
|
Exercisable at June 30, 2024 |
$ | |||||||
January 2024 Pre-Funded Warrants and Amendment of Prior Warrants
On January 17, 2024, the Company entered into Securities Purchase Agreements (see Note 7, “Stockholders’ Equity” for additional information), relating to the issuance and sale of up to
The January 2024 Pre-Funded warrants were classified as a component of permanent equity in the Company's condensed consolidated balance sheet as they are freestanding financial instruments that are immediately exercisable, do not embody an obligation for the Company to repurchase its own shares and permit the holders to receive a fixed number of shares of common stock upon exercise. All of the shares underlying the January 2024 Pre-Funded warrants have been included in the weighted-average number of shares of common stock used to calculate net loss per share attributable to common stockholders because the shares may be issued for little or no consideration and are fully vested and are exercisable after their original issuance date. The January 2024 Pre-Funded warrants may participate with common shareholders in dividends or other distributions.
In July 2023, in connection with a prior private placement, the Company issued to certain of the Purchasers (i) Series A common stock purchase warrants to purchase up to
9. Stock-Based Compensation
The Company recorded total stock-based compensation expense for stock options, restricted stock units, or RSUs, granted under the Company’s equity incentive plans and the Inducement Grant, and the Amended 2011 ESPP, as follows (in thousands):
|
Three Months Ended |
Six Months Ended |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
Research and development |
$ | $ | $ | $ | ||||||||||||
|
Selling, general and administrative |
||||||||||||||||
|
Discontinued operations |
||||||||||||||||
|
Total |
$ | $ | $ | $ | ||||||||||||
The following table summarizes restricted stock unit activity under the Company’s equity incentive plans and the Inducement Grant:
|
Weighted |
||||||||
|
Number of |
Average |
|||||||
|
Restricted |
Grant Date |
|||||||
|
Stock Units |
Fair Value |
|||||||
|
Restricted stock units outstanding, January 1, 2024 |
$ | |||||||
|
Granted |
||||||||
|
Vested |
( |
) | ||||||
|
Forfeited |
( |
) | ||||||
|
Restricted stock units outstanding, June 30, 2024 |
$ | |||||||
Upon vesting, certain of the Company’s RSUs may be settled on a net-exercise basis to cover any required withholding tax with the remaining amount converted into an equivalent number of shares of common stock. There were
The following table summarizes stock option activity under the Company’s equity incentive plans and the Inducement Grant:
|
Number Options |
Weighted- |
Weighted- |
Aggregate |
|||||||||||||
|
(in thousands) |
||||||||||||||||
|
January 1, 2024 |
$ | |||||||||||||||
|
Granted |
||||||||||||||||
|
Forfeited |
( |
) | ||||||||||||||
|
Expired |
( |
) | ||||||||||||||
|
Exercised |
||||||||||||||||
|
June 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and exercisable options— June 30, 2024 |
$ | $ | ||||||||||||||
|
Vested and expected to vest— June 30, 2024 |
$ | $ | ||||||||||||||
The per-share weighted average grant date fair value of the options granted during the six months ended June 30, 2024 was estimated at $
|
Six months ended June 30, 2024 |
||||
|
Expected term (in years) |
||||
|
Risk-free interest rate |
% | |||
|
Expected volatility |
% | |||
|
Expected dividend rate |
% | |||
As of June 30, 2024, total stock-based compensation expense related to unvested options to be recognized in future periods was $
10. Net Loss per Share of Common Stock
The Company’s basic net loss per share of common stock is calculated by dividing the net loss by the weighted average number of shares of common stock outstanding for the period. The diluted net loss per share of common stock is computed by giving effect to all potential common stock equivalents outstanding for the period determined using the treasury stock method. For purposes of this calculation, options to purchase common stock, RSUs, and warrants to purchase common stock were considered to be common stock equivalents. In periods with a reported net loss, common stock equivalents are excluded from the calculation of diluted net loss per share of common stock if their effect is antidilutive. Potential common shares that are issuable for little or no cash consideration, such as the Company’s pre-funded warrants issued in January 2024 and July 2023 with a de minimis exercise price of $
The following outstanding shares of common stock equivalents were excluded from the computation of diluted net loss per share of common stock for the periods presented because including them would have been antidilutive:
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||
|
2024 |
2023 |
2024 |
2023 |
|||||||||||||
|
RSUs, stock options and ESPP to purchase common stock |
||||||||||||||||
|
Common stock warrants |
||||||||||||||||
In addition, the shares held back and contingently issuable in connection with the Lowell Merger, as described in Note 4, “Asset Acquisition” to the Company’s 2023 Annual Report on Form 10-K, have also been excluded from the computation of diluted net loss per share of common stock for the periods presented because the contingencies for issuance of these shares have not been met.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion and analysis should be read in conjunction with the unaudited financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q, or Form 10-Q, and with the audited Consolidated Financial Statements and related notes thereto included as part of our Annual Report on Form 10-K for the year ended December 31, 2023, or Annual Report.
About Talphera, Inc.
We are a specialty pharmaceutical company focused on the development and commercialization of innovative therapies for use in medically supervised settings.
Our Portfolio
Our portfolio consists of nafamostat product candidates and pre-filled syringe product candidates, as further described below.
In January 2022, we acquired Lowell Therapeutics, Inc., or Lowell, a privately held company, pursuant to the Agreement and Plan of Merger, dated as of November 14, 2021, or the Merger Agreement, in a transaction for consideration of approximately $32.5 million plus net cash acquired and certain other adjustments, and which includes up to approximately $26.0 million of contingent consideration payable in cash or stock at our option, upon the achievement of regulatory and sales-based milestones, or the Merger Agreement. In connection with the Merger Agreement, we acquired Niyad™ and LTX-608 (lyophilized vials of nafamostat for injection into the extracorporeal circuit or direct IV infusion to the patient, respectively), an in-process research and development, or IPR&D, asset. For additional information regarding the Merger Agreement, see Note 4, “Asset Acquisition” to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2023 for additional information.
Nafamostat Product Candidates
|
Product/Product Candidate |
Description |
Target Use |
Status |
|||
|
Niyad |
Lyophilized vial containing nafamostat for injection |
Regional anticoagulant for injection into the extracorporeal circuit |
Received an investigational device exemption, or IDE, and Breakthrough Device Designation from the United States Food and Drug Administration, or FDA, and initiated a registrational trial. |
|||
|
LTX-608 |
Lyophilized vial containing nafamostat for injection |
IV infusion for disseminated intravascular coagulation, or DIC, acute respiratory distress syndrome, or ARDS, acute pancreatitis, or as an anti-viral treatment |
IND to be submitted following toxicology evaluation to enable Phase 2 study. |
Niyad
We are developing Niyad to become the first and currently only FDA-approved regional anticoagulant for injection into the extracorporeal circuit, such as the dialysis circuit during continuous renal replacement therapy, or CRRT, for acute kidney injury, or AKI, patients in the hospital, and for chronic kidney disease patients undergoing intermittent hemodialysis, or IHD, in dialysis centers. Niyad is expected to be used during renal replacement therapy for AKI patients in the hospital and for end-stage renal disease, or ESRD, patients receiving dialysis in outpatient clinics. Niyad is being studied under an Investigational Device Exemption, or IDE, and has received Breakthrough Device Designation from the FDA and an ICD-10 procedural code from the U.S. Centers for Medicare & Medicaid Services. While not approved for commercial use in the United States, the active drug component of Niyad, nafamostat, has been approved in Japan and South Korea as a regional anticoagulant for the dialysis circuit, disseminated intravascular coagulation and acute pancreatitis. Niyad has the potential for six years of data exclusivity upon FDA approval of the device. Niyad is a lyophilized formulation of nafamostat, a broad-spectrum, synthetic serine protease inhibitor, which has a half-life of 8 minutes, with anticoagulant, anti-inflammatory and potential anti-viral activities.
The Niyad NEPHRO CRRT Study, which has received both IDE approval from the FDA and central Institutional Review Board, or IRB, approval, is designed as a prospective, double-blinded trial to be conducted at up to 14 U.S. hospital intensive care units. NEPHRO CRRT stands for Nafamostat Efficacy in Phase 3 Registrational Continuous Renal Replacement Therapy Study. We have initiated the NEPHRO study and we plan to submit an application for Premarket Approval, or PMA, to the FDA upon completion of the trial. The study will enroll and evaluate 166 adult patients undergoing renal replacement therapy, who cannot tolerate heparin or are at risk for bleeding. The primary endpoint of the study is mean post-filter activated clotting time using Niyad versus placebo over the first 24 hours. Key secondary endpoints include filter lifespan, number of filter changes over 72 hours, number of transfusions over 72 hours and dialysis efficacy (based on urea concentration) over the first 24 hours. We believe that decades of nafamostat studies on anticoagulation of the extracorporeal circuit can help guide and support our Niyad development efforts.
LTX-608
LTX-608 is our nafamostat formulation for direct IV infusion being explored as an investigational product for one or more of the following indications: antiviral treatment, or treatment of ARDS, DIC or acute pancreatitis. For example, third-party studies have been conducted outside the U.S. in COVID patients where initial results demonstrated that nafamostat shortens time to clinical improvement, increasing the recovery rate and lowering the mortality rate when combined with standard of care, or SOC, compared to SOC alone, in the category of the sickest COVID patients. We are currently evaluating the initial indication on which we will target and focus our resources. Nafamostat is already approved for DIC and acute pancreatitis in Japan and South Korea, which may favor focusing on one of those indications first. Nafamostat has the potential for five years of data exclusivity as a new chemical entity, or NCE, upon the first FDA approval of a new drug application that is independent from any exclusivity arising from issuance of our pending patent applications. We currently have a pending patent application for Niyad with claims drawn to priming of the extracorporeal circuit and blood flow when using nafamostat, and multiple LTX-608 pending patent applications that include claims drawn to use of nafamostat in DIC, acute pancreatitis, as an antiviral agent, in ARDS and in other conditions.
Pre-filled Syringe (PFS) Product Candidates
|
Product/Product Candidate |
Description |
Target Use |
Status |
|||
|
Fedsyra™ |
Ephedrine pre-filled syringe for injection |
Clinically important hypotension occurring in the setting of anesthesia |
Product candidate licensed from Laboratoire Aguettant, or Aguettant; evaluating timing of New Drug Application, or NDA, for submission to FDA. Approved in the European Union; owned and marketed by Aguettant. |
|||
|
Phenylephrine |
Phenylephrine pre-filled syringe for injection |
Clinically important hypotension resulting primarily from vasodilation in the setting of anesthesia |
Product candidate licensed from Aguettant; evaluating timing of NDA for submission to FDA. Approved in the European Union; owned and marketed by Aguettant. |
Fedsyra and Phenylephrine
The PFS product candidates are ready-to-use formulations of active ingredients that are currently approved in the United States in concentrated formulations that must be diluted prior to administration to patients, and more recently in ready-to-use vial, and in the case of ephedrine, ready-to-use pre-filled syringe formulations. Hospitals currently purchase ready-to-use, pre-filled syringe presentations of these active ingredients mainly from compounding facilities that have not obtained FDA approval for the products, or manually dilute the products in-house. There have been two recently FDA-approved pre-filled ephedrine syringe products made available on the market. Our product candidates have been developed in a ready-to-use strength and pre-filled into syringes that can be immediately administered to patients, eliminating the need for calculations and additional dilution and filling steps. Aguettant pre-filled syringes are focused on delivering commonly used medicines safely and efficiently. Perioperative medication errors continue, and pre-filled syringes are preferred for improving safety while containing costs. We believe that, if approved, our pre-filled syringe products may offer significant benefits to hospitals and surgery centers and avoid potential disadvantages of the currently available compounded products. We are currently focusing our resources on the registrational trial for Niyad. We continue to evaluate the timing of submitting the NDA for our ephedrine pre-filled syringe given the two other FDA-approved products recently made available on the market.
Our Strategy
Our strategy is focused on developing, obtaining approval, and commercializing Niyad. Accordingly, we divested DSUVIA to Vertical Pharmaceuticals, LLC, a wholly owned subsidiary of Alora Pharmaceuticals, LLC, or Alora, in April 2023, who will continue to commercialize the product and pay us sales-based milestone and other payments, as defined in the DSUVIA Agreement (see Note 3, “Discontinued Operations” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information). Further, we will continue marketing DSUVIA to the Department of Defense, or DoD. We believe this will maximize the value of DSUVIA as Alora has more available resources to invest on DSUVIA commercialization and as a result can execute a more robust commercial plan to support DSUVIA sales expansion. We have no plans to further develop or commercialize any of our other sufentanil sublingual products that were previously our product candidates. As described below, in January 2024, we entered into an agreement with XOMA (US) LLC, or XOMA, whereby we have sold our rights to all payments for services performed to support sales of DSUVIA to the DoD by Alora under the Marketing Agreement, and sales milestones we are entitled to under the DSUVIA Agreement with Alora, until XOMA receives a certain specified return on its investment, after which we will share equally in the payments earned on sales to the Department of Defense, milestones and other payments from Alora (see Note 4, “Sale of Future Payments” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information). This transaction was consummated to provide further funding for the development of our lead product candidate, Niyad.
Recent Developments
In January 2024, we entered into the XOMA Agreement pursuant to which we sold to XOMA our right to amounts payable to us by Alora under the DSUVIA Agreement in exchange for $8.0 million in order to monetize certain future payments for services performed to support sales of DSUVIA to the DoD by Alora under the Marketing Agreement, payments on commercial sales of DSUVIA by Alora, and sales milestones we are entitled to under the DSUVIA Agreement with Alora, retaining the right, after XOMA has received $20.0 million of payments in respect of such payments, or the XOMA Threshold, to 50% of the payments in respect of net sales of DSUVIA to the DoD, 50% of potential sales-based milestones in respect of net sales of DSUVIA and 50% of certain associated license and acquisition payments relating to DSUVIA (see Note 4, “Sale of Future Payments” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information).
General Trends and Outlook
Global Supply Chain
We continue to engage with various elements of our supply chain and distribution channel, including our customers, contract manufacturers, and logistics and transportation providers, to supply our product candidates for development purposes and to remain informed of any challenges within our supply chain. We intend to adapt our plans as needed to continue to drive our product development programs. However, global events have impacted our global supply chain and we may face further disruptions to our supply chain and operations, and associated delays in the manufacturing and supply of our products. Such supply disruptions may adversely impact our ability to continue development of our product candidates and ultimately generate sales of and revenues from any approved products, and our business, financial condition, results of operations and growth prospects could be adversely affected.
Inflation
We do not believe that inflation has had a material impact on our business or operating results during the periods presented. However, inflation, led by supply chain constraints, federal stimulus funding, increases to household savings, and the sudden macroeconomic shift in activity levels arising from the loosening or removal of many government restrictions, has had, and may continue to have, an impact on overhead costs and transportation costs and may in the future adversely affect our operating results. In addition, increased inflation has had, and may continue to have, an effect on interest rates. Increased interest rates may adversely affect our borrowing rate and our ability to obtain, or the terms under which we can obtain, any potential additional funding.
Financial Overview
We have incurred net losses and generated negative cash flows from operations and expect to continue to incur losses in the future as we continue to fund any future research and development activities needed to support the FDA regulatory review of our product candidates.
Our net loss for the three and six months ended June 30, 2024 was $3.8 million and $7.8 million, respectively, compared to $4.4 million and $12.5 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $452.0 million. As of June 30, 2024, we had cash, cash equivalents and short-term investments totaling $14.0 million compared to $9.4 million as of December 31, 2023.
Critical Accounting Estimates
The accompanying discussion and analysis of our financial condition and results of operations are based upon our unaudited condensed consolidated financial statements and the related disclosures, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates, assumptions and judgments that affect the reported amounts in our financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. To the extent that there are material differences between these estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected. Our critical accounting policies and estimates are detailed in our Annual Report.
There have been no significant changes to our critical accounting policies or significant judgements and estimates for the three and six months ended June 30, 2024, from those previously disclosed in our Annual Report, except as follows:
Sale of Future Payments
On January 12, 2024, we entered into the Purchase Agreement with XOMA to monetize a portion of our future payments for services performed to support sales of DSUVIA to the DoD by Alora under the Marketing Agreement, and sales milestones under the DSUVIA Agreement. Refer to Note 4, “Sale of Future Payments” for further details on the Purchase Agreement.
The liability related to the sale of future payments is recorded as debt and will be amortized under the effective interest rate method over the estimated life of the Purchase Agreement. The amortization of the liability related to the sale of future payments is based on our current estimate of future payments under the Marketing Agreement. The estimate of future payments include payments related to estimated future DoD sales and the probability of meeting and the potential timing of milestone payments are derived using internal management estimates and reflect management’s judgements, current market conditions, and internal forecasts. A significant change in these inputs could result in a material increase or decrease to the effective interest rate of the liability for the sale of future payments.
We will periodically assess the amount and timing of expected payments using a combination of internal projections and historical data. To the extent our future estimates of future payments are greater or less than previous estimates or the estimated timing of such payments is materially different than previous estimates, we will adjust the amortization of the Sale of Future Payment Liability and prospectively recognize the related non-cash interest expense.
Recently Issued Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standard Update, or ASU, 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07, which requires all public entities, including public entities with a single reportable segment, to provide in interim and annual periods one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance. Additionally, the standard requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures. The guidance in this update is effective for fiscal years beginning after December 15, 2023, and interim periods after December 15, 2024. We are evaluating the disclosure impact of ASU 2023-07; however, the adoption of ASU 2023-07 will not have a material impact on our consolidated financial statements.
In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which requires companies to disclose, on an annual basis, specific categories in the effective tax rate reconciliation and provide additional information for reconciling items that meet a quantitative threshold. In addition, ASU 2023-09 requires companies to disclose additional information about income taxes paid. ASU 2023-09 will be effective for annual periods beginning January 1, 2025 and will be applied on a prospective basis with the option to apply the standard retrospectively. We are evaluating the disclosure impact of ASU 2023-09; however, the adoption of ASU 2023-09 will not have a material impact on our consolidated financial statements.
We do not believe other recently issued but not yet effective accounting standards, if currently adopted, would have a material effect on our consolidated financial statements.
Results of Operations
Our unaudited condensed consolidated results of operations are presented for the three and six months ended June 30, 2024 and 2023. Certain financial results (revenues and expenses) relating to the divestment of our DSUVIA/DZUVEO business are reflected in discontinued operations. See Note 3, “Discontinued Operations” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information. Unless otherwise noted, the revenue and expense amounts discussed below are based on and relate to our continuing operations.
Results of operations for any period may be unrelated to results of operations for any other period. In addition, historical results should not be viewed as indicative of future operating results.
Three and Six Months Ended June 30, 2024 and 2023
Revenue
For the three and six months ended June 30, 2023, we recognized $0.3 million in revenue related to the DSUVIA Agreement with Alora under the Marketing Agreement executed in April 2023, pursuant to which Talphera has the exclusive right to market and offer DSUVIA for sale to the DoD and for which Alora pays us 75% of net sales of DSUVIA sold to DoD.
Research and Development Expenses
Research and development expenses included the following:
|
• |
expenses incurred under agreements with contract research organizations and clinical trial sites; |
|
• |
employee-related expenses, which include salaries, benefits and stock-based compensation; |
|
• |
payments to third party pharmaceutical and engineering development contractors; |
|
• |
payments to third party manufacturers; |
|
• |
depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities and equipment, and equipment and laboratory and other supply costs; and |
|
• |
costs for equipment and laboratory and other supplies. |
We expect to incur future research and development expenditures to support the FDA regulatory review of our product candidates and anticipated activities required for the development of our nafamostat product candidates.
We track external development expenses on a program-by-program basis. Our development resources are shared among all our programs. Compensation and benefits, facilities, depreciation, stock-based compensation, and development support services are not allocated specifically to projects and are considered research and development overhead.
Below is a summary of our research and development expenses for the three and six months ended June 30, 2024 and 2023 (in thousands, except percentages):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
Drug Indication/Description |
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
||||||||||||||||||||||||
|
(In thousands, except percentages) |
||||||||||||||||||||||||||||||||
|
Research and development expenses |
$ | 1,909 | $ | 1,552 | $ | 357 | 23 | % | $ | 3,342 | $ | 2,599 | $ | 743 | 29 | % | ||||||||||||||||
Research and development expenses for the three and six months ended June 30, 2024 increased as compared to the three and six months ended June 30, 2023, primarily due to an increase in costs associated with Niyad development.
Selling, General and Administrative Expenses
Selling, general and administrative expenses consist primarily of salaries, benefits and stock-based compensation for personnel engaged in commercialization, administration, finance and business development activities. Other significant expenses included allocated facility costs and professional fees for general legal, audit and consulting services.
Total selling, general and administrative expenses for the three and six months ended June 30, 2024 and 2023, were as follows (in thousands, except percentages):
|
Three Months Ended June 30, |
Six Months Ended June 30, |
|||||||||||||||||||||||||||||||
|
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
|||||||||||||||||||||||||
|
(In thousands, except percentages) |
||||||||||||||||||||||||||||||||
|
Selling, general and administrative expenses |
$ | 2,361 | $ | 2,670 | $ | (309 | ) | (12 | )% | $ | 5,165 | $ | 6,951 | $ | (1,786 | ) | (26 | )% | ||||||||||||||
Selling, general and administrative expenses decreased for the three and six months ended June 30, 2024, as compared to the three and six months ended June 30, 2023, primarily due to the divestment of DSUVIA. More specifically, the decrease for the three months ended June 30, 2024 compared to June 30, 2023 was attributed to a $0.1 million reduction in employee compensation and related expenses due to a reduction in headcount, a $0.2 million reduction in legal fees, a $0.2 million decrease in stock-based compensation expense, and a net increase in other selling, general and administrative expenses of $0.2 million, and the decrease for the six months ended June 30, 2024 compared to June 30, 2023 was attributed to a $0.4 million reduction in employee compensation and related expenses due to a reduction in headcount, a $0.6 million reduction in legal fees, a $0.4 million decrease in stock-based compensation expense, and a net decrease in other selling, general and administrative expenses of $0.4 million.
Other Income (Expense), Net
Total other income (expense), net for the three and six months ended June 30, 2024 and 2023, was as follows (in thousands, except percentages):
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||||||||||||||||||||||||
|
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
2024 |
2023 |
$ Change 2024 vs. 2023 |
% Change 2024 vs. 2023 |
|||||||||||||||||||||||||
|
(In thousands, except percentages) |
||||||||||||||||||||||||||||||||
|
Interest expense |
$ | — | $ | (15 | ) | $ | 15 | (100 | )% | $ | — | $ | (134 | ) | $ | 134 | (100 | )% | ||||||||||||||
|
Interest income and other income, net |
201 | 858 | (657 | ) | (77 | )% | 421 | 1,058 | (637 | ) | (60 | )% | ||||||||||||||||||||
|
Gain on sale of future payments |
— | — | — | — | % | 1,246 | — | 1,246 | — | % | ||||||||||||||||||||||
|
Change in fair value of warrant liability |
455 | (1,299 | ) | 1,754 | (135 | )% | (547 | ) | 4,012 | (4,559 | ) | (114 | )% | |||||||||||||||||||
|
Non-cash interest expense on liability related to sale of future payments |
(213 | ) | — | (213 | ) | — | % | (394 | ) | — | (394 | ) | — | % | ||||||||||||||||||
|
Total other income (expense), net |
$ | 443 | $ | (456 | ) | $ | 899 | (197 | )% | $ | 726 | $ | 4,936 | $ | (4,210 | ) | (85 | )% | ||||||||||||||
Interest expense consisted primarily of interest accrued or paid on our debt obligation agreements and amortization of debt discounts. In April 2023, in connection with the closing of the DSUVIA Agreement, we fully repaid the Loan Agreement with Oxford. Refer to Note 5, “Long-Term Debt” to the unaudited condensed consolidated financial statements in this Quarterly Report on Form 10-Q for additional information.