glyc_Current_Folio_10Q

Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


FORM 10-Q


 

(Mark one)

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

 

For the quarterly period ended September 30, 2017

 

OR

 

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

 

For the transition period from                      to                       

 

Commission File Number 001-36177

 


 

GlycoMimetics, Inc.

(Exact name of registrant as specified in its charter)

 


 

Delaware

06-1686563

(State or Other Jurisdiction of

Incorporation or Organization)

(I.R.S. Employer

Identification No.)

 

 

9708 Medical Center Drive

Rockville, Maryland

20850

(Address of principal executive offices)

(Zip Code)

 

(240) 243-1201

(Registrant’s telephone number, including area code)

 

N/A

(Former name, former address and former fiscal year, if changed since last report)

 


 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☒    No  ◻ 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes  ☒    No  ◻ 

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer                   Accelerated filer ☒Smaller reporting company

 

Non-accelerated filer          (Do not check if a smaller reporting company)

 

                                                                Emerging growth company ☒

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☒

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act of 1934).    Yes      No   ☒ 

The number of outstanding shares of the registrant’s common stock, par value $0.001 per share, as of the close of business on November 7, 2017 was 34,337,799.

 

 

 


 

GLYCOMIMETICS, INC.

 

INDEX TO FORM 10-Q

 

 

 

 

 

 

PAGE

 

 

 

PART I. FINANCIAL INFORMATION 

 

 

 

 

 

Item 1. Financial Statements 

 

3

 

 

 

Balance Sheets as of September 30, 2017 (unaudited) and December 31, 2016 

 

3

 

 

 

Unaudited Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2017 and 2016 

 

4

 

 

 

Unaudited Statements of Cash Flows for the nine months ended September 30, 2017 and 2016 

 

5

 

 

 

Notes to Unaudited Financial Statements 

 

6

 

 

 

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

 

16

 

 

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk 

 

26

 

 

 

Item 4. Controls and Procedures 

 

26

 

 

 

PART II. OTHER INFORMATION 

 

 

 

 

 

Item 1. Legal Proceedings 

 

27

 

 

 

Item 1A. Risk Factors 

 

27

 

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 

 

27

 

 

 

Item 6. Exhibits 

 

28

 

 

 

Signatures 

 

29

 

 


 

Table of Contents

Part I. FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

GLYCOMIMETICS, INC.

Balance Sheets

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

 

2017

 

2016

 

Assets

    

(Unaudited)

    

 

 

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

112,872,534

 

$

40,041,641

 

Prepaid expenses and other current assets

 

 

1,015,747

 

 

478,503

 

Total current assets

 

 

113,888,281

 

 

40,520,144

 

Property and equipment, net

 

 

1,122,216

 

 

1,056,332

 

Prepaid research and development expenses

 

 

759,531

 

 

759,531

 

Deposits

 

 

52,320

 

 

52,320

 

Total assets

 

$

115,822,348

 

$

42,388,327

 

Liabilities & stockholders’ equity

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

1,631,722

 

$

1,565,210

 

Accrued bonuses

 

 

1,146,497

 

 

1,432,485

 

Accrued expenses

 

 

3,678,609

 

 

3,267,371

 

Deferred rent

 

 

74,072

 

 

68,551

 

Total current liabilities

 

 

6,530,900

 

 

6,333,617

 

Deferred rent, net of current portion

 

 

726,986

 

 

753,579

 

Total liabilities

 

 

7,257,886

 

 

7,087,196

 

Stockholders’ equity:

 

 

 

 

 

 

 

Preferred stock; $0.001 par value; 5,000,000 shares authorized, no shares issued and outstanding at September 30, 2017 and December 31, 2016

 

 

 

 

 

Common stock; $0.001 par value; 100,000,000 shares authorized, 32,737,799 shares issued and outstanding at September 30, 2017; 100,000,000 shares authorized, 23,250,023 shares issued and outstanding at December 31, 2016

 

 

32,736

 

 

23,249

 

Additional paid-in capital

 

 

251,550,974

 

 

154,254,193

 

Accumulated deficit

 

 

(143,019,248)

 

 

(118,976,311)

 

Total stockholders’ equity

 

 

108,564,462

 

 

35,301,131

 

Total liabilities and stockholders’ equity

 

$

115,822,348

 

$

42,388,327

 

 

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

 

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GLYCOMIMETICS, INC.

Unaudited Statements of Operations and Comprehensive Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

 

 

2017

 

2016

 

2017

 

2016

 

Revenue

    

$

 —

    

$

18,500

    

$

 —

    

$

18,500

    

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

 

5,779,759

 

 

5,921,461

 

 

17,380,337

 

 

17,221,360

 

General and administrative expense

 

 

2,401,976

 

 

1,983,795

 

 

7,016,081

 

 

6,352,355

 

Total costs and expenses

 

 

8,181,735

 

 

7,905,256

 

 

24,396,418

 

 

23,573,715

 

Loss from operations

 

 

(8,181,735)

 

 

(7,886,756)

 

 

(24,396,418)

 

 

(23,555,215)

 

Other income

 

 

231,634

 

 

32,063

 

 

373,208

 

 

73,974

 

Net loss and comprehensive loss

 

$

(7,950,101)

 

$

(7,854,693)

 

$

(24,023,210)

 

$

(23,481,241)

 

Basic and diluted net loss per common share

 

$

(0.24)

 

$

(0.34)

 

$

(0.86)

 

$

(1.14)

 

Basic and diluted weighted average number of common shares

 

 

32,724,010

 

 

23,049,347

 

 

27,814,781

 

 

20,638,129

 

 

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

 

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GLYCOMIMETICS, INC.

Unaudited Statements of Cash Flows

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

 

    

2017

    

2016

 

Operating activities

 

 

 

 

 

 

 

Net loss

 

$

(24,023,210)

 

$

(23,481,241)

 

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

 

 

 

 

 

 

 

Depreciation

 

 

193,976

 

 

139,749

 

Stock-based compensation expense

 

 

2,796,301

 

 

2,238,647

 

Changes in assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(537,244)

 

 

(797,906)

 

Prepaid research and development expenses

 

 

 —

 

 

(63,000)

 

Deposits

 

 

 —

 

 

(52,320)

 

Accounts payable

 

 

66,512

 

 

682,504

 

Accrued expenses and bonuses

 

 

125,250

 

 

(3,122,258)

 

Deferred rent

 

 

(21,072)

 

 

679,177

 

Net cash used in operating activities

 

 

(21,399,487)

 

 

(23,776,648)

 

 

 

 

 

 

 

 

 

Investing activities

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(259,860)

 

 

(265,635)

 

Net cash used in investing activities

 

 

(259,860)

 

 

(265,635)

 

 

 

 

 

 

 

 

 

Financing activities

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net of issuance costs

 

 

94,269,213

 

 

22,453,785

 

Proceeds from exercise of stock options

 

 

221,027

 

 

68,488

 

Net cash provided by financing activities

 

 

94,490,240

 

 

22,522,273

 

Net change in cash and cash equivalents

 

 

72,830,893

 

 

(1,520,010)

 

Cash and cash equivalents, beginning of period

 

 

40,041,641

 

 

46,802,560

 

Cash and cash equivalents, end of period

 

$

112,872,534

 

$

45,282,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-cash investing activities

 

 

 

 

 

 

 

Property acquisition costs included in accounts payable and accrued expenses

 

$

 —

 

$

29,329

 

 

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

 

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GLYCOMIMETICS, INC.

Notes to Unaudited Financial Statements

 

1. Description of the Business

 

GlycoMimetics, Inc. (the Company), a Delaware corporation headquartered in Rockville, Maryland, was incorporated on April 4, 2003 and commenced operations on May 21, 2003. The Company is a clinical stage biotechnology company focused on the discovery and development of novel glycomimetic drugs to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. Glycomimetics are molecules that mimic the structure of carbohydrates involved in important biological processes. The Company’s proprietary glycomimetics platform is based on its expertise in carbohydrate chemistry and its understanding of the role carbohydrates play in key biological processes. Using this expertise and understanding, the Company is developing a pipeline of proprietary glycomimetics designed to inhibit disease-related functions of carbohydrates, such as the roles they play in inflammation, cancer and infection.

 

The Company’s executive personnel have devoted substantially all of their time to date to the planning and organization of the Company, the process of hiring scientists, initiating research and development programs and securing adequate capital for anticipated growth and operations. The Company has not commercialized any of its drug candidates or commenced commercial operations. The Company is subject to a number of risks similar to those of other companies in similar development stages, including dependence on key individuals, the need to develop commercially viable drugs, competition from other companies, many of whom are larger and better capitalized, and the need to obtain adequate additional financing to fund the development of its drug candidates. The Company has incurred significant operating losses since inception and has relied on its ability to fund its operations through private and public equity financings, and management expects operating losses and negative operating cash flows to continue for the foreseeable future. As the Company continues to incur losses, profitability will be dependent upon the successful development, approval, and commercialization of its drug candidates and achieving a level of revenues adequate to support the Company’s cost structure. The Company may never achieve profitability, and unless and until it does, the Company will continue to need to raise additional capital. Management intends to fund future operations through additional public or private equity or debt offerings and may seek additional capital through arrangements with strategic partners or from other sources.

 

2. Significant Accounting Policies

 

Basis of Accounting

 

The accompanying financial statements were prepared based on the accrual method of accounting in accordance with U.S. generally accepted accounting principles (GAAP).

 

Unaudited Financial Statements

 

The accompanying balance sheet as of September 30, 2017 and statements of operations and comprehensive loss for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016 are unaudited. These unaudited financial statements have been prepared in accordance with the rules and regulations of the United States Securities and Exchange Commission (the SEC) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete annual financial statements. These financial statements should be read in conjunction with the audited financial statements and the accompanying notes for the year ended December 31, 2016 contained in the Company’s Annual Report on Form 10-K filed with the SEC on March 1, 2017. The unaudited interim financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) necessary to state fairly the Company’s financial position as of September 30, 2017, the results of operations for the three and nine months ended September 30, 2017 and 2016 and cash flows for the nine months ended September 30, 2017 and 2016. The December 31, 2016 balance sheet included herein was derived from audited financial statements, but does not include all disclosures including notes required by GAAP for complete annual financial statements. The financial data and other information disclosed in these notes to the financial statements related to the three and nine months ended September 30, 2017 and 2016 are unaudited. Interim results are not necessarily indicative of results for an entire year.

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Use of Estimates

 

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Although actual results could differ from those estimates, management does not believe that such differences would be material.

 

 

Fair Value Measurements

 

The Company had no assets or liabilities that were measured using quoted prices for similar assets and liabilities or significant unobservable inputs (Level 2 and Level 3 assets and liabilities, respectively) as of September 30, 2017 and December 31, 2016. The carrying value of cash held in money market funds of approximately $110.9 million and $38.0 million as of September 30, 2017 and December 31, 2016, respectively, is included in cash and cash equivalents and approximates market values based on quoted market prices (Level 1 inputs).

 

Concentration of Credit Risk

 

Credit risk represents the risk that the Company would incur a loss if counterparties failed to perform pursuant to the terms of their agreements. Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents. Cash and cash equivalents consist of money market funds with major financial institutions in the United States. These funds may be redeemed upon demand and, therefore, bear minimal risk. The Company does not anticipate any losses on such balances.

 

Revenue Recognition

 

From time to time, the Company is awarded reimbursement contracts for services and development grant contracts with government and non-government entities and philanthropic organizations. Under these contracts, the Company typically is reimbursed for the costs in connection with specific development activities. The Company recognizes revenue to the extent of costs incurred in connection with performance under such grant arrangements.

 

The Company has entered into a collaborative research and development agreement with Pfizer Inc. (Pfizer). The agreement is in the form of a license agreement (the Pfizer Agreement). The Pfizer Agreement calls for a nonrefundable up-front payment and milestone payments upon achieving significant milestone events. The Pfizer Agreement also contemplates royalty payments on future sales of an approved product. There are no performance, cancellation, termination, or refund provisions in the Pfizer Agreement that contain material financial consequences to the Company.

 

The primary deliverable under this arrangement is an exclusive worldwide license to the Company’s rivipansel compound, but the arrangement also includes deliverables related to research and preclinical development activities to be performed by the Company on Pfizer’s behalf.

 

Collaborative research and development agreements can provide for one or more of up-front license fees, research payments, and milestone payments. Agreements with multiple components (deliverables or items) are evaluated according to the provisions of Accounting Standards Codification (ASC) 605-25, Revenue Recognition—Multiple-Element Arrangements, to determine whether the deliverables can be separated into more than one unit of accounting. An item can generally be considered a separate unit of accounting if all of the following criteria are met: (1) the delivered item(s) has value to the customer on a stand-alone basis and (2) if the arrangement includes a general right of return relative to the delivered item(s) then delivery or performance of the undelivered item(s) is considered probable and substantially in control of the Company. Items that cannot be divided into separate units are combined with other units of accounting, as appropriate. Consideration received is allocated among the separate units based on selling price hierarchy. The selling price hierarchy for each deliverable is based on (i) vendor-specific objective evidence (VSOE), if available; (ii) third-party evidence (TPE) of selling price if VSOE is not available; or (iii) an estimated selling price, if neither VSOE nor TPE is available. Management was not able to establish VSOE or TPE for separate unit deliverables, as the Company does not have a history of entering into such arrangements or selling the individual deliverables within such arrangements separately. In addition, there may be significant differentiation in these arrangements, which indicates that comparable third-party pricing may not be available. Management determined that the selling price for the

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deliverables within the Pfizer Agreement should be determined using its best estimate of selling price. The process of determining the best estimate of selling price involved significant judgment on the Company’s part and included consideration of multiple factors such as estimated direct expenses, other costs, and available clinical development data.

 

Pursuant to ASC 605-25, each required deliverable under the Pfizer Agreement is evaluated to determine whether it qualifies as a separate unit of accounting. Factors considered in this determination include the research capabilities of Pfizer, the proprietary nature of the license and know-how, and the availability of the Company’s glycomimetics technology research expertise in the general marketplace. Based on all relevant facts and circumstances and, most significantly, on the proprietary nature of the Company’s technology and the related proprietary nature of the Company’s research services, management concluded that stand-alone value does not exist for the license, and therefore, the license is not a separate unit of accounting under the Pfizer Agreement and will be combined with the research and development services (including participation on a joint steering committee). The Company has satisfied the deliverables under the Pfizer Agreement.

 

Pursuant to ASC 605-28, Revenue Recognition—Milestone Method, at the inception of agreements that include milestone payments, the Company evaluates whether each milestone is substantive and at risk to both parties on the basis of the contingent nature of the milestone. This evaluation includes an assessment of whether (a) the consideration is commensurate with either (1) the entity’s performance to achieve the milestone, or (2) the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity’s performance to achieve the milestone, (b) the consideration relates solely to past performance and (c) the consideration is reasonable relative to all of the deliverables and payment terms within the arrangement. In making this assessment, the Company evaluates factors such as scientific, regulatory, commercial and other risks that must be overcome to achieve the respective milestone, the level of effort and investment required to achieve the respective milestone and whether the milestone consideration is reasonable relative to all deliverables and payment terms in the agreement.

 

Non-refundable development and regulatory milestones that are expected to be achieved as a result of the Company’s efforts during the period of substantial involvement are recognized as revenue upon the achievement of the milestone, assuming all other revenue recognition criteria are met. Milestones that are not considered substantive because the Company does not contribute effort to the achievement of such milestones are generally achieved after the period of substantial involvement and are recognized as revenue upon achievement of the milestone, as there are no undelivered elements remaining and no continuing performance obligation, assuming all other revenue recognition criteria are met. In May 2014, the Company recognized $15.0 million in revenue as a result of the first non-refundable milestone payment received from Pfizer. In June 2015, the Company recognized $20.0 million in revenue as a result of Pfizer dosing the first patient in the Phase 3 clinical trial of rivipansel, which triggered the second non-refundable milestone payment.

 

Accrued Liabilities

 

The Company is required to estimate accrued liabilities as part of the process of preparing its financial statements. The estimation of accrued liabilities involves identifying services that have been performed on the Company’s behalf, and then estimating the level of service performed and the associated cost incurred for such services as of each balance sheet date. Accrued liabilities include professional service fees, such as for lawyers and accountants, contract service fees, such as those under contracts with clinical monitors, data management organizations and investigators in conjunction with clinical trials, and fees to contract manufacturers in conjunction with the production of clinical materials. Pursuant to the Company’s assessment of the services that have been performed, the Company recognizes these expenses as the services are provided. Such assessments include: (i) an evaluation by the project manager of the work that has been completed during the period; (ii) measurement of progress prepared internally and/or provided by the third-party service provider; (iii) analyses of data that justify the progress; and (iv) the Company’s judgment.

 

 

Research and Development Costs

 

Except for payments made in advance of services, research and development costs are expensed as incurred. For payments made in advance, the Company recognizes research and development expense as the services are rendered. Research and development costs primarily consist of salaries and related expenses for personnel, laboratory supplies and raw materials, sponsored research, depreciation of laboratory facilities and leasehold improvements, and utilities costs

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related to research space. Other research and development expenses include fees paid to consultants and outside service providers including clinical research organizations and clinical manufacturing organizations.

 

 

Stock-Based Compensation

 

Stock-based payments are accounted for in accordance with the provisions of ASC 718, Compensation—Stock Compensation. The fair value of stock-based payments is estimated, on the date of grant, using the Black-Scholes-Merton model. The resulting fair value is recognized ratably over the requisite service period, which is generally the vesting period of the option.

 

The Company has elected to use the Black-Scholes-Merton option pricing model to value any options granted. The Company will reconsider use of the Black-Scholes-Merton model if additional information becomes available in the future that indicates another model would be more appropriate or if grants issued in future periods have characteristics that prevent their value from being reasonably estimated using this model.

 

A discussion of management’s methodology for developing some of the assumptions used in the valuation model follows:

 

Expected Dividend Yield—The Company has never declared or paid dividends and has no plans to do so in the foreseeable future.

 

Expected Volatility—Volatility is a measure of the amount by which a financial variable such as share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Prior to the Company’s initial public offering, there was not a market for the Company’s shares. The Company utilizes the historical volatilities of a peer group (e.g., several public entities of similar size, complexity, and stage of development), along with the Company’s historical volatility since its initial public offering, to determine its expected volatility.

 

Risk-Free Interest Rate—This is the U.S. Treasury rate for the week of each option grant during the year, having a term that most closely resembles the expected life of the option.

 

Expected Term—This is a period of time that the options granted are expected to remain unexercised. Options granted have a maximum term of 10 years. The Company estimates the expected life of the option term to be 6.25 years. The Company uses a simplified method to calculate the average expected term.

 

Expected Forfeiture Rate—Effective on January 1, 2017 with the adoption of ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, the Company elected to account for forfeitures as they occur.

 

Net Loss Per Common Share

 

Basic net loss per common share is determined by dividing net loss by the weighted-average number of common shares outstanding during the period, without consideration of common stock equivalents. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common stock equivalents outstanding for the period. The treasury stock method is used to determine the dilutive effect of the Company’s stock options, restricted stock units and warrants.

 

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Basic and diluted net loss per common share is computed as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

    

2017

 

2016

    

2017

 

2016

Net loss

 

$

(7,950,101)

 

$

(7,854,693)

 

$

(24,023,210)

 

$

(23,481,241)

Basic and diluted net loss per common share

 

$

(0.24)

 

$

(0.34)

 

$

(0.86)

 

$

(1.14)

Basic and diluted weighted average common shares outstanding

 

 

32,724,010

 

 

23,049,347

 

 

27,814,781

 

 

20,638,129

 

 

 

 

 

 

 

 

 

 

 

 

 

The following potentially dilutive securities outstanding have been excluded from the computation of diluted weighted average common shares outstanding, as they would be anti-dilutive:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

    

2017

    

2016

    

2017

    

2016

Warrants

 

 

553,868

 

 

555,412

 

 

553,868

 

 

555,412

Stock options and restricted stock units

 

 

3,421,124

 

 

2,815,166

 

 

3,421,124

 

 

2,815,166

 

Comprehensive Loss

Comprehensive loss comprises net loss and other changes in equity that are excluded from net loss. For the three and nine months ended September 30, 2017 and 2016, the Company’s net loss equaled comprehensive net loss and, accordingly, no additional disclosure is presented.

 

Recently Issued Accounting Standards

 

Adopted Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU No. 2016-09, Compensation – Stock Compensation  (Topic 718): Improvements to Employee Share-Based Payment Accounting. This ASU includes provisions intended to simplify various aspects related to how share-based payments are accounted for and presented in financial statements including the income tax effects of share-based payments, minimum statutory withholding requirements and forfeitures. The new guidance requires all income tax effects of awards to be recognized in the income statement when the awards vest or are settled. It also allows an employer to repurchase more of an employee’s shares than the current standard for tax withholding purposes without triggering liability accounting and to make a policy election to account for forfeitures as they occur. The Company adopted the provisions of ASU 2016-09 on January 1, 2017. The Company has elected to account for forfeitures as they occur. The Company has applied this change using a modified retrospective method through a cumulative-effect adjustment of $19,727 to accumulated deficit. Additionally, the Company recognized deferred tax assets of $98,767 for the excess tax benefits that arose directly from tax deductions related to equity compensation greater than the amounts recognized for financial reporting and also recognized an increase of an equal amount in the valuation allowance against those deferred tax assets. The Company has adopted the additional provisions in the standard and has determined these provisions do not have a material impact on the financial statements.

 

Accounting Standards Not Yet Adopted

On May 28, 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers  (Topic 606), requiring an entity to recognize the amount of revenue to which it expects to be entitled for the transfer of promised goods or services to customers. The updated standard will replace most existing revenue recognition guidance in GAAP when it becomes effective and permits the use of either the retrospective or cumulative effect transition method. In August 2015, the FASB issued ASU No. 2015-14, Revenue from Contracts with Customers: Deferral of the Effective Date, which deferred the effective date of the new revenue standard for periods beginning after December 15, 2016 to December 15, 2017, with early adoption permitted but not earlier than the original effective date. Accordingly, the updated standard is effective for the Company in the first quarter of fiscal 2018. The Company has evaluated the Pfizer Agreement to determine the impact of the new revenue standard on the upfront and milestone payments within the Pfizer Agreement and has determined that the transition to the new revenue standard will have no material impact on the

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financial statements. The Company expects to adopt the new standard on January 1, 2018 using the full retrospective transition method.

In February 2016, the FASB issued ASU No. 2016-02, Leases (Topic 842), which supersedes existing guidance on accounting for leases in Leases (Topic 840) and generally requires all leases, including operating leases, to be recognized in the statement of financial position as right-of-use assets and lease liabilities by lessees. The provisions of ASU 2016-02 are to be applied using a modified retrospective approach and are effective for reporting periods beginning after December 15, 2018; early adoption is permitted. The Company is currently evaluating the effect that this ASU will have on the financial statements.

With the exception of the new standards discussed above, there have been no new accounting pronouncements that have significance, or potential significance, to the Company’s financial statements.

 

 

3. Prepaid Expenses and Other Current Assets

 

The following is a summary of the Company’s prepaid expenses and other current assets:

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2017

    

2016

 

Prepaid expenses

 

$

940,099

 

$

199,195

 

Other receivables

 

 

75,648

 

 

268,659

 

Deposits

 

 

 —

 

 

10,649

 

Prepaid expenses and other current assets

 

$

1,015,747

 

$

478,503

 

 

 

4. Property and Equipment

 

Property and equipment, net consists of the following:

 

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

    

2017

    

2016

 

Furniture and fixtures

 

$

314,024

 

$

262,135

 

Laboratory equipment

 

 

1,282,655

 

 

1,130,180

 

Office equipment

 

 

11,084

 

 

6,610

 

Computer equipment

 

 

191,825

 

 

169,423

 

Leasehold improvements

 

 

573,165

 

 

36,128

 

Construction in progress

 

 

 —

 

 

508,417

 

Property and equipment

 

 

2,372,753

 

 

2,112,893

 

Less accumulated depreciation

 

 

(1,250,537)

 

 

(1,056,561)

 

Property and equipment, net

 

$

1,122,216

 

$

1,056,332

 

 

Depreciation expense was $70,060 and $45,808 for the three months ended September 30, 2017 and 2016, respectively, and $193,976 and $139,749 for the nine months ended September 30, 2017 and 2016, respectively.

5. Accrued Expenses

 

The following is a summary of the Company’s accrued expenses:

 

 

 

 

 

 

 

 

 

 

September 30, 

 

December 31, 

 

 

 

2017

 

2016

 

Accrued research and development expenses

 

$

2,727,309

 

$

2,513,243

 

Accrued consulting and other professional fees

 

 

371,595

 

 

148,579

 

Other accrued expenses

 

 

187,067

 

 

315,002

 

Accrued employee benefits

 

 

392,638

 

 

290,547

 

Accrued expenses

 

$

3,678,609

 

$

3,267,371

 

 

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6. Operating Leases

 

The Company leases office and research space in Rockville, Maryland under an operating lease with a term through October 31, 2023 (as amended to date, the Lease) that is subject to annual rent increases. The Company has the right to sublease or assign all or a portion of the premises, subject to the conditions set forth in the Lease. The Lease may be terminated early by either the landlord or the Company in certain circumstances. In connection with the Lease, the Company received rent abatement as a lease incentive. The annual rent increases and rent abatement have been recognized as deferred rent that is being adjusted on a straight-line basis over the term of the Lease.

 

In March 2016, the Company amended the Lease (the Lease Amendment) to lease additional space as of June 1, 2016. In addition to the other terms of the Lease, the Lease Amendment provided for a tenant improvement allowance reflected in the Company’s financial statements as an increase in capitalized leasehold improvements as incurred and an increase in deferred rent. In May 2016, the Company also paid a security deposit of $52,320 to be held until the expiration or termination of the Company’s obligations under the Lease. The term of the Lease Amendment for the additional space continues through October 31, 2023, the same date as for the premises originally leased under the Lease, subject to the Company’s renewal option set forth in the Lease. The Company’s one-time option to terminate the Lease effective as of October 31, 2020 also applies to the additional space.

 

Deferred rent related to the Lease was $801,058 and $822,130 at September 30, 2017 and December 31, 2016, respectively. Total rent expense under the Company’s operating leases was $223,337 and $219,983 for the three months ended September 30, 2017 and 2016, respectively, and $667,507 and $557,262 for the nine months ended September 30, 2017 and 2016, respectively.

 

 

7. Stockholders’ Equity

 

At-The-Market Equity Offering

 

On March 1, 2016, the Company entered into an at-the-market sales agreement with Cowen and Company, LLC to sell the Company’s securities under a shelf registration statement filed in March 2015. The at-the market sales agreement was terminated on May 23, 2017. During the nine months ended September 30, 2017, the Company issued and sold 1,388,647 shares of common stock under the at-the-market sales agreement. The shares were sold at a weighted average price per share of $5.55, for aggregate net proceeds of $7.4 million, after deducting commissions and offering expenses.

 

On September 28, 2017, the Company entered into a new at-the-market sales agreement with Cowen and Company, LLC to sell the Company’s securities under a shelf registration statement filed in September 2017. Subsequent to September 30, 2017, the Company issued and sold 1,600,000 shares of common stock under the at-the-market sales agreement. The shares were sold at a weighted average price per share of $12.50, for aggregate net proceeds of $19.2 million, after deducting commissions and offering expenses.

 

Equity Offering

 

In May 2017, the Company completed a public offering in which the Company sold 8,050,000 shares of its common stock at a price to the public of $11.50 per share. The Company received net proceeds of $86.8 million from this offering, after deducting underwriting discounts, commissions and other offering expenses.

 

2003 Stock Incentive Plan

 

The 2003 Stock Incentive Plan (the 2003 Plan) provided for the grant of incentives and nonqualified stock options and restricted stock awards. The exercise price for incentive stock options must be at least equal to the fair value of the common stock on the grant date. Unless otherwise stated in a stock option agreement, 25% of the shares subject to an option grant will vest upon the first anniversary of the vesting start date and thereafter at the rate of one forty-eighth of the option shares per month as of the first day of each month after the first anniversary. Upon termination of employment by reasons other than death, cause, or disability, any vested options shall terminate 60 days after the termination date. Stock options terminate 10 years from the date of grant. The 2003 Plan expired on May 21, 2013.

 

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A summary of the Company’s stock option activity under the 2003 Plan for the nine months ended September 30, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

 

Outstanding

 

Weighted-Average

 

Contractual Term

 

Intrinsic Value

 

 

    

Options

    

Exercise Price

    

(Years)

    

(In thousands)

 

Outstanding as of December 31, 2016

 

729,819

 

$

1.26

 

3.2

 

 

 

 

Options exercised

 

(16,608)

 

 

1.65

 

 

 

 

 

 

Options forfeited

 

 —

 

 

 —

 

 

 

 

 

 

Outstanding as of September 30, 2017

 

713,211

 

 

1.25

 

2.4

 

$

9,089

 

Vested as of September 30, 2017

 

713,211

 

 

1.25

 

2.4

 

$

9,089

 

Exercisable as of September 30, 2017

 

713,211

 

 

1.25

 

2.4

 

$

9,089

 

 

As of September 30, 2017, the options under the 2003 Plan were fully expensed. Total intrinsic value of the options exercised during the nine months ended September 30, 2017 and 2016 was $103,638 and $95,221, respectively, and total cash received for options exercised was $27,358 and $40,668 during the nine months ended September 30, 2017 and 2016, respectively. The total fair value of shares underlying options which vested in the nine months ended September 30, 2017 and 2016 was $1,573 and $14,450, respectively.

 

2013 Equity Incentive Plan

 

The Company’s board of directors adopted, and its stockholders approved, its 2013 Equity Incentive Plan (the 2013 Plan) effective on January 9, 2014. The 2013 Plan provides for the grant of incentive stock options within the meaning of Section 422 of the Internal Revenue Code to the Company’s employees and its parent and subsidiary corporations’ employees, and for the grant of nonstatutory stock options, restricted stock awards, restricted stock unit awards, stock appreciation rights, performance stock awards and other forms of stock compensation to its employees, including officers, consultants and directors. The 2013 Plan also provides for the grant of performance cash awards to the Company’s employees, consultants and directors. Unless otherwise stated in a stock option agreement, 25% of the shares subject to an option grant will typically vest upon the first anniversary of the vesting start date and thereafter at the rate of one forty-eighth of the option shares per month as of the first day of each month after the first anniversary. Upon termination of employment by reasons other than death, cause, or disability, any vested options will terminate 90 days after the termination date, unless otherwise set forth in a stock option agreement. Stock options generally terminate 10 years from the date of grant.

 

Authorized Shares

 

The maximum number of shares of common stock that initially could be issued under the 2013 Plan was  1,000,000 shares, plus any shares subject to stock options or similar awards granted under the 2003 Plan that expire or terminate without having been exercised in full or are forfeited to or repurchased by the Company. The number of shares of common stock reserved for issuance under the 2013 Plan automatically increases on January 1 of each year until January 1, 2023, by 3% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares as may be determined by the Company’s board of directors. The maximum number of shares that may be issued pursuant to exercise of incentive stock options under the 2013 Plan is 20,000,000 shares. As of January 1, 2017, the number of shares of common stock that may be issued under the 2013 Plan was automatically increased by 697,500 shares, representing 3% of the total number of shares of common stock outstanding on December 31, 2016, increasing the number of shares of common stock available for issuance under the 2013 Plan to 2,837,201 shares.

 

Shares issued under the 2013 Plan may be authorized but unissued or reacquired shares of common stock. Shares subject to stock awards granted under the 2013 Plan that expire or terminate without being exercised in full, or that are paid out in cash rather than in shares, will not reduce the number of shares available for issuance under the 2013 Plan. Additionally, shares issued pursuant to stock awards under the 2013 Plan that the Company repurchases or that are forfeited, as well as shares reacquired by the Company as consideration for the exercise or purchase price of a stock

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award or to satisfy tax withholding obligations related to a stock award, will become available for future grant under the 2013 Plan.

 

A summary of the Company’s stock option activity under the 2013 Plan for the nine months ended September 30, 2017 is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

 

 

 

 

 

 

Remaining

 

Aggregate

 

 

 

Outstanding

 

Weighted-Average

 

Contractual Term

 

Intrinsic Value

 

 

 

Options

    

Exercise Price

    

(Years)

    

(In thousands)

 

Outstanding as of December 31, 2016

 

2,066,105

 

$

7.41

 

7.9

 

 

 

 

Options granted

 

674,738

 

 

7.03

 

 

 

 

 

 

Options exercised

 

(32,521)

 

 

5.96

 

 

 

 

 

 

Options forfeited

 

(22,159)

 

 

7.35

 

 

 

 

 

 

Outstanding as of September 30, 2017

 

2,686,163

 

 

7.33

 

7.6

 

$

17,884

 

Vested or expected to vest as of September 30, 2017

 

2,686,163

 

 

7.33

 

7.6

 

$

17,884

 

Exercisable as of September 30, 2017

 

1,453,937

 

 

7.84

 

6.7

 

$

9,003

 

 

The weighted-average fair value of the options granted during the nine months ended September 30, 2017 and 2016 was $4.76 per share and $3.38 per share, respectively, applying the Black-Scholes-Merton option pricing model utilizing the following weighted-average assumptions:

 

 

 

 

 

 

 

Nine Months Ended

 

Nine Months Ended

 

    

September 30, 2017

 

September 30, 2016

Expected term

 

6.25 years

 

6.25 years

Expected volatility

 

75.20%

 

68.86%

Risk-free interest rate

 

2.08%

 

1.69%

Expected dividend yield

 

0%

 

0%

 

As of September 30, 2017, there was $4,854,266 of total unrecognized compensation expense related to unvested options under the 2013 Plan that will be recognized over a weighted-average period of approximately 2.2 years. Total intrinsic value of the options exercised during the nine months ended September 30, 2017 and 2016 was $228,291 and $2,275, respectively, and total cash received for options exercised was $193,669 and $27,825 during the nine months ended September 30, 2017 and 2016, respectively. The total fair value of shares underlying options which vested in the nine months ended September 30, 2017 and 2016 was $2,872,004 and $2,364,683, respectively.

 

A restricted stock unit (RSU) is a stock award that entitles the holder to receive shares of the Company’s common stock as the award vests. The fair value of each RSU is based on the closing price of the Company’s stock on the date of grant. The Company has granted RSUs with service conditions (service RSUs) that vest in three equal annual installments provided that the employee remains employed with the Company. As of September 30, 2017, there was $30,763 of unrecognized compensation costs related to unvested service RSUs.

 

The following is a summary of RSU activity under the 2013 Plan for the nine months ended September 30, 2017:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-Average

 

 

 

 

Number

 

Grant Date

 

 

    

of Shares

 

 

Fair Value

 

Unvested at December 31, 2016

 

 

16,916

 

$

5.04

 

Granted

 

 

 —

 

 

 —

 

Forfeited

 

 

 —

 

 

 —

 

Vested

 

 

4,833

 

 

4.61

 

Unvested at September 30, 2017

 

 

12,083

 

 

5.21

 

 

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Stock-based compensation expense was classified on the statement of operations as follows for the three and nine months ended September 30, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Nine Months Ended September 30, 

 

 

    

2017

 

2016

   

2017

 

2016

    

Research and development expense

 

$

327,133

 

$

260,882

 

$

953,821

 

$

772,163

 

General and administrative expense

 

 

635,212

 

 

478,531

 

 

1,842,480

 

 

1,466,484

 

Total stock-based compensation expense

 

$

962,345

 

$

739,413

 

$

2,796,301

 

$

2,238,647

 

 

 

 

 

 

 

 

8. Income Taxes

 

The Company has not recorded any tax provision or benefit for the nine months ended September 30, 2017 and 2016. The Company has provided a valuation allowance for the full amount of its net deferred tax assets since realization of any future benefit from deductible temporary differences, net operating loss carryforwards and research and development credits is not more-likely-than-not to be realized at September 30, 2017 and December 31, 2016.

 

9. Research and License Agreements

 

In October 2011, the Company and Pfizer entered into the Pfizer Agreement that provides Pfizer an exclusive worldwide license to rivipansel for vaso-occlusive crisis associated with sickle cell disease and for other diseases for which the drug candidate may be developed. The Company was responsible for completion of the Phase 2 clinical trial, after which Pfizer assumed all further development and commercialization responsibilities. Upon execution of the Pfizer Agreement, the Company received an up-front payment of $22.5 million. The Pfizer Agreement also provides for potential milestone payments of up to $115.0 million upon the achievement of specified development milestones, including the dosing of the first patients in Phase 3 clinical trials for up to two indications and the first commercial sale of a licensed product in the United States and selected European countries for up to two indications; potential milestone payments of up to $70.0 million upon the achievement of specified regulatory milestones, including the acceptance of our filings for regulatory approval by regulatory authorities in the United States and Europe for up to two indications; and potential milestone payments of up to $135.0 million upon the achievement of specified levels of annual net sales of licensed products. Pfizer has the right to terminate the Pfizer Agreement by giving prior written notice.

 

The Company has determined that each potential future clinical, development and regulatory milestone is substantive. Although sales-based milestones are not considered substantive, they are still recognized upon achievement of the milestone (assuming all other revenue recognition criteria have been met) because there are no undelivered elements that would preclude revenue recognition at that time. The Company is also eligible to receive royalties on future sales contingent upon annual net sales thresholds. In addition, the Company and Pfizer have formed a joint steering committee that will oversee and coordinate activities as set forth in the research program. The $22.5 million up-front payment was recognized over a period of 1.5 years. In May 2014, Pfizer made a $15.0 million non-refundable milestone payment to the Company, which was recognized as revenue by the Company in May 2014 when earned.  In June 2015, Pfizer dosed the first patient in the Phase 3 clinical trial of rivipansel, which triggered a non-refundable milestone payment to the Company of $20.0 million, which the Company recognized as revenue in June 2015. The Company did not recognize any revenue under the Pfizer Agreement during the three and nine months ended September 30, 2017 or 2016.

 

In February 2004, the Company entered into a research services agreement (the Research Agreement) with the University of Basel (the University) for biological evaluation of selectin antagonists. Certain patents covering the rivipansel compound are subject to provisions of the Research Agreement. Under the terms of the Research Agreement, the Company will owe to the University 10% of all future milestone and royalty payments received from Pfizer with respect to rivipansel. There were no milestone payments due to the University for the three and nine months ended September 30, 2017 or 2016.

 

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Certain statements contained in this Quarterly Report on Form 10-Q may constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The words or phrases “would be,” “will allow,” “intends to,” “will likely result,” “are expected to,” “will continue,” “is anticipated,” “estimate,” “project,” or similar expressions, or the negative of such words or phrases, are intended to identify “forward-looking statements.” We have based these forward-looking statements on our current expectations and projections about future events. Because such statements include risks and uncertainties, actual results may differ materially from those expressed or implied by such forward-looking statements. Factors that could cause or contribute to these differences include those below and elsewhere in this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K, particularly in Part I – Item 1A, “Risk Factors,” and our other filings with the Securities and Exchange Commission. Statements made herein are as of the date of the filing of this Form 10-Q with the Securities and Exchange Commission and should not be relied upon as of any subsequent date. Unless otherwise required by applicable law, we do not undertake, and we specifically disclaim, any obligation to update any forward-looking statements to reflect occurrences, developments, unanticipated events or circumstances after the date of such statement.

 

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited financial statements and related notes that appear in Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes for the year ended December 31, 2016, which are included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2017.

 

Overview

 

We are a clinical-stage biotechnology company focused on the discovery and development of novel glycomimetic drugs to address unmet medical needs resulting from diseases in which carbohydrate biology plays a key role. Glycomimetics are molecules that mimic the structure of carbohydrates involved in important biological processes. Our proprietary glycomimetics platform is based on our expertise in carbohydrate chemistry and our understanding of the role carbohydrates play in key biological processes. Using this expertise and understanding, we are developing a pipeline of proprietary glycomimetics designed to inhibit disease-related functions of carbohydrates, such as the roles they play in inflammation, cancer and infection. We believe this represents an innovative approach to drug discovery to treat a wide range of diseases.

 

Most human proteins are modified by the addition of complex carbohydrates to the surface of the proteins. The addition of these carbohydrate structures affects the functions of these proteins and their interactions with other molecules. Our initial research and development efforts have focused on drug candidates targeting selectins, which are proteins that serve as adhesion molecules and bind to carbohydrates that are involved in the inflammatory component and progression of a wide range of diseases, including hematologic disorders, cancer and cardiovascular disease. Inhibiting specific carbohydrates from binding to selectins has long been viewed as a potentially attractive approach for therapeutic intervention. The ability to successfully develop drug-like compounds that inhibit binding with selectins, known as selectin antagonists, has been limited by the complexities of carbohydrate chemistry. We believe our expertise in carbohydrate chemistry enables us to design selectin antagonists and other glycomimetics that inhibit the disease-related functions of certain carbohydrates.

 

We are focusing our initial efforts on drug candidates for rare diseases that we believe will qualify for orphan drug designation. Our first drug candidate, rivipansel, is a pan-selectin antagonist being developed for the treatment of vaso-occlusive crisis, or VOC, a debilitating and painful condition that occurs periodically throughout the life of a person with sickle cell disease. We have entered into an agreement with Pfizer Inc., or Pfizer, for the further development and potential commercialization of rivipansel worldwide. Rivipansel has received fast track designation from the U.S. Food and Drug Administration, or FDA, as well as orphan drug designation from the FDA in the United States and from the European Medicines Agency, or EMA, in the European Union. We believe the clinical progress of rivipansel provides evidence of the significant potential of our lead program and our proprietary glycomimetics platform.

 

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Building on our experience with rivipansel, we are developing a pipeline of other glycomimetic drug candidates. Our second glycomimetic drug candidate, GMI-1271, is a specific E-selectin inhibitor, which we are developing to be used in combination with chemotherapy to treat patients with either acute myeloid leukemia, or AML, or multiple myeloma, or MM, both of which are life-threatening hematologic cancers, and potentially other hematologic cancers as well. We have completed enrollment in a Phase 1/2 clinical trial of GMI-1271 as an adjunct to standard chemotherapy in patients with AML and are currently conducting a Phase 1 clinical trial of GMI-1271 combined with chemotherapy for the treatment of MM. In the Phase 2 portion of our AML clinical trial, AML patients treated with GMI-1271, combined with chemotherapy, have experienced higher-than-expected remission rates and lower-than-expected induction-related mortality rates. We believe the data generated in this Phase 1/2 clinical trial support conducting one or more additional clinical trials of GMI-1271 in AML, with the ultimate goal of obtaining marketing approval from the FDA.

 

GMI-1271 received orphan drug designation from the FDA in May 2015 for the treatment of AML. In June 2016, GMI-1271 received fast track designation from the FDA for the treatment of adult patients with relapsed or refractory AML and elderly patients aged 60 years or older with AML. In May 2017, GMI-1271 received Breakthrough Therapy designation from the FDA for the treatment of adult patients with relapsed or refractory AML. In May 2017, the European Commission, based on a favorable recommendation from the EMA Committee for Orphan Medicinal Products, granted orphan designation for GMI-1271 for the treatment of AML.

 

In May 2015, we commenced our multinational, Phase 1/2, open-label trial of GMI-1271 as an adjunct to standard chemotherapy in patients with AML. This trial in males and females with AML enrolled patients at a number of academic institutions in the United States, Ireland and Australia. The trial consists of two parts. In the Phase 1 portion, escalation testing was performed to determine a recommended GMI-1271 dose in combination with standard chemotherapy to be used in the Phase 2 portion. In the Phase 2 portion of the trial, dose expansion was performed at the recommended dose of 10 mg/kg GMI-1271 in combination with standard chemotherapy.  The primary objective of the trial was to evaluate the safety of GMI-1271 in combination with chemotherapy. Secondary objectives were to characterize pharmacokinetics, or PK, pharmacodynamics, or PD, and to observe anti-leukemic activity. There were a total of 19 patients with relapsed or refractory AML enrolled and dosed with a single cycle of treatment with GMI-1271 and chemotherapy in the Phase 1 portion of the trial.

 

In the Phase 2 portion, one cohort of 25 patients over 60 years of age with newly diagnosed AML and a second cohort comprised of 47 patients with relapsed or refractory AML were enrolled.  Unlike in the Phase 1 portion, some of the patients in the Phase 2 portion were treated with multiple cycles of GMI-1271. In May 2017, we completed enrollment of 91 patients in the Phase 1/2 trial. We plan to provide additional updates from this clinical trial in the fourth quarter of 2017 and in 2018. We are consulting with the FDA regarding the design of a potential Phase 3 pivotal trial that could support an application for marketing approval for GMI-1271 for the treatment of AML. Based on the feedback from the FDA, we plan to initiate this pivotal trial in mid-2018.

 

In June 2017, we presented new data from the Phase 2 portion of the trial at the June 2017 annual meetings of the American Society of Clinical Oncology, or ASCO, and the European Hematology Association, or EHA. In the relapsed or refractory disease arm of the trial, 66 patients had been enrolled. Of the 54 relapsed/refractory patients with AML for whom data is available, the CR/CRi rate was 41%. The CR/CRi rate is the percentage of patients who achieved remission, with either full or incomplete blood count recovery. The mortality rate among this group at 60 days was 7%. Median overall survival of the 19 patients enrolled in the Phase 1 portion of the trial was 7.6 months. We believe these results compare favorably to what would be expected in this population, based on published historical controls in similar patients. In the newly-diagnosed, treatment-naïve elderly arm of the trial, 25 patients had been enrolled. Among these 25 patients, the CR/CRi rate was 68%, with a 73% rate for patients with de novo disease and 64% for patients with secondary AML.

 

Our data from the GMI-1271 program has been selected for two oral presentations at the upcoming annual meeting of the American Society of Hematology, or ASH, to be held in December 2017. One of these presentations will be an update on the current data set from the Phase 1/2 open-label trial of GMI-1271 as an adjunct to standard chemotherapy in patients with AML. The second oral presentation will present data from preclinical studies in which E-selectin was upregulated in a model of AML and increased resistance to chemotherapy, which we believe can be reversed by treatment with GMI-1271.

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In December 2015, at the ASH annual meeting, we presented preclinical data suggesting that GMI-1271 could reverse resistance of certain chemotherapies seen in MM. In September 2016, we dosed the first patient in a Phase 1 multiple dose-escalation clinical trial in defined populations of patients with MM who have not responded optimally to standard chemotherapy. In this trial, we are evaluating the efficacy, safety and PK of GMI-1271, combined with bortezomib- or carfilzomib-based chemotherapy, for the treatment of MM. We are currently enrolling patients at clinical trial sites in Ireland and have initiated the enrollment process at additional sites in Europe.

 

In addition to GMI-1271, we have designed a family of small molecule drug candidates that simultaneously inhibit both E-selectin and CXCR4. We have selected one of these compounds, GMI-1359, for development as a potential treatment for certain malignancies. Since E-selectin and CXCR4 are both adhesion molecules that keep cancer cells in the bone marrow, we believe that targeting both E-selectin and CXCR4 with a single compound could improve efficacy in the treatment of cancers that affect the bone marrow such as AML and MM, as compared to targeting CXCR4 alone. In December 2016 at the ASH annual meeting, we presented preclinical data suggesting that GMI-1359 has a unique tumor cell mobilization kinetic profile and enhanced the ability of chemotherapy to target and improve survival from a high-risk form of mutated AML.

 

In 2016, we completed enrollment in a Phase 1 single-dose escalation trial of GMI-1359 in healthy volunteers. In this trial, volunteer participants received a single injection of GMI-1359, after which they were evaluated for safety, tolerability, PK and PD. The randomized, double-blind, placebo-controlled, escalating dose study was conducted at a single site in the United States. We are currently expanding enrollment in this trial with two additional cohorts and anticipate selecting an initial cancer indication for this drug candidate and determining an optimal dose for further clinical evaluation in 2018.

 

Using our glycomimetics platform, we have also designed inhibitors that specifically block the binding of galectin-3 to carbohydrate structures. Galectin-3 is a protein that is known to play critical roles in many pathological processes, including fibrosis, inflammation, cancer and cardiovascular disease. We plan to optimize these compounds and conduct preclinical experiments in the fourth quarter of 2017 and in 2018 to further characterize the effects of galectin-3 inhibitors on immune processes and anti-fibrotic activity. We are also designing other galectin inhibitors that we believe could be used to treat various diseases.

We commenced operations in 2003, and our operations to date have been limited to organizing and staffing our company, business planning, raising capital, developing our glycomimetics platform, identifying potential drug candidates, undertaking preclinical studies and conducting clinical trials of rivipansel, GMI-1271 and GMI-1359. To date, we have financed our operations primarily through private placements of our securities, upfront and milestone payments under our collaboration with Pfizer and the net proceeds from our IPO in January 2014, at-the-market sales facilities with Cowen and Company LLC, or Cowen, and our public offerings of common stock in June 2016 and May 2017. We have no approved drugs currently available for sale, and substantially all of our revenue to date has been revenue from the upfront and milestone payments from Pfizer, although we have received nominal amounts of revenue under research grants.

Prior to our IPO, we raised an aggregate of $86.6 million to fund our operations, of which $22.5 million was an upfront payment under our collaboration with Pfizer and $64.1 million was from the sale of our convertible promissory notes and convertible preferred stock. The IPO provided us with net proceeds of $57.2 million, and we received a non-refundable milestone payment from Pfizer in May 2014 of $15.0 million. In August 2015, we received another non-refundable milestone payment from Pfizer of $20.0 million following the dosing of the first patient in the Phase 3 clinical trial of rivipansel. We received an additional $19.7 million in net proceeds from our public offering in June 2016 and $86.8 million in net proceeds from our public offering in May 2017. In 2016 and to date in 2017 we have received an aggregate of $30.5 million of net proceeds under the at-the-market facilities with Cowen.

Since inception, we have incurred significant operating losses. We have generated cumulative revenue of $58.6 million since our inception through September 30, 2017, primarily consisting of the $22.5 million upfront payment from Pfizer in 2011, the $15.0 million non-refundable milestone payment in May 2014 and the $20.0 million non-refundable milestone payment in August 2015. We had an accumulated deficit of $135.1 million as of September 30, 2017, and we expect to continue to incur significant expenses and operating losses over at least the next several years. Our net losses may fluctuate significantly from quarter to quarter and year to year, depending on the timing of our clinical trials, the

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receipt of milestone payments, if any, under our collaboration with Pfizer, and our expenditures on other research and development activities. We anticipate that our expenses will increase substantially as we:

·

initiate and conduct our planned clinical trials of GMI-1271 and GMI-1359;

·

continue the research and development of our other drug candidates;

·

seek to discover and develop additional drug candidates;

·

seek regulatory approvals for any drug candidates other than rivipansel that successfully complete clinical trials;

·

ultimately establish a sales, marketing and distribution infrastructure and scale up external manufacturing capabilities to commercialize any drug candidates other than rivipansel for which we may obtain regulatory approval;

·

maintain, expand and protect our intellectual property portfolio;

·

hire additional clinical, quality control and scientific personnel; and

·

add operational, financial and management information systems and personnel, including personnel to support our drug development and potential future commercialization efforts.

To fund further operations, we will need to raise capital. We may obtain additional financing in the future through the issuance of our common stock, through other equity or debt financings or through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed could compromise our ability to execute on our business plan. Although it is difficult to predict future liquidity requirements, we believe that our existing cash and cash equivalents, together with interest thereon, will be sufficient to fund our operations at least through the second half of 2019. However, our ability to successfully transition to profitability will be dependent upon achieving a level of revenues adequate to support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities.

Our Collaboration with Pfizer

In October 2011, we entered into the license agreement with Pfizer under which we granted Pfizer an exclusive worldwide license to develop and commercialize products containing rivipansel for all fields and uses. The license also covers specified back-up compounds along with modifications of and improvements to rivipansel that meet defined chemical properties. Pfizer is required to use commercially reasonable efforts, at its expense, to develop, obtain regulatory approval for and commercialize rivipansel for sickle cell disease in the United States. Under the terms of the agreement, we received a $22.5 million upfront payment. We are also eligible to earn potential milestone payments of up to $115.0 million upon the achievement of specified development milestones, including the dosing of the first patients in Phase 3 clinical trials for up to two indications and the first commercial sale of a licensed product in the United States and selected European countries for up to two indications, up to $70.0 million upon the achievement of specified regulatory milestones, including the acceptance of our filings for regulatory approval by regulatory authorities in the United States and Europe for up to two indications, and up to $135.0 million upon the achievement of specified levels of annual net sales of licensed products. We are also eligible to receive tiered royalties for each licensed product, with percentages ranging from the low double digits to the low teens, based on net sales worldwide, subject to reductions in specified circumstances.

 

The first potential milestone payment under the Pfizer agreement was $35.0 million upon the initiation of dosing of the first patient in a Phase 3 clinical trial of rivipansel by Pfizer. Under the collaboration, Pfizer made a $15.0 million non-refundable milestone payment to us in May 2014, which we recognized as revenue in May 2014, when earned, and the dosing of the first patient in the Phase 3 clinical trial in June 2015 triggered the remaining $20.0 million milestone payment to us.  We recorded the $20.0 million milestone payment as revenue in June 2015. There were no milestone payments received from Pfizer for the three or nine months ended September 30, 2017.

 

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We entered into a research services agreement with the University of Basel, or the University,  for biological evaluation of selectin antagonists. Certain patents covering the rivipansel compound are subject to provisions of the Research Agreement. Under the terms of the Research Agreement, we will owe to the University 10% of all future milestone and royalty payments received from Pfizer with respect to rivipansel. In February 2016, we paid $2.0 million to the University based upon the non-refundable milestone payments from Pfizer. We recorded these payments during the year ended December 31, 2015, at the time the payments became due to the University. There were no additional payments due to the University for the three months or nine months ended September 30, 2017.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

There have been no material changes in our critical accounting policies, estimates and judgments during the nine months ended September 30, 2017 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2016.

 

Components of Operating Results

 

Revenue

 

To date, we have not generated any revenue from the sale of our drug candidates and do not expect to generate any revenue from the sale of drugs in the near future. Substantially all of our revenue recognized to date has consisted of the upfront and milestone payments under our agreement with Pfizer.

 

Since our inception, we have also recognized a nominal amount of revenue under research grant contracts, generally to the extent of our costs incurred in connection with specific research or development activities.

 

Research and Development

 

Research and development expenses consist of expenses incurred in performing research and development activities, including compensation and benefits for full-time research and development employees, facilities expenses, overhead expenses, cost of laboratory supplies, clinical trial and related clinical manufacturing expenses, fees paid to contract research organizations and other consultants and other outside expenses. Other preclinical research and platform programs include activities related to exploratory efforts, target validation, lead optimization for our earlier programs and our proprietary glycomimetics platform.

 

To date, our research and development expenses have related primarily to the development of rivipansel and our other drug candidates. In April 2013, when we completed our Phase 2 clinical trial of rivipansel, all further clinical development obligations associated with rivipansel shifted to Pfizer.

 

We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis because we are organized and record expense by functional department and our employees may allocate time to more than one development project. Accordingly, we only allocate a portion of our research and development expenses by functional area and by drug candidate.

 

Research and development costs are expensed as incurred. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

 

Research and development activities are central to our business model. Drug candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later stage clinical trials. We expect our research and development expenses to increase over the next several years as we seek to progress GMI-1271, GMI-1359 and our other drug candidates through clinical development. For example, as we prepare to potentially submit an application for marketing approval for GMI-1271, we will incur substantial expenses in scaling up the production and manufacturing of GMI-1271. However, it is difficult to determine with certainty the duration and completion costs of our current or future preclinical studies and clinical trials of our drug candidates, or if, when or to what extent we will generate revenues from the commercialization

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and sale of any of our drug candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our drug candidates.

 

The duration, costs and timing of clinical trials and development of our drug candidates will depend on a variety of factors that include:

 

·

per patient trial costs;

 

·

the number of patients that participate in the trials;

 

·

the number of sites included in the trials;

 

·

the countries in which the trial is conducted;

 

·

the length of time required to enroll eligible patients;

 

·

the number of doses that patients receive;

 

·

the drop-out or discontinuation rates of patients;

 

·

potential additional safety monitoring or other studies requested by regulatory agencies;

 

·

the duration of patient follow-up; and

 

·

the safety and efficacy profile of the drug candidate.

 

In addition, the probability of success for each drug candidate will depend on numerous factors, including competition, manufacturing capability and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each drug candidate, as well as an assessment of each drug candidate’s commercial potential.

 

General and Administrative

 

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in executive, finance, accounting, business development and human resources functions. Other significant costs include facility costs not otherwise included in research and development expenses, legal fees relating to patent and corporate matters and fees for accounting and consulting services. We anticipate that our general and administrative expenses will increase in the future to support our continued research and development activities.

 

Other Income

 

Other income consists of interest income earned on our cash and cash equivalents.

 

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Results of Operations for the Three and Nine Months Ended September 30, 2017 and 2016

 

The following tables set forth our results of operations for the three and nine months ended September 30, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

Revenue

    

$

 —

    

$

18

    

$

(18)

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

 

5,780

 

 

5,921

 

 

(141)

 

General and administrative expense

 

 

2,402

 

 

1,984

 

 

418

 

Total costs and expenses

 

 

8,182

 

 

7,905

 

 

277

 

Loss from operations

 

 

(8,182)

 

 

(7,887)

 

 

(295)

 

Other income

 

 

232

 

 

32

 

 

200

 

Net loss and comprehensive loss

 

$

(7,950)

 

$

(7,855)

 

$

(95)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

Revenue

    

$

 —

    

$

18

    

$

(18)

 

Costs and expenses:

 

 

 

 

 

 

 

 

 

 

Research and development expense

 

 

17,380

 

 

17,221

 

 

159

 

General and administrative expense

 

 

7,016

 

 

6,352

 

 

664

 

Total costs and expenses

 

 

24,396

 

 

23,573

 

 

823

 

Loss from operations

 

 

(24,396)

 

 

(23,555)

 

 

(841)

 

Other income

 

 

373

 

 

74

 

 

299

 

Net loss and comprehensive loss

 

$

(24,023)

 

$

(23,481)

 

$

(542)

 

 

Research and Development Expense

 

The following tables summarize our research and development expense by functional area for the three and nine months ended September 30, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

Clinical development

    

$

1,109

    

$

2,389

    

$

(1,280)

 

Manufacturing and formulation

 

 

1,893

 

 

893

 

 

1,000

 

Contract research services, consulting and other costs

 

 

308

 

 

332

 

 

(24)

 

Laboratory costs

 

 

499

 

 

466

 

 

33

 

Personnel-related

 

 

1,644

 

 

1,580

 

 

64

 

Stock-based compensation

 

 

327

 

 

261

 

 

66

 

Research and development expense

 

$

5,780

 

$

5,921

 

$

(141)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

Clinical development

    

$

4,392

    

$

5,403

    

$

(1,011)

 

Manufacturing and formulation

 

 

4,165

 

 

3,780

 

 

385

 

Contract research services, consulting and other costs

 

 

1,196

 

 

1,354

 

 

(158)

 

Laboratory costs

 

 

1,456

 

 

1,237

 

 

219

 

Personnel-related

 

 

5,217

 

 

4,675

 

 

542

 

Stock-based compensation

 

 

954

 

 

772

 

 

182

 

Research and development expense

 

$

17,380

 

$

17,221

 

$

159

 

 

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During the three months ended September 30, 2017, our research and development expense decreased by $141,000, or 2%, compared to the same period in 2016. The decrease was primarily caused by lower clinical trial expenses related to the Phase 2 clinical trial of GMI-1271 for the treatment of AML due to patient enrollment completion in May 2017 and a decrease in costs for non-clinical toxicology studies and clinical studies for GMI-1359. These decreases were offset in part by additional costs related to the manufacturing of Phase 3 clinical supplies of GMI-1271. Personnel-related and stock-based compensation expenses increased due to annual salary adjustments for research and development personnel and annual stock option awards granted in the first quarter of 2017. During the nine months ended September 30, 2017, our research and development expense increased by $159,000, or 1%, compared to the same period in 2016.  The increase was caused by the ongoing costs associated with the clinical trials for GMI-1271 in AML and MM, partially offset by a decrease in expenses related to non-clinical toxicology and clinical studies and manufacturing and process development for GMI-1359. Personnel-related and stock-based compensation expenses increased due to annual salary adjustments for research and development personnel and annual stock option awards granted in the first quarter of 2017.

 

The following tables summarize our research and development expense by drug candidate for the three and nine months ended September 30, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

GMI-1271

    

$

2,921

    

$

2,799

    

$

122

 

GMI-1359

 

 

253

 

 

715

 

 

(462)

 

Other research and development

 

 

635

 

 

565

 

 

70

 

Personnel-related and stock-based compensation

 

 

1,971

 

 

1,842

 

 

129

 

Research and development expense

 

$

5,780

 

$

5,921

 

$

(141)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

GMI-1271

    

$

8,760

    

$

7,619

    

$

1,141

 

GMI-1359

 

 

562

 

 

2,316

 

 

(1,754)

 

Other research and development

 

 

1,887

 

 

1,838

 

 

49

 

Personnel-related and stock-based compensation

 

 

6,171

 

 

5,448

 

 

723

 

Research and development expense

 

$

17,380

 

$

17,221

 

$

159

 

 

General and Administrative Expense

 

The following tables summarize the components of our general and administrative expense for the three and nine  months ended September 30, 2017 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended September 30, 

 

Period-to-Period

 

(in thousands)

 

2017

 

2016

 

Change

 

Personnel-related

    

$

729

    

$

640

    

$

89

 

Stock-based compensation

 

 

635

 

 

479

 

 

156

 

Legal, consulting and other professional expenses

 

 

863

 

 

719

 

 

144

 

Other