Nature of Operations and Basis of Presentation

12 Months Ended

Dec. 31, 2019

Organization Consolidation And Presentation Of Financial Statements [Abstract]

Nature of Operations and Basis of Presentation

1. NATURE OF OPERATIONS AND BASIS OF PRESENTATION

Business

Acer Therapeutics Inc., a Delaware corporation (the “Company”), is a pharmaceutical company focused on the acquisition, development, and commercialization of therapies for serious rare and life-threatening diseases with significant unmet medical needs. The Company’s pipeline includes three clinical-stage candidates: EDSIVO™ (celiprolol) for the treatment of vascular Ehlers-Danlos syndrome (“vEDS”) in patients with a confirmed type III collagen (COL3A1) mutation; ACER-001 (a taste-masked, immediate release formulation of sodium phenylbutyrate) for the treatment of various inborn errors of metabolism, including urea cycle disorders (“UCD”) and Maple Syrup Urine Disease (“MSUD”); and osanetant for the treatment of induced Vasomotor Symptoms (“iVMS”) where Hormone Replacement Therapy (“HRT”) is likely contraindicated. The Company’s product candidates are believed to present a comparatively de-risked profile, having one or more of a favorable safety profile, clinical proof-of-concept data, mechanistic differentiation, and/or accelerated paths for development through specific programs and procedures established by the United States (“U.S.”) Food and Drug Administration (“FDA”).

Since its inception, the Company has devoted substantially all of its efforts to business planning, research and development, recruiting management and technical staff, acquiring operating assets and raising capital. The Company has not generated any product revenue to date and may never generate any product revenue in the future.

In June 2019, the Company received a Complete Response Letter from the FDA regarding its new drug application (“NDA”) for EDSIVO^TM (celiprolol) for the treatment of vEDS. The Complete Response Letter stated that it will be necessary to conduct an adequate and well-controlled trial to determine whether celiprolol reduces the risk of clinical events in patients with vEDS. The Company had previously devoted a substantial majority of its research, development, clinical, and precommercial efforts and financial resources towards the development of EDSIVO™. In order to reduce operating expenses and conserve cash resources following receipt of the FDA’s Complete Response Letter, in June 2019, the Company implemented a corporate restructuring which included a reduction of approximately 60% of its full-time workforce of 48 employees and halted precommercial activities for EDSIVO^TM. In December 2019, the Company submitted a Formal Dispute Resolution Request to the FDA’s Office of New Drugs appealing the FDA’s decision as outlined in the Complete Response Letter. In March 2020, the Company received a response to its Formal Dispute Resolution Request from the Office of New Drugs of the FDA stating that it had denied the Company’s appeal of the Complete Response Letter in relation to the NDA for EDSIVO^TM. In its Appeal Denied letter, the Office of New Drugs described possible paths forward for Acer to explore that could provide the substantial evidence of effectiveness needed to support a potential resubmission of the EDSIVO^TM NDA for the treatment of patients with vEDS with a confirmed COL3A1 mutation. In its Appeal Denied letter, the Office of New Drugs referred to the FDA Guidance document issued in December 2019, where substantial evidence of effectiveness can be provided by two or more adequate and well-controlled studies demonstrating efficacy, or a single positive adequate and well-controlled study plus confirmatory evidence. While neither resubmission nor the prospect of approval of the EDSIVO^TM NDA is assured, the Company is evaluating its possible next steps with the goal of resubmission of the EDSIVO^TM NDA. Depending on its progress, as well as the Company’s available resources and needs, the Company may decide at any time not to continue development of EDSIVO™, which could have a material adverse effect on its business operations and financial prospects.

Merger and Reverse Stock Split

On September 19, 2017, the Company (then a Texas corporation known as Opexa Therapeutics, Inc.) completed its business combination with Acer Therapeutics Inc., a Delaware corporation (“Private Acer”), in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of June 30, 2017, by and among the Company, Opexa Merger Sub, Inc. (“Merger Sub”) and Private Acer (the “Merger Agreement”), pursuant to which Merger Sub merged with and into Private Acer, with Private Acer surviving as a wholly-owned subsidiary of the Company (the “Merger”). This transaction was approved by the Company’s stockholders at a special meeting of its stockholders on September 19, 2017. Also on September 19, 2017, in connection with, and prior to the completion of, the Merger, the Company effected a 1-for-10.355527 reverse stock split of its then outstanding common stock (the “Reverse Split”) and immediately following the Merger, the Company changed its name to “Acer Therapeutics Inc.” pursuant to amendments to its certificate of formation filed with the Texas Secretary of State on September 19, 2017. All share numbers in this report have been adjusted to reflect the Reverse Split.

Following the completion of the Merger, the business conducted by the Company became primarily the business conducted by Private Acer.

Delaware Reincorporation and Subsidiary Merger

On May 15, 2018, the Company changed its state of incorporation from the State of Texas to the State of Delaware pursuant to a plan of conversion, dated May 15, 2018. As a result of this reincorporation, the par value of the Company’s preferred stock was changed to $0.0001 from no par value and the par value of the Company’s common stock was reduced to $0.0001 from $0.01.

Immediately following the Reincorporation, the Company’s holding company structure was eliminated by merging wholly-owned subsidiary Private Acer with and into the Company (the “Subsidiary Merger”). The Company was the surviving corporation in connection with the Subsidiary Merger.

Basis of Presentation

The consolidated financial statements include Acer Therapeutics Inc. and, prior to the date of the Subsidiary Merger, its wholly-owned subsidiary, Private Acer. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the U.S., as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).

Liquidity

The Company had an accumulated deficit of $76.3 million and cash and cash equivalents of $12.1 million as of December 31, 2019. Net cash used in operating activities was $29.5 million and $16.6 million for the years ended December 31, 2019 and 2018, respectively. On November 9, 2018, the Company entered into a sales agreement with Roth Capital Partners, LLC, and on March 18, 2020, an amended and restated sales agreement (the “Agreement”) was entered into with JonesTrading Institutional Services LLC and Roth Capital Partners, LLC. The Agreement provides a facility for the offer and sale of shares of common stock from time to time having an aggregate offering price of up to $50 million depending upon market demand, in transactions deemed to be an at-the-market offering (the “ATM Offering”). Any such sales would be effected pursuant to the Company’s registration statement on Form S-3 (File No. 333-228319), declared effective by the SEC on November 21, 2018. As of December 31, 2019, the Company had not sold any shares of common stock under the Agreement. The Company has no obligation to sell any shares of common stock pursuant to the Agreement and may at any time suspend sales pursuant to the Agreement. Each party may terminate the Agreement at any time without liability. The Company’s existing cash and cash equivalents are expected to enable it to continue to evaluate possible next steps with respect to EDSIVO^TM, complete the Acer-001 (UCD) pivotal bioequivalence trial, advance certain of its other development activities, and provide for other working capital purposes, but exclude support for EDSIVO™ development and precommercial activities and the planned osanetant clinical trial.

Management expects to continue to finance operations through the issuance of additional equity or debt securities and/or through strategic collaborations. Any transactions which occur may contain covenants that restrict the ability of management to operate the business and any securities issued may have rights, preferences, or privileges senior to the Company’s common stock and may dilute the ownership of current stockholders of the Company.

Going Concern

The accompanying financial statements have been prepared in conformity with GAAP, which contemplate continuation of the Company as a going concern. The Company has not established a source of revenues and, as such, has been dependent on funding operations through the sale of equity securities. Since inception, the Company has experienced significant losses and incurred negative cash flows from operations. The Company expects to incur further losses over the next several years as it develops its business. The Company has spent, and expects to continue to spend, a substantial amount of funds in connection with implementing its business strategy, including its planned product development efforts and potential precommercial activities.  

As of December 31, 2019, the Company had cash and cash equivalents of $12.1 million. The Company’s cash and cash equivalents available at December 31, 2019 are expected to fund operations through the end of 2020, excluding support for EDSIVO™ development and precommercial activities and the planned osanetant clinical trial.

The Company will need to raise additional capital to fund continued operations some time during 2020. The Company has no commitments for any additional financing and may not be successful in its efforts to raise additional funds or achieve profitable operations. Any amounts raised will be used for further development of the Company’s product candidates, precommercial activities, potential acquisitions of additional product candidates and for other working capital purposes. If the Company is unable to obtain additional capital (which is not assured at this time), its long-term business plan may not be accomplished, and the Company may be forced to cease, reduce, or delay operations.

These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern. The accompanying financial statements do not include any adjustments or classifications that may result from the possible inability of the Company to continue as a going concern.