Nature of Operations and Basis of Presentation

3 Months Ended

Mar. 31, 2020

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 four clinical-stage candidates: emetine hydrochloride (“emetine”) for the treatment of patients with COVID-19; 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.

Liquidity 

The Company had an accumulated deficit of $81.2 million and cash and cash equivalents of $7.0 million as of March 31, 2020. Net cash used in operating activities was $5.1 million and $9.8 million for the three months ended March 31, 2020 and 2019, 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 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 (“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 March 31, 2020, 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 available at March 31, 2020 are expected to fund operations into the fourth quarter of 2020 and enable it to advance emetine through Investigational New Drug Application (“IND”) submission, continue to evaluate possible next steps with respect to EDSIVO^TM, advance ACER-001 toward New Drug Application (“NDA”) submission, advance osanetant toward IND submission, and provide for other working capital purposes, excluding support for a planned emetine clinical trial or any other development or precommercial activities.

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 has an accumulated deficit of $81.2 million as of March 31, 2020 and 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 March 31, 2020, the Company had cash and cash equivalents of $7.0 million and current liabilities aggregating to $1.8 million. The Company’s cash and cash equivalents available at March 31, 2020 are expected to fund operations into the fourth quarter of 2020, excluding support for a planned emetine clinical trial and support for EDSIVO™ development and precommercial activities.

The Company will need to raise additional capital in 2020 to fund continued operations.  The Company may not be successful in its efforts to raise additional funds or achieve profitable operations. The Company continues to explore potential opportunities and alternatives to obtain the additional resources that will be necessary to support its ongoing operations through and beyond the next 12 months, including cutting expenses where possible and raising additional capital through either private or public equity or debt financing as well as using its ATM facility and/or its $15.0 million equity line facility entered into on April 30, 2020, with Lincoln Park Capital Fund, LLC (“Lincoln Park”) (once sales can commence to Lincoln Park under the purchase agreement), which is subject to certain limitations and conditions. The Company has no commitments for any additional financing. Any amounts raised will be used for further development of its product candidates, precommercial activities, potential acquisitions of additional product candidates, and for other working capital purposes.

If the Company is unable to obtain additional funding to support its current or proposed activities and operations, it may not be able to continue its operations as proposed, which may require it to suspend or terminate any ongoing development activities, modify its business plan, curtail various aspects of its operations, cease operations, or seek relief under applicable bankruptcy laws. In such event, the Company’s stockholders may lose a substantial portion or even all of their investment.

These factors individually and collectively raise substantial doubt about the Company’s ability to continue as a going concern for twelve months from the date these financial statements are available, or May 14, 2021. The accompanying unaudited condensed 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.

Merger and Reincorporation

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, 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”). 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. Following the completion of the Merger, the business conducted by the Company became primarily the business conducted by Private Acer. For accounting and financial reporting purposes, Private Acer was considered to have acquired the Company in the 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. Immediately following the reincorporation, the holding company structure was eliminated by merging wholly-owned subsidiary Private Acer with and into the Company. The Company was the surviving corporation in connection with the subsidiary merger.

Basis of Presentation

The accompanying unaudited condensed financial statements are unaudited and have been prepared in accordance with GAAP for interim financial information and with the instructions to Form 10-Q and Regulation S-X. The unaudited condensed financial statements have been prepared on the same basis as the audited annual financial statements and reflect, in the opinion of management, all adjustments of a normal and recurring nature that are necessary for the fair presentation of the Company’s financial position, results of operations, stockholders’ equity and cash flows for the periods presented. The results of operations for the three months ended March 31, 2020 are not necessarily indicative of the results to be expected for the year ending December 31, 2020 or for any other future annual or interim period. The condensed balance sheet as of December 31, 2019, included herein, was derived from the audited financial statements as of that date but does not include all disclosures required by GAAP. These unaudited financial statements should be read in conjunction with the Company’s audited financial statements included in its Annual Report on Form 10-K for the year ended December 31, 2019.

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 GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).