Nature of Operations and Basis of Presentation

12 Months Ended

Dec. 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 programs: ACER-001 (sodium phenylbutyrate) for the treatment of various inborn errors of metabolism, including urea cycle disorders (“UCDs”) and Maple Syrup Urine Disease (“MSUD”); EDSIVO™ (celiprolol) for the treatment of vascular Ehlers-Danlos syndrome (“vEDS”) in patients with a confirmed type III collagen (COL3A1) mutation; ACER-801 (osanetant) for the treatment of induced Vasomotor Symptoms (“iVMS”); and ACER-2820 (emetine), a host-directed therapy against a variety of infectious diseases, including COVID-19.

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 Food and Drug Administration (“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. In February 2021, the Company submitted a meeting request to the FDA to discuss Acer’s proposed plan to provide sufficient confirmatory evidence. If successful, data provided under the Company’s proposal could potentially satisfy the additional confirmatory evidence needed to support a resubmission of the Company’s NDA, assuming the additional data analysis is positive. There can be no assurance that FDA will accept the Company’s plan or, if accepted, that the resulting data would be adequate to support resubmission, filing or approval of the Company’s NDA. The Company may also conclude at any point that the cost, risk and uncertainty of obtaining that additional data does not justify continuing with the development of EDSIVO™.

Liquidity

The Company had an accumulated deficit of $99.1 million and cash and cash equivalents of $5.8 million as of December 31, 2020. Net cash used in operating activities was $17.0 million and $29.5 million for the years ended December 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.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. From May 19, 2020 through December 31, 2020, during multiple trading days, the Company sold an aggregate of 1,838,957 shares of common stock at an average gross sale price of $3.9228 per share, resulting in gross proceeds of $7.2 million. Proceeds, net of $0.3 million of fees and offering costs were $6.9 million. See Note 11, “Subsequent Events,” regarding additional sales made subsequent to December 31, 2020.

On April 30, 2020, the Company entered into a purchase agreement and registration rights agreement pursuant to which Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $15.0 million of the Company’s common stock. Under the terms and subject to the conditions of the purchase agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $15.0 million of the Company’s common stock. Such sales of common stock by the Company will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on June 8, 2020. The number of shares the Company may sell to Lincoln Park on any single business day in a regular purchase is 50,000, but that amount may be increased up to 100,000 shares, depending upon the market price of the Company’s common stock at the time of sale and subject to a maximum limit of $1.0 million per regular purchase. The purchase price per share for each such regular purchase will be based on prevailing market prices of the Company’s common stock immediately preceding the time of sale as computed under the purchase agreement. In addition to regular purchases, the Company may also direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the purchase agreement. The Company issued 148,148 shares of common stock to Lincoln Park as a commitment fee in connection with entering into the purchase agreement. The $0.4 million fair value of the commitment fee shares was recorded to General and administrative expense along with other costs incurred in connection with entering into the purchase agreement. As of December 31, 2020, the Company had sold 900,000 shares of common stock under its purchase agreement with Lincoln Park at a weighted average price of $2.64 per share, resulting in gross proceeds of $2.4 million. Proceeds, net of $0.2 million of offering costs, were $2.2 million. See Note 11, “Subsequent Events,” regarding additional sales made subsequent to December 31, 2020.

On July 24, 2020, the Company entered into a securities purchase agreement for the sale and issuance of an aggregate of 244,998 shares of the Company’s common stock, for an aggregate purchase price of $0.9 million, in a private placement transaction (“Private Placement”) with certain directors, officers, and employees at a price per share of $3.50. The shares of common stock issued in the Private Placement constitute “restricted securities” under the federal securities laws and are subject to a minimum six-month holding period.

On January 25, 2021, the Company and Relief Therapeutics Holding AG (“Relief”) entered into an option agreement pursuant to which the Company granted Relief an exclusive option to pursue a potential collaboration and license agreement with the Company for development, regulatory approval, and commercialization for ACER-001 for the treatment of UCDs and MSUD. The option agreement provides for a period of time up to June 30, 2021 for the parties to perform additional due diligence and to work toward negotiation and execution of a definitive agreement with respect to the potential collaboration for ACER-001. In consideration for the grant of the exclusivity option, (i) the Company received from Relief an upfront non-refundable payment of $1.0 million, (ii) Relief provided to the Company a 12-month secured loan in the principal amount of $4.0 million, as evidenced by a promissory note the Company issued to Relief, and (iii) the Company granted Relief a security interest in all of its assets to secure performance of the promissory note, as evidenced by a security agreement. The note is repayable in one lump sum within 12 months from issuance and bears interest at a rate equal to 6% per annum. At Relief’s option, the outstanding balance of the $4.0 million loan can be used to offset the $14.0 million payment that may otherwise be payable to the Company from Relief if a definitive agreement is executed. If a definitive agreement with respect to the potential collaboration is not executed by the parties on or before June 30, 2021, the exclusivity option will terminate and the note is repayable by the Company upon maturity. The note contains certain customary events of default (including, but not limited to, default in payment of principal or interest thereunder or a material breach of the security agreement). See Note 11, “Subsequent Events,” regarding the option agreement and $4.0 million 12-month secured loan arrangement with Relief.

The Company’s existing cash and cash equivalents available at December 31, 2020, combined with the funds raised subsequent to December 31, 2020, are expected to fund operations into the third quarter of 2021.

Management expects to continue to finance operations through the issuance of additional equity or debt securities, non-dilutive funding, 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 accounting principles generally accepted in the U.S. (“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 $99.1 million as of December 31, 2020 and expects to incur further losses over the foreseeable future 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, 2020, the Company had cash and cash equivalents of $5.8 million and current liabilities of $6.1 million. The Company’s cash and cash equivalents available at December 31, 2020, combined with the funds raised subsequent to December 31, 2020, are expected to fund operations into the third quarter of 2021.

The Company will need to raise additional capital to fund continued operations in 2021. 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 raising additional capital through either private or public equity or debt financing or non-dilutive funding, 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, which is subject to certain limitations and conditions. The Company has no commitments for any additional financing except for the agreement with Lincoln Park. As noted above, the Company received a 12-month $4.0 million secured loan from Relief in connection with granting Relief an exclusivity option to pursue a potential collaboration and license agreement with the Company for ACER-001. At Relief’s option, the outstanding balance of the $4.0 million loan can be used to offset the payment that may otherwise be payable to the Company from Relief if a definitive agreement is executed. If a definitive agreement is not executed by the parties on or before June 30, 2021, the exclusivity option will terminate and the note will be repayable by the Company upon maturity at January 25, 2022. 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 March 1, 2021. 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.

Basis of Presentation

Any reference in these notes to applicable guidance is meant to refer to the authoritative accounting principles generally accepted in the United States (“U.S.”), as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”).