10-Q 1 mnlo-10q_20190930.htm 10-Q mnlo-10q_20190930.htm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

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 001-38356

 

MENLO THERAPEUTICS INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

45-3757789

(State or other jurisdiction of
incorporation or organization)

 

(I.R.S. Employer
Identification No.)

 

200 Cardinal Way, 2nd Floor

Redwood City, California 94063

(Address of principal executive offices including zip code)

650-486-1416

(Registrant’s telephone number, including area code)

           Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.0001 per share

 

MNLO

 

The Nasdaq Stock Market LLC

 

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 every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

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

Non-accelerated filer

 

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 12b-2 of the Act).

Yes  ☐    No  ☒

As of October 15, 2019, there were 23,983,751 shares of the registrant’s Common Stock, par value $0.0001 per share, outstanding.

 

 

 

 

 


TABLE OF CONTENTS

 

 

 

Page

Part I

Financial Information

4

Item 1.

Unaudited Condensed Financial Statements

4

 

Condensed Balance Sheets

4

 

Condensed Statements of Operations and Comprehensive Loss

5

 

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6

 

Condensed Statements of Cash Flows

8

 

Notes to Unaudited Interim Condensed Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

27

Item 4.

Controls and Procedures

27

 

 

 

Part II

Other Information

28

Item 1

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

61

Item 3.

Defaults Upon Senior Securities

61

Item 4.

Mine Safety Disclosures

61

Item 5.

Other Information

61

Item 6.

Exhibits

62

SIGNATURES

63

 

 

2


 

This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are statements that could be deemed forward-looking statements reflecting the current beliefs and expectations of management with respect to future events or to our future financial performance and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. These statements are often identified by the use of words such as “aim,” “anticipate,” “assume,” “believe,” “contemplate,” “continue,” “could,” “due,” “estimate,” “expect,” “goal,” “intend,” “may,” “objective,” “plan,” “predict,” “potential,” “positioned,” “seek,” “should,” “target,” “will,” “would,” “until,” “if” and similar expressions or variations.

The following factors, among others, including those described in the section titled “Risk Factors” included in this Quarterly Report on Form 10-Q, could cause our future results to differ materially from those expressed in the forward-looking information:

 

our clinical and regulatory development plans for serlopitant, including the timing of the commencement of, and receipt of results from, our ongoing and planned clinical trials and the timing of our submission of an NDA to the FDA for serlopitant;

 

our expectations regarding the potential safety and efficacy of serlopitant;

 

our expectations regarding the potential market size and size of the potential patient populations for serlopitant, if approved or cleared for commercial use;

 

the timing of commencement of future non-clinical studies and clinical trials;

 

our ability to successfully complete clinical trials;

 

our intentions and our ability to establish collaborations or obtain additional funding;

 

the timing or likelihood of regulatory filings and approvals or clearances for our product candidates;

 

the costs of preparing to manufacture serlopitant on a commercial scale;

 

our commercialization, marketing and manufacturing capabilities and expectations;

 

our intentions with respect to the commercialization of serlopitant or any other candidates;

 

the pricing and reimbursement of serlopitant, if approved;

 

the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates, including the projected terms of patent protection;

 

estimates of our expenses, future revenue, capital requirements, our needs for additional financing and our ability to obtain additional capital;

 

our ability to attract and retain key personnel;

 

the impact of laws and regulations;

 

our use of proceeds from our initial public offering and our ongoing at-the-market offering program;

 

our defense of current and any future litigation that may be initiated against us;

 

our financial performance; and

 

developments and projections relating to our competitors and our industry, including competing drugs and therapies.

 

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

 

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We discuss these risks in greater detail in “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Given these uncertainties, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our management’s beliefs and assumptions only as of the date of this Quarterly Report on Form 10-Q. Except as required by law, we assume no obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

3


 

PART I – FINANCIAL INFORMATION

 

Item 1. Unaudited Condensed Financial Statements

 

Menlo Therapeutics Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)

 

 

 

September 30,

2019

 

 

December 31,

2018

 

 

 

(unaudited)

 

 

 

 

 

ASSETS

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

34,244

 

 

$

49,510

 

Short-term investments

 

 

57,112

 

 

 

86,740

 

Prepaid expenses and other current assets

 

 

2,073

 

 

 

3,250

 

Total current assets

 

 

93,429

 

 

 

139,500

 

Long-term investments

 

 

2,004

 

 

 

 

Property and equipment, net

 

 

113

 

 

 

146

 

Prepaid expenses and other long-term assets

 

 

200

 

 

 

282

 

Right-of-use asset

 

 

830

 

 

 

 

Total assets

 

$

96,576

 

 

$

139,928

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

2,992

 

 

$

3,290

 

Accrued expenses and other current liabilities

 

 

5,719

 

 

 

6,254

 

Lease liability

 

 

741

 

 

 

 

Total current liabilities

 

 

9,452

 

 

 

9,544

 

Long term lease liability

 

 

122

 

 

 

 

Other non-current liabilities

 

 

 

 

 

7

 

Total liabilities

 

 

9,574

 

 

 

9,551

 

Commitments and contingencies (see Note 7)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock: $0.0001 par value; 20,000,000 shares authorized at

   September 30, 2019 and December 31, 2018; no shares issued

   and outstanding at September 30, 2019 and December 31, 2018

 

 

 

 

 

 

Common stock: $0.0001 par value; 300,000,000 shares authorized

   at September 30, 2019 and December 31, 2018; 23,983,751 and

   23,233,184 shares issued and outstanding at September 30, 2019 and

   December 31, 2018, respectively

 

 

3

 

 

 

3

 

Additional paid-in capital

 

 

249,805

 

 

 

241,106

 

Accumulated other comprehensive gain (loss)

 

 

35

 

 

 

(96

)

Accumulated deficit

 

 

(162,841

)

 

 

(110,636

)

Total stockholders’ equity

 

 

87,002

 

 

 

130,377

 

Total liabilities and stockholders’ equity

 

$

96,576

 

 

$

139,928

 

 

See accompanying notes.

4


 

Menlo Therapeutics Inc.

Condensed Statements of Operations and Comprehensive Loss

(Unaudited)

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Collaboration and license revenue

 

$

 

 

$

 

 

$

 

 

$

10,640

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

12,622

 

 

 

10,667

 

 

 

42,003

 

 

 

37,913

 

General and administrative

 

 

4,804

 

 

 

3,035

 

 

 

12,309

 

 

 

8,822

 

Total operating expenses

 

 

17,426

 

 

 

13,702

 

 

 

54,312

 

 

 

46,735

 

Loss from operations

 

 

(17,426

)

 

 

(13,702

)

 

 

(54,312

)

 

 

(36,095

)

Interest income and other expense, net

 

 

571

 

 

 

855

 

 

 

2,107

 

 

 

2,243

 

Net loss

 

$

(16,855

)

 

$

(12,847

)

 

$

(52,205

)

 

$

(33,852

)

Other comprehensive loss:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain (loss) on available-for-sale securities

 

 

30

 

 

 

48

 

 

 

131

 

 

 

(50

)

Comprehensive loss

 

$

(16,825

)

 

$

(12,799

)

 

$

(52,074

)

 

$

(33,902

)

Net loss attributable to common stockholders per share,

   basic and diluted

 

$

(0.70

)

 

$

(0.56

)

 

$

(2.20

)

 

$

(1.60

)

Weighted-average number of common shares used to

   compute basic and diluted net loss per share

 

 

23,955,210

 

 

 

22,977,793

 

 

 

23,708,123

 

 

 

21,164,069

 

 

See accompanying notes.

 

 

5


 

Menlo Therapeutics Inc.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share data)

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Other

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Gain (Loss)

 

 

Equity

 

Balance at December 31, 2018

 

23,233,184

 

 

$

3

 

 

$

241,106

 

 

$

(110,636

)

 

$

(96

)

 

$

130,377

 

Issuance of common stock on exercise of stock

   options

 

34,418

 

 

 

 

 

 

83

 

 

 

 

 

 

 

 

 

83

 

Issuance of common stock under Employee Stock

   Purchase Plan

 

46,019

 

 

 

 

 

 

300

 

 

 

 

 

 

 

 

 

300

 

Issuance of common stock under at-the-market

   offering, net of commissions and offering costs

 

358,614

 

 

 

 

 

 

2,632

 

 

 

 

 

 

 

 

 

2,632

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

7

 

 

 

 

 

 

 

 

 

7

 

Stock-based compensation

 

 

 

 

 

 

 

1,019

 

 

 

 

 

 

 

 

 

1,019

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

86

 

 

 

86

 

Net loss

 

 

 

 

 

 

 

 

 

 

(18,873

)

 

 

 

 

 

(18,873

)

Balance at March 31, 2019

 

23,672,235

 

 

$

3

 

 

$

245,147

 

 

$

(129,509

)

 

$

(10

)

 

$

115,631

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock on exercise of stock

   options

 

25,746

 

 

 

 

 

 

71

 

 

 

 

 

 

 

 

 

71

 

Issuance of common stock under at-the-market

   offering, net of commissions and offering costs

 

246,416

 

 

 

 

 

 

1,864

 

 

 

 

 

 

 

 

 

1,864

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

5

 

 

 

 

 

 

 

 

 

5

 

Stock-based compensation

 

 

 

 

 

 

 

1,068

 

 

 

 

 

 

 

 

 

1,068

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

15

 

 

 

15

 

Net loss

 

 

 

 

 

 

 

 

 

 

(16,477

)

 

 

 

 

 

(16,477

)

Balance at June 30, 2019

 

23,944,397

 

 

$

3

 

 

$

248,155

 

 

$

(145,986

)

 

$

5

 

 

$

102,177

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock on exercise of stock

   options

 

183

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under Employee Stock

   Purchase Plan

 

30,679

 

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

129

 

Issuance of common stock under at-the-market

   offering, net of commissions and offering costs

 

8,492

 

 

 

 

 

 

42

 

 

 

 

 

 

 

 

 

42

 

Vesting of early exercised stock options

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

1,473

 

 

 

 

 

 

 

 

 

1,503

 

Unrealized gain on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

30

 

 

 

30

 

Net loss

 

 

 

 

 

 

 

 

 

 

(16,855

)

 

 

 

 

 

(16,855

)

Balance at September 30, 2019

 

23,983,751

 

 

$

3

 

 

$

249,805

 

 

$

(162,841

)

 

$

35

 

 

$

87,002

 

 

See accompanying notes.

6


 

Menlo Therapeutics Inc.

Condensed Statements of Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(Unaudited)

(in thousands, except share data)

 

 

Series A Convertible Preferred Stock

 

 

Series B Convertible Preferred Stock

 

 

Series C Convertible Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Accumulated

 

 

Other

Comprehensive

 

 

Stockholders’

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Gain (Loss)

 

 

Equity

 

Balance at December 31, 2017

 

14,300

 

 

$

14,183

 

 

 

14,106,583

 

 

$

44,820

 

 

 

11,854,463

 

 

$

50,324

 

 

 

5,298,593

 

 

$

1

 

 

$

2,207

 

 

$

(59,191

)

 

$

(51

)

 

$

(57,034

)

Conversion of preferred

   stock to common stock

 

(14,300

)

 

 

(14,183

)

 

 

(14,106,583

)

 

 

(44,820

)

 

 

(11,854,463

)

 

 

(50,324

)

 

 

9,629,405

 

 

 

1

 

 

 

109,326

 

 

 

 

 

 

 

 

 

109,327

 

Issuance of common stock

   under public offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,050,000

 

 

 

1

 

 

 

125,388

 

 

 

 

 

 

 

 

 

125,389

 

Vesting of early exercised

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

822

 

 

 

 

 

 

 

 

 

822

 

Unrealized gain on

   available-for-sale

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(151

)

 

 

(151

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,657

)

 

 

 

 

 

(12,657

)

Balance at March 31, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,977,998

 

 

$

3

 

 

$

237,749

 

 

$

(71,848

)

 

$

(202

)

 

$

165,702

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

   under public offering, net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27

 

 

 

 

 

 

 

 

 

27

 

Vesting of early exercised

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8

 

 

 

 

 

 

 

 

 

8

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

746

 

 

 

 

 

 

 

 

 

746

 

Unrealized gain on

   available-for-sale

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

53

 

 

 

53

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,347

)

 

 

 

 

 

(8,347

)

Balance at June 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

22,977,998

 

 

$

3

 

 

$

238,530

 

 

$

(80,195

)

 

$

(149

)

 

$

158,189

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock

   on exercise of stock

   options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

254,186

 

 

 

 

 

 

494

 

 

 

 

 

 

 

 

 

494

 

Vesting of early exercised

   stock options

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

994

 

 

 

 

 

 

 

 

 

994

 

Unrealized gain on

   available-for-sale

   securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

48

 

 

 

48

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,847

)

 

 

 

 

 

(12,847

)

Balance at September 30, 2018

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,232,184

 

 

$

3

 

 

$

240,024

 

 

$

(93,042

)

 

$

(101

)

 

$

146,884

 

 

See accompanying notes.

 

 

7


 

Menlo Therapeutics Inc.

Condensed Statements of Cash Flows

(Unaudited)

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(52,205

)

 

$

(33,852

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

43

 

 

 

10

 

Amortization of right-of-use-asset

 

 

484

 

 

 

 

Amortization of premium on investment securities

 

 

(554

)

 

 

(551

)

Stock-based compensation expense

 

 

3,560

 

 

 

2,564

 

Change in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

 

 

 

786

 

Prepaid expenses and other current assets

 

 

1,177

 

 

 

1,763

 

Prepaid expenses and other long-term assets

 

 

82

 

 

 

(354

)

Accounts payable

 

 

(298

)

 

 

240

 

Accrued expenses and other current liabilities

 

 

(517

)

 

 

1,819