UNITED STATES SECURITIES AND EXCHANGE COMMISSION
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FORM
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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THERIVA BIOLOGICS, INC.
NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). In particular, statements contained in this Quarterly Report on Form 10-Q, including but not limited to, statements regarding the timing of our clinical trials, the development and commercialization of our pipeline products, the sufficiency of our cash, our ability to finance our operations and business initiatives and obtain funding for such activities and the timing of any such financing, our future results of operations and financial position, business strategy and plans prospects, or costs and objectives of management for future research, development or operations, are forward-looking statements. These forward-looking statements relate to our future plans, objectives, expectations and intentions and may be identified by words such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “seeks,” “goals,” “estimates,” “predicts,” “potential” and “continue” or similar words. Readers are cautioned that these forward-looking statements are based on our current beliefs, expectations and assumptions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those identified below, under Part II, Item 1A. “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q, and those identified under Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2022 filed on March 30, 2023 (the “2022 Form 10-K”). Therefore, actual results may differ materially and adversely from those expressed, projected or implied in any forward-looking statements. We undertake no obligation to revise or update any forward-looking statements for any reason.
NOTE REGARDING COMPANY REFERENCES
Throughout this Quarterly Report on Form 10-Q, “Theriva Biologics,” the “Company,” “we,” “us” and “our” refer to Theriva Biologics, Inc. and our subsidiary Theriva Biologics, S.L. (“VCN”, formerly known as VCN Biosciences, S.L.).
NOTE REGARDING TRADEMARKS
All trademarks, trade names and service marks appearing in this Quarterly Report on Form 10-Q are the property of their respective owners.
THERIVA BIOLOGICS, INC.
FORM 10-Q
TABLE OF CONTENTS
2
PART I–FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
Theriva Biologics, Inc. and Subsidiaries
Consolidated Balance Sheets
(In thousands except share and par value amounts)
| March 31, 2023 |
| December 31, 2022 | |||
Assets |
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Current Assets |
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Cash and cash equivalents | $ | | $ | | ||
Prepaid expenses and other current assets |
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Total Current Assets |
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Non-Current Assets | ||||||
Property and equipment, net |
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Restricted cash | | | ||||
Right of use asset | | | ||||
In-process research and development |
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Goodwill | | | ||||
Deposits and other assets |
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Total Assets | $ | | $ | | ||
Liabilities and Stockholders‘ Equity |
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Current Liabilities: |
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Accounts payable | $ | | $ | | ||
Accrued expenses |
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Accrued employee benefits |
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Contingent consideration, current portion | | | ||||
Loans payable-current | | | ||||
Operating lease liability |
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Total Current Liabilities |
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Non-current Liabilities | ||||||
Non-current contingent consideration | | | ||||
Loan Payable - Long term | | | ||||
Deferred tax liabilities, net | | | ||||
Lease liability - Long term | | | ||||
Total Liabilities |
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Commitments and Contingencies |
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Temporary Equity | ||||||
Series C convertible preferred stock, $ | | | ||||
Series D convertible preferred stock, $ |
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Stockholders’ Equity: |
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Common stock, $ |
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Additional paid-in capital |
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Treasury stock at cost, | ( | ( | ||||
Accumulated other comprehensive loss | ( | ( | ||||
Accumulated deficit |
| ( |
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Total Stockholders’ Equity |
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Total Liabilities and Stockholders’ Equity | $ | | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
3
Theriva Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share amounts)
(Unaudited)
| For the three months ended March 31, | |||||
| 2023 |
| 2022 | |||
Operating Costs and Expenses: |
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General and administrative | $ | |
| $ | | |
Research and development |
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Total Operating Costs and Expenses |
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Loss from Operations |
| ( |
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Other Income (Expense): | ||||||
Exchange income (loss) |
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Interest income |
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Total Other Income (Expense) |
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Net Loss before income taxes | ( | ( | ||||
Income tax benefit | | | ||||
Net Loss Attributable to Common Stockholders | $ | ( | $ | ( | ||
Net Loss Per Share - Basic and Dilutive | $ | ( | $ | ( | ||
Weighted average number of shares outstanding during the period - Basic and Dilutive |
| |
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Net Loss | ( | ( | ||||
Gain on foreign currency translation | | | ||||
Total comprehensive loss | $ | ( | $ | ( |
See accompanying notes to unaudited condensed consolidated financial statements.
4
Theriva Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Stockholders Equity (Deficit)
(In thousands, except share and par value amounts)
Common Stock $0.001 Par Value | Accumulated | |||||||||||||||||||
Additional | Other | Total | ||||||||||||||||||
Paid-in | Accumulated | Comprehensive | Stockholders’ | |||||||||||||||||
| Shares |
| Amount |
| Capital |
| Deficit |
| income |
| Treasury Stock |
| Equity | |||||||
Balance at December 31, 2022 | | $ | | $ | | $ | ( | $ | ( | ( | $ | | ||||||||
Stock-based compensation | | | | | | — | | |||||||||||||
Translation gains | | | | | | — | | |||||||||||||
Net loss | | | | ( | | — | ( | |||||||||||||
Balance at March 31, 2023 | | $ | | $ | | $ | ( | $ | ( | ( | $ | |
Common Stock $0.001 Par Value | Accumulated | ||||||||||||||||
| Other | Total | |||||||||||||||
Accumulated | Comprehensive | Stockholders’ | |||||||||||||||
| Shares |
| Amount |
| APIC |
| Deficit |
| income |
| Equity | ||||||
Balance at December 31, 2021 | | $ | | $ | | $ | ( | $ | | $ | | ||||||
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Stock-based compensation | | | | | |
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Issuance of Common Stock for VCN Acquisition | | | | | |
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Translation gains | | | | | |
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Net loss | | | | ( | | ( | |||||||||||
Balance at March 31, 2022 |
| |
| $ | |
| $ | |
| $ | ( |
| $ | |
| $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
5
Theriva Biologics, Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
For the Three Months Ended March 31, | ||||||
| 2023 |
| 2022 | |||
Cash Flows From Operating Activities: |
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Net loss | $ | ( | $ | ( | ||
Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Income tax benefit | ( |
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Change in fair value of contingent consideration |
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Right of use asset | | | ||||
Depreciation |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
| ( |
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Accounts payable |
| ( |
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Accrued expenses |
| |
| ( | ||
Accrued employee benefits |
| ( |
| ( | ||
Lease liability |
| ( |
| ( | ||
Net Cash Used In Operating Activities |
| ( |
| ( | ||
Cash Flows from Investing Activities |
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Purchase of property and equipment | ( | | ||||
Cash paid for business combination, net of cash acquired | ( | |||||
Pre-acquisition loan to VCN | ( | |||||
Net Cash Used in Investing Activities | ( | ( | ||||
Cash Flows from Financing Activities |
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Payment of debt | ( | ( | ||||
Net Cash Provided by Financing Activities | ( | ( | ||||
Effects of exchange rate changes on cash and cash equivalents | ( | | ||||
Net decrease in cash and cash equivalents and restricted cash | ( | ( | ||||
Cash and cash equivalents and restricted at the beginning of this period |
| |
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Cash and cash equivalents and restricted cash at the end of this period | $ | | $ | | ||
Reconciliation of cash, cash equivalents, and restricted cash reported in the statement of financial position | ||||||
Cash and cash equivalents | $ | | $ | | ||
Restricted cash included in other long-term assets | | | ||||
Total cash, cash equivalents, and restricted cash shown in the statement of cash flows | $ | | $ | | ||
Supplemental non-cash investing and financing activities: |
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Right of use assets obtained in exchange for lease liabilities | $ | | $ | | ||
Fair value of contingent consideration in a business combination | $ | | $ | | ||
Fair value of equity issued as consideration in a business combination | $ | $ | | |||
Effective settlement of pre-closing VCN financing | $ | $ | |
See accompanying notes to unaudited condensed consolidated financial statements.
6
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization, Nature of Operations and Basis of Presentation
Description of Business
Theriva Biologics, Inc. (the “Company” or “Theriva Biologics”) is a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the acquisition of Theriva Biologics S.L. (“VCN”, formerly known as VCN Biosciences, S.L.) (the “Acquisition”), described in more detail below, the Company transitioned its strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, improve access of co-administered cancer therapies to the tumor, and promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, the Company’s focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases in areas which included our clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI), and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. On October 12, 2022, the Company changed its name to Theriva Biologics, Inc. In connection with the name change, its common stock began trading on the NYSE American LLC under the new ticker symbol “TOVX” effective as of the opening of trading hours on October 13, 2022. Effective November 15, 2022, our acquired subsidiary VCN Biosciences, S.L. rebranded to Theriva Biologics, S.L. without other changes to its corporate structure.
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Form 10-K. The interim results for the three months ended March 31, 2023 are not necessarily indicative of results for the full year.
The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. The Company believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. As of March 31, 2023 the Company has
Business Combination
The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
As a result of the acquisition of VCN (see Note 3), the Company recorded
7
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Organization, Nature of Operations and Basis of Presentation – (continued)
IPR&D
IPR&D assets represent the fair value assigned to technologies that the Company acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to have indefinite-lives until the completion or abandonment of the associated research and development projects. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed to have definite lives and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.
During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis on October 1, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that could indicate an impairment. The impairment test consists of a comparison of the estimated fair value of the IPR&D with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess.
Goodwill
The Company tests the carrying amounts of goodwill for recoverability on an annual basis on October 1 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations.
Contingent Consideration
Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets.
8
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
2. Summary of Significant Accounting Policies
Long-Lived Assets
Long-lived assets include property, equipment and right-of-use assets. Management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset.
Recent Accounting Pronouncements and Developments
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company has adopted ASU 2020-06 on January 1, 2022. The ASU impacted the analysis of the accounting treatment for the issuance of Convertible Preferred Series C & D stock during the third quarter of 2022, specifically the cash conversion and beneficial conversion features.
3. BUSINESS COMBINATION
Summary
On March 10, 2022, the Company completed the acquisition of all the outstanding shares of Theriva Biologics, S.L , which at the time was known as VCN Biosciences, S.L.(the “VCN Shares”) from the shareholders of VCN. VCN is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. Theriva’s lead product candidate, VCN-01, is being studied in a Company sponsored Phase 2 clinical trial for pancreatic cancer with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC) , retinoblastoma, brain tumors and pancreatic and ovarian cancers. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care chemotherapies or immunotherapies, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment. Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. Theriva has the exclusive rights to four patent families for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL) and with Hospital Sant Joan de Deu (HSJD), with a number of additional patents pending. As consideration for the purchase of the VCN Shares and pursuant to the terms of a purchase agreement that the parties entered into (the “Purchase Agreement”), the Company paid $
9
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
3. BUSINESS COMBINATION - (continued)
In anticipation of the Acquisition, prior to the Closing, the Company loaned VCN $
Total purchase consideration including cash, common shares and contingent consideration was valued at approximately $
Cash paid at Closing |
| $ | |
Receivable from VCN “effectively settled” |
| | |
Fair value of common shares issued |
| | |
Fair value of contingent consideration |
| | |
$ | |
As of March 31, 2023 and December 31, 2022, the fair value of the contingent consideration was approximately $
The allocation of the fair value of the VCN acquisition updated for measurement period and other adjustments is shown in the table below.
| Estimated fair value | ||
($in thousands) | |||
Cash and cash equivalents | $ | | |
Receivables |
| | |
Property and equipment |
| | |
In-process research and development intangible asset |
| | |
Goodwill |
| | |
Deferred tax assets (liabilities), net |
| ( | |
Accounts payable |
| ( | |
Accrued expenses |
| ( | |
Accrued employee benefits |
| ( | |
Loan Payable-current |
| ( | |
Other long-term liabilities |
| ( | |
Total purchase consideration | $ | |
The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the Acquisition, we recognized $
Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities. Goodwill of $
Theriva Biologics, S.L. operations recorded a net loss of $
10
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
3. BUSINESS COMBINATION - (continued)
During the year ended December 31, 2022, the Company recognized the following measurement period adjustments:
● | estimate of acquired liabilities resulting in a $ |
● | estimate in the receivable from the prior owner resulting in a $ |
● | estimated fair value of its in-process R&D resulting in a $ |
The cumulative impact of the re-measurements as of the year ended December 31, 2022, was a reduction in accrued liabilities of $
Pro Forma Consolidated Financial Information (unaudited)
The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the VCN Acquisition had been completed as of January 1, 2022 (in thousands):
Three months Ended March 31 | |||||||
(in thousands) |
| 2023 |
| 2022 | |||
Net revenues | | $ | | ||||
Net loss | $ | ( | $ | ( |
Transaction Costs
In conjunction with the Acquisition, the Company incurred approximately $
4. Goodwill and Intangibles
The following table provides the Company’s Goodwill as of March 31, 2023.
| Goodwill (in thousands) | ||
Balance at December 31, 2021 | $ | | |
Goodwill from Acquisition of VCN |
| | |
Goodwill impairment loss |
| — | |
Measurement Period Adjustments | ( | ||
Effects of exchange rates | ( | ||
Balance at December 31, 2022 | | ||
Effects of exchange rates | | ||
Balance at March 31, 2023 | $ | |
11
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
4. Goodwill and Intangibles – (continued)
The following table provides the Company’s in-process R&D as of March 31, 2023.
| In-process | ||
R&D (in thousands) | |||
Balance at December 31, 2021 | $ | | |
Acquired IPR&D |
| | |
Measurement Period Adjustments | | ||
Effects of exchange rates | ( | ||
Balance at December 31, 2022 |
| | |
Effects of exchange rates | | ||
Balance at March 31, 2023 | $ | |
During the quarter ending September 30, 2022, and the quarter ended December 31, 2022, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and the Company deemed this to be a trigger event for impairment. The Company performed an impairment analysis and concluded that the Goodwill and IPR&D was not impaired as of September 30, 2022, and December 31, 2022. There was no trigger event during the three months ended March 31, 2023.
5. Fair Value of Financial Instruments
Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified on a three-tier hierarchy as follows:
● | Level 1 inputs: Quoted prices (unadjusted) for identical assets or liabilities in active markets; |
● | Level 2 inputs: Inputs, other than quoted prices, that are observable either directly or indirectly; and |
● | Level 3 inputs: Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions. |
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.
The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these instruments.
In connection with the Acquisition of VCN, the Company will be required pay up to $
12
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
5. Fair Value of Financial Instruments – (continued)
The fair value of financial instruments measured on a recurring basis is as follows:
| As of March 31, 2023 | |||||||||
Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||
Liabilities: |
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Contingent consideration | $ | |
| — |
| — | $ | |
| As of December 31, 2022 | |||||||||
Description |
| Total |
| Level 1 |
| Level 2 |
| Level 3 | ||
Liabilities: |
|
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|
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Contingent consideration | $ | |
| — |
| — | $ | |
The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:
As of March 31, 2023 | ||||||
Valuation | Significant | Weighted Average | ||||
| Methodology |
| Unobservable Input |
| (range, if applicable) | |
Contingent Consideration |
| Discounted Cash Flows |
| Milestone dates |
| 2023-2028 |
| ||||||
|
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| Discount rate |
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| Weighted Average Discount rate |
| ||
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| Probability of Occurrence (periodic for each Milestone) |
| ||
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| Probability of occurrence (cumulative through each Milestone) |
|
| As of December 31, 2022 | |||||
Valuation | Significant | Weighted Average | ||||
| Methodology |
| Unobservable Input |
| (range, if applicable) | |
Contingent Consideration |
| Discounted Cash Flows |
| Milestone dates |
| 2023-2028 |
|
| Discount rate | ||||
Weighted Average Discount rate | ||||||
Probability of Occurrence (periodic for each Milestone) | ||||||
|
| Probability of occurrence (cumulative through each Milestone) |
13
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
6. Selected Balance Sheet Information
Prepaid expenses and other current assets (in thousands)
March 31, | December 31, | |||||
| 2023 |
| 2022 | |||
Prepaid clinical research organizations | $ | | $ | | ||
Prepaid manufacturing expenses | | | ||||
Prepaid insurance | | | ||||
Receivable from prior owner | | | ||||
Prepaid consulting, subscriptions and other expenses | | | ||||
VAT receivable | | | ||||
Total | $ | | $ | |
Prepaid clinical research organizations (CROs) expense is classified as a current asset. The Company makes payments to the CROs based on agreed upon terms that include payments in advance of study services. Receivable from prior VCN owner includes amounts due related to research and development tax rebates, VAT and corporate taxes.
Property and equipment, net (in thousands)
| March 31, | December 31, | ||||
| 2023 |
| 2022 | |||
Computers and office equipment | $ | | $ | | ||
Other Property, Plant and Equipment | | | ||||
Leasehold improvements |
| |
| | ||
Software |
| |
| | ||
|
| |
| | ||
Less: accumulated depreciation and amortization |
| ( |
| ( | ||
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| ||||
Total | $ | | $ | |
Accrued expenses (in thousands)
| March 31, | December 31, | ||||
| 2023 |
| 2022 | |||
Accrued manufacturing costs | $ | | $ | | ||
Accrued clinical consulting services |
| |
| | ||
Accrued vendor payments | | | ||||
Total | $ | | $ | |
Accrued employee benefits (in thousands)
| March 31, | December 31, | ||||
| 2023 |
| 2022 | |||
Accrued bonus expense | $ | | $ | | ||
Accrued vacation expense | | | ||||
Accrued compensation expense |
| |
| | ||
|
|
| ||||
Total | $ | | $ | |
14
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
7. Stock-Based Compensation
Stock Incentive Plans
On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to
On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to
On September 17, 2020, the stockholders approved and adopted the 2020 Stock Incentive Plan (“2020 Stock Plan”) for the issuance of up to
The Company has applied fair value accounting for all stock-based payment awards since inception. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. There were
Expected dividends —The Company has never declared or paid dividends on its common stock 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 a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The expected volatility assumption is derived from the historical volatility of the Company’s common stock over a period approximately equal to the expected term.
Risk-free interest rate—The assumed risk free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option.
Expected life of the option—The period of time that the options granted are expected to remain unexercised. Options granted during the year have a maximum term of seven years. The Company estimates the expected life of the option term based on the weighted average life between the dates that options become fully vested and the maximum life of options granted.
15
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
7. Stock-Based Compensation – (continued)
The Company records stock-based compensation based upon the stated vesting provisions in the related agreements. The vesting provisions for these agreements have various terms as follows:
● | immediate vesting, |
● | in full on the one-year anniversary date of the grant date, |
● | half vesting immediately and the remaining over three years, |
● | quarterly over three years, |
● | annually over three years, |
● | one-third immediate vesting and the remaining annually over two years, |
● | one-half immediate vesting and the remaining over nine months, |
● | one-quarter immediate vesting and the remaining over three years, |
● | one-quarter immediate vesting and the remaining over 33 months, |
● | monthly over one year, and |
● | monthly over three years. |
16
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
7. Stock-Based Compensation – (continued)
A summary of stock option activity for the three months ended March 31, 2023 and the year ended December 31, 2022 is as follows:
|
| Weighted |
| Weighted Average |
| Aggregate | ||||
Average Exercise | Remaining | Intrinsic | ||||||||
| Options |
| Price |
| Contractual Life |
| Value | |||
Balance - December 31, 2021 |
| | $ | |
| $ | — | |||
|
|
|
| |||||||
Granted |
| | |
|
|
|
| |||
Exercised |
| — | — |
|
| |||||
Expired |
| ( | |
|
|
|
| |||
Forfeited |
| ( | |
|
|
|
| |||
Balance - December 31, 2022 | | | — | |||||||
Granted | — | — | ||||||||
Exercised | — | — | ||||||||
Expired | ( | | ||||||||
Forfeited | — | — | ||||||||
|
|
|
| |||||||
Balance - March 31, 2023 - outstanding |
| | $ |
| $ | | ||||
|
|
|
|
| ||||||
Balance - March 31, 2023 - exercisable |
| | $ |
| $ | | ||||
|
| |||||||||
Grant date fair value of options granted – three months ended March 31, 2023 | $ | — |
|
|
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| ||||
|
| |||||||||
Weighted average grant date fair value – three months ended March 31, 2023 | $ | — |
|
|
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| ||||
|
| |||||||||
Grant date fair value of options granted – year ended December 31, 2022 | $ | |
|
|
|
| ||||
|
| |||||||||
Weighted average grant date fair value – year ended December 31, 2022 | $ | |
|
|
|
|
Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the three months ended March 31, 2023 and 2022 was $
As of March 31, 2023, total unrecognized stock-based compensation expense related to stock options was $
The FASB’s guidance for stock-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company did not record any excess tax benefits during the three months ended March 31, 2023 and 2022.
17
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
8. Stock Warrants
On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $
On November 16, 2020, the exercise price of the Warrants was reduced from $
If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise.
18
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
8. Stock Warrants – (continued)
On August 3, 2022, the Company announced the exercise price of Warrants issued by the Company in October 2018 was reduced from $
A summary of all warrant activity for the Company for the quarter ended March 31, 2023 and the year ended December 31, 2022 is as follows:
Weighted Average | |||||||
| Number of |
| Weighted Average |
| Remaining | ||
Warrants | Exercise Price |
| Contractual Life | ||||
Balance at December 31, 2021 |
| | | ||||
Granted |
| |
| | |||
Exercised |
| |
| | |||
Forfeited |
| ( |
| | |||
Balance at December 31, 2022 |
| | $ | | |||
Granted | | | |||||
Exercised | | | |||||
Forfeited | | | |||||
Balance at March 31, 2023 | $ |
On December 26, 2017, the Company entered into a consulting agreement for advisory services for a period of six months. As compensation for such services, the consultant was paid an upfront payment, a monthly fee and on January 24, 2018 was issued a warrant exercisable for
9. Net Loss per Share
Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding including the effect of common share equivalents. Diluted net loss per share assumes the issuance of potential dilutive common shares outstanding for the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive. Net loss attributable to common stockholders for the three months ended March 31, 2023 was $
19
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
10. Related Party
On December 15, 2022, the Company approved the retention of MaryAnn Shallcross, the wife of Steven Shallcross, as director of Clinical Operations, for compensation of $
11. Common and Preferred Stock
Series C and D Preferred Stock
On July 29, 2022, the Company closed a private placement offering pursuant to the terms of a Securities Purchase Agreement dated as of July 28, 2022 entered into with MSD Credit Opportunity Master Fund, L.P.(the “Securities Purchase Agreement”), pursuant to which the Company issued and sold
The Company included certain proposals at its 2022 annual meeting of stockholders, including to consider (i) an amendment to the Company’s Articles of Incorporation, as amended (the “Charter”), to change the name of the Company to “Theriva Biologics, Inc.” (the “Name Change”), (ii) an amendment to the Articles of Incorporation, as amended to increase the number of authorized shares of Common Stock from
Pursuant to the Securities Purchase Agreement, the Company filed certificates of designation (the “Certificates of Designation”) with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series C Preferred Stock and Series D Preferred Stock. The Certificate of Designation for the Series C Preferred Stock provides, in particular, that the Series C Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast votes on an as converted to Common Stock basis on the Stockholder Items. The Certificate of Designation for the Series D Preferred Stock provides, in particular, that the Series D Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast
The holders of Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock. The Conversion Price may be adjusted pursuant to the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation).
The Series C Preferred Stock and Series D Preferred Stock is classified as temporary equity as a result of the deemed liquidation provision. Transaction expenses paid to third parties will be charged to temporary equity and will not be accreted as deemed dividends until redemption becomes probable.
20
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
11. Common and Preferred Stock – (continued)
In order to comply with Section 122 of the NYSE American Company Guide, on August 9, 2022 the Company and the holder of the Company’s Series C preferred stock and Series D preferred stock amended the Securities Purchase Agreement entered into between them on July 28, 2022 to provide that the holder may only submit
B. Riley Securities Sales Agreement
On August 5, 2016, the Company entered into the Sales Agreement (the “Original Sales Agreement”) with FBR Capital Markets & Co. (now known as B. Riley Securities) to act as a sales agent, which agreement was amended and restated on February 9, 2021 to add Alliance Global Partners as a sale agent. The amended and restated Sales Agreement (the “Amended and Restated Sales Agreement”) enables the Company to offer and sell shares of common stock from time to time through B. Riley Securities, Inc. and A.G.P./Alliance Global Partners as the Company’s sales agent. Sales of common stock under the Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act. The sales agents are entitled to receive a commission rate of up to
12. Indebtedness
As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rates loans (
| March 31, 2023 |
| March 31, 2023 |
| December 31, 2022 |
| December 31, 2022 | |||||
Current | Non-current | Current | Non-current | |||||||||
|
|
|
|
|
|
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| |||||
NEBT Loan | | $ | | | | |||||||
RETOS 2015 | | | | | ||||||||
$ | | $ | | $ | | $ | |
The difference between the fair value of these liabilities (when relevant conditions associated with the grants are met) and the amount received is recognized as a government grant and classified as other operating income in the statement of profit and loss.
A maturity analysis of the debt as of March 31, 2023 is as follows (amounts in thousands of dollars):
2023 |
| | |
2024 |
| | |
2025 |
| | |
2026 |
| | |
2027 |
| | |
2028 |
| | |
Total |
| |
21
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
13. Commitments and Contingencies
The Company’s existing lease as of March 31, 2023 for its U.S. location is classified as an operating lease. As of March 31, 2023, the Company has
The Company also leases research and office facilities in Barcelona Spain for its
Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the quarter ended March 31, 2023 and 2022 approximated $
A maturity analysis of our operating leases as of March 31, 2023 is as follows (amounts in thousands of dollars):
Future undiscounted cash flow for the years ending March 31, |
|
| |
2023 | | ||
2024 | | ||
2025 | | ||
2026 | | ||
2027 | | ||
Total | | ||
Discount factor | ( | ||
Lease liability | | ||
Lease liability – current | ( | ||
Lease liability – long term | $ | |
22
Theriva Biologics, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
13. Commitments and Contingencies – (continued)
Risks and Uncertainties
The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in its clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak. Further, although the Company have not experienced any material adverse effects on its business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could impact demand or pricing manufacturing of its drug candidates or services providers, foreign exchange rates or employee wages. The Company is actively monitoring the effects these disruptions and increasing inflation could have on its operations.
Through the VCN Acquisition, the Company has operations in Spain and may conduct research and development, manufacturing, and clinical trials in Western European countries. The invasion of Ukraine by Russia and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt our supply chain, and despite the fact that we currently do not plan any clinical trials in Eastern Europe, may adversely impact the cost and conduct of R&D, manufacturing, and international clinical trials of our product candidates.
14. Subsequent Events
Effective May 10, 2023, The Company entered into a Separation Agreement and Release with Frank Tufaro (the “Separation Agreement”) and a consulting agreement with Mr. Tufaro. Mr. Tufaro had entered into an employment agreement with the Company on March 22, 2022 (the “Employment Agreement”) to serve as our Chief Operating Officer.
In accordance with the terms of the Employment Agreement, the Separation Agreement provides for (i) the payment to Mr. Tufaro of a total of $
The Consulting Agreement has a term of six months unless sooner terminated. Either party may terminate the Consulting Agreement without cause at any time upon thirty (days’ prior written notice or with cause immediately. Mr. Tufaro will be compensated a set daily rate for each full day that he provides consulting services, pro-rated for any days services are provided less than eight hours.
23
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q, and our audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in our 2022 Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Our actual results and the timing of events could differ materially from those expressed or implied by the forward-looking statements due to important factors and risks including, but not limited to, those set forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of our 2022 Form 10-K.
Overview
We are a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the Acquisition of Theriva Biologics, S.L. (“VCN”, formerly named VCN Biosciences, S.L.), described in more detail below, we began transitioning our strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, improve access of co-administered cancer therapies to the tumor, and promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, our focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases which included. our clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage, thereby preventing overgrowth and infection by pathogenic organisms such Clostridioides difficile infection (CDI) and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases.
As part of our strategic transformation into an oncology focused company, we are exploring value creation options around our SYN-004 and SYN-020 assets. SYN-004 and SYN-020 both have significant potential opportunity in non-oncology related indications. Advancement of these products may be better achieved through out-licensing or partnering and we will explore opportunities for both SYN-004 and SYN-020 moving forward.
Our Current Product Pipeline
24
*Based on management’s current beliefs and expectations
aGVHD acute graft-vs-host disease; allo-HCT allogeneic hematopoietic cell transplant. IAP recombinant bovine intestinal alkaline phosphatase II. CPI immune checkpoint inhibitor. Gem/Nab Gemcitabine + Abraxane® (nab-paclitaxel). HNSCC head and neck squamous cell carcinoma. IV intravenous. IVit intravitreal. MAD multiple ascending dose. ODD Orphan Drug Designation. OV oncolytic adenovirus engineered to selectively replicate in tumors and express hyaluronidase enzyme PH20.
¹Additional products with preclinical proof-of-concept include SYN-006 (carbapenemase) to prevent aGVHD and infection by carbapenem resistant enterococci and SYN-007 (ribaxamase) DR to prevent antibiotic associated diarrhea with oral β-lactam antibiotics.
²Depending on funding/partnership. SYN-004 may enter an FDA-agreed Phase 3 clinical trial for the treatment of CDI.
³We have an option-license agreement with Massachusetts General Hospital to develop SYN-020 in several potential indications related to inflammation and gut barrier dysfunction.
Recent Clinical Developments
On January 9, 2023, we issued a press release announcing that the first patient has been dosed in the Phase 1 investigator sponsored clinical trial of intravenous VCN-01 in patients with high-grade brain tumors who are scheduled for surgical resection.
On January 17, 2023, we issued a press release announcing the first patient has been dosed in VIRAGE, the Phase 2b randomized, open-label, placebo-controlled, multicenter clinical trial of systemically administered VCN-01 in combination with standard-of-care (SoC) chemotherapy (gemcitabine/nab-paclitaxel) as a first line therapy for patients with newly diagnosed metastatic pancreatic ductal adenocarcinoma (PDAC) (NCT05673811).
On February 16, 2023, we issued a press release announcing that the presentation of blinded safety and pharmacokinetic (PK) data from the ongoing Phase 1b/2a randomized, double-blinded, placebo-controlled clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) recipients for the prevention of acute graft-versus-host-disease (aGVHD). These data were featured in a poster presentation at 2023 Tandem Meetings: Transplantation & Cellular Therapy Meetings of ASTCT and CIBMTR, being held in Orlando, Florida from February 15-19, 2023. Cohort 1 of the study enrolled 19 patients who received at least 1 dose of study drug (SYN-004 or Placebo randomized 2:1). Twelve of these patients completed two doses of IV MER to be evaluable towards the study endpoints. While the study is on-going and remains blinded, key findings showcased in the poster presentation (#LBA6) titled “Interim Analysis of SYN-004 Phase 1b/2a Trial in Hematopoietic Cell Transplant (HCT) Recipients” include:
● | Adverse events (AEs) and serious adverse events (SAEs) observed in Cohort 1 were typical of those observed in allo-HCT patients and no AEs or SAEs were determined to be related to study drug treatment by the investigators. |
● | Consistent with previous studies of SYN-004 in healthy volunteers, SYN-004 was not observed in blood samples from the majority of the evaluable patients. |
● | Meropenem pharmacokinetics were as expected for this patient population. |
25
Our Current Oncology-Focused Pipeline
Oncolytic Viruses
Our oncology platform is based on oncolytic virotherapy (“OV therapy”), which exploits the ability of certain viruses to kill tumor cells and trigger an anti-tumor immune response. This novel class of anticancer agents has unique mechanisms of action compared to other cancer drugs. Oncolytic viruses exploit the fact that cancer cells contain mutations that cause them to lose growth control and form tumors. Once inside a tumor cell, oncolytic viruses are designed to exploit the tumor cell machinery to generate thousands of additional copies of the virus, which then kill the tumor cell and spread to neighboring cells, causing a chain reaction of cell killing. This infection by OVs also alerts the immune system, which can then attack the virus infected cells and the tumor cells to help destroy the tumor in some instances.
Our OV candidates products are engineered to efficiently infect and selectively replicate to a high extent in tumor cells versus normal host cells, which enables intravenous delivery. By contrast, many other oncolytic viruses in clinical development today are administered by direct injection into the tumor. Intravenous delivery has the potential to expand the therapeutic effect of OVs because the virus can infect both the primary tumor and tumor metastases throughout the body.
Our first product candidate, VCN-01, is a clinical stage oncolytic human adenovirus that is modified to express an enzyme, hyaluronidase, that degrades hyaluronan in the tumor stroma, which helps the virus and other molecules to penetrate and spread throughout the tumor. VCN-01 can be used alone or in combination with other cancer therapies such as chemotherapy and immunotherapy, for difficult to treat cancers. An expanding intellectual property portfolio supports our oncology programs, and because our products are characterized as biologics, they will be further protected by data and/or market exclusivity in major markets.
VCN-01 has been administered to 82 patients across multiple Phase 1 clinical trials, including patients with pancreatic cancer, head and neck squamous cell carcinoma, ovarian carcinoma, colorectal cancer, and retinoblastoma.
Current clinical update
We are currently conducting a Phase 2 Trial of intravenous VCN-01 with or without nab-paclitaxel plus gemcitabine in patients with solid tumors and PDAC. Additional Phase 1 investigator sponsored studies are evaluating intravitreal VCN-01 in patients with retinoblastoma, a Phase 1 Trial of intravenous VCN-01 in Combination with Durvalumab in Subjects with Recurrent/ Metastatic SCCHN and a Phase 1 Trial evaluating the intravenous administration of VCN-01 in patients prior to surgical resection of high-grade brain tumors
Phase 1 Clinical Trials in PDAC
The safety, tolerability, and potential dosing regimens for VCN-01 in patients with PDAC or colorectal cancer were evaluated in Phase 1 clinical trials evaluating intratumoral (n=8; NCT02045589) and intravenous (n= 42; NCT02045602) VCN-01 either alone or in combination with gemcitabine ± nab-paclitaxel (published in J. Immunother. Cancer 2021 Nov;9(11):e003254 and J. Immunother. Cancer 2022 Mar;10(3):e003255 respectively). Intravenous VCN-01 was found to have an acceptable safety/tolerability profile in PDAC and colorectal cancer patients and demonstrated compelling biochemical and clinical outcomes that enabled the advancement of VCN-01 into Phase 2 clinical trials in patients with metastatic PDAC.
Phase 2 Trial of intravenous VCN-01 with or without nab-paclitaxel plus gemcitabine in patients with solid tumors and PDAC
In January 2023, we dosed the first patients in VIRAGE, the Phase 2b randomized, open-label, placebo-controlled, multicenter clinical trial of systemically administered VCN-01 in combination with standard-of-care (SoC) chemotherapy (gemcitabine/nab-paclitaxel) as a first line therapy for patients with newly-diagnosed metastatic pancreatic ductal adenocarcinoma. The study is expected to enroll 92 patients and be conducted at approximately 25 sites in the US and EU. Two doses of VCN-01 are included in the treatment arm: the 1st dose is administered on day 1, then one week later 3 cycles of gemcitabine and nab-paclitaxel as standard of care is administered. The second VCN-01 dose is administered 7 days before the 4th cycle of chemotherapy (approximately 90 days after the first VCN-01 dose), followed by additional cycles of gemcitabine/nab-paclitaxel chemotherapy.
26
Retinoblastoma
Phase 1 Trial of intravitreal VCN-01 in patients with retinoblastoma
During the third quarter of 2017, VCN entered into a Clinical Trial Agreement with Hospital Sant Joan de Déu (Barcelona, Spain) to conduct an investigator sponsored Phase 1 clinical study evaluating the safety and tolerability of two intravitreal injections of VCN-01 in patients with intraocular retinoblastoma refractory to systemic, intra-arterial or intravitreal chemotherapy, or radiotherapy, in whom enucleation was the only recommended treatment (NCT03284268). Patients received two doses of VCN-01 injected 14 days apart using a dose escalation regimen. At this time, the dose-escalation phase of the study has already been completed in 6 patients distributed in two cohorts (2 x 109 vp/eye and 2 x 1010 vp/eye). VCN-01 was well tolerated to date after intravitreal administration, although some degree of intravitreal inflammation and associated turbidity were observed. Inflammation has been managed and potential turbidity minimized with local and systemic administration of anti-inflammatory drugs. VCN-01 does not appear to change the retinal function, and selective VCN-01 replication in retinoblastoma cells has been observed by immunohistochemical analysis. Replication within retinoblastoma tumors over time was detected and VCN-01 reduced the number of vitreous seeds in 4 out of 5 patients treated at 2 x 1010 vp/eye (n=5). The investigator has reported that one patient treated with VCN-01 has had a complete regression lasting more than 30 months.
Six (6) patients have been treated with VCN-01 to date. This study is ongoing and the enrollment period has been extended to include additional patients. We anticipate meeting with the FDA during the second half of 2023 to discuss the path forward for VCN-01 as an adjunct to chemotherapy in pediatric patients with advanced retinoblastoma.
On September 30, 2022, we issued a press release announcing an oral presentation entitled “Topotecan enhances oncolytic adenovirus infection, replication and antitumor activity in retinoblastoma,” featuring Dr. Angel Montero-Carcaboso, Researcher at Fundació Sant Joan de Déu at the SIOP 2022 Congress of the International Society of Pediatric Oncology, being held in Barcelona, Spain from September 28-October 1, 2022. The new data from the study for which Dr. Angel Montero-Carcaboso is the lead investigator further support evaluation of VCN-01, an oncolytic adenovirus expressing hyaluronidase, and topotecan for the treatment of refractory retinoblastoma. Key data and conclusions showcased in the SIOP presentation include:
● | VCN-01 treatment in combination with topotecan, but not with carboplatin or melphalan, significantly increased VCN-01 infection and replication in retinoblastoma cells (p=0.0007) in vitro. |
● | In athymic mice engrafted with human retinoblastomas, topotecan administered systemically after intratumoral VCN-01 increased viral genome replication and the number of VCN-01 infected cells when compared to administration of VCN-01 alone (p = 0.0002). |
● | Sequential administration of intratumoral VCN-01 followed by systemic topotecan significantly increased median ocular survival, compared to VCN-01 alone (p =0.0364). |
Phase 1 Trial of intravenous VCN-01 in Combination with Durvalumab in Subjects with Recurrent/ Metastatic SCCHN
In February 2019, VCN entered into a Clinical Trial Agreement with Catalan Institute of Oncology (ICO) (Spain) to conduct an investigator sponsored Phase 1 clinical study to evaluate the safety, tolerability and RP2D of a single intravenous injection of VCN-01 combined with durvalumab in two administration regimens: VCN-01 concomitantly with durvalumab, or sequentially with durvalumab starting two weeks after VCN-01 administration (NCT03799744). The study is also designed to evaluate whether VCN-01 treatment can re-sensitize PD-(l)-1 refractory tumors to subsequent anti-PD-L1 therapy. Durvalumab is a human monoclonal antibody (mAb) of the immunoglobulin G (IgG) 1 kappa subclass that inhibits binding of PD-L1. It is marketed as IMFINZI® by AstraZeneca/MedImmune, who supplied the product for its use in the clinical study. This Phase I trial is a multicenter, open label, dose escalation study in patients with histologically confirmed head and neck squamous cell carcinoma from specific sites: oral cavity, oropharynx, larynx or hypopharynx that is recurrent/metastatic (R/M) and not amenable to curative therapy by surgery or radiation. In addition, all patients should have undergone prior exposure to anti-PD-(L) 1 and progressed. Patients are entered at each dose level, according to a planned dose escalation schedule. The treatment is a single intravenous VCN-01 dose combined with concomitant intravenous durvalumab (MEDI4736) 1500 mg Q4W (Arm I) or durvalumab starting two weeks after VCN-01 administration (“sequential schedule”; Arm II). Patient recruitment into Arm I and Arm II was performed concurrently. Intravenous VCN-01 was administered to each patient only once during the trial at the VCN-01 dose level to which they were randomized. Durvalumab was administered Q4W until disease progression,
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unacceptable toxicity, withdrawal of consent, or another discontinuation criterion. Patient recruitment into the study was completed in February 2022 with a total of 18 patients enrolled. On September 05, 2022 we announced a presentation of initial data from this study in a poster at the European Society for Medical Oncology (ESMO) Congress. The poster reported that treatment with VCN-01 had an acceptable safety profile when administered with durvalumab in the sequential schedule and the most common treatment-related adverse events were dose-dependent and reversible pyrexia, flu-like symptoms and increases in liver transaminases. Sustained blood levels of VCN-01 viral genomes and increased serum hyaluronidase levels were maintained for over six weeks and analysis of tumor samples showed an increase in CD8 T cells (a marker of tumor inflammation); upregulation of PD-L1; and downregulation of matrix-related pathways after VCN-01 administration. The last patients in this study are currently being followed for overall survival and patent samples are being analyzed to evaluate potential VCN-01 pharmacodynamic effects. We expect to report additional results from this study in H2 2023 as data become available.
Phase 1 Trial evaluating the safety and feasibility of huCART-meso cells when given in combination with VCN-01
In July 2021, VCN entered into a Clinical Trial Agreement with the University of Pennsylvania (Philadelphia) to conduct an investigator sponsored Phase 1 clinical study to evaluate the safety, tolerability and feasibility of intravenous administration of VCN-01 in combination with lentiviral transduced huCART-meso cells (developed by the laboratory of Dr. Carl June) in patients with histologically confirmed unresectable or metastatic pancreatic adenocarcinoma and serous epithelial ovarian cancer (NCT05057715). This is a Phase I study evaluating the combination of VCN-01 when given in combination with huCART-meso cells in a dose-escalation design in two cohorts (N = 3-6), where patients receive VCN-01 as a single IV infusion (at 3.3x1012 or 1x1013 vp) on Day 0, followed by a single dose of 5x107 huCART-meso cells on Day 14 via IV infusion. huCART-meso cells are modified T-cells targeting the mesothelin antigen, which is frequently expressed in multiple tumor types, particularly in pancreatic and ovarian cancers. Dr. June’s previous clinical studies have shown that huCART-meso cells encounter significant challenges in the tumor microenvironment, including immunosuppressive cells and soluble factors as well as metabolic restrictions. Initial VCN-01 clinical data from the studies described above suggest that administration of VCN-01 may increase tumor immunogenicity and improve access of the huCART-meso cells to tumor cells. This Phase I study will evaluate the safety and tolerability of the VCN-01 huCART-meso cell combination and test the hypothesis that administration of VCN-01 may enhance the potential antitumor effects of the co-administered huCART-meso cells.
On July 8, 2022, we were notified that the first patient to be dosed with VCN-01 had passed the safety evaluation period in this study. The study is on-going.
Phase 1 Trial evaluating the intravenous administration of VCN-01 in patients prior to surgical resection of high-grade brain tumors
In the second quarter of 2021, VCN entered into a Clinical Trial Agreement with the University of Leeds (UK) to sponsor a proof-of-concept Phase 1 clinical study to evaluate whether intravenously administered VCN-01 can cross the blood-brain barrier and infect the target brain tumor. This is an open-label, non-randomized, single center study of VCN-01 given intravenously at a dose of 1x1013 virus particles to patients prior to planned surgery for recurrent high-grade primary or metastatic brain tumors. We believe that the intravenous delivery of anti-cancer therapy to brain tumors, if effective, may enable the treatment of systemically disseminated brain metastases and may allow for reduction in the need to use neurosurgery to administer the drugs. This study aims to assess the presence of VCN-01 within the resected surgical specimen after systemic VCN-01 delivery and determine the safety of intravenous VCN-01 in patients with recurrent high-grade glioma or brain metastases. By confirming the presence of VCN-01 in high grade brain tumors following intravenous delivery, this study may pave the way for larger trials to study VCN-01 efficacy, both as a monotherapy and in combination with PD-1/PD-L1 blockade. This trial has already received approval from Medicines & Healthcare Products Regulatory Agency (MHRA) from UK Government.
On January 9, 2023, we issued a press release announcing that the first patient was dosed in this study and recruitment is on-going.
Our Current Gastrointestinal (GI) and Microbiome-Focused Pipeline
Our SYN-004 (ribaxamase) and SYN-020 clinical programs are focused on the gastrointestinal tract (GI) and the gut microbiome, which is home to billions of microbial species and composed of a natural balance of both “good” beneficial species and potentially “bad” pathogenic species. When the natural balance or normal function of these microbial species is disrupted, a person’s health can be compromised. All of our programs are supported by our growing intellectual property portfolio. We are maintaining and building our patent portfolio through: filing new patent applications; prosecuting existing applications; and licensing and acquiring new patents and patent applications.
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SYN-004 (ribaxamase) — Prevention of antibiotic-mediated microbiome damage, thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI) and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host disease (aGVHD) in allogeneic HCT recipients
SYN-004 (ribaxamase) is a proprietary oral capsule prophylactic therapy designed to degrade certain IV beta-lactam antibiotics excreted into the GI tract and thereby maintain the natural balance of the gut microbiome. Preventing beta-lactam damage to the gut microbiome has a range of potential therapeutic outcomes, including prevention of CDI, suppression of the overgrowth of pathogenic species (particularly antimicrobial-resistant organisms) and potentially reducing the incidence and/or severity of aGVHD in allogeneic hematopoietic cell transplant (HCT) patients. SYN-004 (ribaxamase) 75 mg capsules are intended to be administered orally while patients are administered certain IV beta-lactam antibiotics. The capsule dosage form is designed to release the SYN-004 (ribaxamase) enzyme into proximal small intestine, where it has been shown to degrade beta-lactam antibiotics in the GI tract without altering systemic antibiotic levels. Beta-lactam antibiotics are a mainstay in hospital infection management and include the commonly used penicillin and cephalosporin classes of antibiotics.
Clostridioides difficile Infection
Clostridioides difficile (formerly known as Clostridium difficile and often called C. difficile or CDI) is a leading type of hospital acquired infection and is frequently associated with IV beta-lactam antibiotic treatment. The Centers for Disease Control and Prevention (CDC) identified C. difficile as an “urgent public health threat,” particularly given its resistance to many drugs used to treat other infections. CDI is a major unintended risk associated with the prophylactic or therapeutic use of IV antibiotics, which may adversely alter the natural balance of microflora that normally protect the GI tract, leading to C. difficile overgrowth and infection. Other risk factors for CDI include hospitalization, prolonged length of stay (estimated at 7 days), underlying illness, and immune-compromising conditions including the administration of chemotherapy and advanced age. According to a paper published in BMC Infectious Diseases (Desai K et al. BMC Infect Dis. 2016; 16: 303) the economic cost of CDI was approximately $5.4 billion in 2016 ($4.7 billion in healthcare settings; $725 million in the community) in the U.S., mostly due to hospitalizations.
Phase 1b/2a Clinical Study in Allogeneic HCT Recipients
In August 2019, we entered into a Clinical Trial Agreement (CTA) with the Washington University School of Medicine (Washington University) to conduct a Phase 1b/2a clinical trial of SYN-004 (ribaxamase). Under the terms of this agreement, we serve as the sponsor of the study and supply SYN-004 (ribaxamase). Dr. Erik R. Dubberke, Professor of Medicine and Clinical Director, Transplant Infectious Diseases at Washington University and a member of the SYN-004 (ribaxamase) steering committee serves as the principal investigator of the clinical trial in collaboration with his Washington University colleague Dr. Mark A. Schroeder, Associate Professor of Medicine, Division of Oncology, Bone Marrow Transplantation and Leukemia.
On September 27, 2022, we issued a press release announcing positive outcomes from the Data and Safety Monitoring Committee (“DSMC”) review of results from the first Cohort of the Company’s Phase 1b/2a randomized, double-blinded, placebo-controlled clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) recipients for the prevention of acute graft-versus-host-disease (aGVHD).
To date, we have completed the first of 3 study cohorts (Cohort 1), which enrolled 19 patients who received at least 1 dose of study drug (SYN-004 or Placebo randomized 2:1). Sixteen patients received at least one dose of intravenous (IV) meropenem and 12 of these patients completed sufficient doses of IV meropenem to be evaluable towards the study endpoints. The study is on-going and remains blinded; however, key findings from blinded data for Cohort 1 are included below:
● | Adverse events (AEs) and serious adverse events (SAEs) observed in Cohort 1 were typical of those observed in allo-HCT patients and no AEs or SAEs were determined to be related to study drug treatment by the investigators. |
o | A total of 13 SAEs were reported among 10 patients, with the most common SAE being infections and infestations including sepsis. |
o | One patient died 14 days after the last dose of study drug (within the 30-day reporting period) due to sepsis that was not related to study drug. |
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● | Consistent with previous studies of SYN-004 in healthy volunteers, SYN-004 was not observed in blood samples from the majority of the evaluable patients. |
o | A total of 3 plasma samples (~2% of all analyzed samples) had low but quantifiable levels of SYN-004 using a sensitive ECL assay. |
o | None of the 3 ECL positive plasma samples were found to contain active SYN-004 using a functional enzyme activity assay. |
● | Meropenem pharmacokinetics were as expected for this patient population. |
Based on a review of the safety and pharmacokinetic data, the DSMC recommended that the study may proceed to enroll Cohort 2 in which study drug (SYN-004 or Placebo) will be administered in combination with the IV beta-lactam antibiotic piperacillin/tazobactam. If enrollment proceeds on the current schedule, we may be positioned to announce data readouts for the second cohort during the first half of 2024 and the third cohort during the first half of 2025.
On November 3, 2022 we announced the first patient has been dosed in Cohort 2 of its Phase 1b/2a randomized, double-blinded, placebo-controlled clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) recipients for the prevention of acute graft-versus-host-disease (aGVHD, NCT04692181).
On February 16, 2023 and April 13, 2023 we announced the presentation of safety and pharmacokinetic data from Cohort 1 of the Phase 1b/2a Clinical Trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant recipients at the 2023 Tandem Meetings: Transplantation & Cellular Therapy Meetings of ASTCT and CIBMTR and at the European Congress of Clinical Microbiology & Infectious Diseases (ECCMID) respectively.
SYN-020 — Oral Intestinal Alkaline Phosphatase (IAP)
SYN 020 is a quality-controlled, recombinant version of bovine Intestinal Alkaline Phosphatase (IAP) produced under cGMP conditions and formulated for oral delivery. The published literature indicates that IAP functions to diminish GI and systemic inflammation, tighten the gut barrier to diminish “leaky gut,” and promote a healthy microbiome. Despite its broad therapeutic potential, a key hurdle to commercialization has been the high cost of IAP manufacture which is commercially available for as much as $10,000 per gram. We believe we have developed technologies to traverse this hurdle and now have the ability to produce more than 3 grams per liter of SYN-020 for roughly a few hundred dollars per gram at commercial scale. Based on the known mechanisms as well as our own supporting animal model data, we intended to initially develop SYN-020 to mitigate the intestinal damage caused by radiation therapy that is routinely used to treat pelvic cancers. While we believe SYN-020 may play a pivotal role in addressing acute and long-term complications associated with radiation exposure to the GI tract, we have also begun planning for potential development of SYN-020 in large market indications with significant unmet medical needs. Such indications include celiac disease, non-alcoholic fatty liver disease (“NAFLD”), and indications to treat and prevent metabolic and inflammatory disorders associated with aging which are supported by our collaboration with Massachusetts General Hospital (“MGH”). Across the six major markets, the total prevalent cases of celiac disease are expected to increase from 5.8 million cases in 2013 to an expected 8.1 million cases in 2023, representing an annual growth rate of approximately 4%. During the same period, prevalent cases in the U.S. are expected to increase from 2.8 million in 2013 to an expected 4.3 million in 2023, representing a significant market opportunity.
On June 30, 2020, we submitted an IND application to the FDA in support of an initial indication for the treatment of radiation enteropathy secondary to pelvic cancer therapy. On July 30, 2020, we announced that we received a study-may-proceed letter from the FDA to conduct a Phase 1a single-ascending-dose (“SAD”) study in healthy volunteers designed to evaluate SYN-020 for safety, tolerability and pharmacokinetic parameters(NCT04815993). On April 1, 2021, we announced that enrollment had commenced in the Phase 1 SAD clinical trial of SYN-020. On June 29, 2021, we announced that enrollment, patient dosing and observation had been completed in the Phase 1, open-label, SAD study of SYN-020. The SAD study enrolled 6 healthy adult volunteers into each of four cohorts with SYN-020 given orally as single doses ranging from 5 mg to 150 mg. Analyses of preliminary data demonstrated that SYN-020 maintained a favorable safety profile, was well tolerated at all dose levels, and no adverse events were attributed to the study drug. No serious adverse events were reported.
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During the third quarter of 2021 we initiated a Phase 1 clinical study evaluating multiple ascending doses (“MAD”) of SYN-020 (NCT05045833). On October 21, 2021 we announced that patient enrollment, dosing, and observation commenced in the Phase 1 MAD of SYN-020. The placebo-controlled, blinded study enrolled 32 healthy adult volunteers into four cohorts with SYN-020 administered orally in doses ranging from 5 mg to 75 mg twice daily for 14 days with a follow-up evaluation at day 35. Each cohort included six subjects who received SYN-020 and two who received placebo. On May 10, 2022, we announced positive safety data from the Phase 1 MAD study demonstrating that SYN-020 maintained a favorable safety profile and was well-tolerated across all dose levels. There were a few treatment-related adverse events, and all were mild (grade 1) and resolved without medical intervention. The most common adverse event, constipation, occurred in three out of 24 subjects in the treatment arm and in one out of eight subjects in the placebo arm. No adverse event led to discontinuation of the study drug and there were no serious adverse events. Additionally, fecal SYN-020 analyses verified intestinal bioavailability while plasma levels of SYN-020 were below the limit of quantitation in all samples at all timepoints verifying that SYN-020 was not absorbed into the systemic circulation.
During the second quarter of 2020, we announced that we entered into an agreement with Massachusetts General Hospital (“MGH”) granting us an option for an exclusive license to intellectual property and technology related to the use of IAP to maintain GI and microbiome health, diminish systemic inflammation, and treat age-related diseases. During the second quarter of 2021, we announced an amendment to our option for an exclusive license agreement with MGH to include intellectual property and technology related to the use of SYN-020 to inhibit liver fibrosis in select diseases, including NAFLD. Research published by a team of investigators led by Richard Hodin, MD, Chief of the Massachusetts General Hospital Division of General and Gastrointestinal Surgery and Professor of Surgery, Harvard Medical School, evaluated long-term oral supplementation of IAP, including SYN-020, in mice. Dr. Hodin’s research demonstrated that IAP administration, starting at 10 months of age, slowed the microbiome changes, gut-barrier dysfunction, and gastrointestinal and systemic inflammation that normally accompany aging. Additionally, the IAP administration resulted in improved metabolic profiles in the aged mice, diminished frailty, and extended lifespan. Under the terms of the agreement, we are granted exclusive rights to negotiate a worldwide license with MGH to commercially develop SYN-020 to treat and prevent metabolic and inflammatory diseases associated with aging. If executed, we plan to use this license in the advancement of an expanded clinical development program for SYN-020.
The Phase 1 data from our SAD and MAD studies are intended to support the development of SYN-020 in multiple clinical indications including radiation enteritis, NAFLD, celiac disease, and indications supported by our collaboration with Massachusetts General Hospital. With our transition to an oncology focused Company, we are exploring strategic opportunities to enable advancement of this potentially valuable asset.
Research Programs
VCN-11 Albumin Shield™ Technology
VCN-11 is a novel virus that we believe has the potential to extend our OV platform. VCN-11 has been engineered to contain all of the features of VCN-01 as well as an additional modification to include an albumin binding domain (ABD) in the virus capsid. The virus capsid is the target for neutralizing antibodies (NAbs) that are generated by the host immune system to destroy circulating viruses. The presence of an albumin binding domain, however, blocks the binding of most neutralizing antibodies, which allows the virus to reach the tumor following intravenous administration. This “Albumin Shield” works because human blood contains a large amount of albumin to coat the VCN-11 virus. Importantly, this coating of albumin appears to be displaced after the virus reaches tumor cells to infect them. In pre-clinical mouse studies to test the functionality of the “albumin shield”, mice pre-immunized with virus are able to completely neutralize an unmodified OV because they have a large concentration of neutralizing antibodies in their blood. By contrast, viruses containing the albumin binding domain such as VCN-11 are not neutralized and retain their ability to infect and destroy tumor cells. We believe these results support the further development of VCN-11 for tumors in which rapid multi-dosing may be beneficial.
In the second quarter of 2020, VCN had several interactions with Spanish regulatory authorities (AEMPS) to agree on the design of the non-clinical GLP toxicology and biodistribution studies that are required to support a first-in-human clinical trial for VCN-11.
In March 2021, preclinical data obtained with VCN-11 was published (J Control Release. 2021 Apr 10;332:517-528), showing that VCN-11 induced 450 times more cytotoxicity in tumor cells than in normal cells. VCN confirmed VCN-11 hyaluronidase production by measuring the activity of the PH20 enzyme with a hyaluronic acid-degradation assay, and by measuring PH20 activity in VCN-11 infected tumors in vivo. VCN-11 evaded NAbs from different sources and tumor levels of VCN-11 were demonstrated in the presence of high levels of NAbs in vivo, whereas the control virus without ABD was neutralized. VCN-11 showed a low toxicity profile in
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athymic nude mice and Syrian hamsters, allowing treatments with high doses and fractionated administrations without major toxicities (up to 1.2x1011vp/mouse and 7.5x1011vp/hamster). VCN-11 increased ALT levels on day 3 within an acceptable range that returned to normal levels by day 9. Fractionated intravenous administration of VCN-11 (splitting the dose into two portions administered 4 h apart) appeared to improve VCN-11 circulation kinetics and increase tumor levels. VCN-11 showed antitumor efficacy in the presence of NAbs against Ad5 and itself.
In May 2022, we presented on VCN-11 at the 25th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT). The presentation included preclinical results showcasing the potential of VCN-11 to balance safety, with no major toxicities observed, and effectively target tumors after intravenous re-administration, even in the presence of high level NAbs. Our internal discovery programs are currently evaluating new oncolytic viruses derived from VCN-11 that may expand the potential efficacy of Albumin Shield viruses.
SYN-006, SYN-007
To date, our research programs have been primarily directed to the development of GI acting products that have generated preclinical proof-of-concept with two pipeline products (SYN-006 and SYN-007) that expand the potential utility of our beta-lactamase strategy. SYN-007 is a specially formulated version of SYN-004 (ribaxamase) designed to be used with orally administered beta-lactam antibiotics to protect the gut microbiome from antibiotic-mediated dysbiosis. SYN-006 is a carbapenemase designed to degrade intravenous (IV) carbapenem antibiotics within the GI tract to maintain the natural balance of the gut microbiome for the prevention of CDI, overgrowth of pathogenic organisms and the emergence of antimicrobial resistance (AMR). Our research programs may be expanded to include development of new oncolytic virus products and/or explore oncology applications of our existing products such as SYN-006 and SYN-007.
Intellectual Property
All of our programs are supported by growing patent estates. In total, Theriva Biologics has over 100 U.S. and foreign patents and over 70 U.S. and foreign patents pending. VCN, through assignment or exclusive licenses, controls over 40 U.S. and foreign patents and over 15 U.S. and foreign patents pending.
The SYN-004 (ribaxamase) program is supported by IP that is assigned to Theriva Biologics, namely U.S. and foreign patents and patent application (in most major markets, e.g. Europe (including Germany, Great Britain and France), Japan, China and Canada, among others) and U.S. and foreign patents pending (in most major markets, e.g. Europe (including Germany, Great Britain and France), Japan, China and Canada, among others). For instance, U.S. Patent Nos. 8,894,994 and 9,587,234, which include claims to compositions of matter and pharmaceutical compositions of beta-lactamases, including SYN-004 (ribaxamase), have patent terms to at least 2031. Further, U.S. Patent 9,301,995 and 9,301,996, both of which will expire in at least 2031, cover various uses of beta-lactamases, including SYN-004 (ribaxamase), in protecting the microbiome, and U.S. Patent Nos. 9,290,754, 9,376,673, 9,404,103, 9,464,280, and 9,695,409 which will expire in at least 2035, covers further beta-lactamase compositions of matter related to SYN-004 (ribaxamase).
The SYN-020 (oral intestinal alkaline phosphatase (IAP)) program is supported by IP that is assigned to Theriva Biologics, namely U.S. and foreign patents and patent applications (in many major markets, e.g. Europe, China, Japan, Korea, Canada, and Australia). These patent applications, which cover various formulations, medical uses and manufacture of SYN-020, are expected to expire in 2038-2040, if granted, and without taking potential patent term extensions or patent term adjustment into account.
The VCN-01 and VCN-11 programs are supported by U.S. and foreign patents and patent applications that are assigned to VCN or exclusively licensed from Fundacio Privada Institut d’Investigacio Biomedica de Bellvitge (IDIBELL), Institut Catala d’Oncologia (ICO), and Hospital Sant Joan de Déu in Barcelona. The patents and patent applications include U.S. patents and foreign patents (in most major markets, e.g. Europe, China, Japan, Korea, Canada, Israel, Mexico, Russia, and Australia) and U.S. and foreign patents pending (in most major markets, e.g. Europe, China, Korea, Canada, Mexico, and India). The patents and patent applications cover compositions of matter and pharmaceutical compositions of oncolytic adenoviruses and various medical uses of the same. For instance, U.S. Patent No. 10,316,065, which expires in 2030 without taking potential patent term extensions or patent term adjustment into account, provides composition of matter and pharmaceutical composition coverage for a genus of engineered oncolytic adenovirus suitable for the treatment of solid tumors. Other patents and patent applications, if granted, will provide protection to 2037 without taking potential patent term extensions or patent term adjustment into account.
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Our goal is to (i) obtain, maintain, and enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies, (ii) preserve our trade secrets, and (iii) operate without infringing on the proprietary rights of other parties worldwide. We seek, where appropriate, the broadest intellectual property protection for product candidates, proprietary information, and proprietary technology through a combination of contractual arrangements and patents.
Critical Accounting Estimates
The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods.
There are accounting policies, each of which requires significant judgments and estimates on the part of management, that we believe are significant to the presentation of our consolidated financial statements. The most significant accounting estimates relate to research and development costs, business combinations, contingent consideration, and impairment of long-lived assets.
Business Combination
The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates.
The Company classifies intangible assets into two categories: (1) intangible assets with indefinite lives not subject to amortization and (2) goodwill. Intangible assets that are deemed to have indefinite lives, including goodwill, are reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test for indefinite-lived intangibles, other than goodwill, consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value-based test. If a reporting unit’s carrying value exceeds its fair value, then the Company will record a goodwill impairment charge for the excess amount.
In-process research and development (“ IPR&D”), assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. IPR&D assets represent the fair value assigned to technologies that the Company acquires, which at the time of acquisition have not reached technological feasibility and have no alternative future use. During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value.
Goodwill represents the excess of the purchase price paid when the Company acquired VCN in March 2022, over the fair values of the acquired tangible or intangible assets and assumed liabilities. The Company will conduct an impairment test of goodwill on an annual basis as of October 1 of each year and will also conduct tests if events occur or circumstances change that would, more likely than not, reduce the Company’s fair value below its net equity value. During the quarters ended September 30 and December 31, 2022, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and the Company deemed this to be a triggering event. The Company performed an impairment analysis at both September 30 and December 31, 2022 and concluded that the Goodwill and IPR&D was not impaired at both dates.
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Contingent Consideration
Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets.
Long-Lived Assets
Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which we can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets.
Acquired In-Process Research & Development represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a finite-lived asset and is amortized on a straight-line basis over the estimated useful life. If the project is not completed or is terminated or abandoned, the Company may have an impairment related to the IPR&D which is charged to expense. Indefinite-lived intangible assets are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying value over its fair value.
Research and Development Costs
We expense research and development costs associated with developmental products not yet approved by the FDA to research and development expense as incurred. Research and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs, salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development, testing and enhancement of our product candidates. Research and development expenses include external contract research organization (“CRO”) services. We make payments to the CROs based on agreed upon terms and may include payments in advance of study services. We review and accrue CRO expenses based on services performed and rely on estimates of those costs applicable to the stage of completion of study as provided by the CRO. Accrued CRO costs are subject to revisions as such studies progress to completion. At March 31, 2023 and 2022, we have accrued CRO expenses of $0.8 million and $1.0 million, respectively, that are included in accrued expenses. As of March 31, 2023, and 2022, we have prepaid CRO costs of $2.5 million and $0.3 million, respectively, that are included in prepaid expenses.
Results of Operations
Three Months Ended March 31, 2023 and 2022
General and Administrative Expenses
General and administrative expenses increased to $2.2 million for the three months ended March 31, 2023, from $1.7 million for the three months ended March 31, 2022. This increase of 29% is primarily comprised of increased expense related to the fair value of the
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contingent consideration, additional salary and benefits related to new headcount, audit fees, consulting fees, travel, and VCN administrative expenses not included in the prior year, offset by a decrease in consulting and legal costs related to the VCN acquisition. The charge related to stock-based compensation expense was $87,000 for the three months ended March 31, 2023, compared to $85,000 for the three months ended March 31, 2022.
Research and Development Expenses
Research and development expenses increased to $3.0 million for the three months ended March 31, 2023, from approximately $2.6 million for the three months ended March 31, 2022. This increase of 15% is primarily the result of increased clinical trial expenses related to VCN-01 not incurred in the prior year, offset by lower expenses related to our Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic HCT recipients and decreased manufacturing expenses related to our Phase 1a clinical trial of SYN-020. We anticipate research and development expense to increase as we continue enrollment in our VIRAGE Phase 2 clinical trial of VCN-01 in PDAC, and our ongoing Phase 1 clinical trial in retinoblastoma, expand GMP manufacturing activities for VCN-01, and continue supporting our VCN-11 and other preclinical and discovery initiatives. The charge related to stock-based compensation expense was $39,000 for the three months ended March 31, 2023, compared to $28,000 related to stock-based compensation expense for the three months ended March 31, 2022.
The following table sets forth our research and development expenses directly related to our therapeutic areas for the three months ended March 31, 2023 and 2022. These direct expenses were external costs associated with preclinical studies and clinical trials. Indirect research and development expenses related to employee costs, facilities, stock-based compensation and research and development support services that are not directly allocated to specific product candidates.
March 31, | March 31, | |||||
Therapeutic Areas |
| 2023 |
| 2022 | ||
VCN-01 | $ | 1,655 | $ | 60 | ||
Ribaxamase | 196 | 376 | ||||
SYN-020 | 65 | 659 | ||||
Other therapeutic areas |
| 60 |
| 53 | ||
|
| |||||
Total direct costs |
| 1,976 |
| 1,148 | ||
Total indirect costs |
| 1,001 |
| 1,449 | ||
|
| |||||
Total Research and Development | $ | 2,977 | $ | 2,597 |
Other Income/Expense
Other income was $370,000 for the three months ended March 31, 2023 compared to other expense of $21,000 for the three months ended March 31, 2022. Other income for the three months ended March 31, 2023 is primarily comprised of interest income of $364,000 and exchange gain of $6,000. Other expense the three months ended March 31, 2022 is primarily comprised of exchange loss of $23,000, offset by interest income of $2,000.
Net Loss Attributable to Common Stockholders
Our net loss attributable to common stockholders was approximately $4.5 million, or $0.30 per basic and dilutive common share for the three months ended March 31, 2023, compared to a net loss of approximately $4.3 million, or $0.32 per basic common share and dilutive common share for the three months ended March 31, 2022.
Liquidity and Capital Resources
As of March 31, 2023, the Company has a significant accumulated deficit, and with the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, the Company has experienced significant losses and incurred negative cash flows since inception. The Company expects to continue incurring losses for the foreseeable future, with the recognition of revenue being contingent on successful phase 3 clinical trials and requisite approvals by the FDA or foreign equivalents.
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Our cash and cash equivalents totaled $36.1 million as of March 31, 2023, a decrease of $5.7 million from December 31, 2022. During the three months ended March 31, 2023, the primary use of cash was for working capital requirements and operating activities which resulted in a net loss of $4.5 million for three months ended March 31, 2023. Cash and cash equivalents includes the net proceeds from sales of our Series C Preferred Stock and Series D Preferred Stock issued during the year ended December 31, 2022, proceeds from the sale of Common Stock in “at-the-market” (ATM) equity offerings during 2021 and cash proceeds through the exercise of a portion of the October 2018 warrants in 2021. With these additional sources of liquidity, we believe we will be able to fund our operations through the second quarter and into the third quarter of 2024. Management believes its plan, which includes the additional testing of SYN-004 (ribaxamase) and the advancement of VCN-01 will allow us to meet our financial obligations, further advance key products, and maintain our planned operations for at least one year from the issuance date of these consolidated financial statements. However, the amount of additional capital needed by us will also depend upon the costs to advance our VCN-01 clinical programs and whether we continue to develop SYN-004 internally, or out-license or partner such development. If necessary, we may attempt to utilize the ATM or seek to raise additional capital on the open market, neither of which is guaranteed. Use of the ATM is limited by certain restrictions and management’s plan does not rely on additional capital from either of these sources. If we are not able to obtain additional capital (which is not assured at this time), our long-term business plan may not be accomplished, and we may be forced to cease certain development activities. More specifically, the completion of any later stage clinical trial will require significant financing or a significant partnership.
Historically, we have financed our operations primarily through public and private sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. During the year ended December 31, 2022, our only source of cash was from the sales of our Series C Preferred Stock and Series D Preferred Stock. During the year ended December 31, 2021, our only source of cash was from the exercise of the 2018 Warrants and sales of our common stock through the Original ATM Sales Agreement and the Amended and Restated ATM Sales Agreement.
There can be no assurance that we will be able to continue to raise funds through the sale of shares of common stock through the Amended and Restated ATM Sales Agreement or other equity financings. If we raise funds by selling additional shares of common stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain funding for future clinical trials when needed, we will be unable to carry out our business plan and we will be forced to delay the initiation of future clinical trials until such time as we obtain adequate financing.
We have committed, and expect to continue to commit, substantial capital in order to implement our business strategy, including our planned product development efforts, preparation for our planned clinical trials, and performance of clinical trials and our research and discovery efforts. We believe our cash position of $35 million in early May 2023 is sufficient to fund our operations through at least the end of the second quarter of and into the third quarter 2024, including continuation of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients for the prevention of aGVHD, our ongoing Phase 1 and Phase 2 clinical trials for VCN-01, preclinical studies of VCN-11 and related discovery initiatives, and to fund our committed obligations under the VCN Purchase Agreement for the VCN Acquisition.
Following the anticipated completion of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients, our ongoing Phase 1 and Phase 2 clinical trials for VCN-01, and the preclinical studies of VCN-11, and related discovery initiatives, we will need to obtain additional funds for future clinical trials. We anticipate that our future clinical trials will be much larger in size and require larger cash expenditures than the aforementioned clinical programs. We do not have any committed sources of financing for future clinical trials at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all.
Off-Balance Sheet Arrangements
During the three months ended March 31, 2023, we did not have, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
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Contractual Obligations
Leases
At the inception of a contract we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term.
We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of our operating leases. ROU assets are included in other noncurrent assets and lease liabilities are included in other current and non-current liabilities in our condensed consolidated balance sheets. As of March 31, 2023, we did not have any material finance leases.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The primary objective of our investment activities is to preserve our capital to fund operations. We also seek to maximize income from our investments without assuming significant risk. Our exposure to market risk is confined to our cash and cash equivalents. As of March 31, 2023, our cash and cash equivalents consisted primarily of investments in treasury securities. We do not engage in any hedging activities against changes in interest rates. Due to the short-term duration of our investment portfolio and the low risk profile of our investments, we would not expect our operating results or cash flows to be affected to any significant degree by the effect of a sudden change in market interest rates or credit conditions on our securities portfolio. We may, however, require additional financing to fund future obligations and no assurance can be given that the terms of future sources of financing will not expose us to material market risk.
ITEM 4. CONTROLS AND PROCEDURES.
(a) Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer, evaluated the effectiveness of our disclosure controls and procedures as of March 31, 2023. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the Company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. We have adopted and maintain disclosure controls and procedures (as defined Rules 13a-15(e) and 15d-15(e) under the Exchange Act) that are designed to provide reasonable assurance that information required to be disclosed in the reports filed under the Exchange Act, such as this Quarterly Report on Form 10-Q, is collected, recorded, processed, summarized and reported within the time periods specified in the rules of the SEC. The Company’s disclosure controls and procedures are also designed to ensure that such information is accumulated and communicated to management to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Due to the material weaknesses in internal control over financial reporting as described below, our Chief Executive Officer who also serves as its Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were not effective.
Material Weakness over Non-Routine Transactions
During the course of the preparation of our interim and annual consolidated financial statements for the year ended December 31, 2022, we identified material weaknesses in our controls relating to accounting and disclosure controls for non-routine transactions. Specifically, the controls related to the review of internally and externally prepared reports and analysis used in the financial reporting process and the related income tax implication of non-routine transactions.
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Remediation Plan
In order to remediate these material weaknesses, we plan to implement the following steps to improve the overall processes of identifying and reviewing non-routine transactions and preparing interim financial statements:
● | Perform additional internal review processes to ensure the appropriate accounting and disclosure of non-routine transactions. |
● | Engage a third-party tax specialist to assist us in the preparation and review of interim tax provisions. |
Should additional changes to the remediation plan be warranted, management will modify the planned measures accordingly.
Material Weakness over Information Technology General Controls
During the preparation of our annual consolidated financial statements for the year ended December 31, 2022, we identified a material weakness in our controls relating to general information technology controls over logical access and program change management for certain of our key information systems used to support the financial reporting process.
Remediation Plan
Management will ensure proper segregation of duties over all IT functions ensuring IT personnel are properly trained as to the importance of and specifics over the internal controls for which they are responsible, including consistent, repeatable performance of such controls. Management will also evaluate the responsibilities of its control owners to ensure that proper segregation of duties exists within the process level controls that are dependent upon information produced by IT systems affected by segregation of duties conflicts. Further, management will ensure IT personnel do not have conflicting responsibilities with respect to program changes, administration and user access controls, or that additional controls are implemented to perform an effective review of program changes, administration and user access.
Material Weakness over Evidence of Control Performance
During the preparation of our annual consolidated financial statements for the year ended December 31, 2022, we identified a material weakness relating to the ineffective design and execution of management’s review of controls, particularly with regard to the precision of the review, evidence of review procedures performed, and the evaluation of the completeness and accuracy of information utilized in the performance of the control.
Remediation Plan
Management will ensure all personnel are properly trained as to the importance of properly documenting and evidencing the performance of controls.
When fully implemented, the Company believes that the measures described above will appropriately remediate the identified material weaknesses, although management may determine that taking additional measures to remediate the material weaknesses may be necessary.
Changes in Internal Control Over Financial Reporting
Except for the material weaknesses described above, there has been no change in the Company’s internal control over financial reporting during the Company’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.
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PART II–OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
From time to time we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our business, operating results, financial condition or cash flows. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
ITEM 1A. RISK FACTORS.
The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in our 2022 Form 10-K. Except as disclosed below, there have been no material changes from the risk factors disclosed in our 2022 Form 10-K.
RISKS RELATING TO OUR BUSINESS
We will need to raise additional capital to operate our business and our failure to obtain funding when needed may force us to delay, reduce or eliminate certain of our development programs or commercialization efforts.
During the three months ended March 31, 2023, our operating activities used net cash of approximately $5.6 million and our cash and cash equivalents were approximately $35 million through early May. With the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, we have experienced significant losses since inception and have a significant accumulated deficit. As of March 31, 2023, our accumulated deficit totaled approximately $295.4 million on a consolidated basis. Pursuant to the Purchase Agreement, we have agreed to use reasonable efforts to commercialize VCN-01 and we agreed as a post- closing covenant to commit to fund VCN’s research and development programs, including but not limited to VCN-01 PDAC phase 2 clinical trial, VCN-01 RB trial and necessary G&A within a budgetary plan of approximately $27.8 million over the next three years. We expect to incur additional operating losses in the future and therefore expect our cumulative losses to increase. With the exception of the quarter ended June 30, 2010, and limited laboratory revenues from Adeona Clinical Laboratory, which we sold in March 2012, we have generated very minimal revenues. We do not expect to derive revenue from any source in the near future until we or our potential partners successfully commercialize our products. We expect our expenses to increase in connection with our anticipated activities, particularly as we continue research and development, initiate and conduct clinical trials, and seek marketing approval for our product candidates. Until such time as we receive approval from the FDA and other regulatory authorities for our product candidates, we will not be permitted to sell our products and therefore will not have product revenues from the sale of products. For the foreseeable future we will have to fund all of our operations and capital expenditures from equity and debt offerings, cash on hand, licensing and collaboration fees and grants, if any.
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We will need to raise additional capital to fund our operations and meet our current timelines and we cannot be certain that funding will be available on acceptable terms on a timely basis, or at all. Based on our current plans, our cash and cash equivalents will be sufficient to complete our planned later stage clinical trials of VCN-01 (our proposed clinical trials in PDAC and retinoblastoma), Phase 1a/2a clinical trial of SYN-004, but may not be sufficient for additional trials of SYN-020 or SYN-004, which are expected to require significant cash expenditures. In addition, based on the significant anticipated cost of a Phase 3 clinical program in a broad indication for SYN-004, we expect it will not be feasible for us to initiate and complete this trial at this time without a partner given the capital constraints tied to our current market cap and share price. Further development of VCN’s product candidates will require additional funding. To the extent that we raise additional funds by issuing equity securities, our stockholders may experience significant dilution. Any debt financing, if available, may involve restrictive covenants that may impact our ability to conduct our business and also have a dilutive effect on our stockholders. A failure otherwise to secure additional funds when needed in the future whether through an equity or debt financing or a sufficient amount of capital without a strategic partnership could result in us being unable to complete planned preclinical and clinical trials or obtain approval of our product candidates from the FDA and other regulatory authorities. In addition, we could be forced to delay, discontinue or curtail product development, forego sales and marketing efforts, and forego licensing in attractive business opportunities. Our ability to raise capital through the sale of securities may be limited by the rules of the SEC and NYSE American that place limits on the number and dollar amount of securities that may be sold. There can be no assurances that we will be able to raise the funds needed, especially in light of the fact that our ability to sell securities registered on our registration statement on Form S-3 will be limited until such time the market value of our voting securities held by non-affiliates is $75 million or more. We also may be required to seek collaborators for our product candidates at an earlier stage than otherwise would be desirable and on terms that are less favorable than might otherwise be available.
We expect to seek to raise additional capital in the future, which may be dilutive to stockholders or impose operational restrictions.
We expect to seek to raise additional capital in the future to help fund development of our proposed products. If we raise additional capital through the issuance of equity or of debt securities, the percentage ownership of our current stockholders will be reduced. We may also enter into strategic transactions, issue equity as consideration for acquisitions or part of license issue fees to our licensors, compensate consultants or settle outstanding payables using equity that may be dilutive. We are authorized to issue 350,000,000 shares of common stock, of which 15,124,061 shares of common stock were issued and outstanding as of March 31, 2023. At March 31, 2023, we had reserved 5,388,910 shares of common stock for issuance upon exercise of our outstanding options, preferred shares and warrants. In addition, at such date, we had 4,906,998 shares of our common stock reserved for future issuance under our equity incentive plans. If all of these securities were to be exercised, the total number of shares of our common stock that we would be required to issue is 10,295,908, which in addition to the 15,124,061 shares issued and outstanding, would leave 324,580,031 authorized but unissued shares of common stock.
In order to raise additional capital, we may in the future offer additional shares of our common stock or other securities convertible into or exchangeable for our common stock at prices that may not be the same as the price per share paid by existing stockholders, thereby subjecting such stockholders to dilution. Our stockholders may experience additional dilution in net book value per share and any additional equity securities may have rights, preferences and privileges senior to those of the holders of our common stock.
We may sell shares or other securities in any other offering at a price per share that is less than the price per share paid by existing stockholders, and investors purchasing shares or other securities in the future could have rights superior to existing stockholders. In the event that we sell shares or other securities at prices below the exercise price of the warrants that we issued in our October 2018 offering, the price protection anti-dilution provisions of the warrant provide that the exercise price of the warrants sold in our October 2018 offering is to be reduced which may result in additional warrant exercises and additional dilution to stockholders. The price per share at which we sell additional shares of our common stock, or securities convertible or exchangeable into common stock, in future transactions may be higher or lower than the price per share paid by existing stockholders.
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We have identified material weaknesses in our internal controls, and we cannot provide assurances that this weakness will be effectively remediated or that additional material weaknesses will not occur in the future.
If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud, or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.
Our management is responsible for establishing and maintaining adequate internal control over our financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. During the preparation of our annual tax provision for the year ended December 31, 2022, we identified a material weakness over non-routine transactions related to the review of internally and externally prepared reports and analysis used in the financial reporting process and the related income tax implication of the non-routine transactions, a material weakness over information technology general controls over logical access and program change management for certain of our key information systems used to support the financial reporting process and a material weakness relating to performance over certain controls not being adequately documented. In addition, during the course of the review for the Quarterly Report for the quarter ended March 31, 2022, we identified a material weakness in our controls relating to accounting and disclosure controls for non-routine transactions. While we plan to take remedial action to address the material weaknesses, we cannot provide any assurance that such remedial measures, or any other remedial measures we take, will be effective. If we fail to maintain effective internal control over financial reporting, we may not be able to accurately report our financial results, detect or prevent fraud, or file our periodic reports in a timely manner, which may, among other adverse consequences, cause investors to lose confidence in our reported financial information and lead to a decline in our stock price. In addition, a material weakness will not be considered remediated until the applicable controls operate for a sufficient period of time and management has concluded, through testing, that these controls are designed and operating effectively. Although management believes that the material weaknesses will be remediated by the end of the fiscal year there can be no assurance that the deficiencies will be remediated at such time or that the internal control over financial reporting, as modified, will enable us to identify or avoid material weaknesses in the future.
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ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
We did not sell any equity securities during the quarter ended March 31, 2023 in transactions that were not registered under the Securities Act other than as previously disclosed in our filings with the SEC.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable
ITEM 6. EXHIBITS
The exhibits filed or furnished as part of this Quarterly Report on Form 10-Q are set forth on the Exhibit Index, which Exhibit Index is incorporated herein by reference.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
THERIVA BIOLOGICS, INC. | ||
By: | /s/ Steven A. Shallcross | |
Steven A. Shallcross | ||
Chief Executive Officer, Chief Financial Officer | ||
(Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) | ||
Date: May 11, 2023 |
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EXHIBIT INDEX
Exhibit |
| Exhibit Title |
3.1 | Certificate of Incorporation, as amended (Incorporated by reference to (i) Exhibit 3.1 of the Registrant’s Current Report on Form 8-K filed October 16, 2008, File No. 001-12584, (ii) Exhibit 3.1 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2001 filed August 14, 2001, File No. 001-12584; and (iii) Exhibits 3.1, 4.1 and 4.2 of the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended June 30, 1998 filed August 14, 1998, File No. 001-12584.) | |
3.2 | ||
3.3 | ||
3.4 | ||
3.5 | ||
3.6 | ||
3.7 | ||
3.8 | ||
3.9 | ||
3.10 | ||
3.11 | ||
3.12 | ||
3.13 |
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3.14 | ||
10.1* | Separation Agreement dated as of May 8, 2023 between Theriva Biologics, Inc. and Frank Tufaro | |
10.2*+†† | Consulting Agreement dated as of May 8, 2023 between Theriva Biologics, Inc. and Frank Tufaro | |
31.1 | ||
32.1 | ||
101.INS | Inline XBRL Instance Document* | |
101.SCH | Inline XBRL Taxonomy Extension Schema* | |
101.CAL | Inline XBRL Taxonomy Extension Calculation Linkbase* | |
101.DEF | Inline XBRL Taxonomy Extension Definition Linkbase* | |
101.LAB | Inline XBRL Taxonomy Extension Label Linkbase* | |
101.PRE | Inline XBRL Taxonomy Extension Presentation Linkbase* | |
104 | Cover Page Interactive Data File (formatted in XBRL in Exhibit 101) |
*Filed herewith.
+ Management contract or compensatory plan or arrangement required to be identified pursuant to Item 15(a)(3) of this report.
†† Registrant has omitted certain portions of this exhibit in accordance with Item 601 (b)(10) of Regulation S-K. The Company agrees to furnish unredacted copies of these exhibits to the SEC upon request
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EXHIBIT 10.1
SEPARATION AGREEMENT AND RELEASE
This Separation Agreement and Release (“Agreement”), dated May 8, 2023, is made by and between Francis Tufaro (“Employee”) and Theriva Biologics, Inc. (“Theriva”, or the “Company”) (collectively referred to as the “Parties” or individually referred to as a “Party”).
RECITALS
WHEREAS, Employee was employed by the Company;
WHEREAS, Employee signed an Employment Agreement with the Company dated March 22, 2022 (“Employment Agreement”) to serve as the Company’s Chief Operating Officer;
WHEREAS, Employee signed an Employee Proprietary Information, Inventions, Non-Solicitation and Non-Competition Agreement on March 22, 2022 (the “Confidentiality Agreement”), attached hereto as Exhibit A;
WHEREAS, the Company offered Employee to enter into the Stock Option Grant Notice and Agreement (collectively the “Option Agreement”) granting Employee the option to purchase 100,000 shares of the Company’s common stock (the “Option Award”) subject to the terms and conditions of the Theriva Biologics, Inc. 2020 Stock Incentive Plan (the “2020 Stock Incentive Plan”);
WHEREAS, Employee’s separation from the Company will be effective May 10, 2023 (the “Separation Date”); and
WHEREAS, the Parties wish to resolve any and all disputes, claims, complaints, grievances, charges, actions, petitions, and demands that Employee may have against the Company and any of the Releasees as defined below, including, but not limited to, any and all claims arising out of or in any way related to Employee’s employment with or separation from the Company.
NOW, THEREFORE, in consideration of the mutual promises made herein, the Company and Employee hereby agree as follows:
COVENANTS
2.Benefits. Employee’s health insurance benefits shall cease on the last day of the month in which the Separation Date occurs, subject to Employee’s right to continue Employee’s health, dental and vision insurance under COBRA. Employee’s participation in all benefits and incidents of employment, including, but not limited to, vesting in stock options, and the accrual of bonuses, vacation, and paid time off, ceased as of the Separation Date.
3.Payment of Salary and Receipt of All Benefits. Except for accrued but unpaid salary for the final pay period, accrued but unused vacation days as of the Separation Date, and outstanding expense reimbursement requests for reasonable Company-related business expenses, all of which shall be paid as soon as practicable after the Separation Date, Employee acknowledges and represents that, other than the consideration set forth in this Agreement, the Company and its agents have paid or provided all salary, wages, bonuses, accrued vacation/paid time off, notice periods, premiums, leaves, housing allowances, relocation costs, interest, severance, outplacement costs, fees, reimbursable expenses, commissions, stock, stock options, vesting, and any and all other benefits and compensation due to Employee. For avoidance of doubt, Employee shall retain his right to his vested 401(k) account balance.
4.Release of Claims. Employee agrees that the foregoing consideration represents settlement in full of all outstanding obligations owed to Employee by the Company, Theriva Biologics, S.L., and their respective current and former officers, directors, employees, agents, investors, attorneys, shareholders, administrators, affiliates, benefit plans, plan administrators, professional employer organization or co-employer, insurers, trustees, divisions, and subsidiaries, and predecessor and successor corporations and assigns (collectively, the “Releasees”). Employee, on Employee’s own behalf and on behalf of Employee’s respective heirs, family members, executors, agents, and assigns, hereby and forever releases the Releasees from, and agrees not to sue concerning, or in any manner to institute, prosecute, or pursue, any claim, complaint, charge, duty, obligation, demand, or cause of action relating to any matters of any kind, whether presently known or unknown, suspected or unsuspected, that Employee may possess against any of the Releasees arising from any omissions, acts, facts, or damages that have occurred up until and including the Separation Date, including, without limitation:
a.any and all claims relating to or arising from Employee’s employment relationship with the Company and the termination of that relationship;
b.any and all claims relating to, or arising from, Employee’s right to purchase, or actual purchase of shares of stock of the Company, including, without limitation, any claims for fraud, misrepresentation, breach of fiduciary duty, breach of duty under applicable state corporate law, and securities fraud under any state or federal law;
c.any and all claims for wrongful discharge of employment; termination in violation of public policy; discrimination; harassment; retaliation; breach of contract, both express and implied; breach of covenant of good faith and fair dealing, both express and implied; promissory estoppel; negligent or intentional infliction of emotional distress;
fraud; negligent or intentional misrepresentation; negligent or intentional interference with contract or prospective economic advantage; unfair business practices; defamation; libel; slander; negligence; personal injury; assault; battery; invasion of privacy; false imprisonment; conversion; and disability benefits;
d.any and all claims for violation of any federal, state, or municipal statute, including, but not limited to, Title VII of the Civil Rights Act of 1964; the Civil Rights Act of 1991; the Rehabilitation Act of 1973; the Americans with Disabilities Act of 1990; the Equal Pay Act; the Fair Labor Standards Act; the Fair Credit Reporting Act; the Age Discrimination in Employment Act of 1967; the Older Workers Benefit Protection Act; the Employee Retirement Income Security Act of 1974; the Worker Adjustment and Retraining Notification Act; the Family and Medical Leave Act; the Uniformed Services Employment and Reemployment Rights Act; the Emergency Family and Medical Leave Expansion Act; the Emergency Paid Sick Leave Act; California Fair Employment and Housing Act, as amended, Cal. Govt. Code § 12900 et seq.; Unruh Civil Rights Act, as amended, Cal. Civil Code § 51; Moore-Brown-Roberti Family Rights Act, as amended, Cal. Govt. Code § 12945.1 et seq.; California Pregnancy Disability Leave Law, as amended, Cal. Govt. Code § 12945; the California Constitution; any applicable California Industrial Welfare Commission Wage Order; California Access to Personnel Files Law, as amended, Cal. Lab. Code § 1198.5; California Arrest History Law, Cal. Lab. Code § 432.7-432.8; California Equal Pay Law, Cal. Lab. Code § 1197.5 et seq.; California Ban the Box Law, Cal. Lab. Code § 432.9; California Sex Offender Discrimination Law, Cal. Penal Code § 290.46; California Job Reference Disclosures Law, Cal. Lab. Code § 1050 et seq.; Annual Pay Data Report, Cal. Lab. Code § 160; California Crime Victim Leave Law, Cal. Lab. Code § 230, 230.1 & 230.5; California Nursing Mothers Break Time Law, Cal. Gov’t Code § 12970 & Cal. Code Regs. tit. 2, § 7286.9; California Military Leave Law, Cal. Mil. & Vet. Code §§ 394.5-395.9; California Organ and Bone Marrow Donation Leave Law, Cal. Lab. Code §§ 1508-1513; California Overtime Law, Cal Lab Code § 515 et seq.; Cal. Labor Code § 2699 et seq.; California Plant Closing Law, Cal. Lab. Code § 1400 et seq.; California Security Breach Notification Requirements, as amended, Cal. Civ. Code § 1798.29; California Social Security Number Privacy Law, Cal. Lab. Code § 226; California Wage Payment Law, Cal. Lab. Code § 200 et seq.; California Employee Personal Information Protection Act, Cal. Lab. Code § 1024.6; California Occupational Safety and Health Act, Cal. Lab. Code § 226.7; California Family Rights Act (Cal. Govt. Code § 12945.1 et seq.); California Wage Theft Prevention Act of 2011, Cal. Labor Code § 2810.5 et seq.; California Healthy Workplace Healthy Family Act of 2014, Cal. AB 1522; Cal. Labor Code §§ 226 and 246; California Anti-Retaliation law, Cal. Labor Code §§ 98.7, 1102.5, 1102.61, and 1103.62;
e.any and all claims for violation of the federal or any state constitution;
f.any and all claims arising out of any other laws and regulations relating to employment or employment discrimination;
g.any claim for any loss, cost, damage, or expense arising out of any dispute over the non-withholding or other tax treatment of any of the proceeds received by Employee as a result of this Agreement; and
h.any and all claims for attorneys’ fees and costs.
Employee agrees that the release set forth in this section shall be and remain in effect in all respects as a complete general release as to the matters released. This release does not waive any rights of Employee, or any obligations of the Company: (1) under this Agreement; (2) that cannot be released as a matter of law, including any Protected Activity (as defined below); (3) regarding unemployment compensation benefits or workers’ compensation benefits; (4) regarding indemnification, contribution, advancement or payment of related expenses pursuant to the Company’s Bylaws or other organizing documents, under any written agreement between the Parties (including the Indemnification Agreement), or under applicable law, in each case as applicable; (5) regarding insurance coverage under any directors and officers liability insurance, other insurance policies of Employer, COBRA, or any similar state COBRA law; (6) regarding any benefits vested and non-forfeitable as of the Separation Date under any stock or other employee benefit plan with the Company; (7) in Employee’s capacity as a shareholder of the Company, if applicable; and (8) any claims arising after the date Employee signs this Agreement. Employee represents that Employee has made no assignment or transfer of any right, claim, complaint, charge, duty, obligation, demand, cause of action, or other matter waived or released by this Section.
5.California Civil Code Section 1542. Employee acknowledges that Employee has been advised to consult with legal counsel and is familiar with the provisions of California Civil Code Section 1542, a statute that otherwise prohibits the release of unknown claims, which provides as follows:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.
Employee, being aware of said code section, agrees to expressly waive any rights Employee may have thereunder, as well as under any other statute or common law principles of similar effect.
6.Acknowledgment of Waiver of Claims under ADEA. Employee acknowledges that Employee is waiving and releasing any rights Employee may have under the Age Discrimination in Employment Act of 1967 (“ADEA”) against the Releasees, and that this waiver and release is knowing and voluntary. Employee agrees that this waiver and release does not apply to any rights or claims that may arise under the ADEA after the Effective Date of this Agreement. Employee acknowledges that the consideration given for this waiver and release is in addition to anything of value to which Employee was already entitled. Employee further acknowledges that Employee has been advised by this writing that: (a) Employee should consult with an attorney prior to executing this Agreement; (b) Employee has twenty-one (21) days within which to consider this Agreement; (c) Employee has seven (7) days following Employee’s execution of this Agreement to revoke this Agreement; (d) this Agreement shall not be effective until after the revocation period has expired; and (e) nothing in this Agreement prevents or precludes Employee from challenging or seeking a determination in good faith of the validity of this waiver under the ADEA, nor does it impose any condition precedent, penalties, or costs for doing so, unless specifically authorized by federal law. In the event Employee signs this Agreement and returns it to the Company in less than the 21-day period identified above, Employee hereby acknowledges that Employee has freely and voluntarily chosen to waive the time period allotted for considering this Agreement. Employee acknowledges and understands that revocation must be accomplished by a written notification to the undersigned Company representative that is received prior to the Effective Date. The Parties agree that changes, whether material or immaterial, do not restart the running of the 21-day period.
7.Resignation on Termination. Employee agrees that Employee’s execution of this Agreement shall serve as Employee’s resignation, effective as of the Separation Date, from any directorships, offices, or other positions that Employee holds in the Company or any affiliate. Employee confirms that Employee’s resignation is not because of any disagreement with the Company on any matter relating to the Company’s operations, policies, or practices.
8.No Pending or Future Lawsuits. Employee represents that Employee has no lawsuits, claims, or actions pending in Employee’s name, or on behalf of any other person or entity, against the Company or any of the other Releasees. The Parties represent that neither Party intends to bring any claims on their own behalf or on behalf of any other person or entity against the other Party or, in the case of Employee, against any of the other Releasees.
9.[RESERVED].
10.Code Section 409A.
a.The Parties intend that this Agreement and the benefits provided hereunder be interpreted and construed to be exempt from or to otherwise comply with Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”), to the extent applicable thereto. Notwithstanding any provision of this Agreement to the contrary, this Agreement shall be interpreted and construed consistent with this intent. Although the Company intends to administer this Agreement so that it will be exempt from, or otherwise comply with the requirements of Section 409A, the Company does not represent or warrant that this Agreement will be exempt from or otherwise comply with Section 409A, or any similar provisions of state or local laws. Neither the Company, its affiliates, nor their respective directors, officers, employees or advisors shall be liable to Employee (or any individual claiming a benefit through Employee) for any tax, interest, or penalties that Employee may owe as a result of compensation or benefits paid under this Agreement,
and the Company and its affiliates shall have no obligation to indemnify, reimburse, or otherwise protect Employee from the obligation to pay any taxes pursuant to Code Section 409A or otherwise.
b.Employee’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each installment payment hereunder shall at all times be considered a separate and distinct payment.
11.Trade Secrets and Confidential Information/Company Property. Employee reaffirms and agrees to observe and abide by the terms of the Confidentiality Agreement, specifically including the provisions therein regarding nondisclosure of the Company’s trade secrets and confidential and proprietary information, noncompetition, and nonsolicitation of Company employees. Employee agrees that the above reaffirmation and agreement with the Confidentiality Agreement shall constitute a new and separately enforceable agreement to abide by the terms of the Confidentiality Agreement, entered and effective as of the Effective Date. Employee specifically acknowledges and agrees that any violation of the restrictive covenants in the Confidentiality Agreement shall constitute a material breach of this Agreement. Employee’s signature below constitutes Employee’s certification under penalty of perjury that Employee has returned all documents and other items provided to Employee by the Company, developed or obtained by Employee in connection with Employee’s employment with the Company, or otherwise belonging to the Company, including, but not limited to, all passwords to any software or other programs or data that Employee used in performing services for the Company. For the avoidance of doubt, notwithstanding any other provision herein or in any other agreement between Employee and the Company, following the Separation Date, Employee may retain, in hardcopy and/or electronic format, and use the Microsoft Outlook Contacts and similar contact information maintained by his as of the Separation Date.
12.No Third Party Cooperation. Employee agrees that Employee will not knowingly encourage, counsel, or assist any attorneys or their clients in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints by any third party against any of the Releasees, unless under a subpoena or other court order to do so or as related directly to the ADEA waiver in this Agreement. Employee agrees both to immediately notify the Company upon receipt of any such subpoena or court order, and to furnish, within three (3) business days of its receipt, a copy of such subpoena or other court order. If approached by anyone for counsel or assistance in the presentation or prosecution of any disputes, differences, grievances, claims, charges, or complaints against any of the Releasees, Employee shall state no more than that Employee cannot provide counsel or assistance.
13.Cooperation with the Company. Employee agrees that Employee will assist and cooperate with the Company in connection with the defense or prosecution of any claim that may be made against or by the Company or any Releasees, or in connection with any ongoing or future investigation or dispute or claim of any kind involving the Company, including meeting with the Company’s counsel, any proceeding before any arbitral, administrative, judicial, legislative, or other body or agency, including testifying in any proceeding to the extent such claims, investigations or proceedings relate to services performed or required to be performed by Employee, pertinent knowledge possessed by Employee, or any act or omission by Employee. Employee further agrees to perform all acts and execute and deliver any documents that may be reasonably necessary to carry out the provisions of this paragraph.
14.Nondisparagement. Employee agrees not to disparage the Company or the Company’s or any of its subsidiaries’ officers, directors, employees, in any manner likely to be harmful to them or their business, business reputation, or personal reputation, and the Company agrees that none of its or its subsidiaries’ officers or directors will disparage Employee in any manner likely to be harmful to Employee’s business, business reputation or personal reputation; provided that both Employee and the Company’s or subsidiaries’ officers and directors may respond accurately and fully to any question, inquiry, or request for information when required by law, court order or legal process or in connection with a government or regulatory proceeding or investigation. In addition, nothing in this provision or this Agreement is intended to prohibit or restrain Employee in any manner from making disclosures or engaging in any Protected Activity, as described in Section 20 herein. The Parties acknowledge and agree that the obligations of the Company’s officers and directors under this Section shall only apply for so long as each officer and director remains an employee or director of the Company, as applicable. Employee will refer any requests for verification of his employment or an employment reference to the Company’s Chief Executive Officer and, in response to any such request, the Company’s Chief Executive Officer will state only that Employee resigned and provide Employee’s dates
of employment and last position held. Nothing in this agreement prevents you from discussing or disclosing information about unlawful acts in the workplace, such as harassment or discrimination or any other conduct that you have reason to believe is unlawful.
15.Breach. In addition to the rights provided in the “Attorneys’ Fees” section below, the Parties acknowledge and agree that any material breach of this Agreement, unless such breach constitutes a legal action by Employee challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA by Employee, or of any provision of the Confidentiality Agreement shall entitle the non-breaching Party immediately to recover and/or cease providing the consideration provided to the other Party under this Agreement and to obtain damages, as applicable.
16.No Admission of Liability. The Parties understand and acknowledge that this Agreement constitutes a compromise and settlement of any and all actual or potential disputed claims by Employee. No action taken by the Parties hereto, either previously or in connection with this Agreement, shall be deemed or construed to be (a) an admission of the truth or falsity of any actual or potential claims or (b) an acknowledgment or admission by anyone of any fault or liability whatsoever to the other Party or to any third party.
17.Costs. The Parties shall each bear their own costs, attorneys’ fees, and other fees incurred in connection with the preparation of this Agreement.
18.ARBITRATION. THE PARTIES AGREE THAT ANY AND ALL DISPUTES ARISING OUT OF THE TERMS OF THIS AGREEMENT, THEIR INTERPRETATION, AND ANY OF THE MATTERS HEREIN RELEASED, SHALL BE SUBJECT TO ARBITRATION BEFORE A SINGLE, MUTUALLY AGREED, NEUTRAL ARBITRATOR IN SAN DIEGO COUNTY, ADMINISTERED BY THE JUDICIAL ARBITRATION AND MEDIATION SERVICE (“JAMS”) UNDER ITS COMPREHENSIVE ARBITRATION RULES (“JAMS RULES”) AND CALIFORNIA LAW. THE ARBITRATOR MAY GRANT INJUNCTIONS AND ANY OTHER RELIEF AVAILABLE UNDER APPLICABLE LAW IN SUCH DISPUTES. THE ARBITRATOR SHALL ADMINISTER AND CONDUCT ANY ARBITRATION IN ACCORDANCE WITH CALIFORNIA LAW, AND THE ARBITRATOR SHALL APPLY SUBSTANTIVE AND PROCEDURAL CALIFORNIA LAW TO ANY DISPUTE OR CLAIM, WITHOUT REFERENCE TO ANY CONFLICT-OF-LAW PROVISIONS OF ANY JURISDICTION. TO THE EXTENT THAT THE JAMS RULES CONFLICT WITH CALIFORNIA LAW, CALIFORNIA LAW SHALL TAKE PRECEDENCE. THE DECISION OF THE ARBITRATOR SHALL BE FINAL, CONCLUSIVE, AND BINDING ON THE PARTIES TO THE ARBITRATION. IN RESOLVING ANY MATTER SUBMITTED TO ARBITRATION, THE ARBITRATOR SHALL STRICTLY FOLLOW THE SUBSTANTIVE LAW APPLICABLE TO THE DISPUTE, CLAIM OR CONTROVERSY AND THE ARBITRATOR’S AUTHORITY AND JURISDICTION SHALL BE LIMITED TO DETERMINING THE DISPUTE IN CONFORMITY WITH APPLICABLE LAW AS TO LIABILITY, DAMAGES AND REMEDIES, TO THE SAME EXTENT AS IF THE DISPUTE WAS DETERMINED BY A COURT WITHOUT A JURY. THE PARTIES AGREE THAT THE PREVAILING PARTY IN ANY ARBITRATION SHALL BE ENTITLED TO INJUNCTIVE RELIEF IN ANY COURT OF COMPETENT JURISDICTION TO ENFORCE THE ARBITRATION AWARD. THE PARTIES TO THE ARBITRATION SHALL EACH PAY HALF THE COSTS AND EXPENSES OF SUCH ARBITRATION, AND EACH PARTY SHALL SEPARATELY PAY FOR ITS RESPECTIVE COUNSEL FEES AND EXPENSES; PROVIDED, HOWEVER, THAT THE ARBITRATOR SHALL AWARD ATTORNEYS’ FEES AND COSTS TO THE PREVAILING PARTY, EXCEPT AS PROHIBITED BY LAW. THE PARTIES HEREBY AGREE TO WAIVE THEIR RIGHT TO HAVE ANY DISPUTE BETWEEN THEM RESOLVED IN A COURT OF LAW BY A JUDGE OR JURY. NOTWITHSTANDING THE FOREGOING, THIS SECTION WILL NOT PREVENT EITHER PARTY FROM SEEKING INJUNCTIVE RELIEF (OR ANY OTHER PROVISIONAL REMEDY) FROM ANY COURT HAVING JURISDICTION OVER THE PARTIES AND THE SUBJECT MATTER OF THEIR DISPUTE RELATING TO THIS AGREEMENT AND THE AGREEMENTS INCORPORATED HEREIN BY REFERENCE. SHOULD ANY PART OF THE ARBITRATION AGREEMENT CONTAINED IN THIS PARAGRAPH CONFLICT WITH ANY OTHER ARBITRATION AGREEMENT BETWEEN THE PARTIES, THE PARTIES AGREE THAT THIS ARBITRATION AGREEMENT SHALL GOVERN.
19.Authority; Successors. The Company represents and warrants that the undersigned has the authority to act on behalf of the Company and to bind the Company and all who may claim through it to the terms and conditions of this Agreement. Employee represents and warrants that Employee has the capacity to act on Employee’s own behalf and on
behalf of all who might claim through Employee to bind them to the terms and conditions of this Agreement. Each Party warrants and represents that there are no liens or claims of lien or assignments in law or equity or otherwise of or against any of the claims or causes of action released herein. This Agreement and all rights hereunder will inure to the benefit of, be enforceable by, and binding on the Parties and their heirs, agents, representatives, successors and assigns. The Company will require any successors or assigns to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession or assignment had taken place.
20.Protected Activity. Employee understands that nothing in this Agreement or the Confidentiality Agreement shall in any way limit or prohibit Employee from engaging for a lawful purpose in any Protected Activity, provided, however, that Employee agrees not to seek or accept any monetary award from such a proceeding (except with respect to proceedings before the Securities and Exchange Commission). For purposes of this Agreement, “Protected Activity” shall mean filing a charge, complaint, or report with, or otherwise communicating with, cooperating with or participating in any investigation or proceeding that may be conducted by, any federal, state or local government agency or commission, including the Securities and Exchange Commission, the Equal Employment Opportunity Commission, the Occupational Safety and Health Administration, and the National Labor Relations Board (“Government Agencies”), or discussing the terms and conditions of Employee’s employment with others to the extent expressly permitted by Section 7 of the National Labor Relations Act. Employee understands that in connection with such Protected Activity, Employee is permitted to disclose documents or other information to Government Agencies as permitted by law, and without giving notice to, or receiving authorization from, the Company. Notwithstanding the foregoing, Employee agrees to take all reasonable precautions to prevent any unauthorized use or disclosure of any information that may constitute Company confidential information under the Confidentiality Agreement to any parties other than the relevant Government Agencies. Employee further understands that “Protected Activity” does not include the disclosure of any Company attorney-client privileged communications, and that any such disclosure without the Company’s written consent shall constitute a material breach of this Agreement. In addition, pursuant to the Defend Trade Secrets Act of 2016, Employee is notified that an individual will not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that (i) is made in confidence to a federal, state, or local government official (directly or indirectly) or to an attorney solely for the purpose of reporting or investigating a suspected violation of law, or (ii) is made in a complaint or other document filed in a lawsuit or other proceeding, if (and only if) such filing is made under seal. In addition, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the individual’s attorney and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal and does not disclose the trade secret, except pursuant to court order.
21.No Representations. Employee represents that Employee has had an opportunity to consult with an attorney, and has carefully read and understands the scope and effect of the provisions of this Agreement. Employee has not relied upon any representations or statements made by the Company that are not specifically set forth in this Agreement. Employee acknowledges that there has been an opportunity to negotiate the terms of this Agreement and that the Agreement will not be interpreted as an employer promulgated agreement.
22.Severability. In the event that any provision or any portion of any provision hereof or any surviving agreement made a part hereof becomes or is declared by a court of competent jurisdiction or arbitrator to be illegal, unenforceable, or void, this Agreement shall continue in full force and effect without said provision or portion of provision.
23.Waiver of Statutory Information Rights. Employee hereby waives any current or future rights Employee may have under the Nevada Revised Statutes (and similar rights under other applicable law) to inspect, or make copies and extracts from, the Company’s stock ledger, any list of its stockholders, or any other books and records of the Company or any of its affiliates or subsidiaries, in Employee’s capacity as a holder of stock, shares, units, options, or any other equity instrument.
24.Attorneys’ Fees. Except with regard to a legal action challenging or seeking a determination in good faith of the validity of the waiver herein under the ADEA, in the event that either Party brings an action to enforce or effect its rights under this Agreement, the prevailing Party shall be entitled to recover its costs and expenses, including the
costs of mediation, arbitration, litigation, court fees, and reasonable attorneys’ fees incurred in connection with such an action.
25. Entire Agreement. This Agreement and its exhibits represents the entire agreement and understanding between the Company and Employee concerning the subject matter of this Agreement and Employee’s employment with and separation from the Company and the events leading thereto and associated therewith, and supersedes and replaces any and all prior agreements and understandings concerning the subject matter of this Agreement and Employee’s relationship with the Company, including the Employment Agreement, with the exception of the Confidentiality Agreement, Indemnification Agreement, and Option Agreements. In the event of any conflict between any of the terms in this Agreement and the terms of any other surviving agreement between the Parties, the terms of this Agreement will be controlling.
26.No Oral Modification. This Agreement may only be amended in a writing signed by Employee and the Company’s Chief Executive Officer.
27.Governing Law. This Agreement shall be governed by the laws of the State of California, without regard for choice-of-law provisions. The Parties consent to personal and exclusive jurisdiction and venue in the State of California.
28.Effective Date. Employee understands that this Agreement shall be null and void if not executed by Employee, and returned to the Company, within twenty-one (21) days. Each Party has seven (7) days after that Party signs this Agreement to revoke it. This Agreement will become effective on the eighth (8th) day after Employee signed this Agreement, so long as it has been signed by the Parties and has not been revoked by either Party before that date (the “Effective Date”).
29.Counterparts. This Agreement may be executed in counterparts and each counterpart shall be deemed an original and all of which counterparts taken together shall have the same force and effect as an original and shall constitute an effective, binding agreement on the part of each of the undersigned. The counterparts of this Agreement may be executed and delivered by facsimile, photo, email PDF, Docusign/Echosign or a similarly accredited secure signature service, or other electronic transmission or signature. This Agreement may be executed in one or more counterparts, and counterparts may be exchanged by electronic transmission (including by email), each of which will be deemed an original, but all of which together constitute one and the same instrument.
30.Voluntary Execution of Agreement. Employee understands and agrees that Employee executed this Agreement voluntarily, without any duress or undue influence on the part or behalf of the Company or any third party, with the full intent of releasing all of Employee’s claims against the Company and any of the other Releasees. Employee acknowledges that:
(a) | Employee has read this Agreement; |
(b) | Employee has been represented in the preparation, negotiation, and execution of this Agreement by legal counsel of Employee’s own choice or has elected not to retain legal counsel; |
(c) | Employee understands the terms and consequences of this Agreement and of the releases it contains; and |
(d) | Employee is fully aware of the legal and binding effect of this Agreement. |
IN WITNESS WHEREOF, the Parties have executed this Agreement on the respective dates set forth below.
| FRANCIS TUFARO, an individual |
| |
| |
Dated: May 8, 2023 | /s/ Francis Tufaro |
| Francis Tufaro |
| |
| |
| THERIVA BIOLOGICS, INC. |
| |
| |
Dated: May 8, 203 | By: /s/ Steven A. Shallcross |
| Name: Steven A. Shallcross |
| Title: Chief Executive Officer |
EXHIBIT A
[CONFIDENTIALITY AGREEMENT]
EXHIBIT 10.2
CERTAIN CONFIDENTIAL INFORMATION CONTAINED IN THIS DOCUMENT, MARKED BY [***], HAS BEEN OMITTED BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) IS THE TYPE REGISTRANT TREATS AS PRIVATE OR CONFIDENTIAL.
CONSULTING AGREEMENT
This Consulting Agreement (this “Agreement”), dated May 10, 2023 (the “Effective Date”), is by and between Theriva Biologics, Inc. (“Company”), and Francis Tufaro (“Service Provider”).
1.SERVICES.
Service Provider agrees to aid in the transition process following Service Provider’s separation of employment from the Company. Service Provider agrees that the Company will, from time to time, request Service Provider’s assistance and cooperation in transferring Service Provider’s duties, responding to questions relating to the business, operations, books and records and files of the Company, assisting in the analysis of business opportunities, research and development, financial decisions, and business organization and Service Provider agrees to assist and cooperate with respect to the foregoing. (the “Services”), In providing the Services, Service Provider agrees to provide Service Provider’s own equipment and other materials at Service Provider’s own expense; however, Company will make its facilities and equipment available to Service Provider when necessary. Service Provider agrees to exercise the highest degree of professionalism and utilize Service Provider’s best efforts, expertise and creative talents in performing the Services. Service Provider’s compensation for the Services shall be limited to the compensation set forth on Exhibit A hereto. Service Provider may not subcontract or otherwise delegate its obligations under this Agreement without Company’s prior written consent.
2.RELATIONSHIP OF PARTIES.
Service Provider’s relationship with Company will be that of an independent contractor, and nothing in this Agreement should be construed to create a partnership, joint venture, or employer-employee relationship. Service Provider is not the agent or representative of Company (except as specifically set forth in this Agreement); is not authorized to make any representation, contract or commitment on behalf of Company; will not be entitled to, and hereby elects not to participate in (on either a prospective or retrospective basis), any of the benefits that Company makes available to its employees, such as group insurance, profit-sharing or retirement benefits (and waives the right to receive any such benefits); and will be solely responsible for all tax returns and payments required to be filed with or made to any U.S. federal, state, or local tax authority with respect to Service Provider’s performance of Services and receipt of fees under this Agreement. If applicable, Company will report amounts paid to Service Provider by filing Form 1099-MISC with the Internal Revenue Service, as required by law. Service Provider agrees to accept exclusive liability for complying with all applicable state and federal laws, including laws governing self-employed individuals, if applicable, such as laws related to payment of taxes, social security, disability, and other contributions based on fees paid to Service Provider under this Agreement. Company will not withhold or make payments for taxes, social security, unemployment insurance or disability insurance contributions, or obtain workers’ compensation insurance on Service Provider’s behalf. Service Provider hereby agrees to indemnify and defend Company against any and all such taxes or contributions, including penalties and interest. Service Provider agrees to provide proof of payment of appropriate taxes on any fees paid to Service Provider under this Agreement upon reasonable request of Company.
3.PAYMENTS.
3.1 Compensation. In consideration of the Services to be rendered by, Service Provider and provided that Service Provider has executed the Separation and General Release Agreement annexed hereto as Exhibit B (the “Separation Agreement”) and has not revoked it, Service Provider shall be compensated as set forth on Exhibit A hereto for a period of six (6) months (the “Consulting Period”) commencing on the Effective Date. Unless otherwise agreed by the parties, payment for Services, if reasonably satisfactory to Company, shall be due thirty (30) days after the end of each month during the Consulting Period.
3.2 Expenses. Company shall reimburse Service Provider for reasonable travel and other business expenses that are incurred by Service Provider in the performance of the Services and are approved in advance by Company, in accordance with Company’s general policies, as may be amended from time to time. Service Provider shall provide Company with an itemized list of all such expenses and supporting receipts with each invoice therefor.
4.CONFIDENTIAL INFORMATION.
4.1 Nondisclosure; Recognition of Company’s Rights. At all times during and after Service Provider’s engagement, Service Provider will hold in confidence and will not disclose, use, lecture upon, or publish any of Company’s Confidential Information (defined below), except as may be required in connection with Service Provider’s Services for Company, or as expressly authorized by a duly authorized officer of Company (each an “Authorizing Person” and collectively the “Authorizing Persons”). Service Provider hereby assigns to Company any rights Service Provider may have or acquire in any and all Confidential Information and recognizes that all Confidential Information shall be the sole and exclusive property of Company and its assigns.
Notwithstanding the foregoing, pursuant to 18 U.S.C. Section 1833(b), Service Provider shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that: (1) is made in confidence to a Federal, State, or local government official, either directly or indirectly, or to an attorney, and solely for the purpose of reporting or investigating a suspected violation of law; or (2) is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal.
4.2 Confidential Information. Service Provider understands that its work for Company will involve access to and creation of confidential, proprietary and trade secret information and materials of Company (or its affiliates, licensors, suppliers, vendors or customers) (collectively, “Confidential Information”). Confidential Information includes, without limitation, any and all confidential knowledge, data or information related to Company’s business or its actual or demonstrably anticipated research or development, including without limitation (a) trade secrets, inventions, ideas, processes, computer source and object code, data, formulae, programs, other works of authorship, know-how, improvements, discoveries, developments, designs, and techniques; (b) information regarding products, services, plans for research and development, marketing and business plans, budgets, financial statements, contracts, prices, suppliers, and customers; (c) information regarding the skills and compensation of Company’s employees, contractors, and any other service providers of Company; or (d) the existence of any business discussions, negotiations, or agreements between Company and any third party.
4.3 Third Party Information. Service Provider understands that Company has received and in the future will receive from third parties confidential or proprietary information (“Third Party Information”), subject to a duty on Company’s or its affiliates’ part to maintain the confidentiality of such information and to use it only for certain limited purposes. During and after the term of Service Provider’s engagement, Service Provider will hold Third Party Information in strict confidence and will not disclose to anyone (other than Company personnel who need to know such information in connection with their work for Company), or use Third Party Information, except in connection with Service Provider’s Services for Company or unless expressly authorized by an Authorizing Person in writing or required by a court order, governmental body or by law.
4.4 No Improper Use of Information of Prior Employers. Service Provider represents that Service Provider’s engagement by Company does not and will not breach any agreement with any former employer or other third party, including any noncompete agreement or any agreement to keep in confidence or refrain from using information acquired by Service Provider prior to Service Provider’s engagement by Company. Service Provider further represents that Service Provider has not entered into, and agrees that Service Provider will not enter into, any agreement, either written or oral, in conflict with Service Provider’s obligations under this Agreement or to the Company, unless expressly approved by an Authorizing Person. During Service Provider’s engagement by Company, Service Provider will not improperly make use of, or disclose, any information or trade secrets of any former employer or other third party, nor will Service Provider bring onto the premises of Company or use any unpublished documents or any property belonging to any former employer or other third party, in violation of any lawful agreements with that former employer or third party.
5. Ownership. Service Provider acknowledges and agrees that any and all results and proceeds of (including any deliverables resulting from) the Services, whether tangible or intangible, including any and all ideas, concepts, works, information, data, software and other materials supplied, conceived, originated, prepared, generated or required to be delivered by Service Provider in connection with furnishing Services hereunder, including all intermediate and partial versions thereof (collectively, “Work Product”), is Confidential Information (as defined above) and the property of Company. All right, title and interest in and to the Work Product will vest in Company. To the extent that title to any such Work Product may not otherwise vest in Company, Service Provider hereby irrevocably assigns to Company all of Service Provider’s right, title and interest therein. All such Work Product will belong exclusively to Company, with Company having the right to obtain and to hold in its own name, copyright registrations, patents and such other intellectual property protection as may be appropriate to the subject matter, and any extensions and renewals thereof. Service Provider agrees to give Company, and any person designated by Company, reasonable assistance, at Company’s expense, in defending, perfecting or evidencing the rights defined in this Section 5, including, without limitation, by executing and delivering all documents reasonably requested by Company for such purposes. Unless otherwise directed by Company, upon completion of the Services or upon the earlier termination of this Agreement (or at any other time requested by the Company), Service Provider will immediately turn over to Company all Work Product (including all copies thereof), including, but not limited to, working papers,
descriptions, reports, notes and data. All Work Product will bear Company’s copyright and trade secret notices, as specified by Company. No rights to the Work Product will remain with Service Provider.
6.TERM AND TERMINATION.
6.1 This Agreement shall commence on the Effective Date and continue until the earlier of (a) the six-month anniversary of the Effective Date (b) termination by either party in accordance with this Section 6, or (c) the date that Service Provider revokes Service Provider’s acceptance of the Separation Agreement (the “Consulting Period”). This Agreement may be renewed by mutual written agreement of the parties.
6.1 Termination. Service Provider or Company may terminate this Agreement without Cause at any time upon thirty (30) days’ prior written notice to Company. Either party may terminate this Agreement immediately in the event that the other party has materially breached the Agreement.
6.2 Effect of Termination. Upon termination of this Agreement, Service Provider shall immediately cease performing the Services. If this Agreement is terminated by Service Provider or by the Company, Company agrees to pay Service Provider the compensation due for the period up to the date of termination and consulting-related expenses approved and incurred through the effective date of such termination.
6.3 Return of Company Property. Upon termination of this Agreement, or at any time Company so requests, Service Provider shall deliver immediately to Company all property belonging to Company, whether given to Service Provider by Company or prepared by Service Provider in the course of rendering the Services, including all Services then in progress and all material in Service Provider’s possession containing Confidential Information and any copies thereof, whether prepared by Service Provider or others. Following termination, Service Provider shall not retain any written or other tangible (including machine-readable) material containing any Confidential Information.
7.ARBITRATION OF ALL DISPUTES.
7.1 Agreement to Arbitrate. To ensure the timely and economical resolution of disputes that may arise between Service Provider and Company, both Service Provider and Company mutually agree that pursuant to the Federal Arbitration Act, 9 U.S.C. §1-16, and to the fullest extent permitted by applicable law, they will submit solely to final, binding and confidential arbitration any and all disputes, claims, or causes of action arising from or relating to: (i) the negotiation, execution, interpretation, performance, breach or enforcement of this Agreement; or (ii) the relationship between Company and Service Provider; or (iii) the termination of that relationship; provided, however, that this Section 7 shall not apply to any claim or cause of action that cannot be subject to arbitration as a matter of law. BY AGREEING TO THIS ARBITRATION PROCEDURE, BOTH SERVICE PROVIDER AND COMPANY WAIVE THE RIGHT TO RESOLVE ANY SUCH DISPUTES THROUGH A TRIAL BY JURY OR JUDGE OR THROUGH AN ADMINISTRATIVE PROCEEDING.
7.2 Arbitrator Authority. The Arbitrator shall have the sole and exclusive authority to determine whether a dispute, claim or cause of action is subject to arbitration under this Section 7 and to determine any procedural questions which grow out of such disputes, claims or causes of action and bear on their final disposition.
7.3 Individual Capacity Only. All claims, disputes, or causes of action under this Section 7, whether by Service Provider or Company, must be brought solely in an individual capacity, and shall not be brought as a plaintiff (or claimant) or class member in any purported class or representative proceeding, nor joined or consolidated with the claims of any other person or entity. The Arbitrator may not consolidate the claims of more than one person or entity, and may not preside over any form of representative or class proceeding. To the extent that the preceding sentences in this Section 7.3 are found to violate applicable law or are otherwise found unenforceable, any claim(s) alleged or brought on behalf of a class shall proceed in a court of law rather than by arbitration.
7.4 Arbitration Process. Any arbitration proceeding under this Section 7 shall be presided over by a single arbitrator and conducted by JAMS, Inc. (“JAMS”) in Los Angeles, California under the then applicable JAMS streamlined rules for the resolution of disputes (available upon request and also currently available at http://www.jamsadr.com/rules-streamlined-arbitration/). Service Provider and Company both have the right to be represented by legal counsel at any arbitration proceeding, at each party’s own expense. The Arbitrator shall: (i) have the authority to compel adequate discovery for the resolution of the dispute; (ii) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award; and (iii) be authorized to award any or all remedies that Service Provider or Company would be entitled to seek in a court of law. Company shall pay all JAMS arbitration fees in excess of the amount of court fees that would be required of Service Provider if the dispute were decided in a court of law.
7.5 Injunctive Relief and Final Orders. Nothing in this Section 7 is intended to prevent either Service Provider or Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration. Any final award in any arbitration proceeding hereunder may be entered as a judgment in the federal and state courts of any competent jurisdiction and enforced accordingly.
8.Business Relationships.
Service Provider acknowledges that Company’s relationships with its employees, customers, and vendors are valuable business assets. Service Provider agrees that, during the term of this Agreement and for one (1) year thereafter, Service Provider shall not, (a) either directly or indirectly, solicit or attempt to solicit any employee of the Company to terminate his, her, or its relationship with Company to become an employee, consultant, or independent contractor to or for any other person or entity, or (b) directly or indirectly, through or on behalf of any other individual or entity, use any information that constitutes a “trade secret” within the meaning of the Uniform Trade Secrets Act (“UTSA”) to solicit, entice, or induce any business from any of Company’s clients (including actively sought prospective clients) or vendors.
9.Limitation of Liability.
To the extent permitted by applicable law: (a) in no event shall Company be liable under any legal theory for any special, indirect, consequential, exemplary or incidental damages, however caused, arising out of or relating to this Agreement, even if Company has been advised of the possibility of such damages; and (b) in no event shall Company’s aggregate liability arising out of or relating to this Agreement (regardless of the form of action giving rise to such liability, whether in contract, tort or otherwise) exceed the fees payable by Company hereunder.
10.Indemnification. Service Provider will indemnify and hold harmless Company and its affiliates, employees, and agents from and against any and all liabilities, losses, damages, costs, and other expenses (including attorneys’ and expert witnesses’ costs and fees) arising from or relating to any breach of any representation, warranty, covenant, or obligation of Service Provider in this Agreement or any intentional misconduct or negligence by Service Provider or any of Service Provider’s agents or subcontractors in performing the Services. In the event of any third-party claim, demand, suit, or action (a “Claim”) for which Company (or any of its affiliates, employees, or agents) is or may be entitled to indemnification hereunder, Company may, at its option, require Service Provider to defend such Claim at Service Provider’s sole expense. Service Provider may not agree to settle any such Claim without Company’s express prior written consent.
11.Notification of New Employer or Any Third Party. Upon termination of Service Provider’s engagement, Service Provider consents to the notification of Service Provider’s subsequent employer or any third party of Service Provider’s rights and obligations under this Agreement, by Company providing a copy of this Agreement or otherwise.
12.MISCELLANEOUS.
12.1 Assignment. Neither party shall assign, sell, transfer, delegate or otherwise dispose of, by operation of law or otherwise, this Agreement or any or its rights or obligations under this Agreement; provided, however Company may assign, sell, transfer, delegate or otherwise dispose of this Agreement or any of its rights and obligations hereunder as part of a merger, consolidation, corporate reorganization, sale of all or substantially all of Company’s assets of the business to which Service Provider’s Services relate, sale of stock, change of name or like event. Any purported assignment, sale, transfer, delegation or other disposition, except as permitted herein, shall be null and void. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns.
12.2 Notices. Any notice, request, demand or other communication required or permitted hereunder shall be in writing, shall reference this Agreement and shall be deemed to be properly given: (a) when delivered personally; (b) when sent by facsimile, with written confirmation of receipt by the sending facsimile machine; (c) five (5) business days after having been sent by registered or certified mail, return receipt requested, postage prepaid; or (d) two (2) business days after deposit with an express courier, with written confirmation of receipt. All notices shall be sent to the address set forth on the signature page of this Agreement and to the notice of the person executing this Agreement (or to such other address or person as may be designated by a party by giving written notice to the other party).
12.3 Severability. If any provision of this Agreement is, for any reason, held to be invalid or unenforceable, the other provisions of this Agreement will remain enforceable and the invalid or unenforceable provision will be deemed modified so that it is valid and enforceable to the maximum extent permitted by law.
12.4 Waiver. The waiver by either party of a breach of or a default under any provision of this Agreement shall not be construed as a waiver of any subsequent breach of or default under the same or any other provision of this Agreement, nor shall any delay or omission on the part of either party to exercise or avail itself of any right or remedy that it has or may have hereunder operate as a waiver of any such right or remedy.
12.5 Governing Law and Venue. This Agreement and any action related thereto will be governed and interpreted by and under the laws of the State of California, without giving effect to any conflicts of laws principles that require the application of the law of a different state. Service Provider hereby expressly consents to personal jurisdiction and venue in the state and federal courts for the county in which Company’s principal place of business is located for any lawsuit filed which arises from or relates to this Agreement.
12.6 Headings. The headings used in this Agreement are for convenience only and shall not be considered in construing or interpreting this Agreement.
12.7 Entire Agreement. This Agreement (including the Exhibits attached hereto, which are incorporated herein by reference) is the final, complete and exclusive agreement of the parties with respect to the subject matter hereof and supersedes and merges all prior or contemporaneous proposals, discussions, negotiations, understandings, promises, representations, conditions, communications and agreements, whether written or oral, between the parties with respect to such subject matter and all past courses of dealing or industry custom. The terms of this Agreement will govern all services undertaken by Service Provider for Company; provided, however, that in the event of any conflict between the terms of this Agreement and the Statement of Work, the terms of the Statement of Work will control. This Agreement may only be changed or amended by mutual agreement of authorized representatives of the parties in writing. This Agreement may be executed in two or more counterparts, each of which will be deemed an original, but all of which together will constitute one and the same instrument. Counterparts may be delivered via facsimile, electronic mail (including pdf or any electronic signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic Transactions Act or other applicable law) or other transmission method and any counterpart so delivered will be deemed to have been duly and validly delivered and be valid and effective for all purposes.
In witness whereof, the parties have caused this Agreement to be executed by their duly authorized representatives as of the Effective Date.
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THERIVA BIOLOGICS, INC. |
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BY: | /s/ Steven A. Shallcross |
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NAME: | Steven A. Shallcross |
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TITLE: | Chief Executive Officer |
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ADDRESS: | 9605 Medical Center Drive, Suite 270, Rockville, MD 20850 |
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SERVICE PROVIDER: | |
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| /s/ Francis Tufaro |
| Francis Tufaro |
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ADDRESS: | 3246 Sitio Avellana Rancho Carlsbad, CA 92009 |
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EXHIBIT A
SERVICES AND COMPENSATION
1. Contact. Service Provider’s principal Company contact: Steven A. Shallcross
2. Services. The Services will include, but will not be limited to, those listed in Section 1 of the Agreement.
3. Compensation.
A. A daily rate of [***] per full day of service, pro- rated for any days services are provided less than 8 hours
B. The Company will reimburse Service Provider, in accordance with Company policy, for all reasonable expenses incurred by Service Provider in performing the Services pursuant to this Agreement, if Service Provider receives written consent from an authorized agent of the Company prior to incurring such expenses and submits receipts for such expenses to the Company in accordance with Company policy.
C. Every month, Service Provider shall submit to the Company a written invoice for expenses, and such statement shall be subject to the approval of the contact person listed above or other designated agent of the Company. The Company will remit payment for properly submitted and approved invoices within thirty (30) days following invoice submission.
E. All payments and benefits provided for under this Agreement are intended to be exempt from or otherwise comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended, and the regulations and guidance thereunder (together, “Section 409A”), so that none of the payments and benefits to be provided hereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities or ambiguous terms herein will be interpreted to be exempt or so comply. Each payment and benefit payable under this Agreement is intended to constitute a separate payment for purposes of Section 1.409A-2(b)(2) of the Treasury Regulations. In no event will the Company reimburse Service Provider for any taxes that may be imposed on Service Provider as a result of Section 409A.
[Signature Page Follows]
COMPANY: |
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THERIVA BIOLOGICS, INC. |
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By: | /s/ Steven A. Shallcross |
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Name: | Steven A. Shallcross |
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Title: | Chief Executive Officer |
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Address: | 9605 Medical Center Drive, Suite 270 |
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| Rockville, MD 20850 | |
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Dated: | May 8, 2023 |
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SERVICE PROVIDER: |
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| /s/ Francis Tufaro |
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| Francis Tufaro |
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Address: | 3246 Sitio Avellana Rancho |
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| Carlsbad, CA 92009 | |
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Dated: May 8, 2023
EXHIBIT B
SEPARATION AGREEMENT
EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO RULE 13a-14(a) OR RULE 15d-14(a) OF THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Steven A. Shallcross, certify that:
1.I have reviewed this Quarterly Report on Form 10-Q of Theriva Biologics, Inc.;
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: May 11, 2023 | By: | /s/ Steven A. Shallcross |
| | Name: Steven A. Shallcross |
| | Chief Executive Officer, Chief Financial Officer |
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| | Officer and Principal Accounting Officer) |
EXHIBIT 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFCIER AND PRINCIPAL FINANCIAL OFFICER
PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Pursuant to 18 U.S.C. § 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, the undersigned officer of Theriva Biologics, Inc. (the “Registrant”) hereby certifies, to such officer’s knowledge, that:
(1) | the accompanying Quarterly Report on Form 10-Q of the Registrant for the quarter ended March 31, 2023 (the “Report”) fully complies with the requirements of Section 13(a) or Section 15(d), as applicable, of the Securities Exchange Act of 1934, as amended; and |
(2) | the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant. |
Date: May 11, 2023 | By: | /s/ Steven A. Shallcross |
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| Name: Steven A. Shallcross |
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| Chief Executive Officer, Chief Financial Officer |
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| (Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
Consolidated Balance Sheets (Parenthetical) - $ / shares |
Mar. 31, 2023 |
Dec. 31, 2022 |
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Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 350,000,000 | 350,000,000 |
Common stock, shares issued | 15,844,294 | 15,844,294 |
Common stock, shares outstanding | 15,124,061 | 15,124,061 |
Treasury stock | 720,233 | 720,233 |
Series C convertible preferred stock | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Convertible preferred stock, shares issued | 275,000 | 275,000 |
Convertible preferred stock, shares outstanding | 275,000 | 275,000 |
Series D convertible preferred stock | ||
Convertible preferred stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Convertible preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Convertible preferred stock, shares issued | 100,000 | 100,000 |
Convertible preferred stock, shares outstanding | 100,000 | 100,000 |
Condensed Consolidated Statements of Operations and Comprehensive Loss - USD ($) $ in Thousands |
3 Months Ended | |
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Mar. 31, 2023 |
Mar. 31, 2022 |
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Operating Costs and Expenses: | ||
General and administrative | $ 2,201 | $ 1,655 |
Research and development | 2,977 | 2,597 |
Total Operating Costs and Expenses | 5,178 | 4,252 |
Loss from Operations | (5,178) | (4,252) |
Other Income (Expense): | ||
Exchange income (loss) | 6 | (23) |
Interest income | 364 | 2 |
Total Other Income (Expense) | 370 | (21) |
Net Loss before income taxes | (4,808) | (4,273) |
Income tax benefit | 330 | 0 |
Net Loss Attributable to Common Stockholders | $ (4,478) | $ (4,273) |
Net Loss Per Share - Basic | $ (0.30) | $ (0.31) |
Net Loss Per Share - Dilutive | $ (0.30) | $ (0.31) |
Weighted average number of shares outstanding during the period - Basic | 15,124,061 | 13,820,144 |
Weighted average number of shares outstanding during the period - Dilutive | 15,124,061 | 13,820,144 |
Net Loss | $ (4,478) | $ (4,273) |
Gain on foreign currency translation | 374 | 181 |
Total comprehensive loss | $ (4,104) | $ (4,092) |
Condensed Consolidated Statements of Stockholders Equity (Deficit) - USD ($) |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Accumulated Other Comprehensive income |
Treasury Stock |
Non-Controlling Interest |
Total |
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Balance at Dec. 31, 2021 | $ 13,000 | $ 336,679,000 | $ (271,284,000) | $ 0 | $ 65,408,000 | ||
Balance (in shares) at Dec. 31, 2021 | 13,204,531 | ||||||
Stock-based compensation | $ 0 | 112,000 | 0 | 0 | 112,000 | ||
Issuance of Common Stock for VCN Acquisition | $ 3,000 | 6,596,000 | 0 | 0 | 6,599,000 | ||
Issuance of Common Stock for VCN Acquisition (in shares) | 2,639,530 | ||||||
Translation gains | $ 0 | 0 | 0 | 181,000 | 181,000 | ||
Net loss | $ 0 | 0 | (4,273,000) | 0 | (4,273,000) | ||
Balance (in shares) at Mar. 31, 2022 | 15,844,061 | ||||||
Balance at Mar. 31, 2022 | $ 16,000 | 343,387,000 | (275,557,000) | $ 181,000 | 68,027,000 | ||
Balance at Dec. 31, 2022 | $ 16,000 | 343,750,000 | (290,969,000) | $ (679,000) | $ (288,000) | 51,830,000 | |
Balance (in shares) at Dec. 31, 2022 | 15,844,061 | ||||||
Stock-based compensation | $ 0 | 126,000 | 0 | 0 | 126,000 | ||
Translation gains | 0 | 0 | 0 | 374,000 | 374,000 | ||
Net loss | $ 0 | 0 | (4,478,000) | 0 | (4,478,000) | ||
Balance (in shares) at Mar. 31, 2023 | 15,844,061 | ||||||
Balance at Mar. 31, 2023 | $ 16,000 | $ 343,876,000 | $ (295,447,000) | $ (305,000) | $ (288,000) | $ 47,852,000 |
Organization and Nature of Operations and Basis of Presentation |
3 Months Ended |
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Mar. 31, 2023 | |
Organization and Nature of Operations and Basis of Presentation | |
Organization and Nature of Operations and Basis of Presentation | 1. Organization, Nature of Operations and Basis of Presentation Description of Business Theriva Biologics, Inc. (the “Company” or “Theriva Biologics”) is a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the acquisition of Theriva Biologics S.L. (“VCN”, formerly known as VCN Biosciences, S.L.) (the “Acquisition”), described in more detail below, the Company transitioned its strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, improve access of co-administered cancer therapies to the tumor, and promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, the Company’s focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases in areas which included our clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI), and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. On October 12, 2022, the Company changed its name to Theriva Biologics, Inc. In connection with the name change, its common stock began trading on the NYSE American LLC under the new ticker symbol “TOVX” effective as of the opening of trading hours on October 13, 2022. Effective November 15, 2022, our acquired subsidiary VCN Biosciences, S.L. rebranded to Theriva Biologics, S.L. without other changes to its corporate structure. Basis of Presentation The accompanying condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) for interim financial information. Accordingly, they do not include all of the information and notes required by Accounting Principles Generally Accepted in the United States of America (“U.S. GAAP”) for complete financial statements. The accompanying condensed consolidated financial statements include all adjustments, comprised of normal recurring adjustments, considered necessary by management to fairly state the Company’s results of operations, financial position and cash flows. The operating results for the interim periods are not necessarily indicative of results that may be expected for any other interim period or for the full year. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto included in the Company’s 2022 Form 10-K. The interim results for the three months ended March 31, 2023 are not necessarily indicative of results for the full year. The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which requires the use of estimates, judgments and assumptions that affect the amounts of assets and liabilities at the reporting date and the amounts of revenue and expenses in the periods presented. The Company believes that the accounting estimates employed are appropriate and the resulting balances are reasonable; however, due to the inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. As of March 31, 2023 the Company has one operating segment (which includes the legacy Company business and the VCN business) and therefore one reporting segment. Business Combination The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. As a result of the acquisition of VCN (see Note 3), the Company recorded two intangible assets: in-process research and development (“IPR&D”) and goodwill. The IPR&D and goodwill are deemed to have indefinite lives and therefore not amortized. 1. Organization, Nature of Operations and Basis of Presentation – (continued) IPR&D IPR&D assets represent the fair value assigned to technologies that the Company acquired, which at the time of acquisition have not reached technological feasibility and have no alternative future use. IPR&D assets are considered to have indefinite-lives until the completion or abandonment of the associated research and development projects. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed to have definite lives and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis on October 1, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that could indicate an impairment. The impairment test consists of a comparison of the estimated fair value of the IPR&D with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. Goodwill The Company tests the carrying amounts of goodwill for recoverability on an annual basis on October 1 or more frequently if events or changes in circumstances indicate that the asset might be impaired. The Company performs a one-step test in its evaluation of the carrying value of goodwill if qualitative factors determine it is necessary to complete a goodwill impairment test. In the evaluation, the fair value of the relevant reporting unit is determined and compared to its carrying value. If the fair value is greater than the carrying value, then the carrying value is deemed to be recoverable, and no further action is required. If the fair value estimate is less than the carrying value, goodwill is considered impaired for the amount by which the carrying amount exceeds the reporting unit’s fair value, and a charge is reported in impairment of goodwill in the Company’s consolidated statements of operations. Contingent Consideration Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets. |
Summary of Significant Accounting Policies |
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Summary of Significant Accounting Policies | |
Summary of Significant Accounting Policies | 2. Summary of Significant Accounting Policies Long-Lived Assets Long-lived assets include property, equipment and right-of-use assets. Management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. No impairment charges were recorded during the three months ended March 31, 2023 and 2022. Recent Accounting Pronouncements and Developments In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company has adopted ASU 2020-06 on January 1, 2022. The ASU impacted the analysis of the accounting treatment for the issuance of Convertible Preferred Series C & D stock during the third quarter of 2022, specifically the cash conversion and beneficial conversion features. |
BUSINESS COMBINATION |
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BUSINESS COMBINATION | 3. BUSINESS COMBINATION Summary On March 10, 2022, the Company completed the acquisition of all the outstanding shares of Theriva Biologics, S.L , which at the time was known as VCN Biosciences, S.L.(the “VCN Shares”) from the shareholders of VCN. VCN is a clinical-stage biopharmaceutical company developing new oncolytic adenoviruses for the treatment of cancer. Theriva’s lead product candidate, VCN-01, is being studied in a Company sponsored Phase 2 clinical trial for pancreatic cancer with additional investigator sponsored trials in indications including head and neck squamous cell carcinoma (HNSCC) , retinoblastoma, brain tumors and pancreatic and ovarian cancers. VCN-01 is designed to be administered systemically, intratumorally or intravitreally, either as a monotherapy or in combination with standard of care chemotherapies or immunotherapies, to treat a wide variety of cancer indications. VCN-01 is designed to replicate selectively and aggressively within tumor cells, and to degrade the tumor stroma barrier that serves as a significant physical and immunosuppressive barrier to cancer treatment. Degrading the tumor stroma has been shown to improve access to the tumor by the virus and additional therapies such as chemo- and immuno-therapies. Importantly, degrading the stroma exposes tumor antigens, turning “cold” tumors “hot” and enabling a sustained anti-tumor immune response. Theriva has the exclusive rights to four patent families for proprietary technologies, as well as technologies developed in collaboration with the Virotherapy Group of the Catalan Institute of Oncology (ICO-IDIBELL) and with Hospital Sant Joan de Deu (HSJD), with a number of additional patents pending. As consideration for the purchase of the VCN Shares and pursuant to the terms of a purchase agreement that the parties entered into (the “Purchase Agreement”), the Company paid $4,700,000 to Grifols Innovation and New Technologies Limited (“Grifols”), the owner of approximately 86% of the equity of VCN, and issued to the remaining sellers and certain key VCN employees and consultants of VCN an aggregate of 2,639,530 shares of its common stock, $0.001 par value per share (the “Common Stock”). In addition to the consideration described above, under the terms of the purchase agreement that the parties entered into, the Company assumed up to $2,390,000 of existing liabilities of VCN and has agreed to make cash payments of up to $70.2 million to Grifols upon the achievement of certain clinical and commercialization milestones. In September 2022, the Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in PDAC. Due to this approval, the Company paid Grifols $3.0 million in the fourth quarter of 2022. 3. BUSINESS COMBINATION - (continued) In anticipation of the Acquisition, prior to the Closing, the Company loaned VCN $417,000 to help finance the costs of certain of VCN’s research and development activities. At the Closing, VCN and Grifols entered into a sublease agreement for the sublease by VCN of laboratory and office space as well as a transitional services agreement. As a post-Closing covenant, the Company has agreed to commit to fund VCN’s research and development programs, including but not limited to VCN-01 in a pancreatic ductal adenocarcinoma PDAC Phase 2 trial, VCN-01 in a retinoblastoma (RB) Phase 2/3 trial and necessary G&A within a budgetary plan of approximately $27.8 million. Total purchase consideration including cash, common shares and contingent consideration was valued at approximately $22.8 million, as follows (in thousands):
As of March 31, 2023 and December 31, 2022, the fair value of the contingent consideration was approximately $10.3 million and 10.1 million, respectively. During the three months ended March 31, 2023, the Company recognized in operating expense a $135,000 fair value adjustment increase to contingent consideration. There was no fair value adjustment to contingent consideration for the three months ended March 31, 2022. The allocation of the fair value of the VCN acquisition updated for measurement period and other adjustments is shown in the table below.
The net assets were recorded at their estimated fair value. In valuing acquired assets and liabilities, fair value estimates were based primarily on future expected cash flows, market rate assumptions for contractual obligations, and appropriate discount rates. In connection with the Acquisition, we recognized $19.7 million of indefinite-lived in-process research and development intangible assets. Goodwill is considered an indefinite-lived asset and relates primarily to intangible assets that do not qualify for separate recognition, such as the assembled workforce and synergies between the entities. Goodwill of $5.7 million was established as a result of the Acquisition and is not tax deductible. Theriva Biologics, S.L. operations recorded a net loss of $7.8 million from the date of Acquisition through March 31, 2023. 3. BUSINESS COMBINATION - (continued) During the year ended December 31, 2022, the Company recognized the following measurement period adjustments:
The cumulative impact of the re-measurements as of the year ended December 31, 2022, was a reduction in accrued liabilities of $277,000, and increase in other receivables or $176,000, an increase in in-process R&D of $810,000; an increase in deferred tax liabilities of $202,000 and a decrease in goodwill of $1,061,000. Pro Forma Consolidated Financial Information (unaudited) The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the VCN Acquisition had been completed as of January 1, 2022 (in thousands):
Transaction Costs In conjunction with the Acquisition, the Company incurred approximately $0.2 million in transaction costs during the three months ended March 31, 2022, which were expensed as general, and administrative expense in the consolidated statements of operations. There were no acquisition costs incurred during the three months ended March 31, 2023. |
Goodwill and Intangibles |
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Goodwill and Intangibles | 4. Goodwill and Intangibles The following table provides the Company’s Goodwill as of March 31, 2023.
4. Goodwill and Intangibles – (continued) The following table provides the Company’s in-process R&D as of March 31, 2023.
During the quarter ending September 30, 2022, and the quarter ended December 31, 2022, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and the Company deemed this to be a trigger event for impairment. The Company performed an impairment analysis and concluded that the Goodwill and IPR&D was not impaired as of September 30, 2022, and December 31, 2022. There was no trigger event during the three months ended March 31, 2023. |
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Fair Value of Financial Instruments | 5. Fair Value of Financial Instruments Accounting Standards Codification (“ASC”) 820, Fair Value Measurement, defines fair value as the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is determined based upon assumptions that market participants would use in pricing an asset or liability. Fair value measurements are classified on a three-tier hierarchy as follows:
In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy described above. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy. The carrying amounts of the Company’s short-term financial instruments, including cash and cash equivalents, accounts payable and accrued liabilities, approximate fair value due to the relatively short period to maturity for these instruments. In connection with the Acquisition of VCN, the Company will be required pay up to $70.2 million in additional consideration upon the achievement of certain milestones, including regulatory filings completed noted in Note 3. In September 2022 the Company received approval from the FDA to proceed with the Phase 2 clinical trial of VCN-01 in PDAC. Due to this approval the Company paid Grifols Innovation and New Technologies Limited (“Grifols”) $3.0 million in Q4 2022. The discounted cash flow method used to value this contingent consideration includes inputs of not readily observable market data, which are Level 3 inputs. The fair value of the contingent consideration was $10.3 million as of March 31, 2023 and is reflected as current accrued contingent consideration of $4.9 million and non-current contingent consideration liability of $5.4 million in the consolidated balance sheet. During the three months ended March 31, 2023 the Company recognized in operating expense a $135,000 fair value adjustment increase to contingent consideration. There was no fair value adjustment during the three months ended March 31, 2022. 5. Fair Value of Financial Instruments – (continued) The fair value of financial instruments measured on a recurring basis is as follows:
The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:
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Selected Balance Sheet Information | 6. Selected Balance Sheet Information Prepaid expenses and other current assets (in thousands)
Prepaid clinical research organizations (CROs) expense is classified as a current asset. The Company makes payments to the CROs based on agreed upon terms that include payments in advance of study services. Receivable from prior VCN owner includes amounts due related to research and development tax rebates, VAT and corporate taxes. Property and equipment, net (in thousands)
Accrued expenses (in thousands)
Accrued employee benefits (in thousands)
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Stock-Based Compensation and Warrants | 7. Stock-Based Compensation Stock Incentive Plans On March 20, 2007, the Company’s Board of Directors approved the 2007 Stock Incentive Plan (the “2007 Stock Plan”) for the issuance of up to 7,143 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. This plan was approved by the stockholders on November 2, 2007. The exercise price of stock options under the 2007 Stock Plan was determined by the compensation committee of the Board of Directors and could be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. As of March 31, 2023, there were 372 options and outstanding under the 2007 Stock Plan.On November 2, 2010, the Board of Directors and stockholders adopted the 2010 Stock Incentive Plan (“2010 Stock Plan”) for the issuance of up to 8,572 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. From time to time the number of shares authorized for options was increased such that 400,000 were authorized as of September 5, 2019. The exercise price of stock options under the 2010 Stock Plan is determined by the compensation committee of the Board of Directors and may be equal to or greater than the fair market value of the Company’s common stock on the date the option is granted. Options become exercisable over various periods from the date of grant and expire between and ten years after the grant date. As of March 31, 2023, there were 202,095 options issued and outstanding under the 2010 Stock Plan. There are no shares available to be under this plan.On September 17, 2020, the stockholders approved and adopted the 2020 Stock Incentive Plan (“2020 Stock Plan”) for the issuance of up to 400,000 shares of common stock to be granted through incentive stock options, nonqualified stock options, stock appreciation rights, dividend equivalent rights, restricted stock, restricted stock units and other stock-based awards to officers, other employees, directors and consultants of the Company and its subsidiaries. The number of shares authorized for options was increased such that 7,000,000 were authorized as of March 31, 2023. As of March 31, 2023, there were 2,093,002 options issued and outstanding under the 2020 Stock Plan. In the event of an employee’s termination, the Company will cease to recognize compensation expense for that employee. Stock forfeitures are recognized as incurred. The fair value of the stock-based payment is recognized over the stated vesting period. The Company has applied fair value accounting for all stock-based payment awards since inception. The fair value of each option granted is estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted during the three months ended March 31, 2023 and 2022. Expected dividends —The Company has never declared or paid dividends on its common stock 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 a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. The expected volatility assumption is derived from the historical volatility of the Company’s common stock over a period approximately equal to the expected term. Risk-free interest rate—The assumed risk free rate used is a zero coupon U.S. Treasury security with a maturity that approximates the expected term of the option. Expected life of the option—The period of time that the options granted are expected to remain unexercised. Options granted during the year have a maximum term of seven years. The Company estimates the expected life of the option term based on the weighted average life between the dates that options become fully vested and the maximum life of options granted. 7. Stock-Based Compensation – (continued) The Company records stock-based compensation based upon the stated vesting provisions in the related agreements. The vesting provisions for these agreements have various terms as follows:
7. Stock-Based Compensation – (continued) A summary of stock option activity for the three months ended March 31, 2023 and the year ended December 31, 2022 is as follows:
Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to employees for the three months ended March 31, 2023 and 2022 was $83,000 and $59,000, respectively. Stock-based compensation expense included in general and administrative expenses and research and development expenses relating to stock options issued to consultants for the three months ended March 31, 2023 and 2022 were $43,000 and $53,000, respectively. As of March 31, 2023, total unrecognized stock-based compensation expense related to stock options was $841,000, which is expected to be expensed through May 2025. The FASB’s guidance for stock-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from operating activities. Excess tax benefits are realized tax benefits from tax deductions for exercised options in excess of the deferred tax asset attributable to stock compensation costs for such options. The Company did not record any excess tax benefits during the three months ended March 31, 2023 and 2022. |
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Stock Warrants | 8. Stock Warrants On October 15, 2018, the Company closed its underwritten public offering pursuant to which it received gross proceeds of approximately $18.6 million before deducting underwriting discounts, commissions and other offering expenses payable by the Company and sold (i)Class A Units (the “Class A Units”), consisting of an aggregate of 252,000 shares of the Common Stock, and five-year warrant to purchase an aggregate of 252,000 shares of Common Stock at an exercise price of $13.80 per share, which subsequently was reduced to $6.90 per share and then again to $1.22 (each a “Warrant” and collectively, the “Warrants”) and (ii) Class B Units (the “Class B Units”, and together with the Class A Units, the “Units”), consisting of an aggregate of 15,723 shares of the Company’s Series B Convertible Preferred Stock (the “Series B Preferred Stock”), with a stated value of $1,000 and convertible into shares of Common Stock at the stated value divided by a conversion price of $11.50 per share, with all shares of Series B Preferred Stock convertible into an aggregate of 1,367,218 shares of Common Stock, and issued with a warrant to purchase an aggregate of 1,367,218 shares of Common Stock. On November 16, 2020, the exercise price of the Warrants was reduced from $13.80 per Warrant per full share of the Company’s Common Stock, to $6.90 per Warrant per full share of Common Stock in accordance with the antidilution terms of the Warrant. The reduction was the result of the issuance of shares of Common Stock by the Company through its “at the market offering” facility. The effect of the change in the exercise price of the Warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $0.9 million during the year ended December 31, 2020, which reduces the income available to common stockholders. In addition, pursuant to the underwriting agreement that the Company had entered into with A.G.P./Alliance Global Partners (the “Underwriters”), as representative of the underwriters, the Company granted the Underwriters a 45 day option (the “Over-allotment Option”) to purchase up to an additional 242,883 shares of Common Stock and/or additional Warrants to purchase an additional 242,883 shares of Common Stock. The Underwriters partially exercised the Over-allotment Option by electing to purchase from the Company additional Warrants to purchase 180,783 shares of Common Stock. If, at the time of exercise, there is no effective registration statement registering, or no current prospectus available for, the issuance of the shares of Common Stock to the holder, then the Warrants may only be exercised through a cashless exercise. No fractional shares of Common Stock will be issued in connection with the exercise of a Warrant. In lieu of fractional shares, the holder will receive an amount in cash equal to the fractional amount multiplied by the fair market value of any such fractional shares. The Company has concluded that the Warrants are required to be equity classified. The Warrants were valued on the date of grant using Monte Carlo simulations. During the three months ended March 31, 2021, 1,165,575 Warrants were exercised for cash proceeds of $8.0 million. There were no Warrants exercised during the year ended December 31, 2022, or the three months ended March 31, 2023. 8. Stock Warrants – (continued) On August 3, 2022, the Company announced the exercise price of Warrants issued by the Company in October 2018 was reduced from $6.90 per Warrant per full share of the Company’s common stock, $0.001 par value per share to $1.22 per Warrant per full share of Common Stock. The reduction was the result of the issuance of shares of Preferred Stock by the Company in a private placement. The effect of the change in the exercise price of the Warrants as a result of the triggering of the down round protection clause in the Warrants was recorded as a deemed dividend of $340,000 during the year ended December 31, 2022, which reduces the income available to common stockholders. A summary of all warrant activity for the Company for the quarter ended March 31, 2023 and the year ended December 31, 2022 is as follows:
On December 26, 2017, the Company entered into a consulting agreement for advisory services for a period of six months. As compensation for such services, the consultant was paid an upfront payment, a monthly fee and on January 24, 2018 was issued a warrant exercisable for 714 shares of the Company’s common stock on the date of issue. The warrant is equity classified and the fair value of the warrant approximated $9,000 and was measured using the Black-Scholes option pricing model. The warrant expired in December 2022. |
Net Loss per Share |
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Mar. 31, 2023 | |
Net Loss per Share | |
Net Loss per Share | 9. Net Loss per Share Basic net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding. Diluted net loss per share is computed by dividing net loss by the weighted average number of common shares outstanding including the effect of common share equivalents. Diluted net loss per share assumes the issuance of potential dilutive common shares outstanding for the period and adjusts for any changes in income and the repurchase of common shares that would have occurred from the assumed issuance, unless such effect is anti-dilutive. Net loss attributable to common stockholders for the three months ended March 31, 2023 was $4.5 million. Net loss attributable to common stockholders for the three months ended March 31, 2022 was $4.3 million. The number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share and for the three months ended March 31, 2023 were 2,295,469 and 634,426, respectively and for the three months ended March 31, 2022 were 610,772 and 634,426, respectively, because their effect is anti-dilutive. |
Related Party |
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Related Party | 10. Related Party On December 15, 2022, the Company approved the retention of MaryAnn Shallcross, the wife of Steven Shallcross, as director of Clinical Operations, for compensation of $145,000 and the grant of an option to purchase 50,000 shares of common stock having a value of $20,000. Ms. Shallcross had been performing services for us during 2022 for total compensation of less than $120,000. |
Common and Preferred Stock |
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Mar. 31, 2023 | |
Common and Preferred Stock | |
Common and Preferred Stock | 11. Common and Preferred Stock Series C and D Preferred Stock On July 29, 2022, the Company closed a private placement offering pursuant to the terms of a Securities Purchase Agreement dated as of July 28, 2022 entered into with MSD Credit Opportunity Master Fund, L.P.(the “Securities Purchase Agreement”), pursuant to which the Company issued and sold 275,000 shares of the Company’s Series C Convertible Preferred Stock, par value $0.001 per share (the “Series C Preferred Stock”), and 100,000 shares of the Company’s Series D Convertible Preferred Stock, par value $0.001 per share (the “Series D Preferred Stock,” and together with the Series C Preferred Stock, the “Preferred Stock”), at an offering price of $8.00 per share, for gross proceeds of approximately $3.0 million in the aggregate, before the deduction of discounts, fees and offering expenses. The shares of Preferred Stock are convertible, at a conversion price (the “Conversion Price”) of $1.22 per share (subject in certain circumstances to adjustments), into an aggregate of 2,459,016 shares of the Company’s Common Stock, at the option of the holders of the Preferred Stock and, in certain circumstances, by the Company. The Securities Purchase Agreement contains customary representations, warranties and agreements by the Company and customary conditions to closing. The Company included certain proposals at its 2022 annual meeting of stockholders, including to consider (i) an amendment to the Company’s Articles of Incorporation, as amended (the “Charter”), to change the name of the Company to “Theriva Biologics, Inc.” (the “Name Change”), (ii) an amendment to the Articles of Incorporation, as amended to increase the number of authorized shares of Common Stock from 20,000,000 to 350,000,000 (the “Authorized Common Stock Increase”) and (iii) any proposal to adjourn any meeting of stockholders called for the purpose of voting on the Authorized Common Stock Increase (collectively, the “Stockholder Items”). The purchaser of the Preferred Stock agreed in the Purchase Agreement to (i) not transfer, offer, sell, contract to sell, hypothecate, pledge or otherwise dispose of the shares of the Preferred Stock until the earlier of the date that the Authorized Common Stock Increase is effected or October 26, 2022 (which may be extended to December 31, 2022 if certain conditions are met), and (ii) vote the shares of the Series C Preferred Stock purchased in the Offering in favor of the Stockholder Items. Pursuant to the Securities Purchase Agreement, the Company filed certificates of designation (the “Certificates of Designation”) with the Secretary of the State of Nevada designating the rights, preferences and limitations of the shares of Series C Preferred Stock and Series D Preferred Stock. The Certificate of Designation for the Series C Preferred Stock provides, in particular, that the Series C Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast votes on an as converted to Common Stock basis on the Stockholder Items. The Certificate of Designation for the Series D Preferred Stock provides, in particular, that the Series D Preferred Stock will have no voting rights other than the right to vote as a class on the Stockholder Items and the right to cast 20,000 votes per share of Series D Preferred Stock on the Stockholder Items and to vote the shares of the Series D Preferred Stock purchased in the Offering in the same proportion as shares of Common Stock and any other shares of capital stock of the Company that are entitled to vote thereon (excluding any shares of Common Stock that are not voted) on the Stockholder Items. The holders of Preferred Stock will be entitled to dividends, on an as-if converted basis, equal to dividends actually paid, if any, on shares of Common Stock. The Conversion Price may be adjusted pursuant to the Certificates of Designation for stock dividends and stock splits, subsequent rights offering, pro rata distributions of dividends or the occurrence of a fundamental transaction (as defined in the applicable Certificate of Designation). The Series C Preferred Stock and Series D Preferred Stock is classified as temporary equity as a result of the deemed liquidation provision. Transaction expenses paid to third parties will be charged to temporary equity and will not be accreted as deemed dividends until redemption becomes probable. 11. Common and Preferred Stock – (continued) In order to comply with Section 122 of the NYSE American Company Guide, on August 9, 2022 the Company and the holder of the Company’s Series C preferred stock and Series D preferred stock amended the Securities Purchase Agreement entered into between them on July 28, 2022 to provide that the holder may only submit 1,549,295 of the votes relating to the Series C Preferred Stock that it would otherwise be entitled to vote. B. Riley Securities Sales Agreement On August 5, 2016, the Company entered into the Sales Agreement (the “Original Sales Agreement”) with FBR Capital Markets & Co. (now known as B. Riley Securities) to act as a sales agent, which agreement was amended and restated on February 9, 2021 to add Alliance Global Partners as a sale agent. The amended and restated Sales Agreement (the “Amended and Restated Sales Agreement”) enables the Company to offer and sell shares of common stock from time to time through B. Riley Securities, Inc. and A.G.P./Alliance Global Partners as the Company’s sales agent. Sales of common stock under the Sales Agreement are made in sales deemed to be “at-the-market” equity offerings as defined in Rule 415 promulgated under the Securities Act. The sales agents are entitled to receive a commission rate of up to 3.0% of gross sales in connection with the sale of the Common Stock sold on the Company’s behalf. The Company did not sell any shares of common stock during the three months ended March 31, 2023 through the Amended and Restated Sales Agreement. |
Indebtedness |
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Indebtedness | 12. Indebtedness As a result of the acquisition of VCN the Company acquired interest-free or below-market interest rates loans (0%-1%) extended by Spanish governmental institutions of Ministerio de Ciencia , Innovacion y Universidades and ACC10 Generalitat de Catalunya (CDIT loans) The maturities of these loans are between 2027 and 2028. As a result of the VCN Acquisition, the Company maintains a restricted cash collateral account of $100,000 relating to the RETOS loan, which is reflected a non-current assets on the balance sheet.
The difference between the fair value of these liabilities (when relevant conditions associated with the grants are met) and the amount received is recognized as a government grant and classified as other operating income in the statement of profit and loss. A maturity analysis of the debt as of March 31, 2023 is as follows (amounts in thousands of dollars):
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Commitments and Contingencies | 13. Commitments and Contingencies The Company’s existing lease as of March 31, 2023 for its U.S. location is classified as an operating lease. As of March 31, 2023, the Company has two operating leases for facilities. During the quarter ended June 30, 2021, the Company renewed its Rockville MD facility lease by entering into a Second Lease Amendment which extends the lease term for 63 months beginning on September 1, 2022 and ending on December 31, 2027 at stated rental rates and including a rent abatement. The Second Amendment also has options for a Tenant Improvement Allowance and a Second Extension Term. The Second Amendment also gives the Company the right to expand its space by giving notice to the landlord before December 31, 2021. The Company did not give notice to expand the space during 2021. The Second Extension Term is offered at market rates and there is no economic incentive for the lessee, therefore the Company has determined that it is not part of the original lease term. There is an option in this Second Amendment to Lease for the Company to borrow funds for tenant improvements subject to an 8.5% interest rate.The Company also leases research and office facilities in Barcelona Spain for its 100 percent owned VCN subsidiary. The current lease is short term agreement with a termination notice provision that can be exercised by either party. On the closing date of the VCN acquisition, a sublease was executed for Theriva to lease research and office facilities at a new location in Parets del Valles (Barcelona) from the former owner of VCN. This lease was executed for an initial term estimated to begin in January 2023 until October 2026, with an option to renew for an additional five years. On January 15, 2023, the company moved into the facilities and the new lease commenced and the prior lease terminated.Operating lease costs are presented as part of general and administrative expenses in the condensed consolidated statements of operations, and for the quarter ended March 31, 2023 and 2022 approximated $144,000 and $107,000, respectively. For the Barcelona lease, the day one non-cash addition of right of use assets due to adoption of ASC 842 was $937,000. A maturity analysis of our operating leases as of March 31, 2023 is as follows (amounts in thousands of dollars):
13. Commitments and Contingencies – (continued) Risks and Uncertainties The uncertain financial markets, disruptions in supply chains, mobility restraints, and changing priorities as well as volatile asset values could impact our business in the future. The outbreak and government measures taken in response to the pandemic have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, have spiked, while demand for other goods and services, such as travel, have fallen. The future progression of the pandemic and its effects on the Company’s business and operations are uncertain. The Company may face difficulties recruiting or retaining patients in its ongoing and planned clinical trials if patients are affected by the virus or are fearful of traveling to our clinical trial sites because of the outbreak. We and our third-party contract manufacturers, contract research organizations, and clinical sites may also face disruptions in procuring items that are essential to our research and development activities, including, for example, medical and laboratory supplies used in its clinical trials or preclinical studies, in each case, that are sourced from abroad or for which there are shortages because of ongoing efforts to address the outbreak. Further, although the Company have not experienced any material adverse effects on its business due to increasing inflation, it has raised operating costs for many businesses and, in the future, could impact demand or pricing manufacturing of its drug candidates or services providers, foreign exchange rates or employee wages. The Company is actively monitoring the effects these disruptions and increasing inflation could have on its operations. Through the VCN Acquisition, the Company has operations in Spain and may conduct research and development, manufacturing, and clinical trials in Western European countries. The invasion of Ukraine by Russia and the retaliatory measures that have been taken, or could be taken in the future, by the United States, NATO, and other countries have created global security concerns that could result in a regional conflict and otherwise have a lasting impact on regional and global economies, any or all of which could disrupt our supply chain, and despite the fact that we currently do not plan any clinical trials in Eastern Europe, may adversely impact the cost and conduct of R&D, manufacturing, and international clinical trials of our product candidates. |
Subsequent Events |
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Subsequent Events | 14. Subsequent Events Effective May 10, 2023, The Company entered into a Separation Agreement and Release with Frank Tufaro (the “Separation Agreement”) and a consulting agreement with Mr. Tufaro. Mr. Tufaro had entered into an employment agreement with the Company on March 22, 2022 (the “Employment Agreement”) to serve as our Chief Operating Officer. In accordance with the terms of the Employment Agreement, the Separation Agreement provides for (i) the payment to Mr. Tufaro of a total of $196,875, paid in bi-monthly installments, less applicable withholding, for a period of six months, (ii) reimbursement of COBRA coverage for himself, his spouse and other eligible dependents for the lesser of: six months or until he commences new employment or substantial self-employment, and (iii) acceleration of the vesting of his outstanding stock options (the “Option Awards”)and (iv) the extension of the period of time for which Mr. Tufaro has the right to exercise any vested shares subject to options until the earlier of (i) the expiration date of the Option Awards, or (ii) six (6) months from the separation date. The Separation Agreement contains mutual general releases of claims and non-disparagement provisions. The Consulting Agreement has a term of six months unless sooner terminated. Either party may terminate the Consulting Agreement without cause at any time upon thirty (days’ prior written notice or with cause immediately. Mr. Tufaro will be compensated a set daily rate for each full day that he provides consulting services, pro-rated for any days services are provided less than eight hours. |
Summary of Significant Accounting Policies (Policies) |
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Summary of Significant Accounting Policies | |
Long-Lived Assets | Long-Lived Assets Long-lived assets include property, equipment and right-of-use assets. Management reviews the Company’s long-lived assets for impairment annually or whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be fully recoverable. The Company determines the extent to which an asset may be impaired based upon its expectation of the asset’s future usability as well as whether there is reasonable assurance that the future cash flows associated with the asset will be in excess of its carrying amount. If the total of the expected undiscounted future cash flows is less than the carrying amount of the asset, a loss is recognized for the difference between the fair value and the carrying value of the asset. No impairment charges were recorded during the three months ended March 31, 2023 and 2022. |
Recent Accounting Pronouncements and Developments | Recent Accounting Pronouncements and Developments In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-06 Debt – Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s Own Equity (subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. This ASU amends the guidance on convertible instruments and the derivatives scope exception for contracts in an entity’s own equity and improves and amends the related earnings per share guidance for both Subtopics. The ASU will be effective for annual reporting periods after December 15, 2023 and interim periods within those annual periods and early adoption is permitted in annual reporting periods ending after December 15, 2020. The Company has adopted ASU 2020-06 on January 1, 2022. The ASU impacted the analysis of the accounting treatment for the issuance of Convertible Preferred Series C & D stock during the third quarter of 2022, specifically the cash conversion and beneficial conversion features. |
BUSINESS COMBINATION (Tables) |
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Schedule of purchase consideration | Total purchase consideration including cash, common shares and contingent consideration was valued at approximately $22.8 million, as follows (in thousands):
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Schedule of allocation of fair value of assets and liabilities acquired |
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Schedule of pro forma consolidated financial information | The following unaudited pro forma consolidated financial information summarizes the results of operations for the periods indicated as if the VCN Acquisition had been completed as of January 1, 2022 (in thousands):
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Goodwill and Intangibles (Tables) |
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Schedule of Company's in-process R&D |
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Fair Value of Financial Instruments (Tables) |
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Schedule of recurring Level 3 fair value measurements of contingent consideration significant unobservable inputs |
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Selected Balance Sheet Information (Tables) |
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Schedule of prepaid expenses and other current assets | Prepaid expenses and other current assets (in thousands)
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Schedule of property, plant and equipment, net | Property and equipment, net (in thousands)
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Schedule of accrued expenses | Accrued expenses (in thousands)
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Schedule of accrued employee benefits | Accrued employee benefits (in thousands)
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Stock-Based Compensation (Tables) |
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Summary of stock option activity | A summary of stock option activity for the three months ended March 31, 2023 and the year ended December 31, 2022 is as follows:
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Stock Warrants (Tables) |
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Stock Warrants | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of all warrant activity | A summary of all warrant activity for the Company for the quarter ended March 31, 2023 and the year ended December 31, 2022 is as follows:
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Indebtedness (Tables) |
3 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Indebtedness | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of debt |
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Schedule of maturity analysis of debt | A maturity analysis of the debt as of March 31, 2023 is as follows (amounts in thousands of dollars):
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Commitments and Contingencies (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of maturity analysis of operating leases | A maturity analysis of our operating leases as of March 31, 2023 is as follows (amounts in thousands of dollars):
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Organization and Nature of Operations and Basis of Presentation - (Details) |
3 Months Ended |
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Mar. 31, 2023
segment
Asset
| |
Organization and Nature of Operations and Basis of Presentation | |
Number of operating segments | 1 |
Number of reportable segments | 1 |
Intangible assets acquired | Asset | 2 |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Summary of Significant Accounting Policies | ||
Impairment charges | $ 0 | $ 0 |
BUSINESS COMBINATION (Details) - USD ($) |
3 Months Ended | |||||
---|---|---|---|---|---|---|
Mar. 10, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
Aug. 03, 2022 |
Jul. 29, 2022 |
|
BUSINESS COMBINATION | ||||||
Common stock, shares issued | 15,844,294 | 15,844,294 | 2,459,016 | |||
Common stock, price per share | $ 0.001 | $ 0.001 | $ 0.001 | |||
V C N | ||||||
BUSINESS COMBINATION | ||||||
Common stock, shares issued | 2,639,530 | |||||
Existing liabilities | $ 2,390,000 | |||||
Cash payments | 70,200,000 | |||||
Amount to be paid due to approval | $ 3,000,000.0 | |||||
Finance costs | 417,000 | |||||
Contingent consideration | $ 11,093,000 | $ 10,300,000 | $ 10,100,000 | |||
Operating expense of fair value increase to contingent consideration | $ 135,000 | $ 0 | ||||
Common stock, price per share | $ 0.001 | |||||
V C N | General and administrative expenses | ||||||
BUSINESS COMBINATION | ||||||
Contingent consideration | $ 27,800,000 | |||||
V C N | Grifols Innovation | ||||||
BUSINESS COMBINATION | ||||||
Consideration purchase paid | $ 4,700,000 | |||||
V C N | New technologies | ||||||
BUSINESS COMBINATION | ||||||
Business acquisition, percentage of voting interests acquired | 86.00% |
BUSINESS COMBINATION - Tabular disclosure of Purchase consideration (Details) - V C N - USD ($) $ in Thousands |
Mar. 10, 2022 |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|---|
BUSINESS COMBINATION | |||
Cash paid at closing | $ 4,700 | ||
Receivable from VCN "effectively settled" | 417 | ||
Fair value of common shares issued | 6,599 | ||
Fair value of contingent consideration | 11,093 | $ 10,300 | $ 10,100 |
Purchase consideration | $ 22,809 |
BUSINESS COMBINATION - Schedule of Pro Forma Consolidated Financial Information (Details) - V C N - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
BUSINESS COMBINATION | ||
Net revenues | $ 0 | $ 0 |
Net loss | $ (4,478) | $ (4,796) |
BUSINESS COMBINATION - Transaction Costs (Details) - V C N - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
BUSINESS COMBINATION | ||
Acquisition Cost | $ 0 | |
General and administrative expenses | ||
BUSINESS COMBINATION | ||
Transaction costs on acquisition | $ 200 |
Goodwill and Intangibles - Goodwill (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Goodwill | ||
Balance at the beginning | $ 5,525 | $ 0 |
Goodwill from Acquisition of VCN | 6,757 | |
Measurement Period Adjustment | (1,061) | |
Effects of exchange rates | 92 | (171) |
Balance at the end | $ 5,617 | $ 5,525 |
Goodwill and Intangibles - In-process R&D (Details) - In-process R&D - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Finite-Lived Intangible Assets | ||
Balance at the beginning | $ 19,150 | $ 0 |
Acquired IPR&D - | 18,932 | |
Measurement Period Adjustments | 810 | |
Effects of exchange rates | 319 | (592) |
Balance at the end | $ 19,469 | $ 19,150 |
Fair Value of Financial Instruments - Fair value of financial instruments measured on a recurring basis (Details) - Contingent consideration - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Fair Value of Financial Instruments | ||
Fair value of contingent consideration | $ 10,319 | $ 10,184 |
Level 3 | ||
Fair Value of Financial Instruments | ||
Fair value of contingent consideration | $ 10,319 | $ 10,184 |
Fair Value of Financial Instruments (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
Mar. 31, 2022 |
|
Fair Value Measurement Inputs and Valuation Techniques | |||
Non-current contingent consideration | $ 5,408,000 | $ 7,211,000 | |
Operating expense relating to fair value adjustment | 135,000 | $ 0 | |
V C N | |||
Fair Value Measurement Inputs and Valuation Techniques | |||
Additional consideration related to the achievement of certain milestones | 70,200,000 | ||
Amount to be paid due to approval | $ 3,000,000.0 | ||
Fair value of contingent consideration | 10,300,000 | ||
Accrued contingent consideration | 4,900,000 | ||
Non-current contingent consideration | $ 5,400,000 |
Selected Balance Sheet Information - Schedule of Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Selected Balance Sheet Information | ||
Prepaid clinical research organizations | $ 2,474 | $ 2,293 |
Prepaid manufacturing expenses | 879 | 418 |
Prepaid insurance | 440 | 637 |
Receivable from prior owner | 229 | 144 |
Prepaid consulting, subscriptions and other expenses | 197 | 155 |
VAT receivable | 4 | 87 |
Total | $ 4,223 | $ 3,734 |
Selected Balance Sheet Information - Schedule of Property and equipment, net (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Selected Balance Sheet Information | ||
Property, Plant and Equipment, Gross Total | $ 1,221 | $ 1,210 |
Less: accumulated depreciation and amortization | (897) | (865) |
Total | 324 | 345 |
Computers and office equipment | ||
Selected Balance Sheet Information | ||
Property, Plant and Equipment, Gross Total | 905 | 897 |
Other Property, Plant and Equipment | ||
Selected Balance Sheet Information | ||
Property, Plant and Equipment, Gross Total | 210 | 208 |
Leasehold improvements | ||
Selected Balance Sheet Information | ||
Property, Plant and Equipment, Gross Total | 94 | 94 |
Software | ||
Selected Balance Sheet Information | ||
Property, Plant and Equipment, Gross Total | $ 12 | $ 11 |
Selected Balance Sheet Information - Schedule of Accrued expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Selected Balance Sheet Information | ||
Accrued manufacturing costs | $ 863 | $ 197 |
Accrued clinical consulting services | 838 | 807 |
Accrued vendor payments | 375 | 492 |
Total | $ 2,076 | $ 1,496 |
Selected Balance Sheet Information - Schedule of Accrued employee benefits (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Selected Balance Sheet Information | ||
Accrued bonus expense | $ 325 | $ 1,216 |
Accrued vacation expense | 142 | 100 |
Accrued compensation expense | 182 | 87 |
Total | $ 649 | $ 1,403 |
Stock Warrants - summary of all warrant activity (Details) - $ / shares |
3 Months Ended | 12 Months Ended |
---|---|---|
Mar. 31, 2023 |
Dec. 31, 2022 |
|
Stock Warrants | ||
Number of Warrants, Beginning balance | 634,426 | 634,497 |
Number of Warrants, Granted | 0 | 0 |
Number of Warrants, Exercised | 0 | 0 |
Number of Warrants, Forfeited | 0 | (71) |
Number of Warrants, Ending balance | 634,426 | 634,426 |
Weighted Average Exercise Price, Beginning balance | $ 1.22 | $ 1.24 |
Weighted Average Exercise Price, Granted | 0 | 0 |
Weighted Average Exercise Price, Exercised | 0 | 0 |
Weighted Average Exercise Price, Forfeited | 0 | 182 |
Weighted Average Exercise Price, Ending balance | $ 1.22 | $ 1.22 |
Net Loss per Share (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2023 |
Mar. 31, 2022 |
|
Net Loss per Share | ||
Net loss attributable to common stockholders | $ (4,478) | $ (4,273) |
Equity Option | ||
Net Loss per Share | ||
Number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share | 2,295,469 | 610,772 |
Warrant | ||
Net Loss per Share | ||
Number of options and warrants for the purchase of common stock that were excluded from the computations of net loss per common share | 634,426 | 634,426 |
Related Party (Details) - USD ($) |
3 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Dec. 15, 2022 |
Mar. 31, 2023 |
Mar. 31, 2022 |
Dec. 31, 2022 |
|
Related Party | ||||
Options granted (in shares) | 0 | 0 | ||
Ms. Shallcross | ||||
Related Party | ||||
Compensation | $ 145,000 | |||
Options granted (in shares) | 50,000 | |||
Value of options granted | $ 20,000 | |||
Ms. Shallcross | Maximum | ||||
Related Party | ||||
Compensation | $ 120,000 |
Indebtedness (Details) - USD ($) |
Mar. 31, 2023 |
Mar. 31, 2022 |
---|---|---|
Indebtedness | ||
Restricted cash included in other long-term assets | $ 100,000 | $ 103,000 |
Minimum | ||
Indebtedness | ||
Loans acquired, Interest rate | 0.00% | |
Maximum | ||
Indebtedness | ||
Loans acquired, Interest rate | 1.00% |
Indebtedness - Debt (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Indebtedness | ||
Debt, Current | $ 66 | $ 57 |
Debt, Non current | 160 | 221 |
NEBT Loan | ||
Indebtedness | ||
Debt, Current | 8 | 13 |
Debt, Non current | 32 | 31 |
RETOS 2015 Loan | ||
Indebtedness | ||
Debt, Current | 58 | 44 |
Debt, Non current | $ 128 | $ 190 |
Indebtedness - Maturity analysis of debt (Details) $ in Thousands |
Mar. 31, 2023
USD ($)
|
---|---|
Indebtedness | |
2023 | $ 8 |
2024 | 61 |
2025 | 64 |
2026 | 52 |
2027 | 32 |
2028 | 9 |
Total | $ 226 |
Commitments and Contingencies - Maturity analysis of operating leases (Details) - USD ($) $ in Thousands |
Mar. 31, 2023 |
Dec. 31, 2022 |
---|---|---|
Commitments and Contingencies | ||
2023 | $ 490 | |
2024 | 663 | |
2025 | 673 | |
2026 | 589 | |
2027 | 368 | |
Total | 2,783 | |
Discount factor | (544) | |
Lease liability | 2,239 | |
Lease liability - current | (437) | $ (216) |
Lease liability - Long term | $ 1,802 | $ 1,187 |
Commitments and Contingencies - Additional Information (Details) |
3 Months Ended | ||
---|---|---|---|
Jan. 01, 2019
USD ($)
|
Mar. 31, 2023
USD ($)
item
|
Mar. 31, 2022
USD ($)
|
|
Commitments And Contingencies Disclosure [Line Items] | |||
Number of operating leases for facilities | item | 2 | ||
Renewed lease term | 63 months | ||
Lease rent abatement period | 3 months | ||
Rate of interest of funds borrowed by company | 8.5 | ||
Percentage of office leases owned by subsidiary | 100.00% | ||
Termination notice period (in days) | 90 days | ||
Additional lease renewal term | 5 years | ||
Operating lease cost | $ 144,000 | $ 107,000 | |
Right of use assets exchanged for operating lease obligation | $ 937,000 | $ 0 | |
ASU 2016-02 | |||
Commitments And Contingencies Disclosure [Line Items] | |||
Right of use assets exchanged for operating lease obligation | $ 937,000 |
Subsequent Events (Details) |
May 10, 2023
USD ($)
|
---|---|
Mr. Tufaro | |
Subsequent Events | |
Consideration purchase paid | $ 196,875 |
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