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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2021

 

OR

 

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

 

For the transition period from ____ to ____

Commission File Number: 001-39503

 

Athira Pharma, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

45-3368487

(State or other jurisdiction of
incorporation or organization)

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

 

18706 North Creek Parkway, Suite 104

Bothell, Washington 98011

(Address of principal executive offices)

(425) 620-8501

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.0001 par value per share

ATHA

The Nasdaq Stock Market LLC

 

 

(The Nasdaq Global Select Market)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act:

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 9, 2021 there were 37,295,936 shares of registrant’s common stock, $0.0001 par value per share, outstanding.

 

 


 

 

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

5

Item 1.

Financial Statements (Unaudited)

5

 

Condensed Consolidated Balance Sheets

5

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

6

 

Condensed Consolidated Statements of Convertible Preferred Stock and Stockholders’ Equity

7

 

Condensed Consolidated Statements of Cash Flows

8

 

Notes to Unaudited Condensed Consolidated Financial Statements

9

Item 2.

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

23

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

35

Item 4.

Controls and Procedures

35

PART II.

OTHER INFORMATION

37

Item 1.

Legal Proceedings

37

Item 1A.

Risk Factors

38

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

89

Item 3.

Defaults Upon Senior Securities

89

Item 4.

Mine Safety Disclosures

89

Item 5.

Other Information

89

Item 6.

Exhibits

90

Signatures

91

 

This report includes our trademarks and registered trademarks, including Athira, Athira Pharma, the Athira logo, and other trademarks or service marks of Athira. Each other trademark, trade name or service mark appearing in this report belongs to its holder.

 

2


 

 

SUMMARY RISK FACTORS

 

Our business is subject to numerous risks and uncertainties, including those highlighted in the section of this report captioned “Risk Factors.” The following is a summary of the principal risks we face:

 

We are a late clinical-stage biopharmaceutical company with a limited operating history.

 

Our ability to generate revenue and achieve profitability depends significantly on our ability to achieve a number of objectives.

 

Our development of ATH-1017 may never lead to a marketable product.

 

Our approach to targeting brain growth factors through the use of small molecules is based on a novel therapeutic approach, which exposes us to unforeseen risks. We have limited data from our Phase 1a/1b clinical trial, including only 11 patients with mild to moderate Alzheimer’s disease, and we cannot be certain that future trials will yield similar data. In addition, our use of electroencephalogram methods to gather data requires placement of electrodes on a subject’s scalp and, if not properly placed, we may be unable to obtain the data sought or data obtained may be unreliable.

 

An independent special committee of our board of directors is currently engaged in a review of papers co-authored by our chief executive officer in connection with her doctoral research at Washington State University.

 

Washington State University has undertaken a review of claims of potential research misconduct involving our chief executive officer’s doctoral research at Washington State University.

 

We have concentrated our research and development efforts on the treatment of central nervous system and peripheral degenerative disorders, a field that has seen very limited success in product development.

 

Clinical development involves a lengthy and expensive process with an uncertain outcome, and results of early, smaller-scale preclinical studies and clinical trials with a single or few clinical trial sites may not be predictive of eventual safety or effectiveness in large-scale pivotal clinical trials across multiple clinical trial sites. We may encounter substantial delays in clinical trials, or may not be able to conduct or complete clinical trials on the expected timelines, if at all.

 

If we experience delays or difficulties in the enrollment and/or retention of patients in clinical trials, our regulatory submissions or receipt of necessary marketing approvals could be delayed or prevented.

 

We and certain of our directors and executive officers have been named as defendants in lawsuits that could result in substantial costs and divert management’s attention.

 

We face significant competition, and if our competitors develop and market technologies or products more rapidly than we do or that are more effective, safer, or less expensive than the product candidates we develop, our commercial opportunities will be negatively impacted.

 

The continuing effects of the novel coronavirus disease, or COVID-19, pandemic, including the recent emergence of new, highly contagious variants thereof, could adversely impact our business, including our nonclinical studies and clinical trials.

 

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

 

We will require substantial additional funding to finance our operations, complete the development and commercialization of ATH-1017, and evaluate other and future product candidates. If we are unable to raise this funding when needed, we may be forced to delay, reduce, or eliminate our product development programs or other operations.

 

The regulatory approval processes of the U.S. Food and Drug Administration and other comparable foreign regulatory authorities are lengthy, time consuming and inherently unpredictable. If we are not able to obtain, or if there are delays in obtaining, required regulatory approvals for our product candidates, we will not be able to commercialize, or will be delayed in commercializing, our product candidates, and our ability to generate revenue will be materially impaired.

 

We plan to rely on third parties to conduct our nonclinical studies and clinical trials. If these third parties do not properly and successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval of or commercialize our product candidates.

3


 

 

Even if approved, our product candidates may not achieve adequate market acceptance among physicians, patients, healthcare payors and others in the medical community necessary for commercial success.

 

We have never commercialized a product candidate before and may lack the necessary expertise, personnel and resources to successfully commercialize any products on our own or together with suitable collaborators.

 

Our success depends on our ability to protect our intellectual property and our proprietary technologies.

 

If the scope of any patent protection we obtain is not sufficiently broad, or if we lose any of our patent protection, our ability to prevent our competitors from commercializing similar or identical product candidates would be adversely affected.

 

The market price of our common stock may be volatile, which could result in substantial losses for investors.

4


 

 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Athira Pharma, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

June 30,

2021

 

 

December 31,

2020

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

131,701

 

 

$

60,625

 

Short-term investments

 

 

153,239

 

 

 

124,057

 

Unbilled grant receivable

 

 

2,589

 

 

 

1,300

 

Prepaid expenses and other current assets

 

 

2,968

 

 

 

6,355

 

Total current assets

 

 

290,497

 

 

 

192,337

 

Property and equipment, net

 

 

2,916

 

 

 

2,649

 

Operating lease right-of-use asset

 

 

1,547

 

 

 

936

 

Long-term investments

 

 

64,939

 

 

 

83,509

 

Other long-term assets

 

 

225

 

 

 

132

 

Total assets

 

$

360,124

 

 

$

279,563

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

1,166

 

 

$

1,158

 

Accrued liabilities

 

 

6,205

 

 

 

3,123

 

Current operating lease liability

 

 

263

 

 

 

124

 

Total current liabilities

 

 

7,634

 

 

 

4,405

 

Operating lease liability, less current portion

 

 

1,781

 

 

 

876

 

Total liabilities

 

 

9,415

 

 

 

5,281

 

Stockholders' equity:

 

 

 

 

 

 

 

 

Common stock, $0.0001 par value; 900,000,000 shares

   authorized at June 30, 2021 and December 31, 2020,

   respectively; 37,251,711 and 32,485,784 shares issued

   and outstanding at June 30, 2021 and December 31,

   2020, respectively

 

 

4

 

 

 

3

 

Additional paid-in capital

 

 

414,550

 

 

 

315,288

 

Accumulated other comprehensive income

 

 

37

 

 

 

33

 

Accumulated deficit

 

 

(63,882

)

 

 

(41,042

)

Total stockholders' equity

 

 

350,709

 

 

 

274,282

 

Total liabilities and stockholders'

   equity

 

$

360,124

 

 

$

279,563

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

5


 

Athira Pharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)

 

 

 

Three Months Ended June 30,

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

12,024

 

 

$

1,677

 

 

$

19,469

 

 

$

2,269

 

General and administrative

 

 

4,613

 

 

 

575

 

 

 

7,949

 

 

 

1,250

 

Total operating expenses

 

 

16,637

 

 

 

2,252

 

 

 

27,418

 

 

 

3,519

 

Loss from operations

 

 

(16,637

)

 

 

(2,252

)

 

 

(27,418

)

 

 

(3,519

)

Grant income

 

 

2,589

 

 

 

 

 

 

4,420

 

 

 

22

 

Other income (expense), net

 

 

74

 

 

 

260

 

 

 

158

 

 

 

(300

)

Net loss

 

$

(13,974

)

 

$

(1,992

)

 

$

(22,840

)

 

$

(3,797

)

Unrealized gain on available-for-sale securities

 

 

9

 

 

 

 

 

 

4

 

 

 

 

Comprehensive loss attributable to common stockholders

 

$

(13,965

)

 

$

(1,992

)

 

$

(22,836

)

 

$

(3,797

)

Net loss per share attributable to common stockholders,

   basic and diluted

 

$

(0.38

)

 

$

(0.48

)

 

$

(0.68

)

 

$

(0.96

)

Weighted-average shares used in computing net loss per

   share attributable to common stockholders, basic and

   diluted

 

 

37,214,602

 

 

 

4,127,645

 

 

 

33,813,104

 

 

 

3,937,501

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

6


 

Athira Pharma, Inc.

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

For the Three and Six Months Ended June 30, 2021 and 2020

(in thousands, except share amounts)

(Unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Other

Comprehensive

 

 

Accumulated

 

 

Stockholders’

(Deficit)

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2020

 

 

2,617,386

 

 

$

17,051

 

 

 

 

3,641,449

 

 

$

 

 

$

1,364

 

 

$

 

 

$

(21,087

)

 

$

(19,723

)

Issuance of common stock upon

   exercise of common stock options

 

 

 

 

 

 

 

 

 

220,043

 

 

 

 

 

 

176

 

 

 

 

 

 

 

 

 

176

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

58

 

 

 

 

 

 

 

 

 

58

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,805

)

 

 

(1,805

)

Balance as of March 31, 2020

 

 

2,617,386

 

 

$

17,051

 

 

 

 

3,861,492

 

 

$

 

 

$

1,598

 

 

$

 

 

$

(22,892

)

 

$

(21,294

)

Issuance of common stock upon

   exercise of common stock options

 

 

 

 

 

 

 

 

 

58,006

 

 

 

 

 

 

62

 

 

 

 

 

 

 

 

 

62

 

Issuance of Series B convertible

   preferred stock and common stock

   warrants, net of issuance costs

   of $3.5 million

 

 

9,372,765

 

 

 

70,791

 

 

 

 

 

 

 

 

 

 

10,591

 

 

 

 

 

 

 

 

 

10,591

 

Issuance of the Series B-1 convertible

   preferred stock upon conversion of

   convertible notes

 

 

512,858

 

 

 

4,515

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exercise of common stock warrants

 

 

 

 

 

 

 

 

 

688,067

 

 

 

 

 

 

55

 

 

 

 

 

 

 

 

 

55

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

49

 

 

 

 

 

 

 

 

 

49

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,992

)

 

 

(1,992

)

Balance as of June 30, 2020

 

 

12,503,009

 

 

$

92,357

 

 

 

 

4,607,565

 

 

$

 

 

$

12,355

 

 

$

 

 

$

(24,884

)

 

$

(12,529

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

Total

 

 

 

Convertible

Preferred Stock

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Other

Comprehensive

 

 

Accumulated

 

 

Stockholders’

(Deficit)

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance as of January 1, 2021

 

 

 

 

$

 

 

 

 

32,485,784

 

 

$

3

 

 

$

315,288

 

 

$

33

 

 

$

(41,042

)

 

$

274,282

 

Issuance of common stock upon

   exercise of common stock options

   and vesting of restricted stock units

 

 

 

 

 

 

 

 

 

64,527

 

 

 

 

 

 

70

 

 

 

 

 

 

 

 

 

70

 

Proceeds from follow-on public offering,

   net of underwriters' discounts and

   commissions and issuance costs

 

 

 

 

 

 

 

 

 

4,600,000

 

 

 

1

 

 

 

96,761

 

 

 

 

 

 

 

 

 

96,762

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

974

 

 

 

 

 

 

 

 

 

974

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5

)

 

 

 

 

 

(5

)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(8,866

)

 

 

(8,866

)

Balance as of March 31, 2021

 

 

 

 

$

 

 

 

 

37,150,311

 

 

$

4

 

 

$

413,093

 

 

$

28

 

 

$

(49,908

)

 

$

363,217

 

Issuance of common stock upon

   exercise of common stock options

 

 

 

 

 

 

 

 

 

85,593

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

119

 

Issuance of common stock under

   employee stock purchase plan

 

 

 

 

 

 

 

 

 

15,867

 

 

 

 

 

 

229

 

 

 

 

 

 

 

 

 

229

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,109

 

 

 

 

 

 

 

 

 

1,109

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

9

 

 

 

 

 

 

9

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,974

)

 

 

(13,974

)

Balance as of June 30, 2021

 

 

 

 

$

 

 

 

 

37,251,771

 

 

$

4

 

 

$

414,550

 

 

$

37

 

 

$

(63,882

)

 

$

350,709

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


 

 

Athira Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

Six Months Ended June 30,

 

 

 

2021

 

 

2020

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(22,840

)

 

$

(3,797

)

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

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

2,083

 

 

 

107

 

Depreciation expense

 

 

230

 

 

 

 

Other non-cash expense

 

 

 

 

 

310

 

Amortization of premiums and accretion of discounts on

   available-for-sale securities, net

 

 

226

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Unbilled grant receivables

 

 

(1,289

)

 

 

 

Prepaid expenses and other current assets

 

 

3,217

 

 

 

(1,203

)

Accounts payable and accrued expenses

 

 

3,318

 

 

 

546

 

Operating lease liability

 

 

433

 

 

 

 

Net cash used in operating activities

 

 

(14,622

)

 

 

(4,037

)

Investing activities

 

 

 

 

 

 

 

 

Purchases of available-for-sale securities

 

 

(173,563

)

 

 

 

Maturities of available-for-sale securities

 

 

152,740

 

 

 

 

Proceeds from sales of available-for-sale securities

 

 

9,988

 

 

 

 

Purchases of property and equipment

 

 

(418

)

 

 

 

Principal payments received on stockholder note receivable

 

 

 

 

 

3

 

Net cash (used in) provided by investing activities

 

 

(11,253

)

 

 

3

 

Financing activities

 

 

 

 

 

 

 

 

Proceeds from exercise of common stock options

 

 

189

 

 

 

238

 

Proceeds from issuance of convertible preferred stock and common

   stock warrants, net of issuance costs

 

 

 

 

 

85,396

 

Proceeds from exercise of common stock warrants

 

 

 

 

 

55

 

Proceeds from follow-on public offering, net of issuance costs

 

 

96,762

 

 

 

 

Proceeds from issuance of convertible notes, including derivative,

   net of issuance costs

 

 

 

 

 

1,664

 

Payments of deferred offering costs

 

 

 

 

 

(209

)

Net cash provided by financing activities

 

 

96,951

 

 

 

87,144

 

Net increase (decrease) in cash and cash equivalents

 

 

71,076

 

 

 

83,110

 

Cash and cash equivalents, beginning of period

 

 

60,625

 

 

 

2,056

 

Cash and cash equivalents, end of period

 

$

131,701

 

 

$

85,166

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Deferred offering costs included in accounts payable and

   accrued liabilities

 

$

 

 

$

206

 

Issuance costs for convertible preferred stock included in accounts

   payable and accrued liabilities

 

$

 

 

$

3,470

 

Allocation of proceeds to common stock warrants issued in Series B

   convertible preferred stock financing

 

$

 

 

$

10,591

 

Issuance of Series B-1 preferred stock upon conversion of

   promissory notes

 

$