SEC Filing | Athira Pharma

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10-Q

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 September 30, 2021


☐	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 November 5, 2021 there were 37,351,104 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	25
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37
Item 4.	Controls and Procedures	37
PART II.	OTHER INFORMATION	38
Item 1.	Legal Proceedings	38
Item 1A.	Risk Factors	39
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	90
Item 3.	Defaults Upon Senior Securities	91
Item 4.	Mine Safety Disclosures	91
Item 5.	Other Information	91
Item 6.	Exhibits	92
Signatures		93

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.

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 engaged in a review of papers co-authored by our former chief executive officer in connection with her doctoral research at Washington State University. The special committee’s findings included that she altered images in her 2011 doctoral dissertation and at least four research papers that she co-authored while a graduate student at Washington State University, and published from 2011 to 2014, that we cited challenged research papers in certain communications and applications, and that WSU’s dihexa patent, exclusively licensed to us, incorporated certain of these altered images. Washington State University has undertaken a review of claims of potential research misconduct involving our former chief executive officer’s doctoral research at Washington State University. We cannot predict when WSU’s investigation will be completed or what conclusions WSU will reach.



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.



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.

Our Risk Factors are not guarantees that no such conditions exist as of the date of this report and should not be interpreted as an affirmative statement that such risks or conditions have not materialized, in whole or in part.

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)


	September 30, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	107,328		$	60,625
Short-term investments		128,447			124,057
Unbilled grant receivable		2,079			1,300
Prepaid expenses and other current assets		1,138			6,355
Total current assets		238,992			192,337
Property and equipment, net		3,061			2,649
Operating lease right-of-use asset		1,504			936
Long-term investments		103,649			83,509
Other long-term assets		125			132
Total assets	$	347,331		$	279,563
Liabilities and stockholders' equity
Current liabilities:
Accounts payable	$	959		$	1,158
Accrued liabilities		8,148			3,123
Current operating lease liability		279			124
Total current liabilities		9,386			4,405
Operating lease liability, less current portion		1,708			876
Total liabilities		11,094			5,281
Stockholders' equity:
Common stock, $0.0001 par value; 900,000,000 shares authorized at September 30, 2021 and December 31, 2020, respectively; 37,351,104 and 32,485,784 shares issued and outstanding at September 30, 2021 and December 31, 2020, respectively		4			3
Additional paid-in capital		415,785			315,288
Accumulated other comprehensive income		4			33
Accumulated deficit		(79,556	)		(41,042	)
Total stockholders' equity		336,237			274,282
Total liabilities and stockholders' equity	$	347,331		$	279,563

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

Athira Pharma, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share amounts)

(unaudited)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2021			2020			2021			2020
Operating expenses:
Research and development	$	10,707		$	5,830		$	30,176		$	8,099
General and administrative		7,119			1,567			15,068			2,817
Total operating expenses		17,826			7,397			45,244			10,916
Loss from operations		(17,826	)		(7,397	)		(45,244	)		(10,916	)
Grant income		2,079			—			6,499			22
Other income (expense), net		73			(1,059	)		231			(1,359	)
Net loss	$	(15,674	)	$	(8,456	)	$	(38,514	)	$	(12,253	)
Unrealized (loss) gain on available-for-sale securities		(33	)		7			(29	)		7
Comprehensive loss attributable to common stockholders	$	(15,707	)	$	(8,449	)	$	(38,543	)	$	(12,246	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.42	)	$	(1.12	)	$	(1.12	)	$	(2.38	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		37,312,356			7,564,538			34,315,047			5,155,338

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

Athira Pharma, Inc.

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

For the Three and Nine Months Ended September 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			70,971			—		—		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		$	92,537			4,607,565	$	—	$	12,355	$	—		$	(24,884	)	$	(12,529	)
Issuance of common stock upon exercise of common stock options		—			—			262,285		—		304		—			—			304
Proceeds from initial public offering, net of underwriters' discounts and commissions and issuance costs of $3.3 million		—			—			12,000,000		1		186,445		—			—			186,446
Conversion of convertible preferred stock		(12,503,009	)		(92,537	)		12,503,009		2		92,535		—			—			92,537
Exercise of common stock warrants		—			—			1,714,536		—		1,050		—			—			1,050
Stock-based compensation		—			—			—		—		111		—			—			111
Other comprehensive income		—			—			—		—		—		7			—			7
Net loss		—			—			—		—		—		—			(8,456	)		(8,456	)
Balance as of September 30, 2020		—		$	—			31,087,395	$	3	$	292,800	$	7		$	(33,340	)	$	259,470

													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 loss		—			—			—		—		—		(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
Issuance of common stock upon exercise of common stock options and vesting of restricted stock units		—			—			99,333		—		130		—			—			130
Stock-based compensation		—			—			—		—		1,105		—			—			1,105
Other comprehensive loss		—			—			—		—		—		(33	)		—			(33	)
Net loss		—			—			—		—		—		—			(15,674	)		(15,674	)
Balance as of September 30, 2021		—		$	—			37,351,104	$	4	$	415,785	$	4		$	(79,556	)	$	336,237

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

Athira Pharma, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Nine Months Ended September 30,
	2021			2020
Operating activities
Net loss	$	(38,514	)	$	(12,253	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation