UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of |
(I.R.S. Employer |
(Address of principal executive offices)
(
(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 |
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(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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 May 8, 2023, there were
Table of Contents
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PART I. |
5 |
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Item 1. |
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5 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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7 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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Item 4. |
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PART II. |
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Item 1. |
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Item 1A. |
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Item 2. |
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Item 3. |
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Item 4. |
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Item 5. |
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Item 6. |
94 |
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95 |
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:
3
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.
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)
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March 31, 2023 |
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December 31, 2022 |
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(unaudited) |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Unbilled grant receivable |
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— |
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Prepaid expenses and other current assets |
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Total current assets |
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Restricted cash |
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Property and equipment, net |
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Operating lease right-of-use asset |
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Long-term investments |
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Other long-term assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders' equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued liabilities |
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Accrued legal settlement (Note 7) |
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Current operating lease liability |
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Total current liabilities |
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Operating lease liability, less current portion |
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Total liabilities |
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Stockholders' equity: |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated other comprehensive loss |
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( |
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Accumulated deficit |
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( |
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Total stockholders' equity |
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Total liabilities and stockholders' equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited 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)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Operating expenses: |
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Research and development |
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$ |
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$ |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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( |
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Grant income |
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Other income, net |
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Net loss |
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$ |
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$ |
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Unrealized gain (loss) on available-for-sale securities |
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( |
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Comprehensive loss attributable to common stockholders |
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$ |
( |
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$ |
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Net loss per share attributable to common |
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$ |
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$ |
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Weighted-average shares used in computing |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
Athira Pharma, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
For the Three Months Ended March 31, 2023 and 2022
(in thousands, except share amounts)
(unaudited)
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Accumulated |
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Common Stock |
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Additional |
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Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of January 1, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock upon exercise of |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized loss on available-for-sale securities |
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— |
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— |
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— |
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( |
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— |
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( |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance as of March 31, 2022 |
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$ |
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$ |
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$ |
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$ |
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$ |
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Accumulated |
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Common Stock |
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Additional |
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Other |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Loss |
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Deficit |
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Equity |
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Balance as of January 1, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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$ |
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Issuance of common stock upon exercise of |
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— |
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— |
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— |
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Stock-based compensation |
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— |
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— |
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— |
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— |
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Unrealized gain on available-for-sale securities |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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— |
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( |
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Balance as of March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
Athira Pharma, Inc.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
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Three Months Ended March 31, |
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2023 |
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2022 |
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Operating activities |
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Net loss |
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$ |
( |
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$ |
( |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation expense |
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Non-cash lease expense |
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Amortization of premiums and accretion of discounts on |
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Changes in operating assets and liabilities: |
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Unbilled grant receivable |
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Prepaid expenses and other current assets |
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( |
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Accounts payable and accrued liabilities |
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( |
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Operating lease liability |
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( |
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( |
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Net cash used in operating activities |
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Investing activities |
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Purchases of available-for-sale securities |
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Maturities of available-for-sale securities |
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Purchases of property and equipment |
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( |
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Net cash provided by investing activities |
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Financing activities |
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Proceeds from exercise of common stock options |
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Net cash provided by financing activities |
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Net increase in cash, cash equivalents and restricted cash |
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Cash, cash equivalents and restricted cash, beginning of period |
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Cash, cash equivalents and restricted cash, end of period |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
ATHIRA PHARMA, INC.
Notes to Unaudited Condensed Consolidated Financial Statements
1. Description of Business
Organization
Athira Pharma, Inc. (the “Company”) was incorporated as M3 Biotechnology, Inc. in the state of Washington on
At The Market Common Stock Offering
In January 2023, the Company entered into a sales agreement with Cantor Fitzgerald & Co., or Cantor Fitzgerald, and BTIG, LLC, or BTIG, to sell shares of our common stock having aggregate sales proceeds of up to $
Liquidity and Capital Resources
Since the Company’s inception, it has funded its operations primarily with proceeds from the sale and issuance of common stock, convertible preferred stock, common stock warrants, and convertible notes, and to a lesser extent from grant income and stock option exercises. From the Company’s inception through March 31, 2023, it has raised aggregate net cash proceeds of $
Based upon the Company’s current operating plan, it estimates that its $
2. Significant Accounting Policies
Basis of Presentation
The unaudited condensed consolidated financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). The unaudited condensed consolidated financial statements include the operations of Athira Pharma, Inc., and its wholly owned Australian subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.
Unaudited Interim Condensed Consolidated Financial Statements
The accompanying unaudited condensed consolidated balance sheet as of March 31, 2023, and unaudited condensed consolidated statements of operations and comprehensive loss, cash flows, and stockholders’ equity for the three months ended March 31, 2023 and 2022, are unaudited. The balance sheet as of December 31, 2022 was derived from the audited consolidated financial statements as of and for the year ended December 31, 2022. The unaudited interim condensed consolidated financial statements have been prepared on a basis consistent with the audited annual financial statements as of and for the year ended December 31, 2022, and, in the opinion of management, reflect all adjustments, consisting solely of normal recurring adjustments, necessary for the fair presentation of the Company’s financial position as of March 31, 2023, and the unaudited condensed consolidated results of its operations and its cash flows for the three months
9
ended March 31, 2023 and 2022. The financial data and other information disclosed in these notes related to the three months ended March 31, 2023 and 2022 are also unaudited. The unaudited condensed consolidated results of operations for the three months ended March 31, 2023 are not necessarily indicative of the results to be expected for the full year ending December 31, 2023 or any other period. These unaudited interim condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements as of and for the year ended December 31, 2022 included in its Annual Report on Form 10-K filed with the SEC on March 23, 2023.
Fair Value Measurements
The carrying amounts of certain financial instruments, including cash, cash equivalents, restricted cash, investments, accounts payable and accrued expenses approximate their fair values due to the short-term nature of those amounts.
Restricted Cash
Restricted cash consists of collateral pledged in connection with the Company's corporate credit cards.
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March 31, |
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December 31, |
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2023 |
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2022 |
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Cash and cash equivalents |
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$ |
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$ |
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Restricted cash |
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Cash, cash equivalents and restricted cash |
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$ |
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$ |
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Grant Income
In December 2020, the Company accepted a grant from the National Institute on Aging (“NIA”) of the National Institutes of Health (“NIH”) to support its ACT-AD Phase 2 clinical trial for fosgonimeton (then-named ATH-1017), the Company’s lead therapeutic candidate being developed for the treatment of individuals with mild-to-moderate Alzheimer’s disease. Under the terms of the agreement and approval received from the NIH, the Company may receive up to an aggregate of $
During the three months ended March 31, 2023 and 2022, the Company recognized grant income of $
Short-term and Long-term Investments
The Company generally invests its excess cash in investment grade short- to intermediate-term fixed income securities. Such investments are included in cash and cash equivalents, short-term investments, and long-term investments on the unaudited condensed consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in accumulated other comprehensive loss. Amortization and accretion are included in other income, net. Realized gains and losses on the sale of these securities are recognized in other income, net.
The Company periodically evaluates whether declines in fair values of its investments below their book value are due to expected credit losses, as well as the Company's ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through other income, net.
10
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Estimates include those used for fair value of assets and liabilities, accrued liabilities, valuation allowance for deferred tax assets, and stock-based compensation. Management evaluates related assumptions on an ongoing basis using historical experience and other factors and adjusts those estimates and assumptions when facts and circumstances dictate. Actual results could differ from those estimates.
Research and Development Expenses
Research and development expenses consist primarily of direct and indirect costs incurred for research activities, including development of the pipeline from the Company’s proprietary drug discovery platform (“ATH platform”), the Company’s drug discovery efforts and the development of its product candidates. Direct costs include laboratory materials and supplies, contracted research and manufacturing, clinical trial costs, consulting fees, and other expenses incurred to sustain the Company’s research and development program. Indirect costs include personnel-related expenses, consisting of employee salaries, related benefits, and stock-based compensation expense for employees engaged in research and development activities, and facilities and other expenses consisting of direct and allocated expenses for rent and depreciation and lab consumables.
Research and development costs are expensed as incurred. In-licensing fees and other costs to acquire technologies used in research and development that have not yet received regulatory approval and that are not expected to have an alternative future use are expensed when incurred. Non-refundable advance payments for goods and services that will be used over time for research and development are capitalized and recognized as goods are delivered or as the related services are performed. The Company estimates the period over which such services will be performed and the level of effort to be expended in each period. If actual timing of performance or the level of effort varies from the estimate, the Company adjusts the amounts recorded accordingly. The Company has not experienced any material differences between accrued or prepaid costs and actual costs since inception.
General and Administrative Expenses
General and administrative expenses consist primarily of personnel-related costs, consisting of employee salaries, related benefits, and stock-based compensation expense for employees in the executive, legal, finance and accounting, human resources, and other administrative functions. General and administrative expenses also include third-party costs such as legal costs, insurance costs, accounting, auditing and tax related fees, consulting fees and facilities and other expenses not otherwise included as research and development expenses. General and administrative costs are expensed as incurred.
Leases
The Company adopted Accounting Standards Codification (“ASC”) Topic 842 - Leases effective January 1, 2020. The Company determines if an arrangement contains a lease at inception. The Company performed an evaluation of contracts in accordance with ASC 842 and has determined it has an operating lease agreement for the laboratory and office facilities that the Company occupies. Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized at the date the underlying asset becomes available for the Company’s use. Operating lease liabilities are based on the present value of the future minimum lease payments over the lease term. ROU assets are measured at the amount of the lease liability, adjusted for any initial direct costs incurred and any lease payments made at or before the lease commencement date, less lease incentives received. As the Company’s leases generally do not provide an implicit interest rate, the present value of the future minimum lease payments is determined using the Company’s incremental borrowing rate. This rate is an estimate of the collateralized borrowing rate the Company would incur on its future lease payments over a similar term and is based on the information available to the Company at the lease commencement date, discussed in more detail below.
The Company’s leases contain options to extend the leases; lease terms are adjusted for these options only when it is reasonably certain the Company will exercise these options. The Company’s lease agreements do not contain residual value guarantees or covenants.
The Company has made a policy election regarding its real estate leases not to separate non-lease components from lease components, to the extent they are fixed. Non-lease components that are not fixed are expensed as incurred as
11
variable lease expense. The Company’s lease includes variable non-lease components, such as common-area maintenance costs. The Company has elected not to record on the balance sheet a lease that has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise. The Company accounts for leases with initial terms of 12 months or less as operating expenses on a straight-line basis over the lease term.
Lease expense is recognized within operating expenses on a straight-line basis over the terms of the lease. Incentives granted under the Company’s facilities lease, including rent holidays, are recognized as adjustments to lease expense on a straight-line basis over the term of the lease.
Stock-based Compensation
The Company measures compensation expense for all stock-based payments to employees, officers and directors based on the estimated fair value of the award at the grant date. For stock options, the Company estimates the grant date fair value of each option award using the Black-Scholes option-pricing model. The grant date fair value of restricted stock units is based upon the fair market value of the Company’s common stock based on its closing price as reported on the date of grant on the Nasdaq Global Select Market. Compensation expense is recognized over the requisite service period on a straight-line basis. Forfeitures are recognized as they occur.
The Company records compensation expense for stock option and restricted stock unit grants subject to performance-based milestone vesting over the remaining implicit service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the relative satisfaction of the performance conditions as of the reporting date.
Net Loss Per Share Attributable to Common Stockholders
Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.
Segments
The Company has determined that it operates and manages
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (a) no longer an emerging growth company or (b) affirmatively and irrevocably opts out of the extended transition period provided in the JOBS Act, unless early adoption is permitted. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
Recently Adopted Accounting Pronouncements
In June 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-13, Financial Instruments: Credit Losses (Topic 326) as clarified in ASU 2019-04, ASU 2019-05, and ASU 2020-02. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. The Company
12
3. Fair Value
The Company has certain assets and liabilities that are measured at fair value on a recurring basis according to a fair value hierarchy that prioritizes the inputs, assumptions and valuation techniques used to measure fair value. The three levels of the fair value hierarchy are:
Level 1—Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.
Level 2—Quoted prices in markets that are not active or financial instruments for which all significant inputs are observable, either directly or indirectly.
Level 3—Inputs are generally unobservable and reflect management’s estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are determined using model-based techniques, including probability-based simulation methodologies.
The determination of a financial instrument’s level within the fair value hierarchy is based on an assessment of the lowest level of any input that is significant to the fair value measurement. The Company considers observable data to be market data, which is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and provided by independent sources that are actively involved in the relevant market.
The following tables reflect the Company’s financial asset balances measured at fair value on a recurring basis (in thousands):
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March 31, 2023 |
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Level |
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Amortized |
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Unrealized |
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Unrealized |
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|
Fair |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market fund |
|
1 |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial paper |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Agency securities |
|
2 |
|
|
|
|
|
|
|
|
— |
|
|
|
|
|||
Total cash equivalents |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
|||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
U.S. government debt and agency |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total short-term investments |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government debt and agency |
|
2 |
|
|
|
|
|
|
|
|
( |
) |
|
|
|
|||
Total long-term investments |
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
13
|
|
December 31, 2022 |
|
|||||||||||||||
|
|
Level |
|
Amortized |
|
|
Unrealized |
|
|
Unrealized |
|
|
Fair |
|
||||
Cash equivalents: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Money market fund |
|
1 |
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
||
Commercial paper |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total cash equivalents |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
U.S. government debt and agency |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Corporate bonds |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total short-term investments |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
||
Long-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
U.S. government debt and agency |
|
2 |
|
|
|
|
|
— |
|
|
|
( |
) |
|
|
|
||
Total long-term investments |
|
|
|
$ |
|
|
$ |
— |
|
|
$ |
( |
) |
|
$ |
|
All the commercial paper, U.S. government debt, municipal bonds and agency securities, U.S. treasury bills, and corporate bonds designated as short-term investments have an effective maturity date that is equal to or less than one year from the respective balance sheet date. Those that are designated as long-term investments have an effective maturity date that is more than one year, but less than two years, from the respective balance sheet date.
As of March 31, 2023, the Company does not intend to sell any securities in unrealized loss positions, and it is not more-likely-than-not that the Company will be required to sell such securities prior to the recovery of the amortized cost basis. Based on the Company's assessment, the Company concluded all impairments as of March 31, 2023 to be due to factors other than credit loss, such as changes in interest rates. A credit loss allowance was not recognized and the unrealized losses for available-for-sale securities were recorded in other comprehensive loss.
4. Property and Equipment, Net
Property and equipment consisted of the following (in thousands):
|
|
March 31, |
|
|
December 31, |
|
||
|
|
2023 |
|
|
2022 |
|
||
Lab equipment |
|
$ |
|
|
$ |
|
||
Office furniture, fixtures, and |
|
|
|
|
|
|
||
Leasehold improvement |
|
|
|
|
|
|
||
Property and equipment, at cost |
|
|
|
|
|
|
||
Less: accumulated depreciation |
|
|