- By FYH News Team
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You should read the following discussion and analysis of our financial condition
and results of operations together with the section of this annual report
entitled “Selected Financial Data” and our consolidated financial statements and
related notes included elsewhere in this annual report. This discussion and
other parts of this annual report contain forward-looking statements that
involve risk and uncertainties, such as statements of our plans, objectives,
expectations, and intentions. In this annual report, words such as “may,”
“will,” “expect,” “anticipate,” “estimate,” “intend,” and similar expressions
(as well as other words or expressions referencing future events, conditions or
circumstances) are intended to identify forward-looking statements, as described
elsewhere herein. As a result of many factors, including those factors set forth
in the “Risk Factors” section of this annual report, our actual results could
differ materially from the results described in or implied by the
forward-looking statements contained in the following discussion and analysis.
Overview
We are a biopharmaceutical company driven by our mission to discover, develop
and deliver life-changing treatments that provide hope to underserved patient
communities, starting with sickle cell disease, or SCD. Founded in 2011, our
goal is to transform the treatment and care of SCD, a lifelong, devastating
inherited blood disorder that is marked by red blood cell destruction and
occluded blood flow and hypoxia, which leads to anemia, stroke, multi-organ
failure, severe pain crises, and shortened patient life span. SCD is also marked
by a historical lack of understanding, investment and attention. Although the
fundamental cause of SCD has been understood for decades, therapeutic innovation
and access to care have historically lagged compared to many other rare
diseases. For example, there are approximately three times more individuals in
enactment of the Orphan Drug Act passed in 1983, only four drugs have been
approved for SCD compared to at least 15 drugs approved for cystic fibrosis. As
a result of the lack of treatment options, patients with SCD suffer serious
morbidity and premature mortality.
We continue to make progress on our mission to bring innovative therapies to the
SCD community. Our first medicine, Oxbryta, an oral therapy taken once daily, is
the first and only FDA-approved treatment that directly inhibits sickle
hemoglobin polymerization, the root cause of the sickling and destruction of red
blood cells in SCD. Oxbryta was granted accelerated approval by the
and Drug Administration
adults and children 12 years of age and older, and we have since continued to
grow Oxbryta commercially, with the net number of patients taking Oxbryta
increasing each quarter. In addition, in
We have also been working to expand Oxbryta’s reach to patients at younger ages
as we believe early intervention is critically important for SCD patients.
Starting a disease-modifying therapy earlier in life could potentially help
prevent symptoms and end-organ damage that occurs over time in SCD patients.
This could potentially improve the daily lives of children and their families,
improve patient outcomes and lead to less utilization of healthcare, reducing
healthcare costs for patients and families, and the overall healthcare system.
In
indication for the treatment of SCD to children ages 4 to less than 12 years.
The FDA also approved Oxbryta tablets for oral suspension, a dispersible,
once-daily tablet dosage form suitable for patients ages 4 to less than 12 years
as well as for older patients who have difficulty swallowing whole tablets. We
will continue to study Oxbryta in patients as young as 6 months old to less than
4 years, as we look to potentially further expand access to Oxbryta.
Worldwide, there are millions of people living with SCD, which occurs
predominantly in populations of African, Middle Eastern and South Asian descent
and has an estimated global incidence of 250,000 to 300,000 births annually. We
are executing what we view as a thoughtful and sustainable approach and will
consider distribution and funding approaches to potentially provide access to
our products globally, including in sub-Saharan Africa and
current focus areas of
or GCC, region of the
opportunity to bring Oxbryta to more than 350,000 people living with SCD in the
next several years.
In
authorization for Oxbryta for the treatment of hemolytic anemia (which is low
hemoglobin due to red blood cell destruction) due to SCD in adult and pediatric
patients 12 years of age and older as monotherapy or in combination with
hydroxycarbamide (hydroxyurea), and such authorization includes all Member
States of the
the European Economic Area (
approval, the Committee for Medicinal Products for Human Use, or CHMP, of the
recommending marketing authorization for Oxbryta, subsequent to which we
submitted an application to the Medicines and Healthcare products Regulatory
Agency, or MHRA, in the
Authorisation using the EC Decision Reliance Procedure.
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To provide early access to patients prior to potentially receiving marketing
approval, we established early access and named patient programs for eligible
SCD patients outside
included patients located in the
Kingdom
Under the exclusive agreement with our distribution partner, Biopharma-Middle
East and
access to Oxbryta in the six countries that make up the GCC region (
GCC, the
medicine while health authorities conduct their reviews. In the third quarter of
2021, we were granted marketing authorization for Oxbryta by the
Health and Prevention
children 12 years of age and older, with the
of the
We have ongoing and planned clinical trials in multiple countries to further
evaluate the safety and efficacy of Oxbryta, including trials designed to
demonstrate that improving hemoglobin and reducing hemolysis leads to an
improvement in organ dysfunction. These trials include the Phase 2a HOPE-KIDS 1
Study, an open-label, single- and multiple-dose trial evaluating the safety,
tolerability, pharmacokinetics and exploratory treatment effect of Oxbryta in
pediatric patients as young as 6 months of age. These trials also include the
HOPE-KIDS 2 Study, a post-approval confirmatory study we initiated in
2019
that is using transcranial Doppler, or TCD, flow velocity to seek to demonstrate
a decrease in stroke risk in children with SCD 2 to 15 years of age.
Beyond Oxbryta, we are engaged in other research and development activities. Our
development program includes inclacumab, a P-selectin inhibitor, currently in
Phase 3 development to investigate its potential to reduce the incidence of
painful vaso-occlusive crises, or VOCs and resulting hospital admissions. In
addition, we are advancing GBT021601, or GBT601, our next generation hemoglobin
polymerization inhibitor that is in Phase 1 development and was discovered by
our scientists. Our drug discovery teams continue to work on new targets to
potentially develop the next wave of treatments for SCD.
As part of our efforts to build our pipeline, we have entered into in-license
and collaboration agreements and regularly evaluate opportunities to in-license,
acquire or invest in new business, technology or assets or engage in related
discussions with other business entities.
We licensed inclacumab from
(together, “Roche”) under the License Agreement we entered into in
or Roche Agreement. Prior to licensing inclacumab to us, Roche conducted
clinical studies that enrolled more than 700 non-SCD patients and demonstrated
an encouraging pharmacokinetic, safety, and tolerability profile for inclacumab.
We expect to be able to leverage the safety data from Roche’s prior clinical
studies, as we proceed with our development of inclacumab as a potential
treatment to reduce the frequency of VOCs in patients with SCD and to reduce the
hospital VOC readmission rate for patients that require inpatient treatment for
an initial VOC episode. In
Phase 3 clinical trials of inclacumab. One study is a chronic prevention study
with the primary endpoint of the rate of VOCs over a 48-week treatment period,
and the other study is focusing on hospital readmissions with the primary
endpoint of the rate of readmission to hospitals for VOC within 90 days
following an initial hospitalization for a VOC.
We also have an ongoing early-stage research program under our collaboration
with Syros Pharmaceuticals, Inc., or Syros, under a License and Collaboration
Agreement, or the Syros Agreement, entered into in
develop and commercialize novel therapies for SCD and beta thalassemia. We are
currently exploring orally available, small molecule drugs designed to
upregulate fetal hemoglobin. Under the Syros Agreement, we have an option to
obtain an exclusive worldwide license to develop, manufacture and commercialize
any compounds or products resulting from the collaboration, subject to Syros’
option to co-promote the first product in
In addition, we entered into a license agreement with
intellectual property controlled by Sanofi to use, develop, manufacture,
commercialize and otherwise exploit certain compounds, including compounds
directed against or that modulate one of two specified targets, or Licensed
Compounds, for the treatment of human diseases worldwide. We currently intend to
explore the Licensed Compounds for the potential treatment of SCD, and we
believe the mechanisms are distinct and potentially complementary to that of
Oxbryta.
In
a global pandemic related to SARS-CoV-2, the virus that causes coronavirus
disease 2019, or COVID-19, and the pandemic has impacted our business, including
our commercialization of Oxbryta and our research and development activities.
For example, we have seen a significant decrease in weekly new patient
prescriptions for Oxbryta from a peak in early
rate of new patient prescriptions may remain lower depending on the course of
the pandemic. While we have resumed most of our operations that were temporarily
paused at the beginning of the pandemic, our approach in some cases has changed
to adapt to the new environment, such as the
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increased use of digital and internet-based education and outreach to engage
with healthcare professionals, or HCPs, and payors. We do not know how the
adjustments we have made in our operations or the pandemic in general will
impact our business in the long term. Notably, the pandemic has not
significantly impacted our supply of Oxbryta. We continue to believe we have an
adequate supply of Oxbryta to sustain estimated patient need through 2022, and
we are continuing to produce Oxbryta tablets.
Overall, our business model is aligned with our social purpose, which is
centered on highlighting the disparities and inequalities of people living with
SCD. This includes helping to address these issues through education, support of
and engagement with the SCD community, as well as charitable giving, such as
through
values-driven culture, developing and supporting our people, and creating a more
diverse, equitable and inclusive environment for our employees can help us to
better deliver for SCD patients.
We are not profitable and have incurred losses and negative cash flows from
operations each year since our inception. We have financed our operations
primarily through sale of equity securities and debt financing, including
several follow-on offerings in 2019 through which we sold an additional of
3,986,890 shares of our common stocks for proceeds of
underwriting costs and commissions and offering expenses. In
entered into a
down proceeds of
remaining
2021
which amended the 2019 Term Loan to increase the total term loan by
million
million
million
2028 Notes in a private placement. The aggregate principal amount on the 2028
Notes sold reflects the full exercise by the initial purchasers of their option
to purchase to purchase an additional
amount of the 2028 Notes. We received total proceeds net of debt issuance and
offering costs of
Our net losses were
million
ended
of
incurred in connection with our research and development programs and from
selling, general and administrative costs associated with our operations. We had
2021
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results
of operations is based on our consolidated financial statements, which have been
prepared in accordance with
principles, or
statements requires us 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 consolidated financial statements, as
well as the reported expenses incurred during the reporting periods. Our
estimates are based on our historical experience and on various other factors
that we believe are reasonable under the circumstances, the results of which
form the basis for making judgments about the carrying value of assets and
liabilities that are not readily apparent from other sources. Actual results may
differ from these estimates under different assumptions or conditions. We
believe that the accounting policies discussed below are critical to
understanding our historical and future performance, as these policies relate to
the more significant areas involving management’s judgments and estimates.
Revenue Recognition
We recognize revenue in accordance with Accounting Standards Codification, Topic
606, Revenue from Contracts with Customers, or ASC 606, upon transfer of control
of promised products or services to customers in an amount that reflects the
consideration we expect to receive in exchange for those products or services.
To determine revenue recognition for arrangements that we determine are within
the scope of ASC 606, we perform the following five steps: (i) identify the
contract(s) with a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price; (iv) allocate the transaction
price to the performance obligations in the contract; and (v) recognize revenue
when (or as) we satisfy a performance obligation. We only apply the five-step
model to contracts when it is probable that we will collect substantially all of
the consideration we are entitled to in exchange for the goods or services we
transfer to the customer.
Product sales, net
Our product sales consist of
customers in
sell Oxbryta in
and a specialty
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distributor (each a “Customer” or collectively our “Customers). These agreements
with our Customers provide for transfer of title to the product at the time the
product has been delivered to the Customers. The Customers subsequently dispense
our product directly to a patient or resell our product to hospitals and certain
pharmacies.
We recognize revenue on product sales when the Customers obtain control of our
product, which occurs at a point in time, typically upon delivery to our
Customers. It is at that point that we have a right to payment and that our
Customers obtain title and the risks and rewards of ownership. Shipping and
handling activities are considered to be fulfillment activities rather than a
separate performance obligation. Payment terms are typically 30-60 days
following delivery to our Customers.
We consider the effects of items that can decrease the transaction price such as
variable consideration and consideration payable to Customers or payor. Amounts
related to such items are estimated at contract inception and updated at the end
of each reporting period as additional information becomes available. We record
revenue from product sales after considering the impact of various forms of
variable consideration. Each of these items of variable consideration we record
at the time of revenue recognition and requires significant estimates, judgment
and information obtained from external sources. If management’s estimates differ
from actual results, we will record adjustments that would affect product sales
in the period of adjustment.
Rebates: We are subject to government mandated rebates for Medicaid Drug Rebate
Program, Medicare Part D Prescription Drug Benefit Program, and other government
health care programs in
contractual agreements or legal requirements with public sector benefit
providers. We use the expected-value method for estimating these rebates based
on statutory discount rates and expected utilization. The expected utilization
of rebates is estimated based on third-party data from the specialty pharmacies
and specialty distributor. Estimates for these rebates are adjusted quarterly to
reflect the most recent information. We record an accrued liability for unpaid
rebates related to products for which control has been transferred to Customers.
Prompt payment discounts: We provide discounts to our Customers if they pay for
our products within a defined period of time after title transfers, which terms
are explicitly stated in the contract. We use the most-likely-amount method for
estimating prompt payment discounts. We expect that our Customers will earn
prompt payment discounts. As a result, we deduct the full amount of those
discounts from total product sales when revenues are recognized and record these
discounts as a reduction of accounts receivable.
Co-payment assistance: We provide co-payment assistance to patients who have
commercial insurance and meet certain eligibility requirements. We use the
expected-value method for estimating co-payment assistance based on estimates of
program redemption using data provided by third-party administrators. Estimates
for the co-payment assistance are adjusted quarterly to reflect actual
experience. We record an accrued liability for unredeemed co-payment assistance
related to products for which control has been transferred to Customers.
Medicare Part D Coverage Gap: The Medicare Part D coverage gap is a federal
program to subsidize the costs of prescription drugs for Medicare beneficiaries
in
Medicare Part D insurance coverage gap for prescription drugs sold to eligible
patients. Funding of the coverage gap is generally invoiced and paid in arrears.
We estimate the impact of the Medicare Part D coverage gap using the
expected-value method based on an amount expected to be incurred for the current
quarter’s activity, plus an accrual balance for known prior quarters. Estimates
for the impact of the Medicare Part D coverage gap are adjusted quarterly to
reflect actual experience. We record an accrued liability for unpaid reserves
related to the Medicare Part D coverage gap.
Product returns: Consistent with industry practice, we offer limited product
return rights and generally allow for the return of product that is damaged or
defective, or within a few months prior to and up to a few months after the
product expiration date. We consider several factors in the estimation of
potential product returns, including expiration dates of the product shipped,
the limited product return rights, third-party data in monitoring channel
inventory levels, shelf life of the product, prescription trends, and other
relevant factors. We expect product returns to be immaterial. Other than these
limited returns, we do not provide any product warranties.
Chargebacks: Chargebacks are discounts that occur when contracted parties
purchase directly from a specialty distributor. Contracted parties, which
currently consist primarily of Public Health Service Institutions and federal
government entities purchasing via the Federal Supply Schedule, generally
purchase the product at a discounted price. The specialty distributor, in turn,
charges back the difference between the price initially paid by the specialty
distributor and the discounted price paid to the specialty distributor by the
contracted parties to us. The reserves for chargeback are based on known sales
to contracted parties. We establish the reserves for chargebacks in the same
period that the related revenue is recognized, resulting in a reduction of
product revenue and receivables.
Distributor fees: Our specialty distributor provides distribution services to us
for a fee, based on a contractually determined fixed percentage of sales. We
estimate these distributor fees and record such estimates in the same period the
related revenue is recognized, resulting in a reduction of product revenue. We
record an accrued liability for unpaid distributor fees.
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Each of the above items is variable consideration, which we record at the time
of revenue recognition, and require significant estimates, judgement and
information obtained from external sources. If management’s estimates differ
from actual results, we will record adjustments that would affect product sales
in the period of adjustment.
The following table summarizes activity with respect to our sales allowances and
accruals for the year ended
Rebates, co-payment
assistance, Medicare
Part D coverage gap, Prompt payment
product returns and discounts and
distributor fees chargebacks Total
Balances at December 31, 2019 $ 529 $ 113 $ 642
Provision related to current 13,697 4,351 18,048
period sales
Credit or payments made during (7,821 ) (3,713 ) (11,534 )
the period
Balance at December 31, 2020 $ 6,405 $ 751 $ 7,156
Provision related to current 23,543 9,405 32,948
period sales
Credit or payments made during (19,743 ) (9,227 ) (28,970 )
the period
Balance at December 31, 2021 $ 10,205 $ 929 $ 11,134
Accruals of Research and Development and Manufacturing Costs
We record accruals for estimated costs of research, nonclinical and clinical
studies and manufacturing development. These costs are a significant component
of our research and development expenses. A substantial portion of our ongoing
research and development activities are conducted by third-party service
providers, including contract research organizations and contract manufacturing
organizations. We also accrue for estimated costs of manufacturing activities
for inventories, which are a significant component of the cost of our inventory.
We accrue the costs incurred under our agreements with these third parties based
on actual work completed in accordance with agreements established with these
third parties. We determine the accruals for research and development through
discussions with internal personnel and external service providers as to the
progress or stage of completion of the clinical studies and the agreed-upon fee
to be paid for such services.
The accrual for contract manufacturing activities is based on an estimate of
manufacturing activities completed to date, contractual rates, and amounts
invoiced and paid to date at the end of each reporting period. We determine the
percentage of manufacturing activities completed to date based on discussions
with the contract manufacturing organizations, oversight of the manufacturing
activities and anticipated timeline.
Actual clinical and manufacturing services performed, number of subjects
enrolled, and the rate of subject enrollment may vary from our estimates,
resulting in adjustments to research and development costs or inventories in
future periods. Changes in these estimates that result in material changes to
our accruals could materially affect our results of operations or amounts of
inventories capitalized.
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Results of Operations
Comparison of the years ended
Change
Year Ended December 31, 2021/2020
2021 2020 $ %
(in thousands, except percentages)
Product sales, net $ 194,749 $ 123,803 $ 70,946 57 %
Costs and operating expenses:
Cost of sales 3,316 1,986 1,330 67
Research and development 212,135 155,122 57,013 37
Selling, general and administrative 266,988 210,851 56,137 27
Gain on lease modification
- (984 ) 984 *
Total costs and operating expenses 482,439 366,975 115,464 31
Loss from operations
(287,690 ) (243,172 ) (44,518 ) 18 Interest income 720 5,834 (5,114 ) 88 Interest expense (15,467 ) (9,809 ) (5,658 ) 58 Other expenses, net (177 ) (406 ) 229 56 Total other income (expense), net (14,924 ) (4,381 ) (10,543 ) 241 Loss before income taxes (302,614 ) (247,553 ) (55,061 ) 22 Provision for income taxes 477 - 477 * Net loss$ (303,091 ) $ (247,553 ) $ (55,538 ) 22 % *Change is not meaningful Product sales, net
Product sales consist of sales of Oxbryta, which was approved by the FDA in
and older and approved by the FDA in
children ages 4 to less than 12 years. Product sales were
increase was due to higher volume of sales driven by patient demand.
Cost of sales
Cost of sales of
2021
FDA approval related to the cost of Oxbryta sold. Prior to receiving the
initial approval for Oxbryta in
the manufacture of Oxbryta as research and development expense. We expect to
sell inventory previously expensed to research and development throughout 2022,
and, accordingly we expect our costs of product sales of Oxbryta to increase as
a percentage of net sales in future periods as we produce and sell inventory
that reflects the full cost of manufacturing the product.
Research and development
Research and development expenses consist primarily of costs incurred for the
development of Oxbryta and product candidates, which include:
•
employee-related expenses, which include salaries, benefits and stock-based
compensation;
•
expenses incurred under agreements with consultants, third-party research and
manufacturing organizations, and investigative clinical trial sites that conduct
research and development activities on our behalf;
•
the costs related to production of clinical supplies, including fees paid to
contract manufacturers;
•
laboratory and vendor expenses related to the execution of nonclinical studies
and clinical trials;
•
payments upon achievement of certain clinical development and regulatory
milestones in relation with license agreement; and
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•
facilities and other allocated expenses, which include expenses for rent and
maintenance of facilities, depreciation and amortization expense and other
supplies.
We expense all research and development costs in the periods in which they are
incurred. Costs for certain development activities are recognized based on an
evaluation of the progress to completion of specific tasks using information and
data provided to us by our vendors and clinical sites. Nonrefundable advance
payments for goods or services to be received in future periods for use in
research and development activities are deferred and capitalized. The
capitalized amounts are then expensed as the related goods are delivered and the
services are performed.
The primary component of our total operating expenses is our investment in
research and development activities, including the clinical development of
Oxbryta. We allocate research and development salaries, benefits, stock-based
compensation and indirect costs to Oxbryta, inclacumab, GBT601 and other product
candidates that we may pursue on a program-specific basis.
We expect our research and development expenses will increase in future periods
as we continue to invest in research and development activities related to
developing Oxbryta and product candidates, and as programs advance into later
stages of development and we begin to conduct larger clinical trials. The
process of conducting the necessary clinical research to obtain regulatory
approval is costly and time-consuming, and research and development is highly
uncertain. As a result, we are unable to determine the duration and completion
costs of our research and development projects or when and to what extent we
will generate revenue from the commercialization and sale of any of our product
candidates.
The following table summarizes our research and development expenses incurred
during the respective periods (in thousands, except percentages):
Change
Year Ended December 31, 2021/2020
2021 2020 $ %
Costs incurred by development program:
Oxbryta for the treatment of SCD
Other preclinical programs
46,721 30,997 15,724 51 Inclacumab for the treatment of SCD 46,816 25,817 20,999 81 GBT601 for the treatment of SCD 24,045 14,363 9,682 67
Total research and development expenses
Research and development expenses increased by
million
ended
increase in external costs for inclacumab related to clinical trial activities,
including a
increase in external costs for preclinical programs, a
expenses for Oxbryta related to manufacturing activities, and a
increase in external costs for GBT601 due to manufacturing and clinical trial
activities. Stock-based compensation expense related to research and development
was
year ended
additional personnel and stock price appreciation.
Selling, general and administrative expenses
General and administrative expenses increased by
year ended
increase in professional and consulting services supporting the commercial
activities related to Oxbryta, a
related to medical affairs, a
(including higher stock-based compensation expense) due to a greater number of
employees, and a
expense due to the growth of our operations. Selling, general and administrative
related stock-based compensation expense was
the years ended
Interest income
Interest income was
million
interest income from our investment balances.
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Interest expenses
Interest expense was
million
expense related to our A&R Term Loan, as a result of the timing of the drawdown
of the term loan.
Income Taxes
We recorded an income tax expense of
31, 2021
expenses on earnings of our foreign subsidiaries. No provision for income taxes
was recorded for the years ended
approximately
million
also had state net operating loss carryforwards of approximately
that may offset future state taxable income, through 2041. Current federal and
state tax laws include substantial restrictions on the utilization of net
operating losses and tax credits in the event of an ownership change. Even if
the carryforwards are available, they may be subject to annual limitations, lack
of future taxable income, or future ownership changes that could result in the
expiration of the carryforwards before they are utilized. At
we recorded a 100% valuation allowance against our net deferred tax assets of
approximately
uncertain that they would be fully realized. If we determine in the future that
we will be able to realize all or a portion of our net operating loss
carryforwards, an adjustment to our net operating loss carryforwards would
increase net income in the period in which we make such a determination.
For the years ended
The comparison of the fiscal years ended
in our annual report on Form 10-K for the fiscal year ended
located within Part II, Item 7. Management’s Discussion and Analysis of
Financial Condition and Results of Operations, which is incorporated herein by
reference.
Liquidity and Capital Resources
We are not profitable and have incurred losses and negative cash flows from
operations each year since our inception. We have financed our operations
primarily through sale of equity securities and debt financing. As of
31, 2021
Partnership
credit facility consisting of an initial tranche of
to draw an additional
the amount of
the Term Loan in
million
Amended and Restated Loan Agreement, or A&R Term Loan, which amended the 2019
Term Loan to increase the total term loan by
proceeds, net of the debt issuance costs of
In
Registration Statement, with the
stock, preferred stock, debt securities, warrants and units or any combination
thereof. Concurrently with the filing of the Shelf Registration Statement, we
entered into a Sales Agreement with
for the offering, issuance and sale by us of up to an aggregate of
million
the Shelf Registration Statement, or Sales Agreement. We have agreed to pay to
the Sales Agent cash commissions of up to 3.0% of the gross proceeds from sales
of common stock pursuant to the Sales Agreement. As of
have sold and issued 1,601,884 shares of common stock pursuant to the Sales
Agreement, with total gross proceeds of
underwriting discounts, commissions, and other offering expenses payable by us
of
In
1.875% convertible senior notes due 2028 in a private placement. The aggregate
principal amount on the 2028 Notes sold reflects the full exercise by the
initial purchasers of their option to purchase to purchase an additional
million
proceeds, net of debt issuance and offering costs of
million
In connection with the issuance of the 2028 Notes, we entered into capped call
transactions with certain of the initial purchasers of the 2028 Notes and other
financial institutions, totaling
Calls. The Capped Calls cover, subject to customary adjustments, the number of
shares of our common stock that initially underlie the 2028 Notes (or 10,866,983
shares of our common stock). The Capped Calls have an initial strike price and
an initial cap price of
subject to certain adjustments. Conditions that cause adjustments to the initial
strike price of the Capped Calls mirror conditions that result in corresponding
adjustments to the conversion price of the 2028 Notes. The Capped Calls
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are expected to offset the potential dilution to our common stock as a result of
any conversion of the 2028 Notes, subject to a cap based on the cap price.
Our primary use of cash is to fund operations. Cash used to fund operations is
impacted by the timing of when we pay these expenses, as reflected in the change
in our outstanding accounts payable and accrued expenses.
We believe that our existing capital resources will be sufficient to fund our
planned operations for at least the next twelve months. We have based this
estimate on assumptions that may prove to be wrong, and we could utilize our
available capital resources sooner than we currently expect. We believe we may
continue to require additional financing to commercialize Oxbryta, advance
Oxbryta through clinical development, to acquire and develop other product
candidates and to fund operations for the foreseeable future. We may continue to
seek funds through equity or debt financings, collaborative or other
arrangements with corporate sources, or through other sources of financing.
Adequate additional funding may not be available to us on acceptable terms, or
at all. Our failure to raise capital as and when needed could have a negative
impact on our financial condition and our ability to pursue our business
strategies. Our future funding requirements will depend on many factors,
including:
•
our ability to successfully commercialize Oxbryta, inclacumab, GBT601 and any
other product candidates we may identify and develop in any territories;
•
the manufacturing, selling, and marketing costs associated with the
commercialization of Oxbryta and the potential commercialization of inclacumab,
GBT601 and any other product candidates we may identify and develop, including
the cost and timing of establishing or maintaining our sales and marketing
capabilities in any territory(ies);
•
the amount and timing of sales and other revenues from Oxbryta, inclacumab,
GBT601 and any other product candidates we may identify and develop, including
the sales price and the availability of adequate third-party reimbursement;
•
the time and cost necessary to conduct and complete multiple ongoing studies
(including our HOPE-KIDS 1 Study, our Phase 3 HOPE-KIDS 2 Study, and other
studies;
•
the time and cost necessary to conduct and complete any additional clinical
studies required to pursue additional regulatory approvals for Oxbryta for SCD,
including our Phase 3 HOPE-KIDS 2 Study (which is intended as our required
confirmatory study to move from our current Subpart H approval to a full
approval of Oxbryta) and any studies to support potential label expansions into
younger SCD pediatric populations, or any other post-marketing studies for
Oxbryta for SCD;
•
the progress, data and results of clinical trials of Oxbryta and product
candidates;
•
the progress, timing, scope and costs of our nonclinical studies, our clinical
trials and other related activities, including our ability to enroll subjects in
a timely manner for our ongoing and future clinical trials of Oxbryta,
inclacumab, GBT601 or any other product candidate that we may identify and
develop;
•
the costs of obtaining clinical and commercial supplies of Oxbryta, inclacumab,
GBT601 and any other product candidates we may identify and develop;
•
our ability to advance our development programs, including for Oxbryta,
inclacumab, GBT601 and any other potential product candidate programs we may
identify and pursue, the timing and scope of these development activities, and
the availability of approval for any of our other product candidates;
•
our ability to successfully obtain any additional regulatory approvals from any
regulatory authorities, and the scope of any such regulatory approvals, to
market and sell Oxbryta, inclacumab, GBT601 and any other product candidates we
may identify and develop in any territory(ies);
•
the cash requirements of any future acquisitions or discovery of product
candidates;
•
the time and cost necessary to respond to technological and market developments;
•
the extent to which we may acquire or in-license other product candidates and
technologies, and the costs and timing associated with any such acquisitions or
in-licenses;
•
our ability to attract, hire, and retain qualified personnel; and
•
the costs of maintaining, expanding, and protecting our intellectual property
portfolio.
Further, our operating plan may change, and we may need additional funds to meet
operational needs and capital requirements for commercialization, clinical
trials and other research and development expenditures. We currently have no
credit facility or
92
——————————————————————————–
committed sources of capital. Because of the numerous risks and uncertainties
associated with the development and commercialization of Oxbryta and product
candidates and ongoing developments in connection with the COVID-19 pandemic, we
are unable to estimate the amounts of increased capital outlays and operating
expenditures associated with our current and anticipated commercialization,
clinical trials and research and development activities.
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2021 2020
Cash used in operating activities $ (256,813 ) $ (211,862 )
Net cash provided by (used in) investing activities 12,110 317,312
Cash provided by financing activities 434,335 87,120
Effect of exchange rate changes on cash and cash -
equivalents 319
Net increase (decrease) in cash, cash equivalents
and restricted cash $ 189,951 $ 192,570
Cash flows from operating activities
Net cash used in operating activities for the year ended
offset by non-cash charges of
million
and liabilities was due primarily to an increase of
expenses and other current assets due to prepayments made for clinical trial
activities, an increase of
million
Oxbryta commercial sales, a decrease of
to growth of our operations and timing of receipt of invoices, a decrease of
period, a decrease of
payments, and an increase of
higher number of employees.
Net cash used in operating activities for the year ended
offset by non-cash charges of
net operating assets and liabilities was due primarily to an increase of
million
sales, an increase in accounts receivable of
commercial sales, a decrease of
due to the payout of the accrued
allowance accrual due to higher Oxbryta commercial sales, an increase of
million
million
Cash flows from investing activities
Cash used in investing activities for the year ended
million
which were offset by purchases of marketable securities of
purchases of property and equipment of
Net cash provided by investing activities for the year ended
was
million
million
Cash flows from financing activities
Cash provided by financing activities for the year ended
from net proceeds of
Notes, net proceeds of
Loan, net proceeds of
to the Sales Agreement, net proceeds of
stock in connection with a private placement, proceeds of
issuance of common stock to participants in the Amended and Restated 2015
Employee Stock Purchase Plan, or ESPP, and exercise of stock options, which was
partially offset by
call and
awards.
Cash provided by financing activities for the year ended
from net proceeds of
and
and exercise of stock options, which were partially offset by
taxes paid related to net share settlement of equity awards.
93
——————————————————————————–
For the year ended
Discussions of 2019 cash flow activities can be found in our annual report on
Form 10-K for the fiscal year ended
Item 7. Management’s Discussion and Analysis of Financial Condition and
Liquidity, Capital Resources and Plan of Operations, which is incorporated
herein by reference.
Off-Balance Sheet Arrangements
As of
Item 303(a)(4) of Regulation S-K as promulgated by the
Commission
Contractual Obligations and Other Commitments
In
square feet of office space in
corporate office. The lease has a term of 10 years. The future minimum rental
payment for this lease is
to pay the landlord certain costs, including taxes and operating expenses.
In
facility consisting of an initial term loan of
draw an additional
million
In
superseded in its entirety the 2019 Term Loan, dated as of
provided us with an additional term loan commitment from the Lenders in the
aggregate principal amount of
A&R Term Loan agreement extended the maturity date and interest payments for the
previous tranches that were under the 2019 Term Loan to conform with the new
Tranche C Loan. The Tranche C Loan is in addition to the initial term loan
tranche in an aggregate principal amount of
execution of the Prior Loan Agreement in
loan tranche in an aggregate principal amount of
under the Prior Loan Agreement in
maturity date of
31, 2025
equal to 7.00% plus the greater of (a) the 3-month LIBOR rate and (b) 2%.
Interest on amounts outstanding are payable quarterly in arrears. We are
obligated to pay an additional fee to the Lenders determined by multiplying the
principal amount being paid or prepaid multiplied by 2% when such payments are
made. The obligations under the A&R Term Loan are secured by a first priority
security interest in and a lien on substantially all of our assets, subject to
certain exceptions.
In
1.875% convertible senior notes due 2028 in a private placement. The aggregate
principal amount on the 2028 Notes sold reflects the full exercise by the
initial purchasers of their option to purchase to purchase an additional
million
proceeds net of debt issuance and offering costs of
million
at the aggregate principal amount of
interest at a rate of 1.875% per annum payable semiannually in arrears on
15
mature on
accordance with their terms prior to such date.
In
commercialize novel therapies for SCD and beta thalassemia. Under the agreement,
Syros will use its leading gene control platform to identify therapeutic targets
and discover drugs that potentially induce fetal hemoglobin, and we have an
option to obtain an exclusive worldwide license to develop, manufacture and
commercialize any compounds or products resulting from the agreement, subject to
Syros’ option to co-promote the first product in
exercise the option, we will be responsible for all development, manufacture,
regulatory activities and commercialization of the compound or product. Syros
and we will be responsible for our own costs incurred to conduct research
activities, except that we will fund up to a total of
preclinical research for at least three years. Unless earlier terminated or
extended, the research program under the agreement will end on the third
anniversary of the agreement.
Under the terms of the Syros Agreement, we paid Syros an upfront payment of
agreement, we may be obligated to pay Syros up to
exercise, development, regulatory, commercialization and sales-based milestones
per product candidate and product resulting from the agreement. We will also be
obligated to pay Syros, subject to certain reductions, tiered mid- to
high-single digit royalties as percentages of calendar year net sales on any
product resulting from the agreement. We have recognized the
upfront payment in our research and development costs for year ended
31, 2019
2021
94
——————————————————————————–
and 2020. We have recognized
reimbursement to Syros in our research and development cost for the years ended
In
granted us an exclusive and sublicensable worldwide license under certain patent
rights and know-how to develop and commercialize inclacumab for all indications
and uses, except diagnostic use. Roche retained a non-exclusive, worldwide,
perpetual, royalty-free license to inclacumab solely for any diagnostic use. As
of
as of
milestone payments of
Roche Agreement, we are obligated to make contingent payments to Roche totaling
approximately
including up to
development and regulatory milestones for inclacumab in the SCD indication, and
up to
sales of inclacumab. In addition, we are obligated under such agreement to make
contingent payments to Roche up to an aggregate of
payments that are owed to third parties, based on achievement of such clinical
development and regulatory milestones for inclacumab. In addition, we are
obligated to make contingent payments to Roche up to
payments based on achievement of certain clinical development and regulatory
milestones for inclacumab for any indication other than the SCD indication.
In
Agreement, to exclusively in-license worldwide rights to two early-stage
research programs in SCD: one that pursues a novel anti-sickling mechanism and
another that leverages a new approach to reduce inflammation and oxidative
stress. These mechanisms are distinct and potentially complementary to that of
Oxbryta. The programs, from Sanofi’s
existing pipeline and support our strategy to address SCD from multiple
approaches. Under the terms of the Sanofi Agreement, we will conduct all
research, development, regulatory and commercialization activities worldwide.
Sanofi received an upfront payment of
up to approximately
regulatory, commercial and sales-based milestones and single-digit tiered
royalties on worldwide net sales.
As of
positions in our contractual obligations and commitments as we cannot make a
reasonably reliable estimate of the period of cash settlement.
Recent Accounting Pronouncements
Accounting Pronouncements Adopted
In
Accounting Standards Update, or ASU, No. 2019-12, Income Taxes (Topic 740),
Simplifying the Accounting for Income Taxes. The guidance eliminates certain
exceptions related to the approach for intraperiod tax allocation, the
methodology for calculating income taxes in an interim period, and the
recognition of deferred tax liabilities for outside basis differences. It also
clarifies and simplifies other aspects of the accounting for income taxes. ASU
2019-12 is effective for fiscal years, and interim periods within those fiscal
years, beginning after
applied on a prospective basis. We adopted ASU No. 2019-12 in the first quarter
of 2021 and applied the guidance prospectively. The only aspect of ASU 2019-12
that is currently applicable to us is the removal of the exception related to
intraperiod tax allocation. We began applying the general methodology regarding
the intraperiod allocation of tax expense in 2021. After the adoption of ASU
2019-12, in periods where we have a loss from continuing operations, the amount
of taxes attributable to continuing operations will be determined without regard
to the tax effect of other items, including changes in unrealized gains related
to marketable securities. The adoption of this standard did not have a material
impact on our consolidated financial statements.
In
Subtopic 310-20, Receivables – Nonrefundable Fees and Other Costs. The new
guidance states that an entity should reevaluate whether a callable debt
security is within scope of Topic 310-20. ASU 2020-08 is effective for fiscal
years, and interim periods within those fiscal years, beginning after
15, 2020
the guidance prospectively. The adoption of this new standard did not have a
material impact on our consolidated financial statements.
In
Options (Subtopic 470-20) and Derivatives and Hedging – Contracts in Entity’s
Own Equity (Subtopic 815-40). This ASU simplifies the accounting for convertible
instruments and requires entities to use the if-converted method for all
convertible instruments in calculating diluted earnings-per-share. We early
adopted ASU No. 2020-06 on
method. We applied this ASU to the convertible debt transaction entered into in
impact to our consolidated financial statements as there were no outstanding
financial instruments that require recombination at
95
——————————————————————————–
Accounting Pronouncement Issued But Not Yet Adopted
In
The new guidance contains practical expedients for reference rate reform related
activities that impact debt, leases, derivatives, and other contracts. The
guidance in ASU 2020-04 is optional and may be elected over time as reference
rate reform activities occur. We continue to evaluate the impact of the guidance
and may apply the elections as applicable as changes occur.
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