Search the web
Welcome, Guest
[Sign Out, My Account]
EDGAR_Online

Quotes & Info
Enter Symbol(s):
e.g. YHOO, ^DJI
Symbol Lookup | Financial Search
PATH > SEC Filings for PATH > Form 10-Q on 14-Nov-2011All Recent SEC Filings

Show all filings for NUPATHE INC.

Form 10-Q for NUPATHE INC.


14-Nov-2011

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following commentary should be read in conjunction with:

our unaudited financial statements and accompanying notes included in

Part I, Item 1 of this Form 10-Q,

our audited financial statements and accompanying notes included in our 2010 Annual Report, as well as the information relating to such audited financial statements contained under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2010 Annual Report.

Overview

We are an emerging biopharmaceutical company focused on the development and commercialization of branded therapeutics for diseases of the central nervous system, including neurological and psychiatric disorders. Our most advanced product candidate, NP101 (also referred to as Zelrix and our migraine patch), is an active, single-use transdermal sumatriptan patch that we are developing for the treatment of migraine. NP101 uses our proprietary SmartRelief technology. If approved, NP101 will be the first transdermal patch indicated for the treatment of migraine. Following approval, we plan to build our own specialty sales force to launch NP101 in the U.S. and intend to seek a partner to develop and market NP101 outside the U.S.

We have two other proprietary product candidates in preclinical development that address large market opportunities, NP201 for the continuous symptomatic treatment of Parkinson's disease, which we are seeking to partner, and NP202 for the long-term treatment of schizophrenia and bipolar disorder. To accelerate the resubmission of our New Drug Application (NDA), we are shifting resources from NP202 to NP101. As a result, we expect to submit an Investigational New Drug Application (IND) for NP202 in 2013 instead of 2012, as previously planned.

We were incorporated in the State of Delaware in January 2005 and are a development stage company. Since our inception, we have invested a significant portion of our efforts and financial resources in the development of NP101. NP101 is the only product candidate for which we have conducted clinical trials, and to date we have not marketed, distributed or sold any products. As a result, we have generated no product revenue and have never been profitable. Our net loss for the nine months ended September 30, 2011 and September 30, 2010 was $17.6 million and $18.2 million respectively. As of September 30, 2011, we had an accumulated deficit of $97.4 million.

We have funded our operations to date primarily with the proceeds of the sale of common stock, convertible preferred stock, preferred and common stock warrants, convertible notes and borrowings under credit facilities. From inception through September 30, 2011, we have received net proceeds of $101.6 million from the sale of common stock, convertible preferred stock, preferred and common stock warrants and convertible notes. Since inception, we have also received $17.5 million of proceeds from venture debt.

Recent Developments

We submitted a NDA for NP101 to the FDA in October 2010. On August 29, 2011, we received a complete response letter (CRL) from the FDA regarding the NDA. A CRL is issued by the FDA when the review of an NDA is complete and questions remain that preclude the FDA from approving the NDA in its present form. On November 9, 2011, we had an End-of-Review meeting with the FDA to discuss certain questions outlined in the CRL and our approach for addressing such questions.

In the CRL, the FDA acknowledged that the efficacy of the migraine patch in the overall migraine population was established. The CRL primarily contained chemistry, manufacturing and safety questions. To address the questions raised by the FDA, we intend to complete two small Phase I trials, perform tests to collect additional chemistry data and implement a planned device enhancement to prevent NP101 from turning on in the rare event that it is applied incorrectly. At the request of the FDA, we are also developing an in vitro testing method that is more closely correlated to clinical data than the method that we previously submitted to the FDA. The in vitro test will be used to qualify newly manufactured product. See "Item 1A. Risk Factors" of this Form 10-Q for further discussion of the CRL.

We expect to resubmit the NDA for NP101 in the first half of 2012. We believe our resubmission will result in a six month review period under the Prescription Drug User Fee Act, which will be the target date for the FDA to complete its review of the NDA.

Liquidity and Capital Resources

Our principal sources of liquidity are cash and cash equivalents of $30.0 million as of September 30, 2011, of which $3.0 million is required to be maintained under the terms of our May 2010 Loan Facility. We expect to continue to incur substantial additional operating losses for at least the next several years as we continue to develop our product candidates and seek marketing approval for, and the eventual commercialization of NP101 and our other product candidates. If we obtain marketing approval for NP101, we will incur significant sales, marketing, manufacturing and distribution expenses. In addition, we expect to incur additional expenses to add operational, financial and information systems and personnel to comply with corporate governance, internal controls and similar requirements applicable to us as a public company.


Table of Contents

We believe that our existing cash and cash equivalents will be sufficient to fund our operations and capital requirements beyond the planned resubmission of our NDA for NP101 and into the second half of 2012. However, changing circumstances may cause us to consume capital faster than we currently anticipate, and we may need to spend more money than currently expected because of such circumstances. Our future capital needs and the adequacy of our existing cash and cash equivalents will depend on many factors, including:

our ability to successfully complete the additional trials, tests, device enhancement and other activities to support the resubmission of our NDA for NP101;

the timing and outcome of the FDA's review of our NDA resubmission for NP101, including the extent to which the FDA may request or require us to provide additional information or undertake additional trials or studies;

the cost, scope and timing of activities undertaken to prepare for commercialization of NP101;

the scope, progress, results and costs of development for our other product candidates;

the extent to which we acquire or invest in new products, businesses and technologies; and

the extent to which we choose to establish collaboration, co-promotion, distribution or other similar agreements for product candidates.

We plan to raise additional funds through one or more public or private equity offerings, debt financings, corporate collaboration and licensing arrangements or other financing alternatives, including through sales of common stock to Aspire Capital under the Purchase Agreement discussed below. The covenants under the May 2010 Loan Facility and the pledge of our assets as collateral limit our ability to obtain additional debt financing. Additional equity or debt financing or corporate collaboration and licensing arrangements may not be available on acceptable terms when needed, if at all.

If we raise additional funds by issuing equity securities, our stockholders will experience dilution. Debt financing, if available, would result in increased fixed payment obligations and may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Any debt financing or additional equity that we raise may contain terms, such as liquidation and other preferences, which are not favorable to us or our stockholders. If we raise additional funds through collaboration and licensing arrangements with third parties, it may be necessary to relinquish valuable rights to our technologies, future revenue streams or product candidates or to grant licenses on terms that may not be favorable to us.

Aspire Capital Purchase Agreement

On August 2, 2011, we entered into a common stock purchase agreement ("Purchase Agreement") with Aspire Capital Fund, LLC ("Aspire Capital "), which provides that Aspire Capital is committed to purchase up to an aggregate of $30.0 million of our common stock over the term of the Purchase Agreement. Upon execution of the Purchase Agreement, we issued 84,866 shares of common stock to Aspire Capital as a commitment fee in consideration for entering into the Purchase Agreement (the "Commitment Shares" and we sold 70,721 shares of common stock to Aspire Capital at a per share purchase price of $7.07 resulting in gross proceeds to us of $500,000 (the "Initial Purchase Shares").


Table of Contents

We have registered under the Securities Act of 1933 Aspire Capital's sale of the Commitment Shares, the Initial Purchase Shares, and 2,746,147 additional shares that we may elect to sell to Aspire Capital under the Purchase Agreement. The conditions to the commencement of sales under the Purchase Agreement were satisfied on August 15, 2011. As a result, on any trading day on which the closing sale price of common stock is not less than $4.00 per share, we may direct Aspire Capital to purchase shares of Company common stock at a known per share purchase price based on prevailing market prices, using a formula as set forth in the Purchase Agreement (a "Regular Purchase"). The maximum number of shares that we may direct Aspire to purchase on any trading day pursuant to a Regular Purchase is 100,000 shares or such lesser number of shares that results in an aggregate purchase price of not greater than $500,000.

In addition, on any trading day on which we direct Aspire Capital to make a Regular Purchase for the maximum number of shares set forth above, we may also direct Aspire Capital to purchase a number of shares of common stock equal to up to 30% of the aggregate shares of our common stock traded on the NASDAQ Global Market on the next trading day (a "VWAP Purchase"), subject to a maximum number of shares as we may determine and a minimum trading price, which is equal to the greater of (a) 90% of the closing price of our common stock on the business day immediately preceding the VWAP Purchase Date or (b) such higher price as we may set in the VWAP Purchase Notice. The per share purchase price of common stock sold to Aspire Capital pursuant to a VWAP Purchase is equal to 95% of the volume weighted average price for such purchase date.

There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of any stock sales to Aspire Capital. Aspire Capital has no right to require any sales by us, but is obligated to make purchases from us as we direct in accordance with the Purchase Agreement. There are no limitations on use of proceeds, financial or business covenants, restrictions on future financings, rights of first refusal, participation rights, penalties or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by us at any time, at our discretion, without any penalty or cost to us.

Other than the Commitment Shares and Initial Purchase Shares as referenced above, we did not make any sales to Aspire Capital during the three months ended September 30, 2011.The extent to which we may utilize the Purchase Agreement as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources.

For additional information regarding the Aspire Capital Purchase Agreement, you are urged to read the Form 8-K we filed with the SEC on August 2, 2011.

Results of Operations

Three Months Ended September 30, 2011 compared to the Three Months Ended September 30, 2010

Research and Development Expense



Research and development expense for the three months ended September 30, 2011
and 2010 were comprised of the following:



                                     Three Months Ended
                                        September 30,
                                      2011         2010       Increase/(Decrease)
                                       (in thousands)
Clinical development               $      699    $  1,753         $(1,054 )  (60 )%
Manufacturing                           1,533       2,045            (512 )  (25 )
Regulatory and quality assurance           70         322            (252 )  (78 )
Medical affairs                           191           -             191    n/a
Compensation and related                1,176         904             272     30
Facilities and related                    258         167              91     54
                                   $    3,927    $  5,191         $(1,264 )  (24 )%


Table of Contents

Research and development expenses decreased by $1.3 million to $3.9 million in the three months ended September 30, 2011 from $5.2 million in the three months ended September 30, 2010. Clinical development expenses decreased by $1.1 million during the 2011 period as a result of two long-term, open label NP101 clinical trials that were both ongoing during the three months ended September 30, 2010, but had completed prior to the third quarter of 2011. Also contributing to the decrease in clinical development expenses was the initiation, during the first half of 2010, of two pharmacokinetic trials and a tolerability trial for NP101 that were ongoing during the three months ended September 30, 2010, but had completed by the end of 2010. Partially offsetting these decreases in clinical development was the initiation of a Phase I trial to assess the pharmacokinetics of NP101 during the three months ended September 30, 2011. Manufacturing expenses decreased by $0.5 million to $1.5 million during the three months ended September 30, 2011 compared to $2.0 million during the same period in 2010. Approximately $0.3 million of this decrease was due to lower spend in formulation development for NP201. Also contributing to this decrease was manufacturing costs related to NP101 Phase III clinical supplies during the three months ended September 30, 2010 which did not exist during the same period of 2011. Partially offsetting these manufacturing decreases are increased costs incurred related to the manufacturing scale up for NP101. Regulatory and quality assurance expenses during the third quarter of 2010 were $0.3 million higher than in the third quarter of 2011. This was due to higher spend during the 2010 period for expenses related to the preparation of the NDA that we filed in 2010. Towards the end of 2010, we began to expand our medical affairs function, which resulted in $0.2 million of expense in the three months ended September 30, 2011. The $0.3 million increase during the 2011 period for compensation and related expenses is driven by incremental headcount, annual salary increases for research and development personnel, and increased stock compensation expense.

Research and development expenses by program for the three months ended September 30, 2011 and 2010 were as follows:

                           Three Months Ended
                             September 30,
                          2011              2010       Increase/(Decrease)
                             (in thousands)
NP101                 $           2,371    $ 3,658     $(1,287 )      (35 )%
NP201                                37        438        (401 )      (92 )
NP202                               186         88          98      1,500
General development               1,333       1007         326         32
                      $           3,927    $ 5,191     $(1,264 )      (24 )%

NP101 expenses decreased by $1.3 million for the three months ended September 30, 2011 from $3.7 million for the three months ended September 30, 2010. As discussed above, the 2010 period included NP101 costs for two pharmacokinetic trials and a tolerability trial that the 2011 period did not include, as well as the 2010 expenses incurred for the manufacture of clinical supplies. Partially offsetting this savings in the third quarter of 2011 were expenses incurred for the initiation of a Phase I trial to assess the pharmacokinetics of NP101 and the continued work on NP101 manufacturing scale up. For the three months ended September 30, 2011, increased NP101 medical affairs expenses were partially offset by lower regulatory expenses related to NP101. The third quarter 2011 decrease in NP201 expenses relates to lower spend, particularly in the areas of preclinical and formulation development. The NP202 increase in 2011 relates to the expansion of development activities for this program. Personnel related expenses, including salaries and benefits, are included in the table above as general development expenses as we do not allocate these expenses to specific programs. The 2011 increase shown for general development expenses is primarily related to incremental headcount, annual salary increases for research and development personnel, and increased stock compensation expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $3.0 million in the three months ended September 30, 2011 from $1.3 million for the three months ended September 30, 2010. This higher expense during the 2011 period resulted from the increased infrastructure and expenses related to being a public company, such as increased personnel, board of director's fees and higher stock-based compensation expense. Additionally, during the third quarter of 2011 we incurred significantly more expense, as compared to the third quarter of 2010, related to the growth of our commercial operations as we continued to prepare for the launch of NP101, such as personnel, market research expenses and consulting fees.


Table of Contents

Interest Expense

Interest expense decreased by $1.6 million in the three months ended September 30, 2011 from $2.1 million in the three months ended September 30, 2010. The 2010 period included $1.8 million of non-cash interest expense due to the amortization of the beneficial conversion feature related to our April 2010 Convertible Notes. By the third quarter of 2011, we no longer had outstanding convertible notes, therefore this non-cash interest item was not recurring in the 2011 period. Interest expense for the 2011 period relates to our borrowings under the May 2010 Loan Facility (Term A and Term B Loans) as well as non-cash interest expense for the amortization of the fair value of the warrants issued under these loans.Nine Months Ended September 30, 2011 compared to the Nine Months Ended September 30, 2010

Research and Development Expense



Research and development expense for the nine months ended September 30, 2011
and 2010 were comprised of the following:



                                     Nine Months Ended
                                       September 30,
                                      2011        2010        Increase/(Decrease)
                                      (in thousands)
Clinical development               $    1,806   $  4,652      $    (2,846 )    (61 )%
Manufacturing                           4,491      3,814              677       18
Regulatory and quality assurance       (1,301 )      616           (1,917 )   (311 )
Medical affairs                           593          -              593     n/a
Compensation and related                2,912      2,275              637       28
Facilities and related                    703        492              211       43
                                       $9,204   $ 11,849      $    (2,645 )    (22 )%

Research and development expenses decreased by $2.6 million to $9.2 million in the nine months ended September 30, 2011 from $11.9 million in the nine months ended September 30, 2010. The primary reason for the decrease was a $1.5 million reduction related to a waiver of the NDA filing fee that we had paid to the FDA in the fourth quarter of 2010. At the time of payment, we expensed the full $1.5 million for the filing fee. In March 2011, we received notice from the FDA that we qualified for a one-time waiver and that we would be receiving a refund of the $1.5 million filing fee. As a result, in March 2011, we reversed the previously expensed amount of $1.5 million which is classified as regulatory expense in the table above. Exclusive of this one-time expense reduction, research and development expenses would have been $10.7 million, which is a $1.1 million decrease from the 2010 period. Clinical development expenses were higher during the 2010 period as a result of a long-term, open label trial initiated in the third quarter of 2009 for NP101 as well as two pharmacokinetic trials and a tolerability trial initiated in early 2010, most of which had concluded by the beginning of 2011. These higher clinical development expenses in 2010 were offset by the initiation of a Phase I trial to assess the pharmacokinetics of NP101 during the third quarter of 2011 as well as higher nonclinical consulting expenses during the 2011 period for NP201 ($0.1 million) and NP202 ($0.1 million). Manufacturing expense increased by $0.7 million to $4.5 million during the nine months ended September 30, 2011 compared to $3.8 million during the same period in 2010. This increase mainly relates to manufacturing scale up expenses for NP101 as well as $0.2 million that had been incurred for manufacturing development of our NP202 candidate. Offsetting these 2011 increases in manufacturing are lower costs incurred during the 2011 period for the manufacture of NP101 Phase III clinical supplies. Excluding the impact of the $1.5 million NDA filing fee credit, regulatory and quality assurance expense for the first nine months of 2011 would have been $0.2 million, a decrease of $0.4 million from the 2010 period. This 2011 decrease can be attributed to the fact that the 2010 period included extensive work for the filing of our NP101 NDA, which was filed during the second half of 2010. The $0.6 million of expense for medical affairs resulted from the expansion of our medical affairs function during the first nine months of 2011. We did not have medical affairs activities during that same period in 2010 as these activities began in earnest in late 2010. The $0.6 million increase during the 2011 period for compensation and related expenses is driven by incremental research and development headcount, annual salary increases for research and development personnel, and increased stock compensation expense.

Research and development expenses by program for the nine months ended September 30, 2011 and 2010 are presented below:

Nine Months Ended

                          September 30,
                         2011        2010          Increase/(Decrease)
                         (in thousands)
NP101                 $    4,887   $  8,416        $(3,529 )        (42 )%
NP201                        552        734        (182 )           (25 )
NP202                        437         97         340           3,507
General development        3,328      2,602         726              28
                      $    9,204   $ 11,849        $(2,645 )        (22 )%


Table of Contents

NP101 expenses for the first nine months of 2011 decreased by $3.5 million from the first nine months of 2010. As discussed above, this decrease was due largely to one-time credit of $1.5 million resulting from the waiver by the FDA of the company's NDA submission fee. Exclusive of this $1.5 million credit, NP101 expenses would have been $6.4 million for the nine months ended September 30, 2011, a decrease of $2.0 million from the same period in 2010. As more fully explained above, the $2.0 million reduction in 2011 results from significantly lower clinical development expenses for NP101 during the 2011 period as well as lower manufacturing expenses for NP101 Phase III clinical supplies. These decreases were partially offset by higher manufacturing scale-up expenses for NP101 during the first nine months of 2011 as well as the initiation of a Phase I trial to assess the pharmacokinetics of NP101 in clinical development during the third quarter of 2011. NP201 expenses decreased to $0.6 million during the first nine months of 2011 compared to $0.7 million for the same period in 2010, primarily due to decreased formulation activities for this product offset by higher nonclinical consulting expenses. NP202 expenses increased by $0.3 million during the nine months ended September 30, 2011 as compared to the nine months ended September 30, 2010 as a result of increased consultant expenses and formulation development work for this product candidate. Personnel related expenses, including salaries and benefits, are included in the table above as general development expenses as we do not allocate these expenses to specific programs. The 2011 increase shown for general development expenses is primarily related to incremental research and development headcount, annual salary increases for research and development personnel, and increased stock compensation expense.

Selling, General and Administrative Expenses

Selling, general and administrative expenses increased to $7.5 million in the nine months ended September 30, 2011 from $3.1 million for the nine months ended September 30, 2010. This increase resulted from increased expenses related to being a public company, such as increased personnel, independent auditor fees, board of director's fees and higher stock-based compensation expense. Additionally, during the first nine months of 2011 we incurred significantly more expense, as compared to the first nine months of 2010, related to the growth of our commercial operations as we continued to prepare for the launch of NP101, such as personnel, market research expenses, and consulting fees.

Interest Expense

Interest expense decreased by $2.6 million in the nine months ended September 30, 2011 from $3.5 million in the nine months ended September 30, 2010. The 2010 period included $2.6 million of non-cash interest expense due to the amortization of the beneficial conversion feature related to our April 2010 Convertible Notes and $0.3 million of non-cash interest expense for the increase in fair value of our warrant liability during the nine months ended September 30, 2010. In 2011 we no longer had outstanding convertible notes or liability classified warrants, therefore these non-cash interest items were not recurring in the 2011 period. Interest expense for the 2011 period relates to our borrowings under the May 2010 Loan Facility (Term A and Term B Loans) as well as non-cash interest expense for the amortization of the fair value of the warrants issued under these loans.

Income Tax Benefit

We recognized an income tax benefit of $320,000 in the nine months ended September 30, 2010 related to the sale of Pennsylvania research and development tax credits to a third party buyer. This benefit was not recurring in the first nine months of 2011.

Cash Flow Analysis

Net cash used in operating activities for the nine months ended September 30, 2011 was $14.7 million, primarily the result of spending for our continued . . .

  Add PATH to Portfolio     Set Alert         Email to a Friend  
Get SEC Filings for Another Symbol: Symbol Lookup
Quotes & Info for PATH - All Recent SEC Filings
Copyright © 2014 Yahoo! Inc. All rights reserved. Privacy Policy - Terms of Service
SEC Filing data and information provided by EDGAR Online, Inc. (1-800-416-6651). All information provided "as is" for informational purposes only, not intended for trading purposes or advice. Neither Yahoo! nor any of independent providers is liable for any informational errors, incompleteness, or delays, or for any actions taken in reliance on information contained herein. By accessing the Yahoo! site, you agree not to redistribute the information found therein.