Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Cautionary Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K (Annual Report or Report) includes
forward-looking statements. All statements contained in this Annual
Report other than statements of historical fact, including
statements regarding our future results of operations and financial
position, our business strategy and plans, and our objectives for
future operations, are forward- looking statements. The words
“believe,” “may,” “estimate,”
“continue,” “anticipate,”
“intend,” “expect” and similar expressions
are intended to identify forward-looking statements. We have based
these forward- looking statements largely on our current
expectations and projections about future events and trends that we
believe may affect our financial condition, results of operations,
business strategy, short-term and long-term business operations and
objectives, and financial needs. These forward-looking statements
are subject to a number of risks, uncertainties and assumptions.
Our business is subject to significant risks including, but not
limited to, our ability to obtain additional financing, the results
of our research and development efforts, the results of nonclinical
and clinical testing, the effect of regulation by the United States
Food and Drug Administration (FDA) and other agencies, the impact
of competitive products, product development, commercialization and
technological difficulties, the effect of our accounting policies,
and other risks as detailed in the section entitled “Risk
Factors” in this Annual Report. Further, even if
our product candidates appear promising at various stages of
development, our share price may decrease such that we are unable
to raise additional capital without significant dilution or other
terms that may be unacceptable to our management, Board of
Directors (our Board) and stockholders.
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Moreover, we operate in a very competitive and rapidly changing
environment. New risks emerge from time to time. It is not possible
for our management or Board to predict all risks, nor can we assess
the impact of all factors on our business or the extent to which
any factor, or combination of factors, may cause actual results to
differ materially from those contained in any forward-looking
statements we may make. In light of these risks, uncertainties and
assumptions, the future events and trends discussed in this Annual
Report may not occur and actual results could differ materially and
adversely from those anticipated or implied in the forward-looking
statements.
You should not rely upon forward-looking statements as predictions
of future events. The events and circumstances reflected in the
forward-looking statements may not be achieved or occur. Although
we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. We are under no
duty to update any of these forward-looking statements after the
date of this Annual Report or to conform these statements to actual
results or revised expectations. If we do update one or more
forward-looking statements, no inference should be drawn that we
will make additional updates with respect to those or other
forward-looking statements.
Business Overview
We are a biopharmaceutical company committed to
developing and commercializing differentiated new generation
medications that go beyond the current standard of care for
widespread anxiety, depression and other central nervous system
(CNS) disorders. Our CNS pipeline includes three CNS
product candidates, PH94B Nasal Spray, PH10 Nasal Spray and AV-101,
each with a differentiated profile, favorable safety results
observed in all clinical studies to date and therapeutic potential
in multiple CNS indications. PH94B Nasal Spray (PH94B) is being developed for multiple anxiety
disorders. We recently initiated our PH94B Phase 3 development
program, which we refer to as the PALISADE program, with
PALISADE-1, a U.S., multi-center, randomized, double-blind,
placebo-controlled Phase 3 clinical study to evaluate the efficacy
and safety of PH94B for the acute treatment of anxiety in adults
with social anxiety disorder (SAD), as well as preparations for the additional
studies required to support our potential U.S. New Drug Application
(NDA) for that indication should the PALISADE Phase 3
program be successful. We are also preparing for exploratory Phase
2A clinical studies of PH94B in adults experiencing several other
anxiety disorders. PH10 Nasal Spray (PH10) is being developed as a stand-alone treatment
for multiple depression disorders. Exploratory Phase 2A clinical
development of PH10 for major depressive disorder
(MDD) has been completed. We are now preparing for
planned Phase 2B clinical development of PH10 for this indication.
We are preparing for a Phase 1B clinical study of AV-101 in
combination with probenecid to assess potential future Phase 2A
clinical development of the combination for MDD or certain
neurological indications. Our goal is to become a biopharmaceutical
company that develops and commercializes innovative CNS therapies
for highly prevalent neuropsychiatry and neurology indications
where current treatments options are inadequate to meet the needs
of millions of patients in markets worldwide.
Our Product Candidates
PH94B is a
synthetic investigational neurosteroid developed from proprietary
compounds called pherines. With its novel mechanism of action,
PH94B is an odorless nasal spray administered at microgram-level
doses to achieve rapid-onset anti-anxiety, or anxiolytic, effects.
The pharmacological activity of PH94B is fundamentally
differentiated from that of all FDA-approved anti-anxiety drugs,
including all antidepressants approved by the U.S. Food and Drug
Administration (FDA) for
treatment of SAD, as well as all benzodiazepines and beta blockers
prescribed on an off-label basis. PH94B engages peripheral
chemosensory receptors in nasal passages that trigger a subset of
neurons in the main olfactory bulbs (OB) at the base of the brain. The
OB neurons then stimulate inhibitory GABAergic neurons in the
limbic amygdala, decreasing the activity of the sympathetic nervous
system, and facilitating fear extinction activity of the
limbic-hypothalamic system, the main fear and anxiety center in the
brain, as well as in other parts of the brain. Importantly, PH94B
does not require systemic uptake and distribution to produce its
rapid-onset anti-anxiety effects. Our
ongoing PALISADE Phase 3 program for PH94B is designed to further
demonstrate its potential as a fast-acting, non-sedating,
non-addictive acute treatment of anxiety in adults with SAD. We
believe PH94B also has potential to be developed as a novel
treatment for adjustment disorder with anxiety, postpartum anxiety,
post-traumatic stress disorder, procedural anxiety, panic and other
anxiety disorders. PH94B has been granted Fast Track designation
status by the FDA for development for the acute treatment of
SAD.
PH10 is a synthetic
investigational neurosteroid, which also was developed from
proprietary compounds called pherines. Its novel, rapid-onset
mechanism of action (MOA)
is fundamentally differentiated from the MOA of all current
treatments for MDD and other depression disorders. PH10 is
self-administered at microgram-level doses as an odorless nasal
spray. PH10 activates nasal chemosensory cells in the nasal
passages, connected to neural circuits in the brain that produce
antidepressant effects. Specifically, PH10 engages peripheral
chemosensory receptors in the nasal passages that trigger a subset
of neurons in the main OB that stimulate neurons in the limbic
amygdala. This is turn increases activity of the
limbic-hypothalamic sympathetic nervous system and increases the
release of catecholamines. Importantly, unlike all currently
approved oral antidepressants (ADs), PH10 does not require systemic
uptake and distribution to produce rapid-onset of antidepressant
effects. In all clinical studies to date, PH10 has not caused
psychological side effects (such as dissociation and
hallucinations) or safety concerns that may be associated with
rapid-onset ketamine-based therapy (KBT), including intravenous ketamine or
intranasal ketamine (esketamine). We
believe PH10 has potential to be a new stand-alone treatment for
MDD and several other depression disorders.
AV-101 (4-Cl-KYN) targets the NMDAR (N-methyl-D-aspartate
receptor), an ionotropic glutamate receptor in the brain. Abnormal
NMDAR function is associated with numerous CNS diseases and
disorders. AV-101 is an oral prodrug of 7-chloro-kynurenic acid
(7-Cl-KYNA), which is a potent and selective full antagonist of the
glycine co-agonist site of the NMDAR that inhibits the function of
the NMDAR. However, unlike ketamine and many other NMDAR
antagonists, 7-Cl-KYNA is not an ion channel blocker. At doses
administered in all studies to date, AV-101 has been observed to be
well tolerated and has not exhibited dissociative or hallucinogenic
psychological side effects or safety concerns. In light of these
observations and findings from preclinical studies, we believe that
AV-101, in combination with FDA-approved probenecid, has potential
to become a new oral treatment alternative for certain CNS
indications involving the NMDAR. We are currently preparing to
evaluate AV-101 in combination with probenecid in a Phase 1B
clinical study. The FDA has granted Fast Track designation for
development of AV-101 as a potential adjunctive treatment for MDD
and as a non-opioid treatment for neuropathic pain
(NP).
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Critical Accounting Policies and Estimates
We consider certain accounting policies related to revenue
recognition, determination of right of use assets under lease
transactions and related lease obligations, impairment of
long-lived assets, research and development, stock-based
compensation, warrant liability and income taxes to be critical
accounting policies that require the use of significant judgments
and estimates relating to matters that are inherently uncertain and
may result in materially different results under different
assumptions and conditions. The preparation of financial statements
in conformity with United States generally accepted accounting
principles (GAAP) requires us to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes to the consolidated financial statements. These
estimates include, but are not limited to, those relating to
stock-based compensation, revenue recognition, research and
development expenses, determination of right of use assets under
lease transactions and related lease obligations, and
the assumptions used to value warrants, warrant modifications,
and useful lives for property and equipment and related
depreciation calculations. Our actual results could differ from
these estimates.
Revenue Recognition
We have historically generated revenue principally from
collaborative research and development arrangements, licensing and
technology access fees and government grants. We adopted
Accounting Standards Update (ASU) No. 2014-09, Revenue from Contracts with Customers (Topic
606) and its related amendments, collectively referred to as
ASC (Accounting Standards
Codification) Topic 606, as of April 1, 2018, using the
modified retrospective transition method.
Under
ASC Topic 606, we recognize revenue when our customer obtains
control of promised goods or services, in an amount that reflects
the consideration that we expect to receive in exchange for those
goods or services. To determine revenue recognition for
arrangements that we determine are within the scope of Topic 606,
we perform the following five steps: (i) identify the contract with
a customer; (ii) identify the performance obligations in the
contract; (iii) determine the transaction price, including variable
consideration, if any; (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 the consideration to which we are entitled in exchange for
the goods or services we transfer to a customer.
Once a
contract is determined to be within the scope of Topic 606, we
assess the goods or services promised within each contract and
determine those that are performance obligations. Arrangements that
include rights to additional goods or services that are exercisable
at a customer’s discretion are generally considered options.
We assess whether these options provide a material right to the
customer and if so, they are considered performance obligations.
The exercise of a material right may be accounted for as a contract
modification or as a continuation of the contract for accounting
purposes.
We
assess whether each promised good or service is distinct for the
purpose of identifying the performance obligations in the contract.
This assessment involves subjective determinations and requires
judgments about the individual promised goods or services and
whether such are separable from the other aspects of the
contractual relationship. Promised goods and services are
considered distinct provided that: (i) the customer can benefit
from the good or service either on its own or together with other
resources that are readily available to the customer (that is, the
good or service is capable of being distinct) and (ii) our promise
to transfer the good or service to the customer is separately
identifiable from other promises in the contract (that is, the
promise to transfer the good or service is distinct within the
context of the contract). In assessing whether a promised good or
service is distinct in the evaluation of a collaboration
arrangement subject to Topic 606, we consider factors such as the
research, manufacturing and commercialization capabilities of the
collaboration partner and the availability of the associated
expertise in the general marketplace. We also consider the intended
benefit of the contract in assessing whether a promised good or
service is separately identifiable from other promises in the
contract. If a promised good or service is not distinct, we are
required to combine that good or service with other promised goods
or services until we identify a bundle of goods or services that is
distinct.
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The
transaction price is then determined and allocated to the
identified performance obligations in proportion to their
standalone selling prices (SSP) on a relative SSP basis. SSP is
determined at contract inception and is not updated to reflect
changes between contract inception and satisfaction of the
performance obligations. Determining the SSP for performance
obligations requires significant judgment. In developing the SSP
for a performance obligation, we consider applicable market
conditions and relevant Company-specific factors, including factors
that were contemplated in negotiating the agreement with the
customer and estimated costs. In certain circumstances, we may
apply the residual method to determine the SSP of a good or service
if the standalone selling price is considered highly variable or
uncertain. We validate the SSP for performance obligations by
evaluating whether changes in the key assumptions used to determine
the SSP will have a significant effect on the allocation of
arrangement consideration between multiple performance
obligations.
If the
consideration promised in a contract includes a variable amount, we
estimate the amount of consideration to which we will be entitled
in exchange for transferring the promised goods or services to a
customer. We determine the amount of variable consideration by
using the expected value method or the most likely amount method.
We include the unconstrained amount of estimated variable
consideration in the transaction price. The amount included in the
transaction price is constrained to the amount for which it is
probable that a significant reversal of cumulative revenue
recognized will not occur. At the end of each subsequent reporting
period, we re-evaluate the estimated variable consideration
included in the transaction price and any related constraint, and
if necessary, adjust our estimate of the overall transaction price.
Any such adjustments are recorded on a cumulative catch-up basis in
the period of adjustment.
If an
arrangement includes development and regulatory milestone payments,
we evaluate whether the milestones are considered probable of being
reached and estimate the amount to be included in the transaction
price using the most likely amount method. If it is probable that a
significant revenue reversal would not occur, the associated
milestone value is included in the transaction price. Milestone
payments that are not within our control or the licensee’s
control, such as regulatory approvals, are generally not considered
probable of being achieved until those approvals are
received.
In
determining the transaction price, we adjust consideration for the
effects of the time value of money if the timing of payments
provides us with a significant benefit of financing. We do not
assess whether a contract has a significant financing component if
the expectation at contract inception is such that the period
between payment by the licensee and the transfer of the promised
goods or services to the licensee will be one year or less. For
arrangements with licenses of intellectual property that include
sales-based royalties, including milestone payments based on the
level of sales, and the license is deemed to be the predominant
item to which the royalties relate, we recognize royalty revenue
and sales-based milestones at the later of (i) when the related
sales occur, or (ii) when the performance obligation to which the
royalty has been allocated has been satisfied.
We then
recognize as revenue the amount of the transaction price that is
allocated to the respective performance obligation when (or as)
each performance obligation is satisfied at a point in time or over
time, and if over time, based on the use of an output or input
method.
Right of use assets and lease obligations
We adopted Accounting Standards Update No. 2016-02,
“Leases (Topic
842)”(ASU
2016-02) effective April 1,
2019. ASU 2016-02
requires that we determine, at the inception of an arrangement,
whether the arrangement is or contains a lease, based on the unique
facts and circumstances present. Operating lease assets represent
our right to use an underlying asset for the lease term
(Right of use assets) and
operating lease liabilities represent our obligation to make lease
payments arising from the lease. Right of use assets and operating
lease liabilities are recognized at the commencement date of the
lease based upon the present value of lease payments over the lease
term. When determining the lease term, we include options to extend
or terminate the lease when it is reasonably certain, at inception,
that we will exercise that option. The interest rate implicit in
lease contracts is typically not readily determinable; accordingly,
we use our incremental borrowing rate, which is the rate that would
be incurred to borrow on a collateralized basis over a similar term
an amount equal to the lease payments in a similar economic
environment, based upon the information available at the
commencement date. The lease payments used to determine our
operating lease assets may include lease incentives, stated rent
increases and escalation clauses linked to rates of inflation, when
determinable, and are recognized in determining our Right of use
assets. Our operating lease is reflected in the right-of-use asset
– operating lease; operating lease obligation - current
portion; and operating lease obligation - non-current portion in
our consolidated balance sheets.
Lease
expense for minimum lease payments is recognized on a straight-line
basis over the lease term. As a result of our adoption of ASU
2016-02, we no longer recognize deferred rent on the consolidated
balance sheet. Short-term leases, defined as leases that have a
lease term of 12 months or less at the commencement date, are
excluded from this treatment and are recognized on a straight-line
basis over the term of the lease. Variable lease payments are
amounts owed by us to a lessor that are not fixed, such as
reimbursement for common area maintenance costs for our facility
lease; and are expensed when incurred.
Financing
leases, formerly referred to as capitalized leases, are treated
similarly to operating leases except that the asset subject to the
lease is included in the appropriate fixed asset category, rather
than recorded as a Right of use asset, and depreciated over its
estimated useful life, or lease term, if shorter.
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Impairment of Long-Lived Assets
In accordance with ASC 360-10, Property, Plant &
Equipment—Overall, we
review long-lived assets for impairment whenever events or changes
in circumstances indicate that the carrying amount of property and
equipment may not be recoverable. Determination of recoverability
is based on an estimate of undiscounted future cash flows resulting
from the use of the asset and its eventual disposition. In the
event that such cash flows are not expected to be sufficient to
recover the carrying amount of the assets, we write down the assets
to their estimated fair values and recognize the loss in the
Consolidated Statements of Operations and Comprehensive
Loss.
Research and Development Expenses
Research and development expenses are composed of both internal and
external costs. Internal costs include salaries and
employment-related expenses, including stock-based compensation
expense, of scientific personnel and direct project
costs. External research and development expenses
consist primarily of costs associated with clinical and nonclinical
development of PH94B, PH10,and AV-101, stem cell research and development
costs, and costs related to the application and prosecution of
patents related to AV-101, PH94B, PH10 and our stem cell technology
platform. All such costs are charged to expense as
incurred.
We also record accruals for estimated ongoing clinical trial costs.
Clinical trial costs represent costs incurred by contract research
organizations (CROs) and clinical trial sites. Progress payments are
generally made to CROs, clinical sites, investigators and other
professional service providers. We analyze the progress of the
clinical trial, including levels of subject enrollment, invoices
received and contracted costs when evaluating the adequacy of
accrued liabilities. Significant judgments and estimates must be
made in determining the clinical trial accrual in any reporting
period. Actual results could differ from those estimates under
different assumptions. Revisions are charged to research and
development expense in the period in which the facts that give rise
to the revision become known.
Costs incurred in obtaining product or technology licenses are
charged immediately to research and development expense if the
product or technology licensed has not achieved regulatory approval
or reached technical feasibility and has no alternative future
uses. In September 2018, we acquired an exclusive license to
develop and commercialize PH94B and an option to acquire a license
to develop and commercialize PH10 by issuing an aggregate of
1,630,435 unregistered shares of our common stock having a fair
market value of $2,250,000. In October 2018, we exercised
our option to acquire an exclusive license to develop and
commercialize PH10 by issuing 925,926 shares of our unregistered
common stock having a fair market value of $2,000,000. Since, at the date of each acquisition, neither
product candidate had achieved regulatory approval and each
requires significant additional development and expense, we
recorded the costs related to acquiring the licenses and the option
as research and development expense.
Stock-Based Compensation
We recognize compensation cost for all stock-based awards to
employees and non-employee consultants based on the grant date fair
value of the award. We record stock-based compensation
expense over the period during which the employee or other grantee
is required to perform services in exchange for the award, which
generally represents the scheduled vesting period. We have not
granted restricted stock awards to employees or consultants nor do
we have any awards with market or performance
conditions. Prior to our April 1, 2019 adoption of ASU
2018-07, Compensation-Stock
Compensation (Topic 718), Improvements to Nonemployee Share-Based
Payment Accounting (ASU
2018-07), we historically
re-measured the fair value of option grants to non-employees as
they vested and any resulting increase in value was recognized as
an expense during the period over which the services were
performed. Under ASU 2018-17, expense recognition for grants to
non-employees follows the same methodology as for employees.
Noncash expense attributable to compensatory grants of our common
stock to non-employees is determined by the quoted market price of
the stock on the date of grant and is either recognized as
fully-earned at the time of the grant or expensed ratably over the
term of the related service agreement, depending on the terms of
the specific agreement.
We use the Black-Scholes option pricing model to estimate the fair
value of stock-based awards as of the grant date. The Black-Scholes
model is complex and dependent upon key data input estimates. The
primary data inputs with the greatest degree of judgment are the
expected term of the stock options and the estimated volatility of
our stock price. The Black-Scholes model is highly sensitive to
changes in these two inputs. The expected term of the options
represents the period of time that options granted are expected to
be outstanding. We use the simplified method in accordance with
guidance provided by the Securities and Exchange Commission
(SEC) to estimate the expected term as an input into
the Black-Scholes option pricing model. We determine expected
volatility using the historical method, which, because of the
relatively limited period during which our stock has been publicly
traded on a major exchange and its historically limited trading
volume, is based on the historical daily trading data of the common
stock of a peer group of public companies over the expected term of
the option.
Warrants Issued in Connection with Equity Financing
We generally account for warrants issued in connection with equity
financings as a component of equity, unless there is a deemed
possibility that we may have to settle the warrants in cash or the
warrants contain other features requiring them to be treated as
liabilities. For warrants issued with the possibility of cash
settlement or otherwise requiring liability treatment, we record
the fair value of the issued warrants as a liability at each
reporting period and record changes in the estimated fair value as
noncash gain or loss in the Consolidated Statements of Operations
and Comprehensive Loss.
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Income Taxes
We account for income taxes using the asset and liability approach
for financial reporting purposes. We recognize deferred tax assets
and liabilities for the future tax consequences attributable to
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases and
operating loss and tax credit carryforwards. Deferred tax assets
and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment
date. Valuation allowances are established, when necessary, to
reduce the deferred tax assets to an amount expected to be
realized.
Recent Accounting Pronouncements
See Note 3 to the Consolidated Financial Statements included in
Item 8 in this Annual Report on Form 10-K for information on recent
accounting pronouncements.
Financial Operations Overview and Results of
Operations
Net Loss
Although
we entered into the AffaMed Agreement in June 2020 and the Bayer
Agreement in December 2016, we have not yet achieved recurring
revenue-generating status in amounts sufficient to sustain our
operations and enable our strategic business plans from any of our
product candidates or technologies. Since inception, we have devoted substantial time
and effort to developing AV-101 for multiple CNS indications,
including manufacturing research, process development and
production of AV-101 drug substance and finished drug product,
preclinical efficacy and safety studies, and clinical efficacy and
safety studies in CNS indications. Since acquiring our exclusive
worldwide licenses to PH94B and PH10 in 2018, we have devoted
substantial resources focused on research, development and
commercialization of PH94B and PH10, including initiatives to
advance manufacturing research, process development and production
programs for drug substance and finished drug product, additional
preclinical safety studies, and clinical efficacy and safety
studies in multiple neuropsychiatry indications. Also,
from-time-to-time, we have devoted resources to VistaStem’s
stem cell technology research and development, bioassay development
and small molecule drug rescue initiatives, as well as creating,
protecting and patenting intellectual property (IP) related to our product candidates and stem cell
technologies, with the corollary initiatives of recruiting and
retaining personnel and raising working capital. As of March
31, 2021, we had an accumulated deficit of approximately $242.8
million. Our net loss for the fiscal years ended March 31, 2021 and
2020 was approximately $17.9 million and $20.8 million,
respectively. We expect losses to continue for the foreseeable
future, primarily as we engage in
further research, development and commercialization activities
related to PH94B, PH10 and AV-101, and pursue VistaStem’s
potential drug rescue, drug development and CT and RM
opportunities.
Summary of the Fiscal Year Ended March 31, 2021
On December 22, 2020, we completed a transformative $100 million
underwritten public offering (theDecember 2020Public
Offering) of our securities,
consisting of shares of our common stock and shares of our newly
created Series D Convertible Preferred Stock (Series
D Preferred).After deducting underwriting discounts and
commissions and offering expenses payable by us, we received net
proceeds of approximately $93.6 million from the sale of our
securities in the December 2020 Public Offering.Combined
with financing and development and commercialization partnering
transactions completed earlier in our fiscal year, aggregating
approximately an additional $25 million, the proceeds from the
December 2020 Public Offering have provided us with working capital
to advance an important stream of potential catalysts across our
CNS pipeline, including, among others, our Phase 3 development
program for PH94B for the acute treatment of anxiety in adults with
social anxiety disorder (SAD)
and, upon successful Phase 3 development, submission of our New
Drug Application to the U.S. Food and Drug Administration and
potential U.S. market approval of PH94B.
From an operational perspective, during our fiscal year ended March
31, 2021 (Fiscal 2021), we continued to advance our manufacturing,
preclinical and clinical development, and regulatory initiatives
necessary for our Phase 3 clinical development of PH94B as a
potential acute treatment of anxiety in adults with SAD, PH10 as a
potential stand-alone treatment of MDD and AV-101 in combination
with probenecid as a potential treatment for NMDAR-focused
indications. During the quarter ended March 31, 2021, and
thereafter, following the completion of the December 2020 Public
Offering, we increased our headcount with the addition of twelve
additional employees with significant expertise in various
disciplines including manufacturing, regulatory affairs, clinical
development, commercial affairs and administrative functions.
Further, we accelerated our planning for clinical trials for both
PH94B and PH10, culminating in the start of the PALISADE-1 Phase 3
clinical study in late-May 2021. The PALISADE-1 Phase 3 clinical
study is part of our PH94B PALISADE Phase 3 program for the acute
treatment of anxiety in adult patients with SAD. Throughout Fiscal
2021, we continued to expand our regulatory and intellectual
property foundation to support broad clinical development and,
ultimately, commercialization of our CNS product candidates in the
U.S. and foreign markets.
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Throughout
Fiscal 2021 and through the date of this Report, a strain of SARS-CoV-2, commonly referred to as
COVID-19, has spread to many countries in the world and the
outbreak was declared a pandemic by the World Health Organization.
The U.S. Secretary of Health and Human Services also declared a
public health emergency in the U.S. in response to the
outbreak. From time to time during the COVID-19 pandemic,
our operations and those of our CROs and CMOs have been and still
may be impacted by shelter-in-place
orders, social distancing measures, travel bans and restrictions,
and certain business and government closures or reductions in
service. Our headquarters operations have been significantly
curtailed and our employees have worked remotely since the
beginning of the COVID-19 pandemic. From time to time since
the beginning of the COVID-19 pandemic, we have experienced delays
in the delivery of supplies of active pharmaceutical product
(API) or other key
materials required to continue development of PH94B and PH10.
Future unexpected delays may result in a significant, material
delay or disruption to our current clinical development plans,
programs, and operations.
During our
fiscal quarter ended June 30, 2020, we completeda successful and positive meeting with
the FDA regarding Phase 3 clinical development of PH94B for the
acute treatment of anxiety in adult patients with SAD, reaching
consensus with the FDA on key aspects of the design of our Phase 3