10-Q
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ROC

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41562

 

NewAmsterdam Pharma Company N.V.

(Exact Name of Registrant as Specified in its Charter)

 

 

The Netherlands

N/A

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

Gooimeer 2-35

Naarden

The Netherlands

1411 DC

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: +31 (0) 35 206 2971

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Ordinary Shares, nominal value €0.12 per share

 

NAMS

 

The Nasdaq Stock Market LLC

Warrants to purchase Ordinary Shares

 

NAMSW

 

The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of May 3, 2024, the registrant had 89,976,538 ordinary shares, nominal value €0.12 per share, outstanding.

 

 

1


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

7

 

 

 

Item 1.

Financial Statements (Unaudited)

7

 

Condensed Consolidated Balance Sheets

7

 

Condensed Consolidated Statements of Comprehensive Income (Loss)

8

 

Condensed Consolidated Statements of Shareholders' Equity (Deficit)

9

 

Condensed Consolidated Statements of Cash Flows

10

 

Notes to Unaudited Condensed Consolidated Financial Statements

11

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

25

Item 4.

Controls and Procedures

26

 

 

 

PART II.

OTHER INFORMATION

28

 

 

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

28

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

73

Item 3.

Defaults Upon Senior Securities

73

Item 4.

Mine Safety Disclosures

73

Item 5.

Other Information

74

Item 6.

Exhibits

75

Signatures

76

 

2


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements. Forward-looking statements provide the Company’s current expectations or forecasts of future events. Forward-looking statements include statements about the Company’s expectations, beliefs, plans, objectives, intentions, assumptions and other statements that are not historical facts. Words or phrases such as “anticipate,” “believe,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “objective,” “ongoing,” “plan,” “potential,” “predict,” “project,” “should,” “will” and “would,” or similar words or phrases, or the negatives of those words or phrases, may identify forward-looking statements, but the absence of these words does not necessarily mean that a statement is not forward-looking. Examples of forward-looking statements in this Quarterly Report include, but are not limited to, statements regarding the Company’s disclosure concerning its operations, cash flows, financial position and dividend policy.

Forward-looking statements in this Quarterly Report and in any document incorporated by reference in this Quarterly Report may include, for example, statements about:

the potential liquidity and trading of the Company’s public securities;
the Company’s ability to raise additional capital in sufficient amounts or on terms acceptable to it;
the efficacy and safety of the Company’s product candidate, obicetrapib, as well as potential reimbursement and anticipated market size and market opportunity;
the Company’s dependence on the success of obicetrapib, including the obtaining of regulatory approval to market obicetrapib;
the timing, progress and results of clinical trials for obicetrapib, including statements regarding the timing of initiation and completion of studies or trials and related preparatory work and the period during which results of trials will become available and marketing submissions made;
the Company’s ability to attract and retain senior management and key scientific personnel;
the Company’s limited experience in marketing or distributing products;
managing the risks related to the Company’s international operations;
the Company’s ability to achieve the broad degree of physician adoption and use and market acceptance necessary for commercial success;
the Company’s estimates regarding expenses, future revenue, capital requirements and needs for additional financing;
developments regarding the Company’s competitors and the Company’s industry;
the impact of government laws and regulations;
the Company’s reliance on third parties for all aspects of the manufacturing of obicetrapib for clinical trials; and
the Company’s efforts to obtain, protect or enforce its patents and other intellectual property rights related to the Company’s product candidate.

Forward-looking statements are subject to known and unknown risks and uncertainties and are based on potentially inaccurate assumptions that could cause actual results to differ materially from those expected or implied by the forward-looking statements. Actual results could differ materially from those anticipated in forward-looking statements for many reasons, including the factors described in the section titled “Risk Factors” in this Quarterly Report. Accordingly, you should not place undue reliance on these forward-looking statements, which speak only as of the date of this Quarterly Report. The Company undertakes no obligation to publicly revise any forward-looking statement to reflect circumstances or events after the date of this Quarterly Report or to reflect the occurrence of unanticipated events, except as specifically required by law. You should, however, review the factors and risks that the Company describes in the reports it will file from time to time with the U.S. Securities and Exchange Commission (the “SEC”).

In addition, statements that “we believe” and similar statements reflect the Company’s beliefs and opinions on the relevant subject. These statements are based on information available to the Company as of the date of this Quarterly Report. And while the Company believes that information provides a reasonable basis for these statements, that information may be limited or incomplete. The Company’s statements should not be read to indicate that it has conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and you are cautioned not to unduly rely on these statements.

Although the Company believes the expectations reflected in the forward-looking statements were reasonable at the time made, it cannot guarantee future results, level of activity, performance or achievements. You should carefully consider the cautionary statements contained or referred to in this section in connection with the forward-looking statements contained in this Quarterly Report and any subsequent written or oral forward-looking statements that may be issued by the Company or persons acting on its behalf.

3


 

Unless otherwise stated or the context otherwise indicates, (i) references to “we,” “our,” “us” or the “Company” refer to NewAmsterdam Pharma Company N.V., together with its subsidiaries and (ii) references to “NewAmsterdam Pharma” refer solely to NewAmsterdam Pharma Holding B.V., a private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands and its subsidiaries.

4


 

SUMMARY OF SELECTED RISKS ASSOCIATED WITH OUR BUSINESS

Our business faces significant risks and uncertainties. If any of the following risks are realized, our business, financial condition and results of operations could be materially and adversely affected. You should carefully review and consider the full discussion of our risk factors in the section titled “Risk Factors” in Part II, Item 1A of this Quarterly Report. Some of the more significant risks include the following:

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

We are a clinical-stage company with limited operating history, no approved products and no historical product revenues, which makes it difficult to assess our future prospects and financial results. We have incurred net losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future. We may never generate any product revenue or become profitable or, if we achieve profitability, may not be able to sustain it.
We may require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

Risks Related to Our Product Development, Regulatory Approval and Commercialization

We are dependent on the success of our only product candidate, obicetrapib, and cannot guarantee that obicetrapib will successfully complete clinical development, receive regulatory approval or, if approved, be successfully commercialized.
Clinical drug development involves a lengthy and expensive process with uncertain outcomes. Results of earlier studies and trials may not be predictive of future trial results and our clinical trials may fail to adequately demonstrate the safety and efficacy of obicetrapib.
The regulatory approval processes of the U.S. Food and Drug Administration (the “FDA”), the European Medicines Agency (the “EMA”) and other comparable regulatory authorities are lengthy, time consuming and inherently unpredictable, and if we are ultimately unable to obtain regulatory approval for obicetrapib, our business will be substantially harmed.
Obicetrapib may produce undesirable side effects that we may not have detected in our previous preclinical studies and clinical trials. This could prevent us from gaining approval or market acceptance, including broad physician adoption, for our product candidate if approved, or from maintaining such approval and acceptance, and could substantially increase commercialization costs and even force us to cease operations.
We are developing obicetrapib in combination with other therapies, and safety or supply issues with combination products may delay or prevent development and approval of our combination product candidate.
Even if we receive regulatory approval for obicetrapib or our future product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expenses, force us to limit or withdraw regulatory approval and subject us to penalties if we fail to comply with applicable regulatory requirements.
Obicetrapib, if approved, will face significant competition from competing therapies and our failure to compete effectively may prevent us from achieving significant market penetration.
We currently intend to rely on our collaboration with A. Menarini International Licensing S.A., part of Menarini Group (“Menarini”) for the commercialization of obicetrapib, if approved, in certain European areas. Failure or delay of Menarini to fulfill all or part of its obligations to us under the exclusive license agreement, dated June 23, 2022, with Menarini (the “Menarini License”), a breakdown in collaboration between the parties or a complete or partial loss of this relationship could materially harm our business if obicetrapib is approved in the relevant jurisdictions.

 

Risks Related to Our Business and Strategy

We expect to expand our development, regulatory and sales and marketing capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.
Our international operations subject us to various risks, and our failure to manage these risks could adversely affect our results of operations and we may be exposed to significant foreign exchange risk.

 

Risks Related to Our Intellectual Property

We may not be successful in obtaining all of the necessary intellectual property rights to allow us to develop and commercialize our product candidate, obicetrapib. If our efforts to obtain, protect or enforce our patents and other intellectual property rights related to our product candidates and technologies are not adequate, including due to the risk

5


 

that we are unaware of prior art that may affect the validity of our patents, we may not be able to compete effectively in our market and we otherwise may be harmed.
Third-party claims alleging intellectual property infringement may adversely affect our business, and we may be subject to lawsuits claiming that we infringe, misappropriate or otherwise violate the intellectual property rights of third parties, which could be expensive and time consuming, delay or prevent the development and commercialization of our products and product candidates, or subject future sales to royalty payments, which could damage our business.

Risks Related to Ownership of Our Securities

Sales of a substantial number of our securities in the public market by certain of our securityholders pursuant to a registration statement we filed and/or by our existing securityholders could cause the price of our Ordinary Shares and our warrants, each representing the right to purchase one Ordinary Share at an exercise price of $11.50, to fall.
We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate these material weaknesses, identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls over financial reporting, we may not be able to accurately or timely report our financial condition or results of operations, which may adversely affect our business and the price of our securities.
We are eligible to be treated as an “emerging growth company,” and we cannot be certain if the reduced disclosure requirements applicable to emerging growth companies will make the Ordinary Shares less attractive to investors, which could have a material and adverse effect on the Company, including growth prospects, because we may rely on these reduced disclosure requirements.

 

6


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

 

NewAmsterdam Pharma Company N.V.

Condensed Consolidated Balance Sheets

(Unaudited)

 

 

March 31,
2024

 

 

December 31,
2023

 

(In thousands of USD)

 

 

 

 

 

Assets

 

Current assets:

 

 

 

 

 

Cash

 

481,147

 

 

 

340,450

 

Prepayments and other receivables

 

6,675

 

 

 

6,341

 

Total current assets

 

487,822

 

 

 

346,791

 

Property, plant and equipment, net

 

101

 

 

 

46

 

Operating right of use asset

 

38

 

 

 

55

 

Intangible assets

 

486

 

 

 

170

 

Long term prepaid expenses

 

16

 

 

 

35

 

Total assets

 

488,463

 

 

 

347,097

 

Liabilities and Shareholders' Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

 

8,536

 

 

 

16,923

 

Accrued expenses and other current liabilities

 

9,970

 

 

 

11,398

 

Deferred revenue, current

 

8,116

 

 

 

8,942

 

Lease liability, current

 

43

 

 

 

60

 

Derivative warrant liabilities

 

33,061

 

 

 

12,574

 

Total current liabilities

 

59,726

 

 

 

49,897

 

Deferred revenue, net of current portion

 

444

 

 

 

1,019

 

Derivative earnout liability

 

16,490

 

 

 

7,788

 

Total liabilities

 

76,660

 

 

 

58,704

 

Commitments and contingencies (Note 10)

 

 

 

 

 

Shareholders' Equity (deficit):

 

 

 

 

 

Ordinary shares, €0.12 par value; 400,000,000 shares authorized; 89,720,836 and 82,469,768 shares issued and outstanding as at March 31, 2024 and December 31, 2023, respectively

 

11,113

 

 

 

10,173

 

Additional paid-in capital

 

807,008

 

 

 

590,771

 

Accumulated loss

 

(410,740

)

 

 

(316,973

)

Accumulated other comprehensive income (loss)

 

4,422

 

 

 

4,422

 

Total shareholders' equity

 

411,803

 

 

 

288,393

 

Total liabilities and shareholders' equity (deficit)

 

488,463

 

 

 

347,097

 

 

See notes to consolidated financial statements.
 

7


 

NewAmsterdam Pharma Company N.V.

Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)

(Unaudited)

 

 

For the three months ended March 31,

 

 

2024

 

 

2023

 

(In thousands of USD, except per share amounts)

 

 

 

 

 

Revenue

 

1,401

 

 

 

8,629

 

Operating expenses:

 

 

 

 

 

Research and development expenses

 

42,430

 

 

 

40,420

 

Selling, general and administrative expenses

 

14,453

 

 

 

8,062

 

Total operating expenses

 

56,883

 

 

 

48,482

 

Operating loss

 

(55,482

)

 

 

(39,853

)

Other income (expense):

 

 

 

 

 

Interest income

 

3,083

 

 

 

943

 

Fair value change – earnout and warrants

 

(38,950

)

 

 

(6,175

)

Foreign exchange gains/(losses)

 

(2,418

)

 

 

3,067

 

Loss before tax

 

(93,767

)

 

 

(42,018

)

Income tax expense

 

 

 

 

 

Loss and comprehensive loss for the period

 

(93,767

)

 

 

(42,018

)

Net loss per ordinary share

 

 

 

 

 

Basic and diluted

$

(1.06

)

 

$

(0.51

)

 

See notes to consolidated financial statements.


 

8


 

NewAmsterdam Pharma Company N.V.

Condensed Consolidated Statements of Shareholders' Equity (Deficit)

(Unaudited)

 

(In thousands of USD, except share amounts)

Shares

 

 

Amount

 

 

Additional Paid-In Capital

 

 

Accumulated Loss

 

 

Cumulative Translation Adjustments

 

 

Total Shareholders' Equity

 

Balance at December 31, 2022

 

81,559,780

 

 

 

10,055

 

 

 

555,625

 

 

 

(140,036

)

 

 

4,422

 

 

 

430,066

 

Exercise of warrants

 

208,032

 

 

 

27

 

 

 

2,671

 

 

 

 

 

 

 

 

 

2,698

 

Share-based compensation

 

 

 

 

 

 

 

7,663

 

 

 

 

 

 

 

 

 

7,663

 

Total loss and comprehensive loss for the period

 

 

 

 

 

 

 

 

 

 

(42,018

)

 

 

 

 

 

(42,018

)

As at March 31, 2023

 

81,767,812

 

 

 

10,082

 

 

 

565,959

 

 

 

(182,054

)

 

 

4,422

 

 

 

398,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at December 31, 2023

 

82,469,768

 

 

 

10,173

 

 

 

590,771

 

 

 

(316,973

)

 

 

4,422

 

 

 

288,393

 

Issuance of Ordinary Shares and Pre-Funded Warrants, net of issuance costs

 

5,871,909

 

 

 

759

 

 

 

189,207

 

 

 

 

 

 

 

 

 

189,966

 

Exercise of warrants

 

926,698

 

 

 

121

 

 

 

19,674

 

 

 

 

 

 

 

 

 

19,795

 

Exercise of stock options

 

452,461

 

 

 

60

 

 

 

(609

)

 

 

 

 

 

 

 

 

(549

)

Share-based compensation

 

 

 

 

 

 

 

7,965

 

 

 

 

 

 

 

 

 

7,965

 

Total loss and comprehensive loss for the period

 

 

 

 

 

 

 

 

 

 

(93,767

)

 

 

 

 

 

(93,767

)

As at March 31, 2024

 

89,720,836

 

 

 

11,113

 

 

 

807,008

 

 

 

(410,740

)

 

 

4,422

 

 

 

411,803

 

 

See notes to consolidated financial statements.


 

9


 

NewAmsterdam Pharma Company N.V.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

 

 

For the three months ended March 31,

 

 

2024

 

 

2023

 

(In thousands of USD)

 

 

 

 

 

Operating activities:

 

 

 

 

 

Loss for the period

 

(93,767

)

 

 

(42,018

)

Non-cash adjustments to reconcile loss before tax to net cash flows:

 

 

 

 

 

Depreciation and amortization

 

15

 

 

 

9

 

Non-cash rent expense

 

1

 

 

 

2

 

Fair value change - derivative earnout and warrants

 

38,950

 

 

 

6,175

 

Foreign exchange (gains)/losses

 

2,418

 

 

 

(3,067

)

Share-based compensation

 

7,918

 

 

 

7,616

 

Changes in working capital:

 

 

 

 

 

Changes in prepayments (current and non-current) and other receivables

 

956

 

 

 

(1,413

)

Changes in accounts payable

 

(8,311

)

 

 

(2,920

)

Changes in accrued expenses and other current liabilities

 

(1,381

)

 

 

6,997

 

Changes in deferred revenue

 

(1,401

)

 

 

(3,244

)

Net cash (used in)/provided by operating activities

 

(54,602

)

 

 

(31,863

)

Investing activities:

 

 

 

 

 

Purchase of property, plant and equipment, including internal use software

 

(385

)

 

 

(7

)

Net cash used in investing activities

 

(385

)

 

 

(7

)

Financing activities:

 

 

 

 

 

Proceeds from offering of ordinary shares and pre-funded warrants

 

190,481

 

 

 

 

Transaction costs on issue of Ordinary Shares and Pre-Funded Warrants

 

(515

)

 

 

 

Proceeds from exercise of warrants

 

8,763

 

 

 

2,392

 

Proceeds from exercise of options

 

440

 

 

 

 

Payment of withholding taxes related to net share settlement of exercised options

 

(989

)

 

 

 

Net cash provided by financing activities

 

198,180

 

 

 

2,392

 

Net change in cash

 

143,193

 

 

 

(29,478

)

Foreign exchange differences

 

(2,496

)

 

 

3,062

 

Cash at the beginning of the period

 

340,450

 

 

 

467,728

 

Cash at the end of the period

 

481,147

 

 

 

441,312

 

Noncash financing and investing activities

 

 

 

 

 

Receivable related to exercise of warrants

 

1,271

 

 

 

 

 

See notes to consolidated financial statements

 

10


 

NewAmsterdam Pharma Company N.V.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Note 1. The Company

NewAmsterdam Pharma Company N.V. (“NewAmsterdam Pharma” or the “Company”) is a late-stage biopharmaceutical company whose mission is to improve patient care in populations with metabolic diseases where currently approved therapies have not been adequate or well-tolerated. The Company was incorporated in the Netherlands as a Dutch private company with limited liability (besloten vennootschap met beperkte aansprakelijkheid) under the name NewAmsterdam Pharma Company B.V. on June 10, 2022. On November 21, 2022, the Company’s corporate form was converted to a Dutch public limited liability company (naamloze vennootschap) and its name was changed to NewAmsterdam Pharma Company N.V. The Company’s ordinary shares, nominal value €0.12 per share (the "Ordinary Shares") are listed on the Nasdaq Global Market ("Nasdaq") and trade under the symbol “NAMS.”

The Company is subject to risks and uncertainties common to early-stage companies in the biopharmaceutical industry, including, but not limited to, development by competitors of more advanced or effective therapies, dependence on key executives, protection of and dependence on intellectual property, compliance with government regulations and ability to secure additional capital to fund operations. Significant additional research and development efforts and regulatory approval will be required prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize significant revenue from product sales.

Note 2. Summary of Significant Accounting Policies

Basis of Presentation

The unaudited condensed consolidated financial statements should be read together with our audited financial statements and accompanying notes for year ended December 31, 2023, included in our Annual Report on Form 10-K (the "Annual Report"), filed with the SEC on February 28, 2024. Any terms not defined herein take the meaning as defined in the Annual Report. The Company’s unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) and the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP have been condensed or omitted, and accordingly the balance sheet as of December 31, 2023 included herein has been derived from the audited financial statements at that date but does not include all of the information required by GAAP for complete financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments which are necessary for a fair statement of the Company’s financial information. The interim results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any other interim period or for any other future year. The unaudited condensed consolidated financial statements comprise the financial statements of the Company and its subsidiaries. Any reference in these notes to the applicable guidance is meant to refer to authoritative U.S. GAAP as found in the Accounting Standards Codification (“ASC”) and Accounting Standards Update (“ASU”) of the Financial Accounting Standards Board (“FASB”). The unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries, after elimination of intercompany accounts and transactions.

Prior to 2023, the Company prepared its financial statements in accordance with the International Financial Reporting Standards as issued by the International Accounting Standard Board (“IFRS”) as permitted in the United States based on the Company’s qualification as a foreign private issuer under the rules and regulations of the SEC. In connection with the loss of the Company’s status as a foreign private issuer effective on January 1, 2024, the Company, as a domestic filer, prepared these financial statements in accordance with U.S. GAAP. The transition to U.S. GAAP was made retrospectively for all periods from the Company’s inception.

Except for the policy described below, the accounting policies of the Company are consistent with those described in Note 2 of the consolidated financial statements included within the Annual Report.

Net Loss Per Share

Basic net loss per share is calculated by dividing the net loss by the weighted-average number of Ordinary Shares outstanding during the period. For the purposes of calculating the weighted-average number of Ordinary Shares outstanding, the Ordinary Shares underlying the Pre-Funded Warrants issued in the Offering (as defined in Note 7 below) are included. Diluted net loss per share is the same as basic net loss per share, since the effects of potentially dilutive securities are antidilutive given the net loss for each period presented.

11


 

 

Note 3. Revenue

Revenue consisted of the following:

 

 

Three months ended March 31,

 

(In thousands of USD)

 

2024

 

 

2023

 

License revenue attributed from license performance obligation

 

 

 

 

 

5,385

 

License revenue attributed from R&D performance obligation

 

 

1,401

 

 

 

3,244

 

Total revenue

 

 

1,401

 

 

 

8,629

 

 

All revenue recognized from the R&D performance obligation was included within deferred revenue on the consolidated balance sheet as of the beginning of the applicable reporting period.

 

Note 4. Fair Value Measurements

As of March 31, 2024 and December 31, 2023, the Company’s financial liabilities recognized at fair value on a recurring basis consisted of the following:

 

 

 

As of March 31, 2024

 

(In thousands of USD)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Derivative warrant liability (Public Warrants)

 

 

31,217

 

 

 

 

 

 

 

 

 

31,217

 

Derivative warrant liability (Private Placement Warrants)

 

 

 

 

 

1,844

 

 

 

 

 

 

1,844

 

Derivative earnout liability

 

 

 

 

 

 

 

 

16,490

 

 

 

16,490

 

Total financial liabilities

 

 

31,217

 

 

 

1,844

 

 

 

16,490

 

 

 

49,551

 

 

 

As at December 31, 2023

 

(In thousands of USD)

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Derivative warrant liability (Public Warrants)

 

 

12,051

 

 

 

 

 

 

 

 

 

12,051

 

Derivative warrant liability (Private Placement Warrants)

 

 

 

 

 

523

 

 

 

 

 

 

523

 

Derivative earnout liability

 

 

 

 

 

 

 

 

7,788

 

 

 

7,788

 

Total financial liabilities

 

 

12,051

 

 

 

523

 

 

 

7,788

 

 

 

20,362

 

 

The estimated fair value of the derivative earnout liability was determined using Level 3 inputs, other than the Company's share price as a Level 1 input, as no observable market inputs were available. The derivative earnout liability has been measured at fair value using a Black-Scholes pricing model. Given the assumed zero dividend rate and the fact that no strike price exists that would have led to any volatility measure relative to the Company's share price, the fair value of the earnout liability resulting from the Black-Scholes pricing model is entirely driven by the Company’s closing share price as a Level 1 input and the probability of milestone completion as a Level 3 input. As such, the relevant inputs to the fair value of the derivative earnout liability are as follows:

 

 

 

 

March 31, 2024

 

 

December 31, 2023

 

Ordinary Share value (USD)

 

 

 

$

23.65

 

 

$

11.17

 

Probability of milestone completion

 

 

 

 

40

%

 

 

40

%

Dividend yield

 

 

 

 

0

%

 

 

0

%

Strike price (USD)

 

 

 

 

0.00

 

 

 

0.00

 

 

As management's judgment of the probability of milestone completion remained constant during the period, the change in fair value resulted from the Company’s price per share between valuation dates.

The following table presents a reconciliation of the derivative earnout liability measured on a recurring basis using Level 3 inputs as of March 31, 2024:

 

Balance on December 31, 2023

 

 

 

 

7,788

 

Change in fair value recognized through profit and loss

 

 

 

 

8,702

 

Balance on March 31, 2024

 

 

 

 

16,490

 

All changes in fair value recognized in the statement of operations are unrealized. There were no sales, purchases, settlements or transfers into or out of Level 3 of the fair value hierarchy related to the derivative earnout liability during the period ended March 31, 2024.

12


 

Note 5. Prepayments and Other Receivables

Prepayments and other receivables consisted of the following:

(In thousands of USD)

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid research and development costs

 

 

420

 

 

 

2,337

 

Other prepaid expenses

 

 

2,122

 

 

 

2,123

 

Value added tax receivable

 

 

148

 

 

 

1,006

 

Other receivables

 

 

3,985

 

 

 

875

 

Total prepayments and other receivables

 

 

6,675

 

 

 

6,341

 

 

Note 6. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

(in thousands of USD)

 

March 31,
2024

 

 

December 31,
2023

 

Accrued research and development materials and services

 

 

7,190

 

 

 

5,945

 

Accrued compensation and benefits

 

 

1,105

 

 

 

3,384

 

Accrued professional fees and other

 

 

1,675

 

 

 

2,069

 

Total accrued expenses and other current liabilities

 

 

9,970

 

 

 

11,398

 

 

Note 7. Shareholders’ Equity

Follow-on Offering

On February 16, 2024,the Company completed an underwritten public offering (the “Offering”) of 5,871,909 Ordinary Shares at a public offering price of $19.00 per Ordinary Share and, in lieu of Ordinary Shares to certain investors, pre-funded warrants (the “Pre-Funded Warrants”) to purchase 4,736,841 Ordinary Shares at a public offering price of $18.9999 per Pre-Funded Warrant, which represents the per share public offering price for the Ordinary Shares, less the $0.0001 per share exercise price for each such Pre-Funded Warrant. Of the 5,871,909 Ordinary Shares issued and sold in the offering, 1,383,750 Ordinary Shares were issued and sold pursuant to the exercise of the underwriters’ option to purchase additional Ordinary Shares at the public offering price per share. The Ordinary Shares and Pre-Funded Warrants were issued and sold pursuant to an underwriting agreement, among the Company and Jefferies LLC, Leerink Partners LLC, Piper Sandler & Co. and RBC Capital Markets, LLC, as representatives of the several underwriters listed on Schedule A thereto. The net proceeds to the Company from the Offering were $190.0 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.

 

Note 8. Share-Based Compensation

The Company has three Share-based payment plans and one restricted share award in place as at March 31, 2024:

The Company’s Long-Term Incentive Plan (the “Plan”);
The Company’s Supplementary Long-Term Incentive Plan (the “Supplementary Plan”);
The Company’s Rollover Option Plan (the “Rollover Plan,” together with the Plan and the Supplementary Plan, the “Plans”); and
Chief Executive Officer Restricted Share Award.

Long Term Incentive Plans

The Plans are equity-settled, and the Company may grant various forms of equity awards, including the granting of options to purchase Ordinary Shares (“Company Options”) and restricted stock units (“RSUs”), pursuant to the Plans. In total, as of March 31, 2024 a maximum of 20,549,356 Ordinary Shares may be reserved for issuance pursuant to the Plans. The number of Ordinary Shares reserved for grant under the Plan will increase annually on January 1 of each calendar year by 5% of the then issued and outstanding Ordinary Shares or such lower number as may be determined by the Company's Board of Directors.

13


 

The contractual term is 10 years from grant date for options granted under the Plans. In general, each Company Option has a four-year vesting period with 25% vesting after one year and the remaining 75% vesting in equal monthly installments over the next following three years.

The changes for the three months ended March 31, 2024 in the number of Company Options outstanding related to Ordinary Shares and their related weighted average exercise prices are as follows:

 

 

Number of options

 

 

Weighted average exercise price

 

 

Weighted average remaining contractual term
(in years)

 

 

Aggregate intrinsic value
(in thousands of USD)

 

Outstanding as at December 31, 2023

 

 

15,783,509

 

 

$

7.98

 

 

 

 

 

 

 

Granted

 

 

4,096,148

 

 

$

12.81

 

 

 

 

 

 

 

Exercised

 

 

(546,403

)

 

$

1.27

 

 

 

 

 

 

 

Outstanding as at March 31, 2024

 

 

19,333,254

 

 

$

9.18

 

 

 

8.8

 

 

 

279,666

 

Options exercisable as of March 31, 2024

 

 

6,134,169

 

 

$

5.64

 

 

 

8.0

 

 

 

110,454

 

 

The weighted average grant date fair value of Company Options, estimated as of the grant date using the Black-Scholes option pricing model, was $5.90, and $4.82 per option for options granted during the three months ended March 31, 2024 and 2023, respectively. The total intrinsic value (the amount by which the fair market value exceeded the exercise price) of Company Options exercised during the three months ended March 31, 2024 was $8.0 million. No Company Options were exercised in the three months ended March 31, 2023. Weighted average assumptions used to apply this pricing model were as follows:

 

 

 

 

Three months ended March 31,

 

 

 

 

 

2024

 

 

2023

 

Expected life (years)

 

 

 

 

6.1

 

 

 

6.1

 

Risk-free rate

 

 

 

 

3.9

%

 

 

4.0

%

Volatility

 

 

 

 

41.2

%

 

 

38.5

%

Dividend yield

 

 

 

 

0.0

%

 

 

0.0

%

 

Expected Term

The Company’s expected term represents the period that the Company’s stock-based awards are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The Company utilizes this method due to lack of historical exercise data and the plain-vanilla nature of the Company’s stock-based awards.

Expected Volatility

Since the Company was privately held through November 2022, it alone does not have sufficient relevant company-specific historical data to support its expected volatility alone. In prior periods, due to the insufficiency of historical volatility data on the Company’s own securities, the expected volatility input was determined using comparable companies alone. Beginning on January 1, 2024 expected volatility input was determined using a weighted average calculation considering the volatility of the Company’s own securities and the volatilities of a representative group of publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants. Initially, the volatility of the Company’s Ordinary Shares is assigned a weighting of 10%. This weighting will be increased by 5% per calendar quarter until the expected volatility input is based entirely on the historical volatility of the Company’s Ordinary Shares. For purposes of identifying comparable companies, the Company selected companies with comparable characteristics to it, including enterprise value, risk profiles, position within the industry, and with historical share price information sufficient to meet the expected life of the stock-based awards. The historical volatility data was computed using the daily closing prices for the selected companies’ shares during the equivalent period of the calculated expected term of the stock-based awards.

Risk-Free Interest Rate

The risk-free interest rate is based upon the U.S. Treasury yield curve in effect at the time of grant, with a term that approximates the expected life of the Company Option.

Expected Dividend

The expected dividend rate is zero as the Company currently has no history or expectation of declaring dividends on its Ordinary Shares.

Share-based compensation is classified in the consolidated statement of operations and comprehensive loss as follows:

14


 

 

 

 

 

Three months ended March 31,

 

(in thousands of USD)

 

 

 

2024

 

 

2023

 

Research and development expenses

 

 

 

 

3,479

 

 

 

4,489

 

Selling, general and administrative expenses

 

 

 

 

4,439

 

 

 

3,127

 

Total

 

 

 

 

7,918

 

 

 

7,616

 

 

As of March 31, 2024, there was $41.5 million of unrecognized compensation cost related to Company Options that have not yet vested. These costs are expected to be recognized over a weighted average period of 3.3 years until fully vested.

Restricted Stock Units

As at March 31, 2024 and December 31, 2023, the Company had allocated 143,002 Earnout Shares to be granted to Participating Optionholders if and when a certain clinical development milestone is achieved during the earnout period. These Earnout Shares will be delivered in the form of awards of RSUs granted pursuant to the Plan to such Participating Optionholders who are at the time of achievement of such milestone still providing services to the Company.

The development milestone consists of the achievement and public announcement of positive Phase 3 data for each of the Company’s BROADWAY clinical trial and BROOKLYN clinical trial at any time during the period beginning on November 22, 2022 and ending on the date that is five years after such date.

There is no impact on these financial statements with respect to these RSUs due to the uncertainty of achieving the clinical development milestone.

Chief Executive Officer Restricted Share Award

In July 2021, the Company's chief executive officer, Michael Davidson, M.D., paid the fair market value of the underlying Ordinary Shares (in aggregate $838,806) when he made an investment in restricted shares issued through Depositary Receipts. The total fair value of these equity-settled share-based payment awards amounts to nil and there will be no expenses recognized in the income statement. This award had a four year vesting period with 25% vesting on August 1, 2021 and the remaining 75% vesting in equal monthly installments over the following three years.

In connection with the award arrangement, if Dr. Davidson leaves the Company, all unvested Ordinary Shares will be cancelled against payment by the Company to him of the lower of the (i) the purchase price paid and (ii) the fair market value of such Ordinary Shares at the time of forfeiture. In order to reflect the consideration paid and the possibility that the Ordinary Shares would be repurchased if Dr. Davidson becomes a “Good Leaver” (as such term is defined in the award agreement) during the vesting period, the Company has recognized the consideration as a financial liability until the award has fully vested, at which time it will be reclassified to equity provided that Dr. Davidson remains with the Company. This liability is measured at the lower of (i) the purchase price paid and (ii) the fair market value of the Ordinary Shares at the end of the reporting period. The liability for unvested Ordinary Shares as at March 31, 2024 and December 31, 2023 amounted to $0.1 million and $0.1 million, respectively.

For the three months ended March 31, 2024, the movements in the number of Ordinary Shares outstanding are as follows:

Outstanding as at December 31, 2023

 

 

 

 

608,779

 

Granted/purchased during the period

 

 

 

 

 

Outstanding as at March 31, 2024

 

 

 

 

608,779

 

 

As of March 31, 2024 and December 31, 2023, a total of 558,048 and 519,999 Ordinary Shares had vested, respectively.

 

Note 9. Net Loss per Ordinary Share

For the purposes of calculating the weighted-average number of Ordinary Shares outstanding, the Ordinary Shares underlying the Pre-Funded Warrants issued in the Offering are included.

Basic and diluted net loss per Ordinary Share was calculated as follows:

 

15


 

 

 

Three months ended March 31,

 

(In thousands of USD, except share and per share amounts)

 

2024

 

 

2023

 

Net loss

 

 

(93,767

)

 

 

(42,018

)

Weighted average Ordinary Shares outstanding, basic and diluted

 

 

88,380,230

 

 

 

81,634,428

 

Net loss per Ordinary Share, basic and diluted

 

 

(1.06

)

 

 

(0.51

)

 

The following potentially dilutive securities have been excluded from the computation of diluted weighted-average Ordinary Shares outstanding as they would be anti-dilutive:

 

 

 

Three months ended March 31,

 

 

 

2024

 

 

2023

 

Stock options

 

 

19,333,254

 

 

 

15,347,590

 

Outstanding warrants

 

 

2,994,673

 

 

 

4,558,930

 

Total

 

 

22,327,927

 

 

 

19,906,520

 

 

Note 10. Commitments and Contingencies

Commitments

The Company has entered into a variety of agreements financial commitments in the normal course of business with contract research organizations, contract manufacturing organizations, and other third parties for preclinical and clinical development and manufacturing services. The terms generally provide us with the option to cancel, reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancellable obligations of our service providers, up to the date of cancellation. However, some of our service providers also charge cancellation fees upon cancellation. The amount and timing of such payments are not known, but at March 31, 2024 they are estimated to be a maximum of $19.2 million.

According to the terms of the Menarini License the Company will be responsible for development and commercialization costs related to Licensed Products other than those in the Menarini Territory. In addition, under specified conditions of the agreement, the Company agreed to bear 50% of certain development costs incurred by the other party in the development of the Licensed Products in the Menarini Territory.

Note 11. Related Parties

In the ordinary course of business, the Company may enter into transactions with entities that are associated with a party that meets the criteria of a related party of the Company. These transactions are reviewed quarterly and to date have not been material to the Company’s consolidated financial statements.

Note 12. Subsequent Events

None.

16


 

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

The unaudited condensed consolidated financial statements, included elsewhere in this Quarterly Report, and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for year ended December 31, 2023, included in our Annual Report on Form 10-K (the "Annual Report"), filed with the SEC on February 28, 2024, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations. In addition to historical financial information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those contained in or implied by any forward-looking statements. Factors that could cause or contribute to these differences include those discussed in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in the Annual Report and this Quarterly Report. Our operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period.

Overview

We are a late-stage biopharmaceutical company whose mission is to improve patient care in populations with metabolic diseases where currently approved therapies have not been adequate or well tolerated. We seek to fill a significant unmet need for a safe, well tolerated and convenient low-density lipoprotein cholesterol (“LDL-C”) lowering therapy. In multiple phase 3 studies, we are investigating obicetrapib, an oral, low-dose and once-daily cholesteryl ester transfer protein (“CETP”) inhibitor, alone or as a fixed-dose combination with ezetimibe, as preferred LDL-C lowering therapies to be used as an adjunct to statin therapy for patients at risk of cardiovascular disease with elevated LDL-C, for whom existing therapies are not sufficiently effective or well tolerated. We believe that CETP inhibition may also play a role in other indications by potentially mitigating the risk of developing diseases such as Alzheimer’s disease or Type 2 diabetes.

Our product candidate, obicetrapib, is a next-generation, oral, low-dose CETP inhibitor that we are developing to potentially overcome the limitations of current LDL-C lowering treatments. We believe that obicetrapib has the potential to be a once-daily oral CETP inhibitor for lowering LDL-C, if approved. In our Phase 2 ROSE2 clinical trial evaluating obicetrapib in combination with ezetimibe as an adjunct to high-intensity statin therapy, obicetrapib met its primary and secondary endpoints, with statistically significant reductions in LDL-C and apolipoprotein observed. In five of our Phase 2 trials, TULIP, ROSE, OCEAN, ROSE2 and our Japan Phase 2b trial, evaluating obicetrapib as a monotherapy or a combination therapy with ezetimibe 10 mg, we observed statistically significant LDL-C lowering with side effects similar in frequency and severity to placebo including muscle related side effects and drug-related treatment-emergent serious adverse events. We have observed a favorable tolerability profile for obicetrapib in an aggregate of over 800 patients with dyslipidemia in our clinical trials to date. Furthermore, we believe that obicetrapib’s oral delivery, demonstrated activity at low doses, chemical properties and tolerability make it well-suited for combination approaches. We are developing a fixed dose combination of obicetrapib 10 mg and ezetimibe 10 mg, which has been observed to demonstrate even greater LDL-C reduction in our Phase 2b ROSE2 clinical trial.

Lowering of LDL-C, has been associated with major adverse cardiovascular events ("MACE") benefit in trials of LDL-C lowering drugs, including the REVEAL trial with the CETP inhibitor, anacetrapib. We are performing a cardiovascular outcomes trial (“CVOT”) to reconfirm this relationship.

Our goal is to develop and commercialize an LDL-C lowering monotherapy and a fixed-dose combination therapy, which offers the advantage of a single, low dose, once-daily oral pill, and fulfills the significant unmet need for an effective and convenient LDL-C lowering therapy. If we obtain marketing approval, we intend to commercialize obicetrapib for patients with atherosclerotic cardiovascular disease (“ASCVD”) and/or heterozygous familial hypercholesterolemia (“HeFH”) and elevated levels of LDL-C despite being treated with currently available optimal lipid lowering therapy.

We have partnered with Menarini, providing them with the exclusive rights to commercialize obicetrapib 10 mg either as a sole active ingredient product or in a fixed dose combination with ezetimibe in the majority of European countries, if approved. Subject to receipt of marketing approval, our current plan is to pursue development and commercialization of obicetrapib in the United States ourselves, and to consider additional partners for jurisdictions outside of the United States and the European Union (the “EU”), including in Japan and China. In addition to our partnership with Menarini, we may in the future utilize a variety of types of collaboration, license,

17


 

monetization, distribution and other arrangements with other third parties relating to the development or commercialization, once approved, of obicetrapib or future product candidates or indications. We are also continually evaluating the potential acquisition or license of new product candidates.

As of March 31, 2024 we had cash of $481.1 million as compared to $340.5 million as of December 31, 2023. The increase in cash is primarily driven by the proceeds of the Offering (as defined below) and Warrant (as defined below) exercises partially offset by cash outflows related to research and development costs as we continue development of obicetrapib and increased spending on selling, general and administrative expenses to support our growing organization.

First Quarter 2024 Highlights

Follow-On Offering

On February 16, 2024, we completed an underwritten public offering (the “Offering”) of 5,871,909 of the Company's ordinary shares, nominal value €0.12 per share (the “Ordinary Shares”) at a public offering price of $19.00 per Ordinary Share and, in lieu of Ordinary Shares to certain investors, pre-funded warrants (“Pre-Funded Warrants”) to purchase 4,736,841 Ordinary Shares at a public offering price of $18.9999 per Pre-Funded Warrant, which represents the per share public offering price for the Ordinary Shares less the $0.0001 per share exercise price for each such Pre-Funded Warrant. Of the 5,871,909 Ordinary Shares issued and sold in the Offering, 1,383,750 Ordinary Shares were issued and sold pursuant to the exercise of the underwriters’ option to purchase additional Ordinary Shares at the public offering price per share. The Ordinary Shares and Pre-Funded Warrants were issued and sold pursuant to an underwriting agreement among the Company and Jefferies LLC, Leerink Partners LLC, Piper Sandler & Co. and RBC Capital Markets, LLC, as representatives of the several underwriters listed on Schedule A thereto. The net proceeds to the Company from the Offering were $190.0 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.

TANDEM Phase 3 Clinical Trial

On March 12, 2024, we announced the dosing of the first patient in TANDEM, a Phase 3 pivotal trial, to evaluate 10 mg obicetrapib and 10 mg ezetimibe as a fixed-dose combination used as an adjunct to diet and maximally tolerated lipid-lowering therapies to potentially enhance LDL-lowering in patients with HeFH, ASCVD or ASCVD risk equivalents. We anticipate enrolling approximately 400 patients in the United States who have a baseline LDL-C of ≥ 70 mg/dL.

PREVAIL Enrollment

On April 9, 2024, we announced that the enrollment target for PREVAIL, our Phase 3 CVOT, to evaluate the effects of 10 mg obicetrapib in participants with ASCVD on MACE (cardiovascular death, myocardial infarction, stroke and non-elective coronary revascularization) has met the enrollment target of 9,000 patients. We extended enrollment to the end of April and randomized a total of over 9,500 patients.

Components of our Results of Operations

Revenue

To date, we have not generated any revenue from the sale of pharmaceutical products. Our revenue has been solely derived from our license agreement with Menarini. Pursuant to the Menarini License, we received a non-refundable, non-creditable upfront amount of $120.9 million (€115.0 million) from Menarini on July 7, 2022, of which $98.6 million (€93.5 million) was recognized as revenue upon the execution of the Menarini License on June 23, 2022 and $4.1 million (€4.0 million) was subsequently recognized as revenue in 2022. In the three months ended March 31, 2024, $1.4 million of revenue was recognized related to the recognition of additional amounts of the deferred portion of the upfront payment received from Menarini. Additionally, in partial contribution to our costs of development of the licensed products, Menarini may pay us €27.5 million, payable in two equal annual installments. Due to the scientific uncertainties around the commercialization of the licensed products based on the success of clinical trials, out of our control, the fixed €27.5 million is considered constrained at contract execution and is not initially recognized within the transaction price until it becomes highly probable of no significant revenue reversal. At the end of each reporting period, we assess the probability of significant reversals for any amounts that become likely to be realized prior to recognizing the fixed consideration associated with these payments within the transaction price.

18


 

Under the Menarini License, we are also entitled to receive fixed reimbursement payments for our continued development costs, certain cost sharing payments, sales-based royalties, as well as payments based upon the achievement of defined development, regulatory and commercial milestones. These milestones are contingent payments and represent variable considerations that are not initially recognized within the transaction price. Our ability to receive and generate revenue from these payments is dependent upon a number of factors, including our ability to successfully complete the development of and obtain regulatory approval for obicetrapib within the Menarini Territory. The uncertainty of achieving these milestones significantly impacts our ability to generate revenue. We achieved a milestone pursuant to the Menarini License in January 2023 in connection with the announcement of topline data from our ROSE2 trial. At the end of each reporting period, we assess the probability of significant reversals for any amounts that become likely to be realized prior to recognizing the variable consideration associated with these payments within the transaction price.

We do not expect to generate any revenue from product sales for the foreseeable future. Any revenue generated from potential future collaborations may vary due to the many uncertainties in the development of obicetrapib and other factors.

Research and Development Expenses

Research and development expenses are recognized as an expense when incurred and are typically made up of costs from our clinical and preclinical activities, drug development and manufacturing costs, and costs for contract research organizations ("CROs") and investigative sites. Costs for certain development activities, such as clinical trials, are recognized based on an evaluation of the progress to completion of specific tasks using data provided by vendors of their actual costs incurred. At each balance sheet date, we estimate the level of services provided by vendors and the associated expenditure incurred for the services performed.

All such costs are for the purpose of advancing our product candidate to successfully complete clinical development, attain regulatory approval and, if approved, commercialize our product candidate. Much of our current focus in our ongoing Phase 3 trials is on patient recruitment and retention and data cleaning. Research and development expenses consist of the following:

clinical expenses primarily incurred by CROs assisting with our sponsored clinical trials and including clinical investigator costs, patient enrollments and costs of clinical sites;
manufacturing expenses arising from active pharmaceutical ingredient and drug product development as performed by our contract manufacturing organizations ("CMOs"), which are used in our clinical trials and research and development activities;
costs associated with obtaining potential regulatory approval of our product candidate, including preparation and submission of filings, ongoing monitoring and compliance with comments and recommendations provided by regulatory authorities, and regulatory-related advisory fees;
contracted personnel and employment costs attributed to research and development efforts, which includes management fees, salaries, share-based compensation expenses, bonus plans and payments to contractors who work for us for a fixed number of hours per week or per month;
preclinical and nonclinical research and development expenses of the product candidate, primarily for costs incurred by CROs assisting with an ongoing two-year rat and hamster carcinogenicity study; and
other clinical costs such as clinical trial insurance and other consultancy fees.

We expect our research and development expenses to be significant as we advance obicetrapib through clinical trials and pursue regulatory approval. The process of conducting the necessary clinical trials to obtain regulatory approval is costly and time-consuming. Clinical trials generally become larger and more costly to conduct as they advance into later stages and, in the future, we will be required to make estimates for expense accruals related to clinical trial expenses. At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of obicetrapib. See the section entitled “Risk Factors—Risks Related to Our Product Development, Regulatory Approval and Commercialization” for more information regarding the risks associated with clinical development.

Selling, General and Administrative Expenses

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We recognize selling, general and administrative expenses on the accrual basis when incurred. These expenses mainly relate to consultant fees, employee costs, legal costs, marketing and communication, intellectual property costs due to increased efforts to drug patent development and protection globally, and general overhead costs.

Due to the general growth of the organization associated with administering ongoing and planned clinical trials and our focus on commercial preparedness, we expect that our selling, general and administrative expenses may increase. We will incur increased accounting, audit, legal, regulatory, compliance, director and officer insurance costs as well as investor and public relations expenses associated with being a public company. Additionally, if and when a regulatory approval of a product candidate appears likely, we anticipate an increase in payroll and expenses as a result of our preparation for commercial operations.

Interest Income

Interest income is recognized using the effective interest rate method. Finance income for the three months ended March 31, 2024 and 2023 is related to interest earned on cash balances.

Net Foreign Exchange Gain/Loss

Our exchange gain relates mainly to cash balances denominated in foreign currencies, but also to transactions denominated in foreign currencies. The Company's foreign currency exposure is mainly related to the Euro. As of March 31, 2024, our net exposure to foreign currency risk was $98.3 million, as compared to $114.3 million as of December 31, 2023.

Income Tax

We have a history of losses and therefore have de minimis amounts of corporate tax. We expect to continue incurring losses as we continue to invest in our clinical and preclinical development programs. Consequently, any deferred tax assets are fully offset by a valuation allowance on our balance sheet.

Results of Operations

Comparison of the three months ended March 31, 2024 and 2023

The following table summarizes our consolidated statements of operations for the periods indicated:

 

 

 

For the three months ended March 31,

 

 

 

 

 

 

(In thousands of USD)

 

2024

 

 

2023

 

 

 

 

Change

 

Revenue

 

 

1,401

 

 

 

8,629

 

 

 

 

 

(7,228

)

Operating Expenses:

 

 

 

 

 

 

 

 

 

 

 

Research and development expenses

 

 

42,430

 

 

 

40,420

 

 

 

 

 

2,010

 

Selling, general and administrative expenses

 

 

14,453

 

 

 

8,062

 

 

 

 

 

6,391

 

Total operating expenses

 

 

56,883

 

 

 

48,482

 

 

 

 

 

8,401

 

Operating Loss

 

 

(55,482

)

 

 

(39,853

)

 

 

 

 

(15,629

)

Other income (expense):

 

 

 

 

 

 

 

 

 

 

 

Interest Income

 

 

3,083

 

 

 

943

 

 

 

 

 

2,140

 

Fair value change - earnout and warrants

 

 

(38,950

)

 

 

(6,175

)

 

 

 

 

(32,775

)

Foreign exchange gains/(losses)

 

 

(2,418

)

 

 

3,067

 

 

 

 

 

(5,485

)

Loss before tax

 

 

(93,767

)

 

 

(42,018

)

 

 

 

 

(51,749

)

Income tax expense

 

 

 

 

 

 

 

 

 

 

 

Loss for the period

 

 

(93,767

)

 

 

(42,018

)

 

 

 

 

(51,749

)

 

Revenue

Revenue was $1.4 million for the three months ended March 31, 2024 compared to $8.6 million three months ended March 31, 2023, a decrease of $7.2 million or 84%. This decrease is largely due to the recognition of $5.4 million of revenue from the Menarini License related to a clinical development milestone achieved in the three months ended March 31, 2023 while no milestones were achieved during the three months ended March 31, 2024. The remaining decrease is due to recognition of $1.4 million of deferred revenue from the Menarini License related

20


 

to the research and development performance obligation in the three months ended March 31, 2024 as compared to $3.2 million recognized in the three months ended March 31, 2023.

Research and Development Expenses

Research and development expenses were $42.4 million for the three months ended March 31, 2024 compared to $40.4 million for the three months ended March 31, 2023, an increase of $2.0 million or 5%. This was primarily driven by a:

$7.0 million increase in clinical expenses which related to our ongoing clinical trials. Costs related to our Phase 3 clinical trials increased by $7.3 million in the three months ended March 31, 2024 as compared to three months ended March 31, 2023. The increase related to Phase 3 clinical trials is slightly offset by a reduction of $0.3 million in costs related to Phase 1 and 2 clinical trials and other clinical expenses; and
$4.5 million decrease in manufacturing costs due to a $5 million decrease in costs related to drug substance validation which is partially offset by increased costs for clinical supply as we continue to plan and execute Phase 3 clinical trials.

The following table summarizes our selling, general and administrative expenses for the periods indicated:

 

 

 

For the three months ended March 31,

 

 

 

 

(In thousands of USD)

 

2024

 

 

2023

 

 

Change

 

Clinical expenses

 

 

32,089

 

 

 

25,131

 

 

 

6,958

 

Non-clinical expenses

 

 

495

 

 

 

822

 

 

 

(327

)

Personnel expenses

 

 

5,673

 

 

 

5,788

 

 

 

(115

)

Manufacturing costs

 

 

3,661

 

 

 

8,154

 

 

 

(4,493

)

Regulatory expenses

 

 

492

 

 

 

494

 

 

 

(2

)

Other research and development costs

 

 

20

 

 

 

31

 

 

 

(11

)

Total research and development expenses

 

 

42,430

 

 

 

40,420

 

 

 

2,010

 

 

Selling, General and Administrative Expenses

Selling, general and administrative expenses were $14.5 million for the three months ended March 31, 2024 compared to $8.1 million for the three months ended March 31, 2023, an increase of $6.4 million or 79%. This was primarily driven by a:

$3.0 million increase in personnel expenses related to selling, general and administrative expenses primarily driven by our share-based compensation arrangements which account for $1.3 million of the increase. The remainder is largely due to increased recruitment and employment costs for individuals involved with administrative and commercial preparedness activities to support the growth of the organization and operation as a public company; and
$3.5 million increase in marketing and communication expenses related to startup costs as we begin to build capabilities to support our planned commercial launch of obicetrapib, if approved.

The following table summarizes our research and development expenses for the periods indicated:

 

 

 

For the three months
ended March 31,

 

 

 

 

(In thousands of USD)

 

2024

 

 

2023

 

 

Change

 

Personnel expense

 

 

7,373

 

 

 

4,356

 

 

 

3,017

 

Intellectual property

 

 

470

 

 

 

222

 

 

 

248

 

Legal costs

 

 

531

 

 

 

614

 

 

 

(83

)

Finance and administration

 

 

893

 

 

 

1,225

 

 

 

(332

)

Marketing and communication

 

 

4,075

 

 

 

618

 

 

 

3,457

 

Commission expense

 

 

38

 

 

 

131

 

 

 

(93

)

Facility-related and other costs

 

 

1,073

 

 

 

896

 

 

 

177

 

Total selling, general and administrative expenses

 

 

14,453

 

 

 

8,062

 

 

 

6,391

 

 

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Interest Income

Interest income was $3.1 million for the three months ended March 31, 2024 compared to $0.9 million for the three months ended March 31, 2023, an increase of $2.2 million or 227%. This increase was driven by interest earned on cash balances.

Fair Value Change - Earnout and Warrants

Fair value change - earnout and warrants was a loss of $39.0 million for the three months ended March 31, 2024 compared to a loss of $6.2 million for the three months ended March 31, 2023. The change is driven by changes in the market price during the period for Ordinary Shares and Warrants which trade under the symbols "NAMS" and "NAMSW," respectively.

Foreign Exchange Gains/(Losses)

Net foreign exchange gains/(losses) were a loss of $2.4 million for the three months ended March 31, 2024 compared to a gain of $3.1 million for the three months ended March 31, 2023. This change was largely driven by movements in the exchange rate for Euros which is our primary foreign currency exposure.

Loss for the Period

Loss for the period was $93.8 million for the three months ended March 31, 2024 compared to $42.0 million for the three months ended March 31, 2023, an increase of $51.8 million. The individual components of the change are described above.

Liquidity and Capital Resources

Overview

To date, we have devoted substantially all of our resources to organizing and staffing our company, business planning, raising capital, undertaking preclinical studies and conducting clinical trials of obicetrapib. As a result, we are not yet profitable and have incurred losses in each annual period since our inception. As of March 31, 2024, we had an accumulated loss of $410.7 million. We expect to continue to incur significant losses for the foreseeable future.

We have historically funded our operations primarily through private and public placements of shares, the sale of convertible notes, proceeds from the Menarini License and the proceeds from the closing of the transactions contemplated by the Business Combination Agreement, dated July 25, 2022 (the "Business Combination Agreement"), by and among the Company, NewAmsterdam Pharma Holding B.V., Frazier Lifesciences Acquisition Corporation ("FLAC"), and NewAmsterdam Pharma Investment Corporation (the “Business Combination”). As of March 31, 2024, we had cash of $481.1 million.

Sources of Liquidity

Follow-on Offering

On February 16, 2024, we completed the Offering of 5,871,909 Ordinary Shares at a public offering price of $19.00 per Ordinary Share and, in lieu of Ordinary Shares to certain investors, Pre-Funded Warrants to purchase 4,736,841 Ordinary Shares at a public offering price of $18.9999 per Pre-Funded Warrant, which represents the per share public offering price for the Ordinary Shares less the $0.0001 per share exercise price for each such Pre-Funded Warrant. Of the 5,871,909 Ordinary Shares issued and sold in the Offering, 1,383,750 Ordinary Shares were issued and sold pursuant to the exercise of the underwriters’ option to purchase additional Ordinary Shares at the public offering price per share. The Ordinary Shares and Pre-Funded Warrants were issued and sold pursuant to an underwriting agreement among the Company and Jefferies LLC, Leerink Partners LLC, Piper Sandler & Co. and RBC Capital Markets, LLC, as representatives of the several underwriters listed on Schedule A thereto. The net proceeds to the Company from the Offering were $190.0 million after deducting underwriting discounts and commissions and offering expenses payable by the Company.

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At-the-Market Offering

On December 7, 2023, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“TD Cowen”), pursuant to which we may issue and sell from time to time up to $150 million of our Ordinary Shares through or to TD Cowen as our sales agent or acting as principal in any method deemed to be an “at the market offering.” TD Cowen will receive a commission of up to 3.0% of the gross proceeds of any Ordinary Shares sold pursuant to the Sales Agreement. During the three months ended March 31, 2024, we did not sell any Ordinary Shares pursuant to the Sales Agreement.

Menarini License

On June 23, 2022, we entered into the Menarini License, pursuant to which we granted Menarini an exclusive, royalty-bearing, sublicensable license under certain of our intellectual property and our regulatory documentation to undertake post approval development activities and commercialize the Licensed Products, for any use in the Menarini Territory. Pursuant to the Menarini License, Menarini made a non-refundable, non-creditable upfront payment to us of €115 million. Menarini has also committed to providing us €27.5 million in funding for the research and development activities related to the Licensed Products over two years, together with bearing 50% of any development costs incurred in respect of the pediatric population in the Menarini Territory. We are also eligible to receive up to €863 million upon the achievement of various clinical, regulatory and commercial milestones. If obicetrapib is approved, and successfully commercialized by Menarini, we will be entitled to tiered royalties ranging from the low double-digits to the mid-twenties as a percentage of net sales in the Menarini Territory, with royalty step-downs in the event of generic entrance or in respect of required third-party IP payments. See the section titled “Business—Commercial” contained in our Annual Report for a full description of the Menarini License.

As of March 31, 2024, we have received a total of €5 million in milestone payments from Menarini none of which was received in the three months ended March 31, 2024.

Warrants

In the three months ended March 31, 2024, 1,022,548 Warrants were exercised at an exercise price of $11.50 per Ordinary Share generating gross proceeds of $10.0 million. As of March 31, 2024, we had another 2,994,673 outstanding Warrants to purchase 2,994,673 Ordinary Shares, exercisable at an exercise price of $11.50 per share, which expire on November 23, 2027, at 5:00 p.m., Eastern Standard Time. Based on the exercise price of the Warrants, we may receive up to $34.4 million assuming the exercise of all Warrants outstanding as of March 31, 2024. From April 1, 2024 through May 3, 2024 a total of 255,702 additional Warrants were exercised generating gross proceeds of $2.9 million. The exercise of the Warrants, and any proceeds we may receive from their exercise, are highly dependent on the price of our Ordinary Shares and the spread between the exercise price of the Warrant and the price of an Ordinary Share at the time of exercise. For example, to the extent that the trading price of the Ordinary Shares exceeds $11.50 per share, it is more likely that holders of our Warrants will exercise their Warrants. If the trading price of the Ordinary Shares is less than $11.50 per share, it is unlikely that such holders will exercise their Warrants. The exercise price of the Warrants has at times exceeded the market price of the Ordinary Shares. To the extent that the price of our Ordinary Shares is below $11.50, we believe that the Warrant holders will be unlikely to cash exercise their warrants, resulting in little to no cash proceeds to us. There can be no assurance that our Warrants will be in the money prior to their expiration and, as such, certain unexercised Warrants may expire worthless. As such, it is possible that we may never generate any additional cash proceeds from the exercise of our Warrants. We have not included, and do not intend to include, any potential cash proceeds from the exercise of our Warrants in our short-term or long-term liquidity projections. We will continue to evaluate the probability that the Warrants are exercised over the life of our Warrants and the merit of including potential cash proceeds from the exercise thereof in our liquidity projections.

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Cash Flows

The following is a summary of cash flows for the three months ended March 31, 2024 and 2023:

 

 

For the three months
ended March 31,

 

(In thousands of USD)

 

2024

 

 

2023

 

Net cash (used in)/provided by operating activities

 

 

(54,602

)

 

 

(31,863

)

Net cash used in investing activities

 

 

(385

)

 

 

(7

)

Net cash provided by financing activities

 

 

198,180

 

 

 

2,392

 

Foreign exchange differences

 

 

(2,496

)

 

 

3,062

 

Cash at the beginning of the period

 

 

340,450

 

 

 

467,728

 

Cash at the end of the period

 

 

481,147

 

 

 

441,312

 

 

Net Cash Flows Used In Operating Activities

Net cash flows used in operating activities was $54.6 million in the three months ended March 31, 2024 compared to $31.9 million in the three months ended March 31, 2023, an increase of $22.7 million. This change was primarily due to an increase in research and development and selling general administrative expenditures, the underlying reasons for which are described above.

Net Cash Flows Used In Investing Activities

Net cash flows used in investing activities was $0.4 million in the three months ended March 31, 2024 compared to $0.0 million in the three months ended March 31, 2023, an increase of $0.4 million. The change is primarily due to investments in the three months ended March 31, 2024 in software for internal use.

Net Cash Flows Provided By Financing Activities

Net cash flows provided by financing activities was $198.2 million in the three months ended March 31, 2024 compared to $2.4 million in the three months ended March 31, 2023, an increase of $195.8 million. This change was primarily related to the Offering which generated net proceeds of $190.0 million after deducting underwriting discounts and commissions and offering expenses payable by the Company. The remaining change is due to an $8.6 million increase in the proceeds received from the exercise of Warrants, offset by a $0.5 million net outflow upon the exercise of options after taking into account the payment of related withholding taxes.

Operating Capital and Capital Expenditure Requirements

Third-Party Service Agreements

We have entered into a variety of agreements and financial commitments in the normal course of business with CROs, CMOs, and other third parties for preclinical and clinical development and manufacturing services. The terms generally provide us with the option to cancel, reschedule and adjust our requirements based on our business needs, prior to the delivery of goods or performance of services. Payments due upon cancellation generally consist only of payments for services provided or expenses incurred, including non-cancelable obligations of our service providers, up to the date of cancellation. However, some of our service providers also charge cancellation fees upon cancellation. The amount and timing of such payments are not known, but at March 31, 2024 they are estimated to be a maximum of $14.9 million due within one year and $4.3 million due in more than a year. As at March 31, 2024, we had cash of $481.1 million which is sufficient to fund these obligations.

Leases

We are party to a services agreement (the "Naarden Lease") pursuant to which an affiliate of Forbion leased us office space and the office lease agreement with Renaissance Aventura LLC, dated May 24, 2021 (the “Miami Lease”). Under the Naarden Lease, we are obligated to pay €40 thousand per year in rent. The Naarden Lease will continue until terminated by either us or the landlord. Pursuant to the Miami Lease, we are required to pay annual rent ranging from $69 thousand to $75 thousand, increasing from the low end of the range to the higher end of the range for each year of the lease. The Miami Lease will expire by its terms on October 31, 2024, unless terminated earlier by either party pursuant to the terms of the Miami Lease.

24


 

Menarini License

We will be responsible for the development and commercialization costs related to Licensed Products other than those in the Menarini Territory. In addition, under specified conditions of the agreement, we agreed to bear 50% of certain development costs incurred by the other party in the development of the Licensed Products in the Menarini Territory. Please see the section “Business—Marketing and Sales” contained in the Annual Report for a description of the Menarini License.

Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. We based our estimates on historical experience, known trends and other market-specific or other relevant factors that we believe to be reasonable under the circumstances. On an ongoing basis, management evaluates its estimates when there are changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. If actual results differ from our estimates, or to the extent these estimates are adjusted in future periods, our results of operations could either benefit from, or be adversely affected by, any such change in estimate.

See Note 2 to our consolidated financial statements in the Annual Report and Note 2 to our condensed consolidated financial statements included in Part I, Item 1 of this Quarterly Report for a summary of significant accounting policies and the effect on our consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Our principal financial liabilities consist of trade and other payables lease liability, derivative warrant liabilities and derivative earnout liability. The main purpose of these financial liabilities is to finance our day-to-day operations. Our financial assets consist of prepayments and other receivables and cash, that are derived from our operating activities and funding.

We are exposed to market risk, credit risk and liquidity risk. Our senior management oversees the management of these risks. The Company's Board of Directors (the "Board of Directors") reviews and approves policies for managing each of these risks, which are summarized below.

Market Risk

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises interest rate risk, foreign currency risk and other price risks.

Interest Rate Risk

We are exposed to interest rate risk primarily through our cash. Changes in interest rates may cause variations in interest income and expense resulting from short-term interest-bearing assets. Given our only interest-bearing financial instrument is cash we do not believe an immediate 100 basis point change in interest rates would have a material effect on our financial condition.

Foreign Currency Risk

Foreign currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates. Our exposure to the risk of changes in foreign exchange rates relates primarily to cash and trade and other payables denominated in currencies other than our functional currency, the U.S. Dollar. As of March 31, 2024, our net exposure to foreign currency risk was $98.3 million, mainly related to the Euro. As of March 31, 2024, the effect of a hypothetical 1% change in exchange rates on currencies denominated in other than our functional currency would result in a potential change in future earnings in our consolidated statement of operations of approximately $0.9 million.

25


 

We partly manage our foreign currency risk by selectively holding foreign currency in our cash to offset foreign currency exposures from lease liabilities and trade and other payables. We plan to use this cash to settle future expenses we expect to incur in those foreign currencies.

Other Market Price Risk

As a result of the Business Combination, we have derivative warrant liabilities and a derivative earnout liability which are measured at fair value through profit or loss. As at March 31, 2024 the fair value of the derivative warrant liabilities and the derivative earnout liability were $33.1 million and $16.5 million, respectively. The value of the derivative warrant liability is directly correlated to the market price of a publicly traded Warrant which is traded under the symbol NAMSW. With all other variables held constant, a 1% change in the market price of NAMSW would change the value of the derivative warrant liability by 1% or $0.3 million. The value of the derivative earnout liability is directly correlated to the market price of a publicly traded Ordinary Share which is traded under the symbol NAMS. With all other variables held constant, a 1% change in the market price of NAMS would change the value of the derivative earnout liability by 1% or $0.2 million.

Credit Risk

Credit risk is the risk that a counterparty will not meet its obligations under a financial instrument or customer contract, leading to a financial loss. We are exposed to credit risk primarily from our treasury activities, including deposits with banks and financial institutions and have limited credit risk exposure from our operating activities. We hold available cash in bank accounts with banks which have investment grade credit ratings. Management periodically reviews the creditworthiness of the banks with which it holds assets.

We perform research and development activities and do not yet have any sales. We are able to reclaim value added tax, which is recoverable from tax authorities. Management periodically reviews the recoverability of the balance of input value added tax and believes it is fully recoverable.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our management, under the supervision and with the participation of the Chief Executive Officer (who is our principal executive officer) and Chief Financial Officer (who is our principal financial officer), evaluated the effectiveness of our disclosure controls and procedures, as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as of March 31, 2024. The term "disclosure controls and procedures" means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of March 31, 2024, our disclosure controls and procedures were not effective due to the un-remediated material weaknesses in internal control, previously disclosed in the Annual Report:

a lack of consistent and documented risk assessment procedures and control activities related to financial reporting, with a sufficient level of management review and approval, and adequate application of controls over information technology; and
failure to maintain a sufficient complement of personnel commensurate with its accounting and reporting requirements as it continues to grow as a company, and ability to: (i) design and maintain formal accounting policies, including maintaining appropriate segregation of duties; (ii) design and maintain controls over the preparation and review of journal entries and financial statements, including the fair presentation and disclosure of complex accounting matters.

 

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Notwithstanding the material weaknesses, management has concluded that our financial statements included in this Quarterly Report are fairly stated in all material respects in accordance with US-GAAP for each of the periods presented herein.

Remediation

The Company's management, under the oversight of the Audit Committee, is committed to further strengthen and maintain a strong internal control environment and has continued in 2024 the process of executing its remediation plan which included the following measures:

performed a detailed risk assessment;
hired additional internal and external accounting resources, including third-party internal control advisors and technical accounting advisors;
redesigned and documented critical processes and controls associated with internal control over financial reporting;
designed and maintained formal accounting policies;
designed and implemented procedures and controls over the fair presentation of our financial statements;
implemented a new ERP system;
established segregation of duties and management review and approvals across all key business processes, applications and controls over information technology;
designed and implemented controls over the preparation and review of journal entries and financial statements;
designed and implemented controls over financial reporting and information technology; and
implemented management audit tooling to follow up on control performance.

Although the above listed measures were implemented during 2023 and performance continued in the first quarter of 2024, management is still in the process of testing the implemented controls and refining the remediation plan based on the results. Therefore management does not consider the identified material weaknesses to be fully remediated yet. Management is committed to further strengthen its internal control environment in fiscal year 2024.

Changes in Internal Controls over Financial Reporting

Other than the ongoing remediation efforts described above, there were no changes in our internal control over financial reporting (as defined in Rules 13a15(f) and 15d-15(f) under the Exchange Act), during the three months ended March 31, 2024, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Limitations on the Effectiveness of Controls and Procedures

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

We are not party to any material pending legal proceedings. From time to time, we may be involved in legal proceedings arising in the ordinary course of business.

 

Item 1A. Risk Factors

An investment in our Ordinary Shares is risky. In addition to the other information in this Quarterly Report, you should carefully consider the following risk factors in evaluating us and our business. If any of the events described in the following risk factors were to occur, our business, financial condition, results of operation and future growth prospects would likely be materially and adversely affected. In that event, the trading price of our Ordinary Shares could decline, and you could lose all or a part of your investment in our Ordinary Shares. Therefore, we urge you to carefully review this entire report and consider the risk factors discussed below. Moreover, the risks described below are not the only ones that we face. Additional risks not presently known to us or that we currently deem immaterial may also affect our business, financial condition, operating results or prospects. Additional risks that we currently do not know about, or that we currently believe to be immaterial, may also impair our business. Certain statements below are forward-looking statements. See “Special Note Regarding Forward-Looking Statements” in this Quarterly Report.

Those risk factors below denoted with a “*” are newly added or have been materially updated from our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on February 28, 2024.

Risks Related to Our Limited Operating History, Financial Condition and Capital Requirements

*We are a clinical-stage company with limited operating history, no approved products and no historical product revenues, which makes it difficult to assess our future prospects and financial results. We have incurred net losses since our inception, and anticipate that we will continue to incur significant losses for the foreseeable future. We may never generate any product revenue or become profitable or, if we achieve profitability, may not be able to sustain it.

We are a clinical-stage biopharmaceutical company with a limited operating history upon which you can evaluate our business and prospects. Pharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty. Our operations to date have been limited to developing and undertaking clinical trials of our product candidate, obicetrapib. We are not profitable and have not generated product revenue from operations. We have historically incurred net losses since we commenced operations in October 2019. For the year-to-date period ended March 31, 2024, we incurred a net loss of $93.8 million and as of March 31, 2024 we had an accumulated deficit of $410.7 million. We expect to continue to incur significant expenses and increasing operating losses for the foreseeable future, considering the current research and development stage of our activities, as we do not have products approved for commercial sale. Our ability to ultimately achieve recurring product revenues and profitability is dependent upon our ability to successfully complete the development of obicetrapib and obtain necessary regulatory approvals for, and successfully manufacture, market and commercialize, our product together with our partners.

We believe that we will continue to expend substantial resources in the foreseeable future for the clinical development of obicetrapib or any additional product candidates and indications that we may choose to pursue in the future. These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, and payments for third-party manufacturing and supply, as well as sales and marketing of obicetrapib or any of our future product candidates if they are approved for sale by regulatory authorities. Because the outcome of any clinical trial is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of obicetrapib and any other drug candidates that we may develop in the future. Other unanticipated costs may also arise.

Our future capital requirements depend on many factors, including:

the timing of, and the costs involved in, clinical development and obtaining regulatory approvals for our product candidate;
changes in regulatory requirements during the development phase that can delay or force us to stop our activities related to obicetrapib or any of our future product candidates;
the cost of commercialization activities if obicetrapib is approved for sale, including marketing, sales and distribution costs;
the cost of third-party manufacturing of our product candidate;
the number and characteristics of any other product candidates we develop or acquire;

 

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our ability to establish and maintain strategic collaborations, licensing or other commercialization arrangements, and the terms and timing of such arrangements;
the extent and rate of market acceptance of any future approved products;
the expenses needed to attract and retain skilled personnel;
the costs associated with being a public company;
the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including potential litigation costs and the outcome of such litigation;
the timing, receipt and amount of sales of, or royalties on, future approved products, if any;
any product liability or other lawsuits related to obicetrapib or any future product;
scientific breakthroughs in the field of treatment for cardio metabolic diseases that could significantly diminish the need for our product candidate or make it obsolete; and
changes in reimbursement policies that could have a negative impact on our future revenue stream.

We may require substantial additional financing to achieve our goals, and a failure to obtain this capital when needed and on acceptable terms, or at all, could force us to delay, limit, reduce or terminate our product development, commercialization efforts or other operations.

Since our inception, almost all of our resources have been dedicated to the clinical development of obicetrapib. While we have been successful in the past in obtaining financing, we expect to continue to spend substantial amounts to continue the clinical development of our product candidate. As of March 31, 2024, we had cash of $481.1 million.

We may require additional capital to pursue clinical activities, complete clinical trials, and obtain regulatory approval for and commercialize obicetrapib. In addition, our operating plan may change as a result of many factors currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, convertible debt or debt financings, third-party funding, marketing and distribution arrangements, as well as other collaborations, strategic alliances and licensing arrangements, or a combination of these approaches. Even if we believe that we will have sufficient funds for our current or future operating plans, we may seek additional capital if market conditions are favorable or if we have specific strategic considerations.

Any additional fundraising efforts may divert the attention of our management from day-to-day activities, which may adversely affect our ability to develop and commercialize obicetrapib. In addition, we cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all. Moreover, the terms of any financing may negatively impact the holdings or the rights of our shareholders, and the issuance of additional securities, whether equity or debt, by us or the possibility of such issuance may cause the market price of our Ordinary Shares to decline. The incurrence of indebtedness could result in increased fixed payment obligations and we may be required to agree to certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire, sell or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business.

If adequate funds are not available to us on a timely basis, we may be required or choose to:

delay, limit, reduce or terminate clinical trials or other development activities for obicetrapib or any of our future product candidates;
delay, limit, reduce or terminate our other research and development activities; or
delay, limit, reduce or terminate our establishment or expansion of manufacturing, sales and marketing or distribution capabilities or other activities that may be necessary to commercialize obicetrapib or any of our future product candidates.

We may also be unable to expand our operations or otherwise capitalize on our business opportunities, as desired, which could harm our business, financial condition and results of operations.

Raising additional capital may cause dilution to our shareholders, restrict our operations or require us to relinquish rights to our technologies or current or future product candidates.

Unless and until we can generate substantial revenue, we expect to finance our future cash needs through public or private equity offerings, debt financings, collaborations, strategic alliances, license agreements and marketing or distribution arrangements. Additional funds may not be available when we need them on terms that are acceptable to us, or at all. To the extent that we raise such additional capital through the sale of equity or convertible debt securities, our shareholders’ ownership interest will be diluted, and the terms of such securities may include liquidation or other preferences that adversely affect the rights of our existing shareholders. Debt financing, if available, 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 and distributing dividends, and may be secured by all or a portion of our assets.

 

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If we raise funds by entering into collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish additional valuable rights to our technologies, future revenue streams, research programs or product candidates, or grant licenses on terms that may not be favorable to us, any of which may harm our business, financial condition, operating results and prospects. If we are unable to raise additional funds through public or private equity offerings, debt financings, collaborations, strategic alliances, license agreements, or marketing or distribution arrangements when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or cease operations altogether.

We currently, and may in the future, have assets held at financial institutions that may exceed the insurance coverage offered by the Federal Deposit Insurance Corporation (“FDIC”) and the Dutch Deposit Guarantee Scheme, the loss of which would have a severe negative affect on our operations and liquidity.

We currently maintain substantially all of our funds in cash deposit accounts at three financial institutions. The amounts held in our deposit accounts are, and in the future, may be, in excess of the insurance limit of $250,000 and €100,000 provided by the FDIC and Dutch Deposit Guarantee Scheme, respectively. In the event of a failure of any of these financial institutions where we maintain our deposits or other assets, we may incur a loss to the extent such loss exceeds such limitations, which could have a material adverse effect upon our liquidity, financial condition and our results of operations.

Risks Related to Our Product Development, Regulatory Approval and Commercialization

We are dependent on the success of our only product candidate, obicetrapib, and cannot guarantee that obicetrapib will successfully complete clinical development, receive regulatory approval or, if approved, be successfully commercialized.

We have invested almost all of our efforts and financial resources in the research and development of obicetrapib. Our future success, including our ability to generate revenue, depends on our ability to develop, commercialize, market and sell obicetrapib. However, obicetrapib has yet to receive marketing approval from the FDA, the EMA or other comparable regulatory authorities. We currently generate no revenue from the sale of any products, and we may never be able to develop or commercialize a marketable product.

Obicetrapib’s marketability and commercialization are subject to significant risks associated with successfully completing current and future clinical trials, including:

our ability to successfully complete our clinical trials, including timely patient enrollment and acceptable safety and efficacy data and our ability to demonstrate the safety and efficacy of obicetrapib;
unless we have received a deferral or waiver, our ability to complete successfully any pediatric clinical trials agreed pursuant to the Pediatric Research Equity Act or its EU equivalent;
that the Phase 3 clinical trials, even if successfully completed, will be sufficient to support a new drug application ("NDA") submission;
the prevalence and severity of adverse events ("AEs") associated with obicetrapib;
whether we are required by the FDA, the EMA or other comparable regulatory authorities to conduct additional preclinical studies or clinical trials, and the scope and nature of such studies or trials, prior to approval to market our product, such as a cardiovascular outcomes trial;
the timely receipt of necessary marketing approvals from the FDA, the EMA and other comparable regulatory authorities, including pricing and reimbursement determinations;
the ability to successfully commercialize obicetrapib, if approved, for marketing and sale by the FDA, the EMA or other comparable regulatory authorities;
our ability and the ability of our third party manufacturing partners to timely and satisfactorily manufacture quantities of obicetrapib at quality levels necessary to meet regulatory requirements and at a scale sufficient to meet anticipated demand at a cost that allows us to achieve profitability;
our success in educating healthcare providers and patients about the benefits, risks, administration and use of obicetrapib, if approved;
acceptance of obicetrapib, if approved, as safe and effective by patients and the healthcare community;
the maintenance of an acceptable safety profile of our product following any approval;
the availability, perceived advantages, relative cost, safety and efficacy of alternative and competing treatments for the indications addressed by obicetrapib;

 

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entering into, on favorable terms, any collaboration, licensing or other arrangements that may be necessary or desirable to develop, manufacture or commercialize obicetrapib;
the effectiveness of our and any current or future collaborators’ marketing, sales and distribution strategy, and operations;
our ability to obtain, protect and enforce our intellectual property rights with respect to obicetrapib; and
our ability to implement strategies to minimize the impact of pandemics or other health epidemics to our business, including with respect to initiating, enrolling, conducting or completing our planned and ongoing clinical trials of obicetrapib and addressing any potential disruption or delays to the supply of our product candidates.

Many of these clinical, regulatory and commercial risks are beyond our control. Accordingly, we cannot assure you that we will be able to advance obicetrapib successfully through clinical development, or to obtain regulatory approval of, or commercialize, obicetrapib or any future product candidates. If we fail to achieve these objectives or overcome the challenges presented above, we could experience significant delays or an inability to successfully commercialize obicetrapib. Accordingly, we may not be able to generate sufficient revenues through the sale of obicetrapib to enable us to continue our business.

We have never obtained approval for, or commercialized, any product candidate, and may be unable to do so successfully.

As a company, we have never progressed a product candidate through to regulatory approval. We have not previously submitted an NDA, an EU marketing authorization application ("MAA") or any similar drug approval filing to the FDA, the EMA or any comparable regulatory authority for any product candidate, and we cannot be certain that obicetrapib will be successful in clinical trials or receive regulatory approval. Further, obicetrapib may not receive regulatory approval even if it is successful in clinical trials. Even if we successfully obtain regulatory approvals to market our product candidate, our revenues will be dependent, to a significant extent, upon the size of the markets in the territories for which we gain regulatory approval and have commercial rights or share in revenues from the exercise of such rights. If the markets for patient subsets that we are targeting are not as significant as we estimate, we may not generate significant revenues from sales of such products, if approved.

Further, our clinical trials may require more time and incur greater costs than we anticipate. We cannot be certain that our planned clinical trials will begin or conclude on time, if at all. Large-scale trials require significant financial and management resources. Third-party clinical investigators do not operate under our control. Any performance failure on the part of such third parties could delay the clinical development of obicetrapib or delay or prevent us from obtaining regulatory approval or commercializing obicetrapib or future product candidates, depriving us of potential product revenue and resulting in additional losses.

Clinical drug development involves a lengthy and expensive process with uncertain outcomes. Results of earlier studies and trials may not be predictive of future trial results and our clinical trials may fail to adequately demonstrate the safety and efficacy of obicetrapib.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Trial costs have increased significantly following the COVID-19 pandemic. A failure of one or more of our clinical trials can occur at any time during the clinical trial process. We do not know whether future clinical trials, if any, will begin on time, need to be redesigned, enroll an adequate number of patients on time or be completed on schedule, if at all. Clinical trials can be delayed, suspended or terminated for a variety of reasons, including failure to:

obtain allowance from the FDA or comparable foreign regulatory authorities in order to commence a trial;
identify, recruit and train suitable clinical investigators;
reach agreement on acceptable terms with prospective contract research organizations (“CROs”), and clinical trial sites, and have such CROs and sites effect the proper and timely conduct of our clinical trials;
obtain and maintain investigational review board (“IRB”) or independent ethics committee (“EC") approval in foreign jurisdictions, at each clinical trial site;
identify, recruit and enroll suitable patients to participate in a trial;
have a sufficient number of patients complete a trial or return for post-treatment follow-up;
ensure patient compliance with the trial protocols;
ensure clinical investigators and clinical trial sites observe trial protocol or continue to participate in a trial;
address any patient safety concerns that arise during the course of a trial;
address any conflicts with new or existing laws or regulations;
add a sufficient number of clinical trial sites;

 

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manufacture sufficient quantities at the required quality of obicetrapib for use in clinical trials; or
raise sufficient capital to fund a trial.

Product candidates like obicetrapib in later stages of clinical trials, including large CVOTs, may fail to show the desired safety and efficacy traits despite having progressed through preclinical studies and earlier clinical trials. In addition to the safety and efficacy traits of any product candidate, clinical trial failures may result from a multitude of factors including flaws in trial design, dose selection, placebo effect and patient enrollment criteria. A number of companies in the pharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles, notwithstanding promising results in earlier trials, and it is possible that we will as well. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies. In addition, data obtained from trials and studies are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may delay, limit or prevent regulatory approval.

We may also encounter delays if a clinical trial is suspended or terminated by us or the IRBs or ECs of the institutions in which such trials are being conducted, the trial’s data safety monitoring board (the “DSMB”), the FDA, the EMA or other comparable regulatory authorities. Such authorities may suspend or terminate one or more of our clinical trials due to a number of factors, including our failure to conduct the clinical trial in accordance with relevant regulatory requirements or clinical protocols, inspection of the clinical trial operations or trial site by the FDA, the EMA or other comparable regulatory authorities resulting in the imposition of a clinical hold, unforeseen safety issues or adverse side effects, a finding that the participants are being exposed to an unacceptable benefit-risk ratio, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions or lack of adequate funding to continue the clinical trial.

If we experience delays in the initiation, enrollment or completion of any clinical trial of obicetrapib, or if any clinical trials of obicetrapib are cancelled or fail to adequately demonstrate the safety and efficacy of obicetrapib, the commercial prospects of obicetrapib may be materially adversely affected, and our ability to generate product revenues will be delayed or not realized at all. In addition, any delays in completing our clinical trials may increase our costs and slow down our product candidate development and approval process. Any of these delays may significantly harm our business and financial condition. In addition, many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of obicetrapib.

We depend on enrollment of subjects in our clinical trials for obicetrapib. If we experience delays or difficulties enrolling subjects in our clinical trials, our research and development efforts and business, financial condition and results of operations could be materially adversely affected.

If we experience delays or difficulties in the enrollment of subjects in our ongoing or future clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented. The enrollment of subjects depends on many additional factors, including:

the subject eligibility criteria defined in the protocol;
the general willingness of subjects to enroll in the trial;
patient compliance with the trial protocols;
the sample size of the subjects required for analysis of the trial’s primary endpoints;
the proximity of subjects to trial sites;
the design of the trial;
our ability to recruit clinical trial investigators with the appropriate competencies and experience;
clinicians’ and subjects’ perceptions as to the potential advantages of the product candidate being studied in relation to other available therapies, including any new therapies that may be approved for the indications we are investigating;
the clinical site’s ability to obtain and maintain subject consents; and
clinical trial participants may not comply with clinical trial protocol procedures and instructions.

Our clinical trials may also compete with other clinical trials for product candidates that seek to treat cardio metabolic diseases, and this competition will reduce the number and types of subjects available to us, because some subjects who might have opted to enroll in our trials may instead opt to enroll in a clinical trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we may conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of subjects who are available for our clinical trials at such clinical trial sites.