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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: 001-38503

 

Iterum Therapeutics plc

(Exact name of registrant as specified in its charter)

 

 

Ireland

98-1283148

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Fitzwilliam Court 1st Floor,

Leeson Close,

Dublin 2, Ireland

(Address of principal executive offices)

Not applicable

(Zip Code)

 

(+353) 1 669-4820

(Registrant’s telephone number, including area code)

 

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

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Ordinary Shares, $0.01 par value per share

 

ITRM

 

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 April 30, 2024, the registrant had 16,554,885 ordinary shares, $0.01 par value per share, outstanding.

 

 


 

Table of Contents

 

Page

PART I.

FINANCIAL INFORMATION

1

Item 1.

Financial Statements (Unaudited)

1

Condensed Consolidated Balance Sheets

1

Condensed Consolidated Statements of Operations and Comprehensive Loss

2

Condensed Consolidated Statements of Cash Flows

3

 

Condensed Consolidated Statements of Stockholders' Equity

4

Notes to Unaudited Condensed Consolidated Financial Statements

5

Item 2.

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

21

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

33

Item 4.

Controls and Procedures

33

PART II.

OTHER INFORMATION

34

Item 1.

Legal Proceedings

34

Item 1A.

Risk Factors

34

Item 5.

Other Information

94

Item 6.

Exhibits

95

 

Signatures

96

 

i


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND INDUSTRY DATA

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report are forward-looking statements. In some cases, you can identify forward-looking statements by words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “seek,” “should,” “target,” “will,” “would,” or the negative of these words or other comparable terminology. These forward-looking statements include, but are not limited to, statements about:

our use of cash reserves;
our ability to continue as a going concern;
the design, initiation, timing, progress and results of our preclinical studies and clinical trials, and our research and development programs;
our ability to resolve the issues set forth in the Complete Response Letter (CRL) received from the U.S. Food and Drug Administration in July 2021 in connection with our New Drug Application (NDA) for oral sulopenem;
our ability to retain the continued service of our key professionals and to identify, hire and retain additional qualified professionals;
our ability to advance product candidates into, and successfully complete, clinical trials;
the potential advantages of our product candidates;
the timing or likelihood of regulatory filings and approvals;
the commercialization of our product candidates, if approved;
our manufacturing plans;
our sales, marketing and distribution capabilities and strategy;
market acceptance of any product we successfully commercialize;
the pricing, coverage and reimbursement of our product candidates, if approved;
the implementation of our business model, strategic plans for our business and product candidates;
the scope of protection we are able to establish and maintain for intellectual property rights covering our product candidates and our ability to defend and enforce any such intellectual property rights;
our ability to enter into strategic arrangements, collaborations and/or commercial partnerships in the United States and other territories and the potential benefits of such arrangements;
our estimates regarding expenses, capital requirements and needs for additional financing;
our expectations regarding how far into the future our cash on hand will fund our ongoing operations;
our financial performance;
developments relating to our competitors and our industry;
our ability to regain and maintain compliance with listing requirements of the Nasdaq Capital Market;
the impact of general economic conditions, including inflation; and
our strategic process to sell, license, or otherwise dispose of our rights to oral sulopenem to maximise value for our stakeholders and the outcome, impact, effects and results of our pursuit of strategic alternatives, including the terms, timing, structure, value, benefits and costs of any strategic process and our ability to complete one at all.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors” and elsewhere in this Quarterly Report. Moreover, we operate in a very competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.

ii


 

You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report to conform these statements to new information, actual results or to changes in our expectations, except as required by law.

You should read this Quarterly Report and the documents that we have filed with the Securities and Exchange Commission (SEC), as exhibits to this Quarterly Report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.

This Quarterly Report also contains industry, market and competitive position data from our own internal estimates and research as well as industry and general publications and research surveys and studies conducted by third parties. Industry publications, studies, and surveys generally state that they have been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. Our internal data and estimates are based upon information obtained from trade and business organizations and other contacts in the markets in which we operate and our management’s understanding of industry conditions. While we believe that each of these studies and publications is reliable, we have not independently verified market and industry data from third-party sources. While we believe our internal company research is reliable and the market definitions are appropriate, neither such research nor these definitions have been verified by any independent source. The industry in which we operate is subject to a high degree of uncertainty and risks due to various factors, including those described in the section titled “Risk Factors”.

In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely upon these statements.

 

 

iii


 

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited).

ITERUM THERAPEUTICS PLC

Condensed Consolidated Balance Sheets

(In thousands except share and per share data)

(Unaudited)

 

 

March 31,

 

 

December 31,

 

 

 

2024

 

 

2023

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

7,389

 

 

$

6,071

 

Short-term investments

 

 

10,825

 

 

 

17,859

 

Income taxes receivable

 

 

 

 

 

38

 

Prepaid expenses and other current assets

 

 

840

 

 

 

1,628

 

Total current assets

 

 

19,054

 

 

 

25,596

 

Property and equipment, net

 

 

44

 

 

 

51

 

Restricted cash

 

 

34

 

 

 

34

 

Other assets

 

 

493

 

 

 

578

 

Total assets

 

$

19,625

 

 

$

26,259

 

Liabilities and Shareholders’ Deficit

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

2,966

 

 

$

4,996

 

Accrued expenses

 

 

1,859

 

 

 

7,761

 

Exchangeable Notes

 

 

12,203

 

 

 

 

Other current liabilities

 

 

755

 

 

 

761

 

Income taxes payable

 

 

11

 

 

 

 

Total current liabilities

 

$

17,794

 

 

$

13,518

 

Exchangeable Notes

 

 

 

 

 

11,453

 

Royalty-linked notes

 

 

7,889

 

 

 

7,503

 

Other liabilities

 

 

92

 

 

 

188

 

Total liabilities

 

$

25,775

 

 

$

32,662

 

Commitments and contingencies (Note 14)

 

 

 

 

 

 

Shareholders’ deficit

 

 

 

 

 

 

Undesignated preferred shares, $0.01 par value per share: 100,000,000 shares
authorized at March 31, 2024 and December 31, 2023;
no shares issued at March 31, 2024 and December 31, 2023

 

 

 

 

 

 

Ordinary shares, $0.01 par value per share: 80,000,000 shares authorized at March 31, 2024 and December 31, 2023, 16,470,414 shares issued at March 31, 2024; 13,499,003 shares issued at December 31, 2023

 

 

165

 

 

 

135

 

Additional paid-in capital

 

 

462,084

 

 

 

454,759

 

Accumulated deficit

 

 

(468,399

)

 

 

(461,298

)

Accumulated other comprehensive income

 

 

 

 

 

1

 

Total shareholders' deficit

 

 

(6,150

)

 

 

(6,403

)

Total liabilities and shareholders’ deficit

 

$

19,625

 

 

$

26,259

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

1


 

ITERUM THERAPEUTICS PLC

Condensed Consolidated Statements of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

 

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2024

 

 

2023

 

Operating expenses:

 

 

 

 

 

 

Research and development

 

$

(3,977

)

 

$

(6,432

)

General and administrative

 

 

(2,186

)

 

 

(2,098

)

Total operating expenses

 

 

(6,163

)

 

 

(8,530

)

Operating loss

 

 

(6,163

)

 

 

(8,530

)

Interest expense, net

 

 

(487

)

 

 

(399

)

Adjustments to fair value of derivatives

 

 

(386

)

 

 

(878

)

Other (expense) / income, net

 

 

(17

)

 

 

41

 

Total other expense

 

 

(890

)

 

 

(1,236

)

Loss before income taxes

 

 

(7,053

)

 

 

(9,766

)

Income tax expense

 

 

(48

)

 

 

(123

)

Net loss

 

$

(7,101

)

 

$

(9,889

)

Net loss per share – basic and diluted

 

$

(0.46

)

 

$

(0.78

)

Weighted average ordinary shares outstanding – basic and diluted

 

 

15,432,693

 

 

 

12,681,900

 

Statements of Comprehensive Loss

 

 

 

 

 

 

Net loss

 

$

(7,101

)

 

$

(9,889

)

Other comprehensive income:

 

 

 

 

 

 

  Unrealized (loss) / gain on marketable securities

 

 

(1

)

 

 

219

 

Comprehensive loss

 

$

(7,102

)

 

$

(9,670

)

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

2


 

ITERUM THERAPEUTICS PLC

Condensed Consolidated Statements of Cash Flows

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(7,101

)

 

$

(9,889

)

Adjustments to reconcile net loss to cash used in operating activities:

 

 

 

 

 

 

Depreciation

 

 

7

 

 

 

7

 

Amortization of intangible asset

 

 

 

 

 

429

 

Share-based compensation expense

 

 

138

 

 

 

393

 

Interest on short-term investments

 

 

(1

)

 

 

(77

)

Amortization of debt discount and deferred financing costs

 

 

569

 

 

 

578

 

Interest on exchangeable notes - non-cash

 

 

181

 

 

 

205

 

Adjustments to fair value of derivatives

 

 

386

 

 

 

878

 

Other

 

 

496

 

 

 

606

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

226

 

 

 

(1,445

)

Accounts payable

 

 

(2,031

)

 

 

(539

)

Accrued expenses

 

 

(5,902

)

 

 

(748

)

Income taxes

 

 

49

 

 

 

114

 

Other liabilities

 

 

(100

)

 

 

(102

)

Net cash used in operating activities

 

 

(13,083

)

 

 

(9,590

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of short-term investments

 

 

(6,489

)

 

 

(3,892

)

Proceeds from sale of short-term investments

 

 

13,700

 

 

 

8,998

 

Net cash provided by investing activities

 

 

7,211

 

 

 

5,106

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of ordinary shares, net of transaction costs

 

 

7,217

 

 

 

235

 

Net cash provided by financing activities

 

 

7,217

 

 

 

235

 

Effect of exchange rates on cash and cash equivalents

 

 

(27

)

 

 

(12

)

Net increase / (decrease) in cash, cash equivalents and restricted cash

 

 

1,318

 

 

 

(4,261

)

Cash, cash equivalents and restricted cash, at beginning of period

 

 

6,105

 

 

 

21,126

 

Cash, cash equivalents and restricted cash, at end of period

 

$

7,423

 

 

$

16,865

 

Supplemental Disclosure of Cash Flow Information:

 

 

 

 

 

 

Income taxes paid - U.S.

 

$

 

 

$

11

 

Interest paid

 

$

 

 

$

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

3


 

ITERUM THERAPEUTICS PLC

Condensed Consolidated Statements of Stockholders' Equity / (Deficit)

(In thousands, except share and per share data)

(Unaudited)

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid
in Capital

 

 

Accumulated Deficit

 

 

Comprehensive Income (Loss)

 

 

Total

 

Balance at December 31, 2023

 

 

13,499,003

 

 

$

135

 

 

$

454,759

 

 

$

(461,298

)

 

$

1

 

 

$

(6,403

)

Issuance of ordinary shares, net

 

 

2,971,411

 

 

 

30

 

 

 

7,187

 

 

 

 

 

 

 

 

 

7,217

 

Share-based compensation expense

 

 

 

 

 

 

 

 

138

 

 

 

 

 

 

 

 

 

138

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(7,101

)

 

 

 

 

 

(7,101

)

Unrealized loss on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

(1

)

Balance at March 31, 2024

 

 

16,470,414

 

 

$

165

 

 

$

462,084

 

 

$

(468,399

)

 

$

 

 

$

(6,150

)

 

 

 

Ordinary Shares

 

 

Additional

 

 

 

 

 

Accumulated Other

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Paid
in Capital

 

 

Accumulated Deficit

 

 

Comprehensive Income (Loss)

 

 

Total

 

Balance at December 31, 2022

 

 

12,598,641

 

 

$

126

 

 

$

451,150

 

 

$

(422,927

)

 

$

(350

)

 

$

27,999

 

Issuance of ordinary shares, net

 

 

207,192

 

 

 

2

 

 

 

233

 

 

 

 

 

 

 

 

 

235

 

Share-based compensation expense

 

 

 

 

 

 

 

 

393

 

 

 

 

 

 

 

 

 

393

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(9,889

)

 

 

 

 

 

(9,889

)

Unrealized income on available-for-sale securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

219

 

 

 

219

 

Balance at March 31, 2023

 

 

12,805,833

 

 

$

128

 

 

$

451,776

 

 

$

(432,816

)

 

$

(131

)

 

$

18,957

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

4


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

 

1. Basis of Presentation

Description of Business

Iterum Therapeutics plc (the Company) was incorporated under the laws of the Republic of Ireland in June 2015 as a limited company and re-registered as a public limited company on March 20, 2018. The Company maintains its registered office at Fitzwilliam Court, 1st Floor, Leeson Close, Dublin 2, Ireland. The Company commenced operations in November 2015. The Company licensed global rights to its novel anti-infective compound, sulopenem, from Pfizer Inc. (Pfizer). The Company is a clinical-stage pharmaceutical company dedicated to developing and commercializing sulopenem to be potentially the first oral penem available in the United States and the first and only oral and intravenous (IV) branded penem available globally.

Liquidity and Going Concern

Since inception, the Company has devoted substantially all of its efforts to research and development, recruiting management and technical staff, and raising capital, and has financed its operations through the issuance of ordinary and convertible preferred shares, debt raised under a financing arrangement with Silicon Valley Bank (SVB) including the Paycheck Protection Program loan (PPP loan), a sub-award from the Trustees of Boston University under the Combating Antibiotic Resistant Bacteria Biopharmaceutical Accelerator (CARB-X) program and the proceeds of a private placement (Private Placement) and subsequent rights offering (Rights Offering) pursuant to which its wholly owned subsidiary, Iterum Therapeutics Bermuda Limited (Iterum Bermuda) issued and sold approximately $51.8 million aggregate principal amount of 6.500% Exchangeable Senior Subordinated Notes due 2025 (Exchangeable Notes) and $0.1 million aggregate principal amount of Limited Recourse Royalty-Linked Subordinated Notes (the RLNs and, together with the Exchangeable Notes, the Securities). The Company has not generated any product revenue. The Company is subject to risks and uncertainties common to early-stage companies in the pharmaceutical industry, including, but not limited to, the ability to secure additional capital to fund operations, failure to achieve regulatory approval, failure to successfully develop and commercialize its product candidates, development by competitors of new technological innovations, dependence on key personnel, protection of proprietary technology and compliance with government regulations. Product candidates currently under development will require additional research and development efforts, including regulatory approval prior to commercialization.

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.

The accompanying condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and include the accounts of the Company and its subsidiaries.

The Company filed a universal shelf registration statement on Form S-3 with the SEC, which was declared effective on October 17, 2022 (File No. 333-267795), and pursuant to which the Company registered for sale up to $100.0 million of any combination of debt securities, ordinary shares, preferred shares, subscription rights, purchase contracts, units and/or warrants from time to time and at prices and on terms that the Company may determine. On October 7, 2022, the Company entered into a sales agreement with H.C. Wainwright & Co., LLC (HC Wainwright), as agent, pursuant to which the Company may offer and sell ordinary shares, nominal value $0.01 per share, for aggregate gross sales proceeds of up to $16.0 million (subject to the availability of ordinary shares), from time to time through HC Wainwright by any method permitted that is deemed to be an "at the market offering" as defined in Rule 415 (a)(4) promulgated under the Securities Act of 1933, as amended.

In accordance with Accounting Standards Update (ASU) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year of the date of issue of these quarterly condensed consolidated financial statements.

The Company has funded its operations to date primarily with proceeds from the sale of preferred shares and ordinary shares, warrants, debt raised under its financing arrangement with SVB including the PPP loan (both of which have been repaid), payments received under the CARB-X program and proceeds of the Private Placement and Rights Offering. The Company has incurred operating losses since inception, including net losses of $7,101 and $9,889 for the three months ended March 31, 2024 and 2023, respectively, and a net loss of $38,371 for the year ended December 31, 2023. The Company had an accumulated deficit of $468,399 as of March 31, 2024 and expects to continue to incur net losses for the foreseeable future. The Company’s future cash flows are dependent on key variables such as its ability to secure additional sources of funding in the form of public or private financing of debt or equity or collaboration agreements. Based on its available cash, cash equivalents and short-term investments, the Company does not have cash on hand to fund its current operations and capital expenditure requirements for the next 12 months from the date of this Quarterly Report on Form 10-Q including the repayment of the Exchangeable Notes in January 2025. This condition raises substantial doubt about the Company’s ability to continue as a going concern for one year from the date these condensed consolidated financial statements are issued.

The Company plans to address this condition by raising funding through the possible sale of the Company’s equity or debt through public or private equity financings, which may include sales of the Company’s ordinary shares under the Company’s sales

5


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

agreement with H.C. Wainwright. Although management intends to pursue plans to obtain additional funding to finance its operations, and the Company has successfully raised capital in the past, there is no assurance that the Company will be successful in obtaining sufficient funding on terms acceptable to the Company to fund continuing operations, if at all. In addition, the Company’s ability to raise additional capital through the issue of new shares for cash is limited to issuing only 1.7 million ordinary shares (or rights to acquire such shares) for cash, based on the amount of authorized ordinary shares unissued or unreserved and free from any statutory rights of pre-emption, and therefore available for issuance as of April 30, 2024. While shareholders approved an increase of an additional 60,000,000 ordinary shares at our annual general meeting in May 2023 (the Additional Shares), we did not receive approval for the disapplication of statutory pre-emption rights over such shares. Absent shareholder approval of the dis-application of statutory pre-emption rights with respect to the Additional Shares, any Additional Shares that we propose to issue for cash will first have to be offered to all of our existing shareholders on the same or more favorable terms on a pro-rata basis. As a result of this limitation, we are currently severely limited in the amount of ordinary shares we may sell for cash in any capital raising transaction, and where we propose to issue shares for cash consideration, we may be required to first offer those shares to all of our existing shareholders in a time-consuming pro-rata rights offering. Furthermore, while the statutory pre-emption right applies only to share issuances for cash consideration and it does not apply where we issue shares for non-cash consideration (such as in a share exchange transaction or in any transaction in which property other than cash is received by us in payment for shares), any such transaction would likely be time consuming and complex to execute. In addition, in parallel, the Company is evaluating its corporate, strategic, financial and financing alternatives, with the goal of maximizing value for its stakeholders. These alternatives could potentially include the licensing, sale or divestiture of the Company’s assets or proprietary technologies or another strategic transaction involving the Company. The evaluation of corporate, strategic, financial and financing alternatives may not result in any particular action or any transaction being pursued, entered into or consummated, and there is no assurance as to the timing, sequence or outcome of any action or transaction or series of actions or transactions.

If the Company is unable to obtain funding, it could be forced to significantly delay, scale back or discontinue the development and commercialization of its sulopenem program, or otherwise change its strategy, which could adversely affect its business prospects, or the Company may be unable to continue operations. Based on the Company’s operating losses since inception, the expectation of continued operating losses for the foreseeable future, and the need to raise additional capital to finance its future operations, management has concluded there is substantial doubt about the Company’s ability to continue as a going concern within one year from the date these condensed consolidated financial statements are issued.

The accompanying condensed consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty. Accordingly, the condensed consolidated financial statements have been prepared on a basis that assumes the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the ordinary course of business.

Interim Financial Information

The condensed consolidated balance sheet at December 31, 2023 was derived from audited financial statements, but does not include all disclosures required by GAAP. The accompanying unaudited condensed consolidated financial statements as of March 31, 2024 and for the three months ended March 31, 2024 and 2023 have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) for interim financial statements. Certain information and footnote disclosures normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. These condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and the notes thereto for the year ended December 31, 2023, included in the Company’s Annual Report on Form 10-K filed with the SEC on March 28, 2024. In the opinion of management, all adjustments, consisting only of normal recurring adjustments necessary for a fair statement of the Company’s financial position as of March 31, 2024, and results of operations for the three months ended March 31, 2024 and 2023, and cash flows for the three months ended March 31, 2024 and 2023 have been made. The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results of operations that may be expected for the year ending December 31, 2024.

2. Summary of Significant Accounting Policies

There have been no material changes in the Company’s significant accounting policies as compared to the significant accounting policies described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, the reported amounts of expenses during the reporting period and the assessment of the Company’s ability to continue as a going concern. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, the valuation of the RLNs and the accrual for research and development expenses. The Company bases its estimates on historical experience, known trends and other market-specific or other relevant factors that it believes to be reasonable under the

6


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

circumstances. On an ongoing basis, management evaluates its estimates as there are changes in circumstances, facts and experience. Actual results could differ materially from those estimates.

Specifically, management has estimated variables used to calculate the discounted cash flow analysis (DCF) to value the RLN liability (see Note 3 – Fair Value of Financial Assets and Liabilities).

Cash and Cash Equivalents

The Company’s cash and cash equivalents consist of cash balances and highly liquid investments with maturities of three months or less at the date of purchase. Accounts held at U.S. financial institutions are insured by the Federal Deposit Insurance Corporation up to $250, while accounts held at Irish financial institutions are insured under the Deposit Guarantee Scheme up to $108 (€100).

Cash accounts with any type of restriction are classified as restricted cash. If restrictions are expected to be lifted in the next twelve months, the restricted cash account is classified as current. Included within restricted cash on the Company’s condensed consolidated balance sheet is $17 as of March 31, 2024 relating to the warrants issued on June 5, 2020 pursuant to the securities purchase agreement (June 3, 2020 SPA) from the June 3, 2020 registered direct offering (June 3, 2020 Offering), $6 as of March 31, 2024 relating to the warrants issued on July 2, 2020 pursuant to the securities purchase agreement (June 30, 2020 SPA) from the June 30, 2020 registered direct offering (June 30, 2020 Offering) and $11 as of March 31, 2024 relating to warrants issued in the underwritten offering in October 2020 (October 2020 Offering). These restricted cash amounts are unchanged from December 31, 2023. On the closing date of each of the registered direct offerings in June 2020 (June 3 Offering) and July 2020 (June 30 Offering) and the underwritten offering in the October 2020 Offering, each investor deposited $0.01 per warrant issued being the nominal value of the underlying ordinary share represented by each warrant. This amount will be held in trust by the Company pending a decision by the relevant investor to exercise the warrant by means of a “cashless exercise” pursuant to the terms of the warrant, in which case the $0.01 will be used to pay up the nominal value of the ordinary share issued pursuant to the warrant. Upon the exercise of the warrants other than by means of a "cashless exercise", the amount held in trust will be returned to the relevant investor in accordance with the terms of the applicable purchase agreement or prospectus.

Concentration of Credit Risk

Financial instruments that potentially expose the Company to concentrations of credit risk consist primarily of cash and cash equivalents and short-term investments. The Company has most of its cash, cash equivalents and short-term investments at three accredited financial institutions in the United States and Ireland, in amounts that exceed federally insured limits. The Company does not believe that it is subject to unusual credit risk beyond the normal credit risk associated with commercial banking relationships.

Net Loss Per Ordinary Share

Basic and diluted net loss per ordinary share is determined by dividing net loss attributable to ordinary shareholders by the weighted-average ordinary shares outstanding during the period in accordance with Accounting Standard Codification (ASC) 260, Earnings per Share. For the periods presented, the following ordinary shares underlying the options, unvested restricted share units, warrants and the Exchangeable Notes have been excluded from the calculation because they would be anti-dilutive.

 

 

Three Months Ended March 31,

 

 

 

2024

 

 

2023

 

Options to purchase ordinary shares

 

 

1,108,988

 

 

 

1,213,091

 

Unvested restricted share units

 

 

16,666

 

 

 

89,439

 

Warrants

 

 

480,186

 

 

 

480,186

 

Exchangeable Notes

 

 

1,271,692

 

 

 

1,352,340

 

Total

 

 

2,877,532

 

 

 

3,135,056

 

 

Segment and Other Information

The Company determines and presents operating segments based on the information that is internally provided to the Chief Executive Officer, Chief Financial Officer and Chief Medical Officer, who together are considered the Company’s chief operating decision maker, in accordance with ASC 280, Segment Reporting. The Company has determined that it operates as a single business segment, which is the development and commercialization of innovative treatments for drug resistant bacterial infections.

7


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

The distribution of total operating expenses by geographical area was as follows:

 

 

Three Months Ended March 31,

 

Operating expenses

 

2024

 

 

2023

 

Ireland

 

$

4,521

 

 

$

7,068

 

U.S.

 

 

1,608

 

 

 

1,440

 

Bermuda

 

 

34

 

 

 

22

 

Total

 

$

6,163

 

 

$

8,530

 

The distribution of long-lived assets by geographical area was as follows:

 

Long-lived assets

 

March 31, 2024

 

 

December 31, 2023

 

Ireland

 

$

294

 

 

$

342

 

U.S.

 

 

243

 

 

 

287

 

Total

 

$

537

 

 

$

629

 

 

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the FASB or other standard setting bodies and adopted by the Company as of the specified effective date. Unless otherwise discussed, the Company believes that the impact of recently issued standards that are not yet effective will not have a material impact on its financial position or results of operations upon adoption.

On November 27, 2023, the FASB issued ASU No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, or ASU 2023-07, which enhances segment disclosures and requires additional disclosures of segment expenses. This ASU is effective for annual periods in fiscal years beginning after December 15, 2023, and interim periods beginning after December 15, 2024. Early adoption is permitted. ASU 2023-07 is not expected to have a material impact on the consolidated financial statements.

On October 9, 2023, the FASB issued ASU No. 2023-06, Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative, or ASU 2023-06, which incorporates into the Codification several disclosures and presentation requirements currently residing in SEC Regulations S-X and S-K. For entities subject to the existing SEC disclosure requirements, including those preparing for sale or issuance of securities, the effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. For all other entities, the amendments will be effective two years later, with early adoption permitted. ASU 2023-06 is not expected to have a material impact on the consolidated financial statements.

In December 2023 the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures, or ASU 2023-09, which enhances the annual income tax disclosures for the effective tax rate reconciliation and income taxes paid. The amendments are effective for public business entities, for annual periods beginning after December 15, 2024 and for annual periods beginning after December 15, 2025 for all other entities. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The ASU applies on a prospective basis to annual financial statements for periods beginning after the effective date. However, retrospective application in all prior periods presented is permitted. The Company is assessing what impact ASU 2023-09 will have on the condensed consolidated financial statements.

3. Fair Value of Financial Assets and Liabilities

The following table presents information about the Company’s financial assets that were carried at fair value on a recurring basis on the condensed consolidated balance sheet as of March 31, 2024 and December 31, 2023 and indicates the fair value hierarchy of the valuation inputs utilized to determine such fair value.

8


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

 

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

  Corporate bonds

 

$

1,193

 

 

$

 

 

$

1,193

 

 

$

 

  Commercial paper

 

 

780

 

 

 

 

 

 

780

 

 

 

 

  U.S. Treasury bonds

 

 

8,852

 

 

 

 

 

 

8,852

 

 

 

 

 

 

$

10,825

 

 

$

 

 

$

10,825

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

Total

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

  Corporate bonds

 

$

1,179

 

 

$

 

 

$

1,179

 

 

$

 

  Commercial paper

 

 

3,287

 

 

 

 

 

 

3,287

 

 

 

 

  U.S. Treasury bonds

 

 

13,393

 

 

 

 

 

 

13,393

 

 

 

 

 

 

$

17,859

 

 

$

 

 

$

17,859

 

 

$

 

 

See Note 4 for details on the short-term investments. The carrying amounts reported in the condensed consolidated balance sheets for prepaid expenses and other current assets, accounts payable, accrued expenses and other current liabilities approximate their fair value based on the short-term maturity of these instruments.

The following table presents information about the Company’s Exchangeable Notes and RLNs and indicates the fair value hierarchy of the valuation inputs utilized to determine the approximate fair value:

 

March 31, 2024

 

Book

 

 

Approximate

 

 

 

 

 

 

 

 

 

 

Short-term Liabilities

 

Value

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Exchangeable Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Exchangeable note

 

$

12,203

 

 

$

12,239

 

 

$

 

 

$

12,239

 

 

$

 

Total short-term liabilities

 

$

12,203

 

 

$

12,239

 

 

$

 

 

$

12,239

 

 

$

 

Long-term Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue Futures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty-linked notes

 

 

7,889

 

 

 

7,889

 

 

 

 

 

 

 

 

 

7,889

 

Total long-term liabilities

 

$

7,889

 

 

$

7,889

 

 

$

 

 

$

 

 

$

7,889

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

Book

 

 

Approximate

 

 

 

 

 

 

 

 

 

 

Long-term Liabilities

 

Value

 

 

Fair Value

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

Exchangeable Notes

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Long-term exchangeable note

 

$

11,453

 

 

$

11,645

 

 

$

 

 

$

11,645

 

 

$

 

Revenue Futures

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Royalty-linked notes

 

 

7,503

 

 

 

7,503

 

 

 

 

 

 

 

 

 

7,503

 

Total long-term liabilities

 

$

18,956

 

 

$

19,148

 

 

$

 

 

$

11,645

 

 

$

7,503

 

The fair value of Exchangeable Notes was determined using DCF analysis using the fixed interest rate outlined in the indenture governing the Exchangeable Notes (Exchangeable Notes Indenture), without consideration of transaction costs, which represents a Level 2 basis of fair value measurement.

The Level 3 liabilities held as of March 31, 2024 consist of a separate financial instrument, that was issued as part of the Units, the RLNs (see Note 10 – Royalty-Linked Notes).

At any time on or after January 21, 2021, subject to specified limitations, the Exchangeable Notes are exchangeable for the Company’s ordinary shares, cash or a combination of ordinary shares and cash, at an exchange rate of 104.4282 shares per $1,000 of principal and interest on the Exchangeable Notes (equivalent to an exchange price of approximately $9.576 per ordinary share) as of March 31, 2024, which was adjusted from an initial exchange rate of 66.666 shares per $1,000 principal and interest on the Exchangeable Notes (equivalent to an initial exchange price of $15.00 per ordinary share) and is subject to further adjustment pursuant to the terms of the Exchangeable Notes Indenture. Beginning on January 21, 2021 to March 31, 2024, certain noteholders of $40,691 aggregate principal amount of Exchangeable Notes have exchanged their notes for an aggregate of 3,760,155 of the Company’s ordinary shares, which included accrued and unpaid interest relating to such notes. The aggregate principal amount of Exchangeable Notes outstanding as of March 31, 2024 was $11,117. The fair value of the exchange option at March 31, 2024 was $0.

9


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

The RLN liability is carried at fair value on the condensed consolidated balance sheet (see Note 10 – Royalty-Linked Notes). The total fair value of $7,889 was determined using DCF analysis, without consideration of transaction costs, which represents a Level 3 basis of fair value measurement. The key inputs to valuing the RLNs were the terms of the indenture governing the RLNs (the RLN Indenture), the expected cash flows to be received by holders of the RLNs based on management’s revenue forecasts of U.S. sulopenem sales and a risk-adjusted discount rate to derive the net present value of expected cash flows. The RLNs will be subject to a maximum return amount, including all principal and payments and certain default interest in respect of uncurable defaults, of $160.00 (or 4,000 times the principal amount of such note). The discount rate applied to the model was 22%. Fair value measurements are highly sensitive to changes in these inputs and significant changes in these inputs could result in a significantly higher or lower fair value.

There have been no transfers of assets or liabilities between the fair value measurement levels.

4. Short-term Investments

The Company classifies its short-term investments as available-for-sale. Short-term investments comprise highly liquid investments with minimum “A-” rated securities and as at quarter end consist of corporate bonds, commercial paper and U.S. Treasury bonds with maturities of more than three months at the date of purchase. Short-term investments as of March 31, 2024 have a weighted average maturity of 0.13 years. The investments are reported at fair value with unrealized gains or losses recorded in the condensed consolidated statements of operations and comprehensive loss. Any differences between the amortized cost and fair value of investments are represented by unrealized gains or losses. The fair value of corporate bonds, commercial paper and U.S. Treasury bonds are represented by Level 2 fair value measurements - quoted price for a similar asset, or other observable inputs such as interest rates or yield curves.

The following table represents the Company’s available for sale short-term investments by major security type as of March 31, 2024 and December 31, 2023:

March 31, 2024

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity by period

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair Value

 

 

Less than 1

 

 

 

 

Available-for-sale

 

Cost

 

 

Gains

 

 

(Losses)

 

 

Total

 

 

Year

 

 

1 to 5 Years

 

Corporate bonds

 

$

1,192

 

 

$

1

 

 

$

 

 

$

1,193

 

 

$

1,193

 

 

$

 

Commercial paper

 

 

780

 

 

 

 

 

 

 

 

 

780

 

 

 

780

 

 

 

 

U.S. Treasury bonds

 

 

8,852

 

 

 

2

 

 

 

(2

)

 

 

8,852

 

 

 

8,852

 

 

 

 

Total

 

$

10,824

 

 

$

3

 

 

$

(2

)

 

$

10,825

 

 

$

10,825

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2023

 

 

 

 

 

 

 

 

 

 

 

 

 

Maturity by period

 

 

 

Amortized

 

 

Unrealized

 

 

Unrealized

 

 

Fair Value

 

 

Less than 1

 

 

 

 

Available-for-sale

 

Cost

 

 

Gains

 

 

(Losses)

 

 

Total

 

 

Year

 

 

1 to 5 Years

 

Corporate bonds

 

$

1,179

 

 

$

1

 

 

$

 

 

$

1,180

 

 

$

1,180

 

 

$

 

Commercial paper

 

 

3,288

 

 

 

 

 

 

(1

)

 

 

3,287

 

 

 

3,287

 

 

 

 

U.S. Treasury bonds

 

 

13,391

 

 

 

3

 

 

 

(2

)

 

 

13,392

 

 

 

13,392

 

 

 

 

Total

 

$

17,858

 

 

$

4

 

 

$

(3

)

 

$

17,859

 

 

$

17,859

 

 

$

 

For the three months ended March 31, 2024 and 2023, no allowance was recorded for credit losses. Unrealized gains and losses are reported as a component of accumulated other comprehensive loss in shareholders’ deficit.

5. Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consist of the following:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Prepaid research and development expenses

 

$

497

 

 

$

872

 

Prepaid insurance

 

 

197

 

 

 

472

 

Other prepaid assets

 

 

128

 

 

 

89

 

Research and development tax credit receivable

 

 

18

 

 

 

195

 

Total

 

$

840

 

 

$

1,628

 

 

10


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

6. Property and Equipment, net

Property and equipment and related accumulated depreciation are as follows:

 

 

 

March 31,
2024

 

 

December 31,
2023

 

Leasehold improvements

 

$

148

 

 

$

148

 

Furniture and fixtures

 

 

120

 

 

 

120

 

Computer equipment

 

 

98

 

 

 

98

 

 

 

 

366

 

 

 

366

 

Less: accumulated depreciation

 

 

(322

)

 

 

(315

)

 

 

$

44

 

 

$

51

 

Depreciation expense for the three months ended March 31, 2024 and 2023 was $7 and $7, respectively.

7. Leases

The Company has entered into a number of operating leases, primarily for office space and commercial property. These leases have remaining terms which range from 0.9 years to 1.3 years. The renewal option on one lease was exercised in February 2022 for an additional period of three years, extending this lease term to June 2025. A Deed of Assignment was signed in August 2023 in relation to a commercial property lease and accordingly the related Right of Use asset and lease liability were derecognized. In September 2020, the Company entered into a sublease agreement for a commercial unit. This sublease agreement was assigned with the related lease in August 2023.

In November 2021, the Company entered into a 12-month lease, with a rolling extension, for office space, and in May 2022, the Company entered into a 6-month lease for office space, which was extended to November 2023, and elected not to apply the measurement and recognition requirements of ASC 842 to these short-term leases as any renewal term exercised or considered reasonably certain of exercise by the Company did not extend more than 12 months from the end of the previously determined lease term. In August 2023, the Company extended the lease agreements for a further nine months, with a rolling extension, and twelve months, respectively. While neither of the extended agreements extend more than 12 months from the end of the previously determined lease term, it is considered to be reasonably certain that these lease arrangements will be extended beyond a period of more than 12 months. Accordingly, the Company has applied the measurement and recognition requirements of ASC 842 to these lease arrangements.

Certain leases contain variable lease payments, including payments based on an index or rate. Variable lease payments based on an index or rate are initially measured using the index or rate in effect at lease commencement. Certain agreements contain both lease and non-lease components. The Company has elected to separately account for these components in determining the lease liabilities and right-of-use assets. The Company’s lease agreements generally do not provide an implicit borrowing rate; therefore, an internal incremental borrowing rate was determined based on information available at lease commencement date for the purposes of determining the present value of lease payments. The Company used the incremental borrowing rate on January 1, 2019 for all leases that commenced prior to that date.

All operating lease expenses are recognized on a straight-line basis over the lease term. The Company recognized $99 and $106 of operating lease costs for right-of-use assets during the three months ended March 31, 2024 and 2023, respectively. No rental expense on short-term leases was recognized during the three months ended March 31, 2024, and $72 of rental expense was recognized on short-term leases during the three months ended March 31, 2023. No sublease income was recognized during the three months ended March 31, 2024 and $76 of sublease income was recognized during the three months ended March 31, 2023.

 

Information related to the Company’s right-of-use assets and related lease liabilities is as follows:

 

 

 

Three Months Ended

 

 

Three Months Ended

 

 

 

March 31, 2024

 

 

March 31, 2023

 

Cash paid for operating lease liabilities

 

$

100

 

 

$

102

 

 

 

 

March 31, 2024

 

 

December 31,
2023

 

Weighted-average remaining lease term

 

1.21 years

 

 

1.46 years

 

Weighted-average discount rate

 

 

12.9

%

 

 

12.9

%

 

11


ITERUM THERAPEUTICS PLC

Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)

 

Right-of-use assets and lease liabilities for the Company’s operating leases were recorded in the condensed consolidated balance sheet as follows, representing the Company’s right to use the underlying asset for the lease term (“Other assets”) and the Company’s obligation to make lease payments (“Other current liabilities” and “Other liabilities”):

 

 

March 31, 2024

 

 

December 31,
2023

 

Other assets

 

$

464

 

 

$

549

 

 

 

 

 

 

 

 

Other current liabilities

 

$

370

 

 

$

365

 

Other liabilities

 

 

92

 

 

 

188

 

Total lease liabilities

 

$

462

 

 

$

553

 

Future lease payments included in the measurement of lease liabilities on the condensed consolidated balance sheet as of March 31, 2024 for the following five fiscal years and thereafter were as follows:

Due in 12 month period ended March 31,

 

 

 

2025

 

$

402

 

2026

 

 

93

 

2027

 

 

 

2028

 

 

 

2029

 

 

 

Thereafter

 

 

 

 

$

495

 

Less imputed interest

 

 

(33

)

Total lease liabilities

 

$

462

 

 

8. Accrued Expenses

Accrued expenses consist of the following:

 

 

March 31,
2024