UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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:
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
(Address of principal executive offices)
(Zip Code)
(
(Registrant’s telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol(s) |
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Name of each exchange on which registered |
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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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 August 9, 2024, the registrant had
Table of Contents
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Page |
PART I. |
1 |
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Item 1. |
1 |
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1 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
2 |
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3 |
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4 |
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Notes to Unaudited Condensed Consolidated Financial Statements |
5 |
Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
22 |
Item 3. |
36 |
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Item 4. |
36 |
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PART II. |
37 |
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Item 1. |
37 |
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Item 1A. |
37 |
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Item 5. |
98 |
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Item 6. |
99 |
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100 |
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:
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)
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June 30, |
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December 31, |
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2024 |
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2023 |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Short-term investments |
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Income taxes receivable |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Restricted cash |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and Shareholders’ Deficit |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued expenses |
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Exchangeable Notes |
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— |
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Other current liabilities |
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Total current liabilities |
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$ |
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$ |
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Exchangeable Notes |
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— |
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Royalty-linked notes |
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Other liabilities |
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Total liabilities |
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$ |
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$ |
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(Note 14) |
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Shareholders’ deficit |
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Undesignated preferred shares, $ |
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Ordinary shares, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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( |
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Accumulated other comprehensive (loss) / income |
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( |
) |
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Total shareholders' deficit |
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( |
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( |
) |
Total liabilities and shareholders’ deficit |
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$ |
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$ |
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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)
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Three Months Ended |
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Six Months Ended |
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June 30, |
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June 30, |
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2024 |
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2023 |
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2024 |
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2023 |
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Operating expenses: |
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Research and development |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
General and administrative |
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( |
) |
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( |
) |
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( |
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( |
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Total operating expenses |
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( |
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( |
) |
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( |
) |
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( |
) |
Operating loss |
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( |
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( |
) |
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( |
) |
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( |
) |
Interest expense, net |
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( |
) |
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( |
) |
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( |
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( |
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Adjustments to fair value of derivatives |
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( |
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( |
) |
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( |
) |
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( |
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Other (expense) / income, net |
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( |
) |
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( |
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Total other expense |
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( |
) |
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( |
) |
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( |
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( |
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Loss before income taxes |
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( |
) |
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( |
) |
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( |
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( |
) |
Income tax expense |
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( |
) |
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( |
) |
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( |
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( |
) |
Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Net loss per share – basic and diluted |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
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$ |
( |
) |
Weighted average ordinary shares outstanding – basic and diluted |
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Statements of Comprehensive Loss |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
Other comprehensive (loss) / income: |
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Unrealized (loss) / gain on marketable securities |
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( |
) |
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( |
) |
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Comprehensive loss |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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)
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Six Months Ended June 30, |
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2024 |
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2023 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
) |
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$ |
( |
) |
Adjustments to reconcile net loss to cash used in operating activities: |
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Depreciation |
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Amortization of intangible asset |
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— |
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Share-based compensation expense |
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Interest on short-term investments |
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Amortization of debt discount and deferred financing costs |
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Interest on exchangeable notes - non-cash |
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Adjustments to fair value of derivatives |
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Other |
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Changes in operating assets and liabilities: |
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Prepaid expenses and other current assets |
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( |
) |
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( |
) |
Accounts payable |
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( |
) |
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Accrued expenses |
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( |
) |
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Income taxes |
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( |
) |
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Other liabilities |
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( |
) |
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( |
) |
Net cash used in operating activities |
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( |
) |
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( |
) |
Cash flows from investing activities: |
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Purchases of property, plant and equipment |
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( |
) |
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( |
) |
Purchases of short-term investments |
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( |
) |
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( |
) |
Proceeds from sale of short-term investments |
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Net cash provided by investing activities |
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Cash flows from financing activities: |
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Proceeds from issuance of ordinary shares, net of transaction costs |
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Net cash provided by financing activities |
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Effect of exchange rates on cash and cash equivalents |
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( |
) |
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( |
) |
Net decrease in cash, cash equivalents and restricted cash |
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( |
) |
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( |
) |
Cash, cash equivalents and restricted cash, at beginning of period |
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Cash, cash equivalents and restricted cash, at end of period |
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$ |
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$ |
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Supplemental Disclosure of Cash Flow Information: |
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Income taxes paid - U.S. |
|
$ |
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$ |
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||
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)
|
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Ordinary Shares |
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Additional |
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Shares |
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Amount |
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Paid |
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Accumulated Deficit |
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Accumulated Other Comprehensive Loss |
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Total |
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Balance at March 31, 2024 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
— |
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$ |
( |
) |
|||
Issuance of ordinary shares, net |
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— |
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— |
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Exercise of share options |
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— |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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— |
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Net loss |
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— |
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— |
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— |
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( |
) |
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— |
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( |
) |
Unrealized gain on available-for-sale securities |
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— |
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— |
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— |
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— |
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( |
) |
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( |
) |
Balance at June 30, 2024 |
|
|
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$ |
|
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$ |
|
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$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
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||||||
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Ordinary Shares |
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Additional |
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Accumulated Other |
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Shares |
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Amount |
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Paid |
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Accumulated Deficit |
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Comprehensive Income (Loss) |
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Total |
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||||||
Balance at December 31, 2023 |
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$ |
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$ |
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$ |
( |
) |
|
$ |
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$ |
( |
) |
||||
Issuance of ordinary shares, net |
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— |
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— |
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Exercise of share options |
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— |
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— |
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— |
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|||
Share-based compensation expense |
|
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— |
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— |
|
|
|
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|
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— |
|
|
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— |
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||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance at June 30, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|||
|
|
Ordinary Shares |
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Additional |
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|
Accumulated Other |
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|||||||||
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Shares |
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Amount |
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Paid |
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Accumulated Deficit |
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Comprehensive Income (Loss) |
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Total |
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||||||
Balance at March 31, 2023 |
|
|
|
|
$ |
|
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$ |
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|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of ordinary shares, net |
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|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
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|
||||
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized gain on available-for-sale securities |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
|
|
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|
||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
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||||
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||||||
|
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Ordinary Shares |
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Additional |
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Accumulated Other |
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|||||||||
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Shares |
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Amount |
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Paid |
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|
Accumulated Deficit |
|
|
Comprehensive Income (Loss) |
|
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Total |
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||||||
Balance at December 31, 2022 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
Issuance of ordinary shares, net |
|
|
|
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
||||
Share-based compensation expense |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
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|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Unrealized gain on available-for-sale securities |
|
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— |
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|
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— |
|
|
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— |
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— |
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||
Balance at June 30, 2023 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
|
||||
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 $
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 $
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 $
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
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 June 30, 2024 and for the three and six months ended June 30, 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 June 30, 2024, and results of operations for the three and six months ended June 30, 2024 and 2023, and cash flows for the six months ended June 30, 2024 and 2023 have been made. The results of operations for the three and six months ended June 30, 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
6
ITERUM THERAPEUTICS PLC
Notes to Unaudited Condensed Consolidated Financial Statements
(In thousands, except share and per share data)
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 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 $
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 $
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.
|
|
Three and Six Months Ended |
|
|||||
|
|
June 30, 2024 |
|
|
June 30, 2023 |
|
||
Options to purchase ordinary shares |
|
|
|
|
|
|
||
Unvested restricted share units |
|
|
— |
|
|
|
|
|
Warrants |
|
|
|
|
|
|
||
Exchangeable Notes |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Segment and Other Information
The Company determines and presents operating segments based on the information that is internally provided to the Chief Executive Officer and Chief Financial 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 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 June 30, |
|
|
Six Months Ended June 30, |
|
||||||||||
Operating expenses |
|
2024 |
|
|
2023 |
|
|
2024 |
|
|
2023 |
|
||||
Ireland |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
U.S. |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Bermuda |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
The distribution of long-lived assets by geographical area was as follows:
Long-lived assets |
|
June 30, 2024 |
|
|
December 31, 2023 |
|
||
Ireland |
|
$ |
|
|
$ |
|
||
U.S. |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
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 June 30, 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)
June 30, 2024 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Commercial paper |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
U.S. Treasury bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
||||
December 31, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Assets |
|
Total |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
||||
Short-term investments: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Corporate bonds |
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
Commercial paper |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
U.S. Treasury bonds |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
||
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
||
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:
June 30, 2024 |
|
Book |
|
|
Approximate |
|
|
|
|
|
|
|
|
|
|
|||||
Short-term Liabilities |
|
Value |
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Exchangeable Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Exchangeable note |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|||
Total short-term liabilities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|||
Long-term Liabilities |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Revenue Futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Royalty-linked notes |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total long-term liabilities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
December 31, 2023 |
|
Book |
|
|
Approximate |
|
|
|
|
|
|
|
|
|
|
|||||
Long-term Liabilities |
|
Value |
|
|
Fair Value |
|
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|||||
Exchangeable Notes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Long-term exchangeable note |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
— |
|
|||
Revenue Futures |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||
Royalty-linked notes |
|
|
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|||
Total long-term liabilities |
|
$ |
|
|
$ |
|
|
$ |
— |
|
|
$ |
|
|
$ |
|
||||
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 June 30, 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
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 $