We believe that, our
existing cash, cash equivalents and available-for-sale investments will be sufficient to fund operations and capital expenditures
into the fourth quarter of 2019, thus allowing us to report top-line data from our second Phase 3 trial of vonapanitase in radiocephalic
fistulas and to fund our chemistry, manufacturing and controls, or CMC, activities.
We do not expect to
generate revenue from product sales unless and until we successfully complete development and obtain regulatory approval for vonapanitase,
which we expect will take a number of years and is subject to significant uncertainty. We have no manufacturing facilities and
all of our manufacturing activities are contracted out to third parties. Additionally, we currently use third-party clinical research
organizations, or CROs, to carry out our clinical development activities and we do not yet have a sales organization. If we obtain
regulatory approval for vonapanitase, we expect to incur significant commercialization expenses related to product sales, marketing,
manufacturing and distribution. Accordingly, we may seek to further fund our operations through public or private equity or debt
financings or other sources, including strategic collaborations. We may, however, be unable to raise additional funds or enter
into such other arrangements when needed on favorable terms or at all. Our failure to raise additional capital or enter into such
other arrangements as and when needed would have a negative impact on our financial condition and our ability to develop vonapanitase
or any additional product candidates, if developed.
On June 22, 2017, we
entered into a Securities Purchase Agreement (the “Purchase Agreement”) with a syndicate of current and new institutional
investors (collectively, the “Investors”), led by an affiliate of Deerfield Management Company, L.P., pursuant to which
the Company agreed to issue and sell to the Investors an aggregate of 22,000 shares (the “Preferred Shares”) of the
Company’s Series A Convertible Preferred Stock, par value $0.001 per share (the “Transaction”), for a purchase
price of $1,000 per share, or an aggregate purchase price of $22.0 million, all upon the terms and conditions set forth in the
Purchase Agreement. We also entered into certain Voting Agreements and the Fifth Amended and Restated Investors’ Rights Agreement
in connection on June 22, 2017. We closed the Transaction on August 2, 2017.
The rights, preferences and privileges of
the Series A Preferred Stock are set forth in a Certificate of Designation of Preferences, Rights and Limitations of Series A Convertible
Preferred Stock that we filed on August 1, 2017, with the Secretary of State of the State of Delaware. The holders of a majority
of the outstanding shares of Series A Convertible Preferred Stock are entitled to elect one (1) member of the Company’s Board
of Directors (the “Series A Director”). Jonathan Leff was elected as the Series A Director on August 2, 2017.
In addition, on August 2, 2017, we entered
into a registration rights agreement with the Investors (the “Registration Rights Agreement”). On August 3, 2017, in
accordance with the Registration Rights Agreement, we filed a registration statement on Form S-3 to register the common stock issuable
upon conversion of the Preferred Shares.
Research and Development Expenses
Research and development
expenses consist primarily of costs incurred for the development of vonapanitase, which include:
| ||·||employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;|
| ||·||expenses incurred under agreements with CROs and investigative sites that will conduct our clinical trials;|
| ||·||the cost of acquiring, developing and manufacturing clinical trial materials;|
| ||·||costs associated with regulatory operations; and|
|·||facilities, depreciation and other expenses,
which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies.|
We expense research
and development costs to operations as incurred. We recognize costs for certain development activities, such as clinical trials,
based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations
or information provided to us by our vendors.