Larimar Therapeutics, Inc. — Q3 2020 Form 10-Q
Reporting period: Three and nine months ended September 30, 2020. Larimar is a clinical-stage biotechnology company developing CTI-1601 for Friedreich’s ataxia. It has no approved products and has not generated revenue.
Financial results and position
| Metric | Q3 2020 | Q3 2019 | Nine months 2020 | Nine months 2019 |
|---|---|---|---|---|
| Revenue | $0 | $0 | $0 | $0 |
| Research and development expense | $6.9 million | $8.0 million | $20.8 million | $15.4 million |
| General and administrative expense | $3.4 million | $0.6 million | $7.6 million | $1.7 million |
| Total operating expenses | $10.3 million | $8.6 million | $28.4 million | $17.1 million |
| Net loss | $10.3 million | $8.6 million | $28.3 million | $17.1 million |
| Net loss per share, basic and diluted | $0.64 | $1.42 | $2.69 | $2.80 |
At September 30, 2020, cash and cash equivalents were $101.3 million and marketable debt securities were $1.0 million; restricted cash was an additional $1.3 million. Total liabilities were $11.3 million, including operating lease liabilities; the filing reports no borrowings. Stockholders’ equity was $102.6 million. No meaningful operating margin is reported because the company had no revenue.
Cash used in operations was $32.3 million in the first nine months of 2020, versus $14.8 million in 2019. Investing activities provided $40.6 million, principally reflecting cash acquired in the merger, while financing activities provided $93.3 million, including $75.4 million net private-placement proceeds and $18.0 million in related-party capital contributions.
Changes and comparability
- Nine-month net loss increased $11.2 million year over year as R&D and G&A costs rose. In Q3, R&D declined $1.1 million, chiefly due to timing of manufacturing and toxicology costs, while G&A increased $2.8 million, largely from public-company costs.
- The May 28, 2020 merger with Zafgen was accounted for as a reverse asset acquisition, with Chondrial treated as the accounting acquirer. Historical results before the merger are Chondrial’s; post-merger results include the combined company. Accordingly, the comparisons are not fully like-for-like.
- The merger and June private placement substantially strengthened cash resources. The company also established a $50 million at-the-market offering program in August; no shares had been sold under it by September 30.
Outlook, risks and unusual items
- Management said available cash and cash equivalents were expected to fund operations for at least 12 months from issuance of the interim financial statements. The company expects continued losses and will need additional financing to advance development; there is no assurance funding will be available on acceptable terms.
- COVID-19 temporarily halted CTI-1601 Phase 1 trials after two cohorts. Trials resumed in July, but added patient transport and isolation costs and potential further delays remain risks. Top-line results, initially expected by year-end 2020, were shifted to the first half of 2021.
- CTI-1601 had FDA orphan-drug, Fast Track and rare pediatric disease designations, and European Commission orphan-drug designation; these do not assure approval or faster development.
- Key risks include clinical and regulatory uncertainty, trial enrollment and COVID-related disruption, reliance on a small number of third-party manufacturers, financing needs, and the ability to scale manufacturing and protect intellectual property.
- Management reported disclosure controls were not effective due to previously identified material weaknesses in financial reporting controls, including insufficient accounting staffing and inadequate review and segregation of duties. Remediation was underway; management stated the financial statements fairly presented the reported periods.
- After quarter-end, Larimar entered an agreement to sublease its acquired office premises through October 2029, subject to landlord consent, with rent abatement through March 2021.
Investor verification priorities
- Confirm subsequent CTI-1601 trial progress, safety and efficacy disclosures, and whether the first-half 2021 top-line-results timeline was achieved.
- Track quarterly operating cash use and available liquidity, including any ATM sales or other financing, against the stated runway.
- Review whether the disclosed material weaknesses were remediated and controls tested effectively.
- Assess manufacturing capacity and supplier concentration, and any COVID-related trial or cost disruptions.
- Check the sublease commencement, consent and economics, and clarify future occupancy and lease-cost implications.