Acurx Pharmaceuticals, Inc. — Q2 2021 Form 10-Q
Reporting period: Three and six months ended June 30, 2021; interim financial statements are unaudited. Acurx is a clinical-stage biopharmaceutical company developing antibiotics targeting DNA polymerase IIIC. It has not generated revenue.
Financial overview
| Metric | Q2 2021 | Six months 2021 | Comparable 2020 period |
|---|---|---|---|
| Revenue | None | None | None |
| Research and development expense | $95,074 | $186,981 | $400,738 and $1,085,469 |
| General and administrative expense | $3,975,488 | $5,357,911 | $512,622 and $1,106,992 |
| Total operating expenses | $4,070,562 | $5,544,892 | $913,360 and $2,192,461 |
| Net loss | $4,004,059 | $5,478,389 | $913,360 and $2,192,461 |
| Basic and diluted loss per share | $0.57 | $0.79 | $0.15 and $0.37 |
Liquidity and cash flow: Cash was $17.10 million at June 30, versus $3.18 million at December 31, 2020. Working capital was $15.5 million. Six-month operating cash use was $876,947, compared with $1.63 million in 2020; financing provided $14.80 million, principally from the IPO. The filing gives no meaningful revenue-based margin figures.
Debt: The $66,503 Paycheck Protection Program loan was forgiven in May 2021, producing a $66,503 gain. No loan balance remained at June 30. Accounts payable and accrued expenses were $1.92 million, up from $455,931 at year-end, largely reflecting accrued professional fees.
Material changes and notable items
- On June 29, Acurx completed its IPO, selling 2.875 million shares at $6.00 per share for approximately $14.8 million in net proceeds. It also converted from an LLC to a corporation; 14.08 million membership interests converted into 7.04 million common shares. Common stock outstanding was 9.92 million at June 30 and 10.12 million as of August 13.
- Compared with Q2 2020, Q2 2021 operating expenses increased by $3.16 million and net loss increased by $3.09 million. For the first half, operating expenses rose $3.35 million and net loss increased $3.29 million. Higher G&A—primarily stock-based compensation and professional fees—more than offset lower R&D spending.
- R&D expense fell because the Phase 2a trial-related costs and consulting costs declined; the Phase 2a trial had been completed in 2020. Management said IPO proceeds are intended in part to complete the Phase 2b ibezapolstat trial in patients with C. difficile infection (approximately $4 million) and preclinical development of ACX-375C.
- Stock-based compensation increased materially. The company granted 807,500 options in June to replace cancelled management equity awards; $2.18 million of compensation expense remained unrecognized at quarter-end. In July, it granted a further 1.2 million options to executives and 250,000 to independent directors.
Outlook, risks and controls
- Management expects continuing losses and says additional financing will be needed; the filing states that substantial doubt exists about the company’s ability to continue as a going concern within one year after the financial statements were issued. Further financing may be unavailable or dilutive, and could require spending cuts or delays to development programs.
- The main business risks include clinical and regulatory failure or delay, patient-enrollment challenges, reliance on third-party manufacturers and clinical contractors, potential COVID-19 disruptions, and the need to protect intellectual property. Management reported no material adverse COVID-19 impact at the time, but noted trial enrollment had slowed at some sites.
- Management concluded disclosure controls and procedures were not effective at a reasonable-assurance level at period-end, citing inadequate segregation of duties in a three-person management team. It planned to engage a third-party specialist to recommend improvements; no assurance was given that further weaknesses would not be identified.
- The company has contingent obligations tied to the ibezapolstat asset purchase: milestone payments totaling $700,000 if specified milestones are achieved, including $50,000 already paid, and royalties of 4% of net sales under the agreement. No material litigation was reported.
- The filing provides no financial guidance or specific forecast of cash runway. Management plans to pursue equity financing and grant funding, but does not assure availability.
Important facts for investors to verify
- Cash runway assumptions and the timing, amount, and terms of any future financing, given the explicit going-concern uncertainty.
- Progress, enrollment, costs, and milestones for the Phase 2b ibezapolstat trial and ACX-375C preclinical program.
- Expected future stock-based compensation, outstanding options and warrants, and resulting potential dilution.
- Remediation of the disclosed control weakness and whether additional internal-control deficiencies emerge.
- Whether accrued professional fees and other liabilities are settled as planned, and the status of contingent milestone obligations.