Larimar Therapeutics, Inc. — Form 10-K summary
Reporting period: Fiscal year ended December 31, 2020; filed March 4, 2021. Larimar is a clinical-stage biotechnology company developing CTI-1601 for Friedreich’s ataxia. The May 2020 merger with Zafgen was accounted for as a reverse asset acquisition: Chondrial is the accounting acquirer, so pre-merger historical results are Chondrial’s, while 2020 includes the combined company after the merger. Comparisons with 2019 therefore are not fully like-for-like.
Financial performance and position
| Metric | 2020 | 2019 |
|---|---|---|
| Revenue | None | None |
| Research and development expense | $31.4 million | $20.8 million |
| General and administrative expense | $11.4 million | $2.4 million |
| Total operating expenses / operating loss | $42.8 million | $23.2 million |
| Other income, net | $0.3 million | $0.1 million |
| Net loss | $42.5 million | $23.1 million |
| Basic and diluted net loss per share | $3.57 | $3.80 |
| Net cash used in operating activities | $42.2 million | $22.7 million |
As of December 31, 2020, cash and cash equivalents were $68.1 million, marketable debt securities were $24.5 million, and restricted cash was $1.3 million. Cash, cash equivalents and marketable securities available for operations totaled $92.6 million. Total assets were $104.7 million; total liabilities were $15.0 million, including $6.5 million of operating lease liabilities. The filing reports no debt financing outstanding. Future undiscounted lease payments totaled $10.1 million. The company had an accumulated deficit of $65.6 million. Profit margins are not meaningful because the company had no revenue and incurred losses.
Cash flow from investing activities was positive $17.1 million, primarily reflecting $41.9 million of cash acquired in the merger, partly offset by purchases of marketable securities and merger costs. Financing activities provided $93.6 million, including $75.6 million net proceeds from common stock and pre-funded warrants and $18.0 million in related-party capital contributions. The $80.0 million private placement generated $75.4 million net proceeds. The company also had a $50 million at-the-market program; by year-end it had raised $0.2 million net under the program.
Material changes versus 2019
- Net loss increased by $19.4 million; operating expenses rose by $19.6 million. R&D expense increased $10.6 million, principally from clinical trial costs, clinical supply manufacturing and added personnel.
- G&A expense increased $9.0 million, mainly due to public-company professional and insurance costs, personnel and stock-based compensation.
- Operating cash use increased by $19.5 million. The merger, private placement and related-party funding substantially strengthened liquidity and equity.
- The company completed the Zafgen merger on May 28, 2020, changed its name from Zafgen, and issued shares in the merger and private placement. Outstanding common shares were 15,367,730 at year-end.
Outlook, clinical progress and key risks
- Management expected available cash, cash equivalents and marketable securities to fund operations for at least 12 months from issuance of the financial statements. It anticipates continuing losses and expects to seek further financing; funding may be unavailable or dilutive.
- CTI-1601 was in Phase 1 trials. The single-ascending-dose trial completed dosing in December 2020; preliminary blinded data suggested single doses up to 100 mg were generally tolerated, with mild, transient injection-site events and no serious adverse events reported. Analysis was ongoing, and these preliminary findings do not establish efficacy or final safety.
- The multiple-ascending-dose trial was underway. At filing, management expected top-line results from the Phase 1 studies in the second quarter of 2021, an open-label extension and pediatric study in the second half of 2021, and a registration study in the second half of 2022, subject to results and regulatory discussions.
- COVID-19 temporarily paused Phase 1 dosing and delayed expected results; the company warned that renewed disruption could affect patient travel, enrollment, trial costs, manufacturing and timelines.
- Key risks include dependence on one early-stage candidate, uncertain clinical and regulatory outcomes, rare-disease enrollment and endpoint challenges, biologic manufacturing scale-up and third-party reliance, financing needs, competition, and licensed-patent coverage. Certain licensed U.S. patents expire in 2024 and 2025; longer-dated applications may not issue or provide adequate protection.
- The company held FDA orphan drug, fast track and rare pediatric disease designations and EU orphan designation for CTI-1601. These designations do not assure approval or faster development. No material legal proceedings were reported.
- Management stated disclosure controls and internal control over financial reporting were effective at year-end and that previously reported material weaknesses had been remediated. The auditor did not provide an opinion on internal control over financial reporting; accrued R&D expense estimation was identified as a critical audit matter.
Investor items to verify
- Review subsequent Phase 1 SAD and MAD results, including complete safety, pharmacokinetic and pharmacodynamic data, and any resulting changes to dose or development plans.
- Confirm current cash runway, quarterly cash burn, financing activity and any material change to management’s stated 12-month funding expectation.
- Track progress and cost of manufacturing scale-up, toxicology work, clinical supply and reliance on third-party manufacturers.
- Assess the status of planned pediatric, extension and registration studies, including COVID-related delays and regulatory feedback on trial design and endpoints.
- Review dilution from outstanding options, pre-funded warrants and the at-the-market program, as well as the effect of the merger on historical comparability.
- Monitor licensed and company-owned patent applications, patent expirations, and any changes in the company’s internal-control assessment.