10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2021

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 001-40353

 

IMPEL NEUROPHARMA, INC.

(Exact name of Registrant as specified in its Charter)

 

 

Delaware

 

26-3058238

(State or other jurisdiction

of incorporation or organization)

 

(I.R.S. Employer

Identification No.)

 

201 Elliott Avenue West, Suite 260

Seattle, WA 98119

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (206) 568-1466

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, par value $0.001 per share

IMPL

The Nasdaq Stock Market

 

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.    YES  ☐    NO  ☒

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).    YES  ☒    NO  ☐

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

 

 

 

Accelerated filer

 

Non-accelerated filer

 

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

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  ☒

The number of shares of Registrant’s Common Stock outstanding as of August 11, 2021 was 19,509,619.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report on Form 10-Q other than statements of historical facts, including statements concerning our business strategy and plans, future operating results and financial position, as well as our objectives and expectations for our future operations, are forward-looking statements.

 

In some cases, you can identify forward-looking statements by such terminology as “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” and similar expressions that convey uncertainty of future events or outcomes, although not all forward-looking statements contain these words. Forward-looking statements include, but are not limited to, statements about:

 

our ability to obtain and maintain regulatory approval of TRUDHESA and our other product candidates, and any related restrictions, limitations or warnings in the label of any approved product;
our ability to successfully formulate and execute on our commercialization strategy for TRUDHESA, if approved by the FDA;
the timing or likelihood of regulatory filings and approvals;
the size and growth potential of the markets for our product candidates, if approved for commercial use, and our ability to serve those markets;
the success, cost and timing of our development activities, preclinical studies and clinical trials;
the number, size and design of clinical trials that regulatory authorities may require to obtain marketing approval;
our plans relating to the future development and manufacturing of our product candidates, including plans for future development of our POD devices and plans to address additional indications for which we may pursue regulatory approval;
future agreements with third parties in connection with preclinical and clinical development as well as the manufacture and commercialization of our product candidates, if approved for commercial use;
our ability to attract customers for any approved products;
the effect of litigation, complaints or adverse publicity on our business;
our ability to establish and expand our sales force to address effectively the new indications, geographies and types of organizations we intend to target;
our ability to forecast and maintain an adequate rate of revenue growth and appropriately plan our expenses;
our liquidity and working capital requirements;
our ability to attract and retain qualified employees and key personnel;
our ability to protect and enhance our brand and intellectual property;
the costs related to defending intellectual property infringement and other claims;
privacy, data security, and data protection laws, actual or perceived privacy or data breaches or other data security incidents, or the loss of data;
future regulatory, judicial, and legislative changes in our industry;
future arrangements with, or investments in, other entities or associations, products, services or technologies;
our estimates regarding expenses, future revenues, capital requirements and needs for additional financing; and the increased expenses and administrative workload associated with being a public company.

 


 

We have based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations, prospects, and financial needs. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q and are subject to a number of risks, uncertainties and assumptions described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Because forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified, you should not rely on these forward-looking statements as predictions of future events. The events and circumstances reflected in our forward-looking statements may not be achieved or occur and actual results could differ materially from those projected in the forward-looking statements. We disclaim any intention or obligation to publicly update or revise any forward-looking statements for any reason or to conform such statements to actual results or revised expectations, except as required by law.

 


 

Table of Contents

 

 

 

 

Page

 

PART I—FINANCIAL INFORMATION

 

Item 1.

Condensed Consolidated Financial Statements (unaudited)

4

 

 

Condensed Consolidated Balance Sheets

4

 

 

Condensed Consolidated Statements of Operations and Comprehensive Loss

5

 

 

Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

6

 

 

Condensed Consolidated Statements of Cash Flows

8

 

 

Notes to the Condensed Consolidated Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

22

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

29

Item 4.

Controls and Procedures

29

 

 

PART II—OTHER INFORMATION

 

Item 1.

Legal Proceedings

30

Item 1A.

Risk Factors

30

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

68

Item 3.

Defaults Upon Senior Securities

68

Item 4.

Mine Safety Disclosures

68

Item 5.

Other Information

68

Item 6.

Exhibits

69

EXHIBIT INDEX

69

SIGNATURES

71

 

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Impel” and the “Company” refer to Impel Neuropharma, Inc. and its consolidated subsidiary. Impel, Impel Neuropharma, Inc., the Impel logo and other trade names, trademarks or service marks of Impel are the property of Impel Neuropharma, Inc. This report contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

 

 

 


 

PART I. FINANCIAL INFORMATION

 

Item 1. Condensed Consolidated Financial Statements (unaudited)

 

 

IMPEL NEUROPHARMA, INC.

Condensed Consolidated Balance Sheet

(In thousands, except share and per share data)

(Unaudited)

 

 

June 30,
2021

 

 

December 31,
2020

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

60,948

 

 

$

7,095

 

Prepaid expenses and other current assets

 

 

4,619

 

 

 

1,077

 

Total current assets

 

 

65,567

 

 

 

8,172

 

Property and equipment, net

 

 

3,408

 

 

 

3,700

 

Other assets

 

 

187

 

 

 

187

 

Total assets

 

$

69,162

 

 

$

12,059

 

Liabilities, redeemable convertible preferred stock and
   stockholders’ equity (deficit)

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

5,461

 

 

$

4,314

 

Accrued liabilities

 

 

3,546

 

 

 

3,173

 

Current portion of term debt

 

 

 

 

 

417

 

Redeemable convertible preferred stock warrant liabilities

 

 

 

 

 

2,622

 

Total current liabilities

 

$

9,007

 

 

$

10,526

 

Convertible notes at fair value

 

 

 

 

 

 

Long-term debt

 

 

8,857

 

 

 

7,994

 

Total liabilities

 

$

17,864

 

 

$

18,520

 

Commitments and contingencies (Note 5)

 

 

 

 

 

 

Redeemable convertible preferred stock, $0.001 par value; — and 204,198,489 shares authorized at June 30, 2021 and December 31, 2020 respectively; — and 202,009,981 shares issued and outstanding at June 30, 2021 and December 31, 2020 respectively; aggregate liquidation preference of $128,922 at December 31, 2020

 

 

 

 

$

127,039

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 and — shares authorized at June 30, 2021 and December 31, 2020, respectively
Common stock, $
0.001 par value; 300,000,000 and 266,833,885 shares authorized at June 30, 2021 and December 31, 2020, respectively; 19,470,914 and 755,478 shares issued and outstanding at June 30, 2021 and December 31, 2020, respectively

 

 

19

 

 

 

 

Additional paid-in capital

 

 

216,314

 

 

 

4,762

 

Accumulated deficit

 

 

(165,035

)

 

 

(138,262

)

Total stockholders’ equity (deficit)

 

$

51,298

 

 

$

(133,500

)

Total liabilities, redeemable convertible preferred stock and
   stockholders’ deficit

 

$

69,162

 

 

$

12,059

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


 

IMPEL NEUROPHARMA, INC.

Condensed Consolidated Statement of Operations and Comprehensive Loss

(In thousands, except share and per share data)

(Unaudited)

 

 

Three Months Ended
June 30,

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

6,076

 

 

$

6,832

 

 

$

10,174

 

 

$

13,391

 

General and administrative

 

 

8,862

 

 

 

6,127

 

 

 

14,633

 

 

 

9,374

 

Total operating expenses

 

 

14,938

 

 

 

12,959

 

 

 

24,807

 

 

 

22,765

 

Loss from operations

 

$

(14,938

)

 

$

(12,959

)

 

$

(24,807

)

 

$

(22,765

)

Other (expense) income, net

 

 

(544

)

 

 

36

 

 

 

(1,966

)

 

 

84

 

Loss before income taxes

 

$

(15,482

)

 

$

(12,923

)

 

$

(26,773

)

 

$

(22,681

)

Provision (benefit) for income taxes

 

 

 

 

 

(1

)

 

 

 

 

 

 

Net loss and comprehensive loss

 

$

(15,482

)

 

$

(12,922

)

 

$

(26,773

)

 

$

(22,681

)

Accretion on redeemable convertible preferred stock

 

 

 

 

 

128

 

 

 

129

 

 

 

256

 

Net loss attributable to common stockholders

 

$

(15,482

)

 

$

(13,050

)

 

$

(26,902

)

 

$

(22,937

)

Net loss per share attributable to common stockholders, basic and diluted

 

 

(1.10

)

 

 

(35.88

)

 

 

(3.60

)

 

 

(63.32

)

Weighted-average shares used in computing net loss per share attributable to common
   stockholders, basic and diluted

 

 

14,119,672

 

 

 

363,684

 

 

 

7,475,242

 

 

 

362,246

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


 

IMPEL NEUROPHARMA, INC.

Condensed Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)

 

 

Redeemable Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance — December 31, 2020

 

 

202,009,981

 

 

$

127,039

 

 

 

 

755,478

 

 

$

 

 

$

4,762

 

 

$

(138,262

)

 

$

(133,500

)

Accretion to redemption value on redeemable convertible preferred stock

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

 

(129

)

 

 

 

 

 

(129

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

493

 

 

 

 

 

 

493

 

Issuance of common stock upon the exercise of stock options

 

 

 

 

 

 

 

 

 

8,095

 

 

 

 

 

 

18

 

 

 

 

 

 

18

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,291

)

 

 

(11,291

)

Balance — March 31, 2021

 

 

202,009,981

 

 

$

127,168

 

 

 

 

763,573

 

 

$

 

 

$

5,144

 

 

$

(149,553

)

 

$

(144,409

)

Proceeds from initial public offering, net of underwriters' discounts and commissions of $5.6 million and issuance costs of $2.4 million

 

 

 

 

 

 

 

 

 

5,333,334

 

 

 

5

 

 

 

71,992

 

 

 

 

 

 

71,997

 

Issuance of common stock upon exercise of warrants for cash

 

 

 

 

 

 

 

 

 

23,887

 

 

 

 

 

 

377

 

 

 

 

 

 

377

 

Issuance of common stock upon net exercise of warrants upon initial public offering

 

 

 

 

 

 

 

 

 

37,628

 

 

 

 

 

 

734

 

 

 

 

 

 

734

 

Issuance of common stock upon exchange of Avenue warrant

 

 

 

 

 

 

 

 

 

107,663

 

 

 

 

 

 

1,763

 

 

 

 

 

 

1,763

 

Conversion of redeemable convertible preferred stock to common stock upon initial public offering

 

 

(202,009,981

)

 

 

(127,168

)

 

 

 

12,605,800

 

 

 

13

 

 

 

127,155

 

 

 

 

 

 

127,168

 

Conversion of convertible notes into common stock at initial public offering

 

 

 

 

 

 

 

 

 

559,585

 

 

 

1

 

 

 

8,392

 

 

 

 

 

 

8,393

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 —

 

 

 

 

 

 

556

 

 

 

 

 

 

556

 

Issuance of common stock upon the exercise of stock
   options

 

 

 

 

 

 

 

 

 

39,444

 

 

 

 

 

 

201

 

 

 

 

 

 

201

 

Net loss and comprehensive loss

 

 

 

 

 

-

 

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(15,482

)

 

 

(15,482

)

Balance — June 30, 2021

 

 

 

 

$

 

 

 

 

19,470,914

 

 

$

19

 

 

$

216,314

 

 

$

(165,035

)

 

$

51,298

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

 

 

6


 

IMPEL NEUROPHARMA, INC.

Condensed Consolidated Statement of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Equity (Deficit)

(In thousands, except share data)

(Unaudited)

 

 

Redeemable Convertible
Preferred Stock

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Deficit

 

Balance — December 31, 2019

 

 

201,335,862

 

 

$

125,647

 

 

 

 

360,115

 

 

$

 

 

$

760

 

 

$

(92,464

)

 

$

(91,704

)

Accretion to redemption value on redeemable
   convertible preferred stock

 

 

 

 

 

129

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

 

 

 

(128

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

298

 

 

 

 

 

 

298

 

Issuance of common stock upon the exercise of stock
   options

 

 

 

 

 

 

 

 

 

3,569

 

 

 

 

 

 

8

 

 

 

 

 

 

8

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(9,759

)

 

 

(9,759

)

Balance — March 31, 2020

 

 

201,335,862

 

 

$

125,776

 

 

 

 

363,684

 

 

$

 

 

$

938

 

 

$

(102,223

)

 

 

(101,285

)

Accretion to redemption value on redeemable
   convertible preferred stock

 

 

 

 

 

127

 

 

 

 

 

 

 

 

 

 

(128

)

 

 

 

 

 

(128

)

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,485

 

 

 

 

 

 

2,485

 

Issuance of Series A-2 redeemable convertible preferred stock upon the exercise of preferred warrants

 

 

36,029

 

 

 

18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss and comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,922

)

 

 

(12,922

)

Balance —June 30, 2020

 

 

201,371,891

 

 

$

125,921

 

 

 

 

363,684

 

 

$

 

 

$

3,295

 

 

$

(115,145

)

 

$

(111,850

)

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

7


 

IMPEL NEUROPHARMA, INC.

Condensed Consolidated Statement of Cash Flows

(In thousands)

(Unaudited)

 

 

Six Months Ended
June 30,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(26,773

)

 

$

(22,681

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

Depreciation and amortization

 

 

493

 

 

 

476

 

Stock-based compensation

 

 

1,049

 

 

 

2,783

 

Change in fair value of redeemable convertible preferred stock warrant liabilities

 

 

54

 

 

 

(80

)

Change in fair value of convertible notes

 

 

839

 

 

 

 

Noncash interest

 

 

55

 

 

 

 

Amortization of debt discount

 

 

446

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(3,542

)

 

 

(125

)

Other assets

 

 

 

 

 

(187

)

Accounts payable

 

 

1,070

 

 

 

607

 

Accrued liabilities

 

 

365

 

 

 

(113

)

Net cash used in operating activities

 

$

(25,944

)

 

$

(19,320

)

Cash flows from investing activities:

 

 

 

 

 

 

Purchases of property and equipment

 

 

(116

)

 

 

(818

)

Net cash used in investing activities

 

$

(116

)

 

$

(818

)

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from initial public offering, net of issuance costs

 

 

71,997

 

 

 

 

            Proceeds from the issuance of convertible notes

 

 

7,500

 

 

 

 

Proceeds from exercise of redeemable convertible preferred stock warrants

 

 

197

 

 

18

 

Proceeds from issuance of common stock upon exercise of stock options

 

 

219

 

 

8

 

Net cash provided by financing activities

 

$

79,913

 

 

$

26

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

53,853

 

 

 

(20,112

)

Cash — Beginning of period

 

 

7,095

 

 

 

37,001

 

Cash — End of period

 

$

60,948

 

 

$

16,889

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

Accretion to redemption value on redeemable convertible preferred stock

 

$

129

 

 

$

256

 

Conversion of redeemable convertible preferred stock upon initial public offering

 

$

127,168

 

 

 

 

Issuance of common stock upon exchange / exercise of redeemable convertible preferred stock warrants upon initial public offering

 

$

2,677

 

 

 

 

Conversion of convertible notes into common stock upon initial public offering

 

$

8,393

 

 

 

 

Purchase of property and equipment included in accounts payable and accrued liabilities

 

$

84

 

 

$

145

 

 

 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

8


 

IMPEL NEUROPHARMA, INC.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

1. Organization and Description of Business

Impel Neuropharma, Inc. (“the Company”), is a late-stage is a late-stage pharmaceutical company focused on the development and commercialization of transformative therapies for patients suffering from diseases with high unmet medical needs, with an initial focus on diseases of the central nervous system, or CNS. The Company’s strategy is to pair its proprietary Precision Olfactory Delivery, or POD, upper nasal delivery technology with well-understood therapeutics or other therapeutics where rapid vascular absorption is preferred to drive therapeutic benefit, improve patient outcomes, reduce drug development risk and expand the commercial opportunity within its target diseases. The Company was incorporated under the laws of the State of Delaware on July 24, 2008, maintains its headquarters and principal operations in Seattle, Washington, and performs certain of its research and development activities in Australia.

Initial Public Offering

On April 22, 2021, the Company’s Registration Statement on Form S-1 relating to its initial public offering, or IPO, was declared effective by the Securities and Exchange Commission, or the SEC, and the shares of its common stock began trading on the Nasdaq Global Select Market on April 23, 2021.  The IPO closed on April 27, 2021, pursuant to which the Company issued and sold 5,333,334 shares of its common stock at a public offering price of $15.00 per share. The Company received net proceeds of approximately $72.0 million from the IPO, after deducting underwriting discounts and commissions of $5.6 million and offering costs of $2.4 million. Prior to the completion of the IPO, all shares of redeemable convertible preferred stock then outstanding were converted into 12,605,800 shares of common stock. In addition, the warrant held by Avenue Venture Opportunities Fund, L.P., or Avenue, was exchanged for 107,663 shares of common stock and warrants to purchase 1,987,348 shares of redeemable convertible preferred stock were cash exercised or automatically net exercised into an aggregate of 61,515 shares of common stock. The convertible notes issued in March 2021 for an aggregate principal amount of $7.5 million (see Note 6) were also converted into 559,585 shares of common stock at a 10% discount of the IPO price.

Reverse Stock Split

In April 2021, the Company’s board of directors and stockholders approved an amendment to the Company’s certificate of incorporation to effect a reverse split of shares of the Company’s common stock on an one-for-16.37332 basis, which was effected on April 16, 2021 (the “Reverse Stock Split”). The number of authorized shares and the par values of the common stock and redeemable convertible preferred stock were not adjusted as a result of the Reverse Stock Split. In connection with the Reverse Stock Split, the conversion ratio for the Company’s outstanding redeemable convertible preferred stock was proportionately adjusted such that the common stock issuable upon conversion of such preferred stock was decreased in proportion to the Reverse Stock Split. All references to common stock and options to purchase common stock share data, per share data and related information contained in the condensed consolidated financial statements have been retroactively adjusted to reflect the effect of the Reverse Stock Split for all periods presented.

Liquidity and Capital Resources

The Company raised $72.0 million in net proceeds from its IPO in April 2021 and from the Company’s inception through June 30, 2021, it raised an aggregate of $214.5 million in gross cash proceeds from the IPO, sale and issuance of redeemable convertible preferred stock, convertible notes, debt and warrants. The Company had a cash and cash equivalents balance of $60.9 million as of June 30, 2021.

 

Based upon the Company’s current operating plan, it estimates that its cash and cash equivalents as of June 30, 2021, are together sufficient for the Company to fund operating, investing, and financing cash flow needs for at least one year from the issuance date of these interim financial statements. On July 2, 2021, the Company entered into a loan and security agreement with Oxford Finance LLC (“Oxford”), as the collateral agent and a lender, and Silicon Valley Bank (“SVB”), as a lender to potentially borrow up to an aggregate principal amount of $50.0 million in a series of term loans (see Note 14).  In the event of an FDA approval, the Company may be required to raise additional capital to meet working capital needs associated with commercialization. If sufficient funds on acceptable terms are not available when needed, the Company could be required to reduce operating expenses and delay, reduce the scope of, or eliminate one or more of its development programs or planned product launch plans. Failure to manage discretionary spending or raise additional financing, as needed, may adversely impact the Company’s ability to achieve its intended business objectives.

 

9

 


 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The accompanying financial statements do not reflect any adjustments relating to the recoverability and reclassifications of assets and liabilities that might be necessary if the Company is unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with United States generally accepted accounting principles, or U.S. GAAP. The condensed consolidated financial statements include the operations of Impel Neuropharma, Inc., and its wholly owned Australian subsidiary. All intercompany balances and transactions have been eliminated upon consolidation.

The condensed consolidated balance sheet as of June 30, 2021, the condensed consolidated statements of operations and comprehensive loss, changes in redeemable convertible preferred stock and stockholders’ equity (deficit) and cash flows for the three and six months ended June 30, 2021 and 2020 are unaudited. These unaudited condensed consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s consolidated financial position as of June 30, 2021 and its results of operations and cash flows for the three and six months ended June 30, 2021 and 2020. The financial data and the other financial information contained in these notes to the condensed consolidated financial statements related to the three and six month periods are also unaudited. The results of operations for the three months and six months ended June 30, 2021 are not necessarily indicative of the results to be expected for the year ending December 31, 2021 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2020 included herein was derived from the audited financial statements as of that date. These condensed consolidated financial statements should be read in conjunction with the Company's audited consolidated financial statements included in the prospectus dated April 23, 2021 that forms a part of the Company's Registration Statement on Form S-1 (File No. 333-254999), as filed with the SEC pursuant to Rule 424(b)(4) promulgated under the Securities Act of 1933, as amended.

Reclassifications

We have reclassified prior period financial statements to conform to the current period presentation. During the six months ended 2021, we reclassified certain amounts previously recorded as general and administrative expense to research and development expense.

 

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. On an ongoing basis, management evaluates such estimates and assumptions for continued reasonableness. In particular, management makes estimates with respect to the fair values of common stock, redeemable convertible preferred stock warrant liabilities, stock-based compensation expense, convertible debt and income taxes. Appropriate adjustments, if any, to the estimates used are made prospectively based upon such periodic evaluation. Actual results could differ from those estimates.

Segments

The Company’s chief operating decision maker is its Chief Executive Officer. The Chief Executive Officer reviews financial information on an aggregate basis for the purposes of evaluating financial performance and allocating the Company’s resources. Accordingly, the Company has determined that it operates in one segment.

Cash

The Company considers all highly liquid investments with original maturities of three months or less from the date of purchase to be cash equivalents. At June 30, 2021 and December 31, 2020, cash consisted of cash in bank deposits held at financial institutions.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company’s cash is deposited with high credit quality financial institutions. At times such deposits may be in excess of the Federal Depository Insurance Corporation insured limits.

10


 

 

Fair Value Measurement

Assets and liabilities recorded at fair value on a recurring basis in the balance sheets are categorized based upon the level of judgment associated with the inputs used to measure their fair values. Fair value is defined as the exchange price that would be received for an asset or an exit price that would be paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The authoritative guidance on fair value measurements establishes a three-tier fair value hierarchy for disclosure of fair value measurements as follows:

Level 1—Observable inputs such as unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;

Level 2—Inputs (other than quoted prices included in Level 1) are either directly or indirectly observable for the asset or liability. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active;

Level 3— Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The carrying amounts reflected in the accompanying consolidated balance sheets for cash, other current assets, accounts payable, and accrued liabilities approximate their fair values, due to their short-term nature.

Convertible Notes

In March 2021, the Company issued convertible promissory notes to various investors for an aggregate amount of $7.5 million.  As permitted under Accounting Standards Codification ("ASC") 825, Financial Instruments ("ASC 825"), the Company has elected the fair value option for recognition of the convertible notes. The Company elected the fair value option to allow the Company to eliminate the burden of complying with the requirements for derivative accounting. Under the fair value option, the convertible notes are remeasured at fair value in each reporting period until their conversion in April 2021, with changes in the fair value recognized in the Company’s condensed consolidated statement of operations as other (expense) income, net. Accrued interest on the convertible notes is recorded in other (expense), net.

 

Deferred Offering Costs

The Company incurred offering costs consisting of legal, accounting and other fees and costs directly attributable to the Company’s IPO. As of June 30, 2021, $2.4 million of deferred offering costs were charged to additional paid-in capital upon the completed of the IPO in April 2021. There were no deferred offering costs as of December 31, 2020.

Redeemable Convertible Preferred Stock Warrant Liabilities

Freestanding warrants to purchase shares of the Company’s redeemable convertible preferred stock are accounted for as liabilities at fair value through the date of exercise, because the shares underlying the warrants contain contingent redemption features outside the control of the Company. Warrants classified as liabilities are recorded on the Company’s condensed consolidated balance sheets at their fair value on the date of issuance and remeasured to fair value each subsequent reporting period, with the changes in fair value recognized as a component of other (expense) income, net in the accompanying condensed consolidated statements of operations. The Company adjusted the liability for the final change in the fair value of these warrants immediately preceding their automatic exercise in connection with the IPO. Upon exercise, the corresponding liability was reclassified to additional paid-in capital.

Research and Development

Research and development costs are expensed as incurred and consist primarily of salaries, benefits and other staff-related costs, including associated stock-based compensation, laboratory supplies, nonclinical and clinical studies and trials and related clinical manufacturing costs, costs related to manufacturing preparation, fees paid to other entities that conduct certain research and development

11


 

activities on the Company’s behalf. Non-refundable advance payments for goods or services that will be used or rendered for future research and development activities are deferred and capitalized as prepaid expenses until the related goods are delivered or services are performed. Such payments are evaluated for current or long-term classification based on when such services are expected to be received.

Advance Payments for Research and Development Services and Accruals

As part of the process of preparing its condensed consolidated financial statements, the Company is required to estimate its expenses resulting from its obligation under contracts with vendors and consultants and clinical site agreements in connection with its research and development efforts. The financial terms of these contracts are subject to negotiations which vary contract to contract and may result in payment flows that do not match the periods over which materials or services are provided to the Company under such contracts.

The Company’s objective is to reflect the appropriate research and development expenses in its condensed consolidated financial statements by matching those expenses with the period in which services and efforts are expended. The Company accounts for these expenses according to the progress of its research and development efforts. The Company determines advance payments for research and development services and accrual estimates through discussion with applicable personnel and outside service providers as to the progress of clinical trials, or other services completed. The Company adjusts its rate of research and development expense recognition if actual results differ from its estimates. The Company makes estimates of its advance payments and accrued expenses as of each balance sheet date in its condensed consolidated financial statements based on facts and circumstances known at that time. Although the Company does not expect its estimates to be materially different from amounts actually incurred, its understanding of status and timing of services performed relative to the actual status and timing of services performed may vary and may result in the Company reporting amounts that are too high or too low for any particular period. Through June 30, 2021, there had been no material adjustments to the Company’s prior period estimates of advance payments and accruals for research and development expenses. The Company’s research and development advance payments and accruals are dependent upon the timely and accurate reporting of contract research organizations and other third-party vendors.

Stock-Based Compensation

The Company recognizes stock-based compensation expense for stock options and restricted stock unit awards on a straight-line basis over the requisite service period. The Company’s stock-based compensation costs are based upon the grant date fair value of options estimated using the Black-Scholes-Merton option pricing model. This model utilizes as inputs the estimated fair value of the underlying common stock at the measurement date, the estimated term of the stock options (weighted-average period of time that the options granted are expected to be outstanding), risk-free interest rates, expected dividends, and the expected volatility of the Company’s common stock. The Company has elected to recognize forfeitures of share-based payment awards as they occur.

The Company recognizes stock-based compensation expense for stock options granted to non-employees based on the estimated fair value of the award as it is more readily measurable than the fair value of the services received.

Net Loss Per Share Attributable to Common Stockholders

Basic net loss per share attributable to common stockholders is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period, without consideration of potentially dilutive securities. Diluted net loss per share attributable to common stockholders is the same as basic net loss per share attributable to common stockholders since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company.

Comprehensive Loss

Comprehensive loss represents the change in the Company’s stockholders’ equity (deficit) from all sources other than investments by or distributions to stockholders. The Company has no items of other comprehensive loss; as such, net loss equals comprehensive loss.

Recent Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2016-02, Leases, or Topic 842, which supersedes the guidance in former ASC 840, Leases. This standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less may be accounted for similar to existing guidance for operating leases today. In May 2020, the FASB issued ASU No. 2020-05, Revenue from

12


 

Contracts with Customers (Topic 606) and Leases (Topic 842): Effective Dates for Certain Entities, which deferred the effective dates for non-public entities. Therefore, this standard is effective for annual reporting periods, and interim periods within those years, for public entities beginning after December 15, 2018 and for private entities beginning after December 15, 2021. Originally, a modified retrospective transition approach was required for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. In July 2018, the FASB issued guidance to permit an alternative transition method for Topic 842, which allows transition to the new lease standard by recognizing a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Entities may elect to apply either approach. There are also a number of optional practical expedients that entities may elect to apply. The Company is currently assessing the impact of this standard on its condensed consolidated financial statements. The Company expects to record a material right-of-use asset and lease liability in connection with adopting this standard on January 1, 2022.

Recently Adopted Pronouncements

In August 2020, the FASB issued ASU No. 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, or ASU 2020-06, which simplifies accounting for convertible instruments by removing major separation models required under current U.S. GAAP. ASU 2020-06 removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception and it also simplifies the diluted earnings per share calculation in certain areas. ASU 2020-06 is effective for the Company for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020 and adoption must be as of the beginning of the Company’s annual fiscal year. The Company early adopted this standard on January 1, 2021 and the adoption of the standard did not have a significant impact on its consolidated financial statements.

3. Fair Value Measurements

The following table summarizes the fair value of the Company’s financial liabilities measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

December 31, 2020

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Redeemable convertible preferred stock warrant liabilities

 

$

 

 

$

 

 

$

2,622

 

 

$

2,622

 

Total financial liabilities

 

$

 

 

$

 

 

$

2,622

 

 

$

2,622

 

 

There were no financial liabilities as of June 30, 2021 that were measured at fair value.

The following table summarizes the change in the fair value of the redeemable convertible preferred stock warrant liabilities for the six months ended June 30, 2021 (in thousands):

 

Beginning balance as of December 31, 2020

$

2,622

 

Losses from changes in fair value

 

55

 

Settlement upon IPO

 

(2,677

)

Ending balance as of June 30, 2021

$

 

 

The following table summarizes the change in the fair value of the convertible notes for the six months ended June 30, 2021 (in thousands):

 

Beginning balance as of December 31, 2020

$

 

Issuance of convertible notes

 

7,500

 

Interest

 

54

 

Losses from changes in fair value

 

839

 

Conversion upon IPO

 

(8,393

)

Ending balance as of June 30, 2021

$

 

 

Fair values of the Company’s redeemable convertible preferred stock warrant liabilities and convertible notes are based on significant inputs not observed in the market, and thus represent a Level 3 measurement. Refer to Note 6 and Note 7 for the valuation techniques and assumptions used in estimating the fair value of the convertible notes and warrants, respectively.

13


 

4. Balance Sheet Components

Prepaid Expenses and Other Current Assets

Prepaid expenses and other current assets consisted of the following (in thousands):

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Refundable clinical deposits

 

$

337

 

 

$

672

 

Tax refund receivable

 

 

25

 

 

 

229

 

Prepaid insurance

 

 

3,050

 

 

 

47

 

Other prepaids and current assets

 

 

1,207

 

 

 

129

 

Total prepaid expenses and other current assets

 

$

4,619

 

 

$

1,077

 

 

Accrued Liabilities

Accrued liabilities consisted of the following (in thousands):

 

 

 

June 30,
2021

 

 

December 31,
2020

 

Accrued professional services

 

$

1,340

 

 

$

192

 

Accrued compensation

 

 

1,986

 

 

 

2,393

 

Accrued other liabilities

 

 

214

 

 

 

333

 

Accrued construction in progress

 

 

6

 

 

 

255