UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended
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
(Exact name of Registrant as specified in its Charter)
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(State or other jurisdiction of incorporation or organization) |
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(I.R.S. Employer Identification No.) |
(Address of principal executive offices including zip code)
Registrant’s telephone number, including area code: (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
Trading Symbol(s) |
Name of each exchange on which registered |
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.
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).
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 |
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Accelerated filer |
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Smaller reporting company |
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Emerging growth company |
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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 14, 2023 was
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:
to fund our operations for at least the next 12 months as a going concern; 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
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PART I—FINANCIAL INFORMATION |
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Item 1. |
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4 |
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4 |
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Condensed Consolidated Statements of Operations and Comprehensive Loss |
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Condensed Consolidated Statements of Changes in Stockholders’ (Deficit) Equity |
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7 |
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Item 2. |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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Item 3. |
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29 |
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Item 4. |
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29 |
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PART II—OTHER INFORMATION |
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Item 1. |
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30 |
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Item 1A. |
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30 |
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Item 2. |
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67 |
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Item 3. |
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67 |
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Item 4. |
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67 |
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Item 5. |
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67 |
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Item 6. |
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68 |
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In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Impel” and the “Company” refer to Impel Pharmaceuticals Inc. and its consolidated subsidiary. Impel, Impel Pharmaceuticals Inc., the Impel logo and other trade names, trademarks or service marks of Impel are the property of Impel Pharmaceuticals 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 PHARMACEUTICALS INC.
Condensed Consolidated Balance Sheet
(In thousands, except share and per share data)
(Unaudited)
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June 30, |
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December 31, |
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Assets |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Trade receivables, net |
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Inventory |
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Prepaid expenses and other current assets |
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Total current assets |
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Property and equipment, net |
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Operating lease right-of-use assets |
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Other assets |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ (deficit) equity |
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Current liabilities: |
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Accounts payable |
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$ |
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$ |
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Accrued and other liabilities |
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Current portion of long-term debt |
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Current portion of deferred royalty obligation |
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Current portion of operating lease liability |
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Total current liabilities |
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Operating lease liability, net of current portion |
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Deferred royalty obligation, net of current portion |
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Long-term debt |
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Total liabilities |
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Stockholders’ (deficit) equity: |
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Preferred stock, $ |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
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Total stockholders’ (deficit) equity |
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( |
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Total liabilities and stockholders’ (deficit) equity |
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$ |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
4
IMPEL PHARMACEUTICALS INC.
Condensed Consolidated Statement of Operations and Comprehensive Loss
(In thousands, except share and per share data)
(Unaudited)
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Three Months Ended |
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Six Months Ended |
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2023 |
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2022 |
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2023 |
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2022 |
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Product revenue, net |
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$ |
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$ |
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$ |
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$ |
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Cost of goods sold |
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Gross profit |
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Operating expenses: |
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Research and development |
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Selling, general and administrative |
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Restructuring |
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Total operating expenses |
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Loss from operations |
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( |
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( |
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Other income (expense), net : |
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Interest income (expense), net |
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( |
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( |
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( |
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Other income (expense), net |
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( |
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Total other income (expense), net |
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( |
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( |
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Loss before income taxes |
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( |
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( |
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( |
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Provision (benefit) for income taxes |
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Net loss and comprehensive loss |
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$ |
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$ |
( |
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$ |
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$ |
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Net loss per share - basic and diluted |
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$ |
( |
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$ |
( |
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$ |
( |
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$ |
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Weighted-average shares used in computing net loss per share |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
5
IMPEL PHARMACEUTICALS INC.
Condensed Consolidated Statement of Changes in Stockholders’ (Deficit) Equity
(In thousands, except share data)
(Unaudited)
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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(Deficit) Equity |
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Balance — December 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock-based compensation expense |
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— |
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— |
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— |
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Release of restricted stock units |
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— |
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— |
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— |
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— |
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Net loss and comprehensive loss |
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— |
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— |
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— |
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( |
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Balance — March 31, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
( |
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Stock-based compensation expense |
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— |
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— |
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— |
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Issuance of common stock upon the exercise of stock options |
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— |
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— |
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Net loss and comprehensive loss |
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— |
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— |
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— |
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( |
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( |
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Balance — June 30, 2023 |
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$ |
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$ |
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$ |
( |
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$ |
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Common Stock |
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Additional |
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Accumulated |
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Total |
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Shares |
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Amount |
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Capital |
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Deficit |
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Equity |
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Balance — December 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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Issuance of common stock upon the exercise of stock options |
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— |
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— |
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Net loss and comprehensive loss |
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— |
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— |
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— |
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( |
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Balance — March 31, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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Stock-based compensation expense |
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— |
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— |
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— |
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Issuance of common stock upon the exercise of stock options |
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— |
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— |
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Net loss and comprehensive loss |
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— |
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— |
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— |
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( |
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( |
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Balance — June 30, 2022 |
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$ |
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$ |
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$ |
( |
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$ |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
IMPEL PHARMACEUTICALS INC.
Condensed Consolidated Statement of Cash Flows
(In thousands)
(Unaudited)
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Six Months Ended |
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2023 |
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2022 |
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Cash flows from operating activities: |
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Net loss |
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$ |
( |
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$ |
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Adjustments to reconcile net loss to net cash used in operating activities: |
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Stock-based compensation |
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Depreciation and amortization |
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Non-cash lease expense |
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Non-cash interest expense and amortization of debt discount and issuance costs |
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Loss on early extinguishment of debt |
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Change in fair value of derivatives |
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( |
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Change in fair value of warrant liabilities |
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Write-down of inventory to net realizable value |
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Long-lived asset impairment |
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Changes in operating assets and liabilities: |
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Accounts receivable |
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( |
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Inventory |
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( |
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( |
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Prepaid expenses and other current assets |
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( |
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( |
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Other assets |
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( |
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Accounts payable |
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( |
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( |
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Accrued liabilities |
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( |
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( |
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Operating lease |
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( |
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( |
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Net cash used in operating activities |
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$ |
( |
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$ |
( |
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Cash flows from investing activities: |
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Purchases of property and equipment |
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( |
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( |
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Net cash used in investing activities |
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$ |
( |
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$ |
( |
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Cash flows from financing activities: |
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Proceeds from deferred royalty obligation, net of issuance costs |
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Proceeds from issuance of long-term debt, net of issuance costs |
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Payments on long-term debt, including final payment |
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Proceeds from issuance of common stock upon exercise of stock options |
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Payment of deferred offering costs |
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( |
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Net cash provided by financing activities |
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$ |
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$ |
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Net (decrease) increase in cash and cash equivalents |
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( |
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Cash — Beginning of period |
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Cash — End of period |
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$ |
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$ |
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Supplemental disclosures of cash flow information: |
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Right-of-use asset obtained in exchange for new operating lease liability |
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$ |
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$ |
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Accrued inventory purchases |
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Recognition of derivative liabilities |
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Purchase of property and equipment included in accounts payable and accrued liabilities |
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The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
IMPEL PHARMACEUTICALS INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Organization and Description of Business
Impel Pharmaceuticals Inc. (“the Company”, "we", and "our"), is a commercial-stage biopharmaceutical 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 lead product, Trudhesa™ (dihydroergotamine mesylate) Nasal Spray was approved by the U.S. Food and Drug Administration ("FDA") in September of 2021. Using the Company’s proprietary Precision Olfactory Delivery (POD®) technology, Trudhesa™ gently delivers dihydroergotamine mesylate (DHE), a proven, well-established therapeutic, quickly to the bloodstream through the vascular-rich upper nasal space.
The Company’s strategy is to pair its 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, and maintains its headquarters and principal operations in Seattle, Washington. In April of 2022, the Company changed its name from Impel NeuroPharma, Inc. to Impel Pharmaceuticals Inc.
Recent Developments
From the Company’s inception through June 30, 2023, it raised an aggregate of $
Further, the Senior Credit Agreement with Oaktree Fund Administration, LLC as administrative agent, and the lenders party thereto, or collectively Oaktree, as further described in Note 8, requires maintaining a minimum of $
As of the filing date of this Form 10-Q, the Company was not in compliance with maintaining the minimum liquidity covenant of $
In response to these conditions, the Company is currently in negotiations with Oaktree to seek a forbearance and amendment agreement to remedy the Company’s current and anticipated noncompliance with its covenants under the Senior Credit Agreement. The Company is also currently in negotiations with Oaktree and other investors regarding the terms of an approximately $
8
would alleviate such conditions under the Senior Credit Agreement or the circumstances that give rise to substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the filing date of this Form 10-Q. If the strategic process is unsuccessful, our Board may decide to obtain relief under the US Bankruptcy Code. The Company has hired advisors, if needed, to assist with filing for bankruptcy protection. Accordingly, the Company determined that it cannot be certain that the Company’s plans and initiatives would be effectively implemented within one year after the filing date. Without giving effect to the Company’s plans and initiatives, it is unlikely that the Company will be able to generate sufficient cash flows to meet its required financial obligations, including its debt service and other obligations due to third parties within one year after filing date of this Form 10-Q. The existence of these conditions and events raise substantial doubt about the Company’s ability to continue as a going concern for the twelve-month period following the issuance of these interim financial statements. All outstanding borrowings under the Senior Credit Agreement and deferred royalty obligation are classified as short term on the Condensed Consolidated Balance Sheets as of June 30, 2023 due to the debt covenant violation at the time of the issuance of these interim financial statements.
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, and rules and regulations of the SEC for interim financial reporting. The condensed consolidated financial statements include the operations of Impel Pharmaceuticals 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, 2023, the condensed consolidated statements of operations and comprehensive loss, and changes in stockholders’ (deficit) equity for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022 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, 2023 and its results of operations for the three and six months ended June 30, 2023 and 2022 and cash flows for the six months ended June 30, 2023 and 2022. 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 is also unaudited. The results of operations for the three and six months ended June 30, 2023, are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any other future annual or interim period. The condensed consolidated balance sheet as of December 31, 2022 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 financial statements as of and for the year ended December 31, 2022 included in its Annual Report on Form 10-K filed with the SEC on March 27, 2023.
Our significant accounting policies are described in Note 2 of the notes to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2022. Updates to our accounting policies, including impacts from the adoption of new accounting standards, are discussed below in this Note 2.
Use of Estimates
The preparation of 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 revenue recognition, inventory valuation, the fair values of derivative liabilities, stock-based compensation expense, deferred royalty obligation, lease accounting, income taxes, and additional charges as a result of, or that are associated with, any restructuring initiative as well as impairment and related charges. 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 Chairman and Chief Executive Officer. The Chairman and 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.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and accounts receivables. 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.
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Selling, General and Administrative Expense
Selling, general and administrative expenses are primarily comprised of compensation and benefits associated with sales and marketing, finance, human resources, legal, information technology and other administrative personnel, outside marketing, advertising and legal expenses and other general and administrative costs. The Company expenses the cost of advertising, including promotional expenses, as incurred. Advertising expenses were $
Impairment of Long-Lived Assets
Long-lived assets consist of property and equipment and right of use assets. The Company reviews property and equipment and right of use assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable or that the useful life is shorter than the Company had originally estimated. Recoverability is measured by comparison of the carrying amount of the asset or asset group to the future undiscounted cash flows which the asset or asset group is expected to generate. If the asset or asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset or asset group exceeds the fair value of the asset or asset group. If the useful life is shorter than originally estimated, the Company amortizes the remaining carrying value over the new shorter useful life.
Recently Adopted Accounting Pronouncements
In June 2016 the FASB issued Accounting Standard Update ("ASU") 2016-13, Measurement of Credit Losses on Financial Instruments (Topic 326). This introduces new methodology for recognition of credit losses - the current expected credit loss (“CECL”) method. The CECL method requires the recognition of all losses expected over the life of a financial instrument upon origination or purchase of the instrument, unless the company elects to recognize such instruments at fair value with changes in profit and loss. The Company adopted this guidance as of January 1, 2023. The adoption did not have a material impact to the Company or its disclosures.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (“JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. The Company has elected to use this extended transition period for complying with certain new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date that it is (1) no longer an emerging growth company or (2) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, these financial statements may not be comparable to companies that comply with the new or revised accounting pronouncements as of public company effective dates.
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):
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June 30, 2023 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Liabilities: |
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Common stock warrant liabilities |
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$ |
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$ |
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$ |
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$ |
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Derivative liability - Deferred royalty obligation |
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Derivative liability - Oaktree term loan |
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Total financial liabilities |
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$ |
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$ |
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$ |
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$ |
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December 31, 2022 |
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Level 1 |
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Level 2 |
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Level 3 |
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Total |
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Liabilities: |
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