UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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
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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.
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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. ☐
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As of May 4, 2022, the registrant had
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
TABLE OF CONTENTS
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Page |
PART I. |
1 |
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Item 1. |
1 |
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Condensed Consolidated Balance Sheets as of March 31, 2022 and December 31, 2021 |
1 |
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2 |
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3 |
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Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2022 and 2021 |
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5 |
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Item 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
17 |
Item 3. |
27 |
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Item 4. |
27 |
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PART II. |
28 |
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Item 1. |
28 |
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Item 1A. |
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Item 2. |
28 |
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Item 3. |
28 |
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Item 4. |
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Item 5. |
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Item 6. |
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32 |
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i
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q, or this quarterly report, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and the documents incorporated by reference herein may contain “forward-looking statements” within the meaning of the federal securities laws made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth below under Part II, Item 1A, “Risk Factors” in this quarterly report. Except as required by law, we assume no obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise. These statements, which represent our current expectations or beliefs concerning various future events, may contain words such as “may,” “will,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “estimate” or other words indicating future results, though not all forward-looking statements necessarily contain these identifying words. Such statements may include, but are not limited to, statements concerning the following:
ii
Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause actual results or performance to differ materially from those projected. These statements are only current predictions and are subject to known and unknown risks, uncertainties, and other factors that may cause our or our industry’s actual results, levels of activity, performance or achievements to be materially different from those anticipated by the forward-looking statements. In addition, historic results of scientific research, preclinical and clinical trials do not guarantee that future research or trials will suggest the same conclusions, nor that historic results referred to herein will be interpreted in the same manner due to additional research, preclinical and clinical trial results or otherwise. The forward-looking statements contained in this quarterly report are subject to risks and uncertainties, including those discussed in our other filings with the United States Securities and Exchange Commission, or the Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance, or achievements.
iii
PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except par value information)
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March 31, |
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December 31, |
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(unaudited) |
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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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Accounts receivable |
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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 asset, net |
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Equity-method investment |
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Non-current restricted cash |
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Total assets |
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$ |
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$ |
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Liabilities and stockholders’ 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 liabilities |
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Current portion of long-term debt |
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Deferred revenue |
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Total current liabilities |
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Deferred revenue, net of current portion |
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Long-term debt, net of current portion |
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Operating lease liability, net of current portion |
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Total liabilities |
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$ |
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$ |
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Stockholders’ equity |
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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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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
1
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(unaudited)
(in thousands except per share data)
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Three Months Ended |
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March 31, |
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2022 |
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2021 |
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Revenue |
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$ |
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$ |
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Operating expenses: |
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Research and development, net |
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General and administrative |
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Total operating expenses |
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Loss from operations |
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(Loss) gain from equity-method investment |
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Gain from foreign currency |
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Finance expense, net |
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( |
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Net loss |
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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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Weighted-average shares outstanding, basic and diluted |
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Comprehensive loss: |
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Net loss |
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$ |
( |
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$ |
( |
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Comprehensive loss |
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$ |
( |
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$ |
( |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(unaudited)
in thousands
Three Months Ended March 31, 2022 |
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Stockholders’ |
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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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Net 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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Share-based compensation expense |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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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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Three Months Ended March 31, 2021 |
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Additional |
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Total |
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Common Stock |
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Paid-In |
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Accumulated |
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Stockholders’ |
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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, 2020 |
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$ |
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$ |
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$ |
( |
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$ |
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Net 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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Issuance of common stock related to acquired in-process research and development |
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— |
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— |
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Share-based compensation expense |
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— |
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— |
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— |
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Issuance of common stock upon exercise of stock options |
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— |
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— |
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BALANCE – March 31, 2021 |
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$ |
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$ |
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$ |
( |
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$ |
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3
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
in thousands
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Three Months Ended March 31, |
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2022 |
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2021 |
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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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Depreciation and amortization |
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Share-based compensation expense |
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Acquired in-process research and development expense |
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— |
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Loss (gain) from equity-method investment |
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( |
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Foreign currency transaction gain |
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( |
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( |
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Other non-cash expenses |
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Changes in operating assets and liabilities |
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Accounts receivable |
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( |
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Prepaid expense and other assets |
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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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Deferred revenue |
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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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INVESTING ACTIVITIES: |
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Acquisition 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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FINANCING ACTIVITIES: |
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Proceeds from debt |
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— |
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Proceeds from exercise of stock options |
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Net cash provided by financing activities |
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NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH |
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( |
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Cash, cash equivalents and restricted cash at beginning of the period |
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Cash, cash equivalents and restricted cash at end of the period |
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$ |
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$ |
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Three Months Ended March 31, |
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2022 |
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2021 |
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Supplemental disclosure of cash flow information |
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Cash paid for interest |
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$ |
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$ |
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Non-cash investing activities |
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Right-of-use asset obtained in exchange for lease liabilities |
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$ |
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$ |
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Acquisition of in-process research and development through issuance of common stock |
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$ |
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$ |
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Purchase of property and equipment in accounts payable |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
4
ARCTURUS THERAPEUTICS HOLDINGS INC. AND ITS SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Description of Business, Basis of Presentation and Summary of Significant Accounting Policies
Description of Business
Arcturus Therapeutics Holdings Inc. (the “Company” or "Arcturus") is a late-stage global clinical messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases. The Company became a clinical stage company during 2020 when it announced that its Investigational New Drug (“IND”) application for ornithine transcarbamylase (“OTC”) deficiency and its Clinical Trial Application (“CTA”) candidate LUNAR-COV19 were approved by applicable health authorities.
Basis of Presentation
The accompanying condensed consolidated financial statements include the accounts of Arcturus Therapeutics Holdings Inc. and its subsidiaries and are unaudited. All intercompany accounts and transactions have been eliminated in consolidation. These condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In management’s opinion, the accompanying condensed consolidated financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented.
Interim financial results are not necessarily indicative of results anticipated for the full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements and footnotes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021.
These condensed consolidated financial statements are prepared in accordance with GAAP, which requires management to make estimates and assumptions regarding the valuation of debt instruments, the equity-method investment, share-based compensation expense, accruals for liabilities, income taxes, revenue and deferred revenue, leases, and other matters that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Although these estimates are based on management’s knowledge of current events and actions the Company may undertake in the future, actual results may ultimately differ from these estimates and assumptions.
Joint Ventures, Equity Method Investments and Variable Interest Entities
Investments for which the Company exercises significant influence, but does not have control are accounted for under the equity method. Equity method investment activity is related to a
In April 2021, Arcturus and Axcelead, Inc., a company existing under the laws of Japan (“Axcelead”), formed a joint venture entity, named Arcalis, Inc. (“JV Entity”), which operates as a corporation under the laws of Japan. Axcelead is an integrated drug discovery solutions provider to the pharmaceutical industry in Japan. On July 1, 2017, Axcelead became the successor to a portion of the drug discovery research department of Takeda Pharmaceutical Company Limited. The goal of the JV Entity is to be a contract development and manufacturing organization focused on mRNA manufacturing that would provide manufacturing services to the Company and also to third parties. The joint venture includes a shareholders agreement which sets forth initial funding of the JV Entity and rights of the JV Entity shareholders, including certain approval rights of Arcturus. As part of the joint venture, the Company entered into a License and Technology Transfer Agreement with the JV Entity, pursuant to which Arcturus grants to JV Entity a nonexclusive license to certain intellectual property for use at the JV Entity’s facilities, and obligates Arcturus to conduct certain technology transfer activities.
The Company consolidates variable interest entities (“VIEs”) where it has been determined that the Company is the primary beneficiary of those entities’ operations. Management believes that power is shared between Arcturus and Axcelead, as unrelated parties. The consent of each of the parties is substantive and is required to make the decisions about the JV Entity’s significant activities. Management does not believe that Arcturus has the power to direct the activities of the JV Entity that most significantly impact the JV Entity’s economic performance. Therefore, the Company concluded it is not required to consolidate the JV Entity under the VIE model.
5
The equity method of accounting is applicable for the JV Entity as the Company does not own more than
Liquidity
The Company has incurred significant operating losses since its inception. As of March 31, 2022 and December 31, 2021, the Company had an accumulated deficit of $
The Company’s activities since inception have consisted principally of research and development activities, general and administrative activities, and raising capital. The Company’s activities are subject to significant risks and uncertainties, including failing to secure additional funding before the Company achieves sustainable revenues and profit from operations. From the Company’s inception through March 31, 2022, the Company has funded its operations principally with the proceeds from the sale of capital stock, revenues earned through collaboration agreements and proceeds from long-term debt. During fiscal year 2021, the Company received a term loan of $
Management believes that it has sufficient working capital on hand to fund operations through at least the next twelve months from the date these condensed consolidated financial statements were available to be issued. There can be no assurance that the Company will be successful in securing additional funding, that the Company’s projections of its future working capital needs will prove accurate, or that any additional funding would be sufficient to continue operations in future years.
Segment Information
In making decisions regarding resource allocation and assessing performance, the chief operating decision-maker identifies operating segments as components of an enterprise for which separate discrete financial information is available for evaluation. The Company and its chief operating decision-maker view the Company’s operations and manage its business in
Revenue Recognition
The Company determines revenue recognition for arrangements within the scope of Topic 606 by performing the following five steps: (i) identify the contract; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when, or as, the Company satisfies a performance obligation.
The terms of the Company’s revenue agreements include license fees, upfront payments, milestone payments, reimbursement for research and development activities, option exercise fees, consulting and related technology transfer fees and royalties on sales of commercialized products. Arrangements that include upfront payments are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until the Company performs obligations under these arrangements. The event-based milestone payments represent variable consideration, and the Company uses the most likely amount method to estimate this variable consideration because the Company will either receive the milestone payment or will not, which makes the potential milestone payment a binary event. The most likely amount method requires the Company to determine the likelihood of earning the milestone payment. Given the high degree of uncertainty around achievement of these milestones, the Company determines the milestone amounts to be fully constrained and does not recognize revenue until the uncertainty associated with these payments is resolved. The Company will recognize revenue from sales-based royalty payments when or as the sales occur. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved and other changes in circumstances occur.
A performance obligation is a promise in a contract to transfer a distinct good or service to the collaborative partner and is the unit of account in Topic 606. A contract’s transaction price is allocated to each distinct performance obligation based on relative standalone selling price and recognized as revenue when, or as, the performance obligation is satisfied.
See “Note 2, Collaboration Revenue” for specific details surrounding the Company’s collaboration arrangements.
Leases
See “Note 9, Commitments and Contingencies” for specific details surrounding the Company’s leases.
6
Research and Development, Net
All research and development costs are expensed as incurred. Research and development costs consist primarily of salaries, employee benefits, costs associated with preclinical studies and clinical trials (including amounts paid to clinical research organizations and other professional services), in process research and development expenses and license agreement expenses, net of any grants, and prelaunch inventory. Payments made
prior to the receipt of goods or services to be used in research and development are capitalized until the goods or services are received.
The Company records accruals for estimated research and development costs, comprising payments for work performed by third party contractors, laboratories, participating clinical trial sites, and others. Some of these contractors bill monthly based on actual services performed, while others bill periodically based upon achieving certain contractual milestones. For the latter, the Company accrues the expenses as goods or services are used or rendered. Clinical trial site costs related to patient enrollment are accrued as patients enter and progress through the trial.
Pre-Launch Inventory
Prior to obtaining initial regulatory approval for an investigational product candidate, the Company expenses costs relating to production of inventory as research and development expense in its condensed consolidated statements of operations and comprehensive loss, in the period incurred. When the Company believes regulatory approval and subsequent commercialization of an investigational product candidate is probable, and the Company also expects future economic benefit from the sales of the investigational product candidate to be realized, it will then capitalize the costs of production as inventory.
Statement of Cash Flows
The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the condensed consolidated balance sheet to the total of the same such amounts shown in the condensed consolidated statement of cash flows:
(in thousands) |
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March 31, 2022 |
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March 31, 2021 |
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Cash and cash equivalents |
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$ |
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$ |
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Non-current restricted cash |
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Total cash, cash equivalents and restricted |
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$ |
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$ |
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Net Loss per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for common stock equivalents. Diluted net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock and dilutive common stock equivalents outstanding for the period determined using the treasury-stock method.
Note 2. Revenue
The Company has entered into license agreements and collaborative research and development arrangements with pharmaceutical and biotechnology companies, as well as consulting, related technology transfer and product revenue agreements. Under these arrangements, the Company is entitled to receive license fees, consulting fees, product fees, technological transfer fees, upfront payments, milestone payments if and when certain research and development milestones or technology transfer milestones are achieved, royalties on approved product sales and reimbursement for research and development activities. The Company’s costs of performing these services are included within research and development expenses. The Company’s milestone payments are typically defined by achievement of certain preclinical, clinical, and commercial success criteria. Preclinical milestones may include in vivo proof of concept in disease animal models, lead candidate identification, and completion of IND-enabling toxicology studies. Clinical milestones may, for example, include successful enrollment of the first patient in or completion of Phase 1, 2 and 3 clinical trials, and commercial milestones are often tiered based on net or aggregate sale amounts. The Company cannot guarantee the achievement of these milestones due to risks associated with preclinical and clinical activities required for development of nucleic acid medicine-based therapeutics and vaccines.
7
The following table presents changes during the three months ended March 31, 2022 in the balances of contract assets, including receivables from collaborative partners, consulting and related technology transfer partners, and contract liabilities, including deferred revenue, as compared to what was disclosed in the Company’s Annual Report.
(in thousands) |
|
Contract Assets |
|
|
BALANCE - December 31, 2021 |
|
$ |
|
|
Additions for revenue recognized from billings |
|
|
|
|
Deductions for cash collections |
|
|
( |
) |
BALANCE – March 31, 2022 |
|
$ |
|
|
|
|
|
|
|
(in thousands) |
|
Contract Liabilities |
|
|
BALANCE - December 31, 2021 |
|
$ |
|
|
Additions for advanced billings |
|
|
|
|
Deductions for promised services provided in current period |
|
|
( |
) |
BALANCE – March 31, 2022 |
|
$ |
|
|
The following table summarizes the Company’s revenues for the periods indicated (in thousands).
|
|
For the Three Months |
|
|
|||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
||
Vinbiocare |
|
$ |
|
|
$ |
— |
|
|
|
Janssen |
|
|
|
|
|
|
|
||
Ultragenyx |
|
|
|
|
|
|
|
||
CureVac |
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
||
Total revenue |
|
$ |
|
|
$ |
|
|
||
The following paragraphs provide information regarding the nature and purpose of the Company’s most significant collaboration arrangements.
Vinbiocare
From June 11, 2021 through August 2, 2021, the Company entered into a series of agreements with Vinbiocare, a member of Vingroup Joint Stock Company (collectively, the “Vinbiocare Agreement”), whereby the Company will provide technical expertise and support services to Vinbiocare to assist in the build out of a mRNA drug product manufacturing facility in Vietnam. Such expertise shall include a specified level of access to the Company’s personnel and drug substance necessary to validate the successful set up of the facility. Under the terms of the arrangements, the Company will also provide a specified number of doses of ARCT-154 for use by Vinbiocare in a phase 3 clinical study within Vietnam. The Company received an upfront payment in aggregate of $
In evaluating the Vinbiocare Agreement in accordance with ASC Topic 606, the Company concluded that Vinbiocare is a customer. The Company identified all promised goods/services within the Vinbiocare Agreement, and when combining certain promised goods/services, the Company concluded that there are four distinct performance obligations. The
As of March 31, 2022, the transaction price consists of upfront consideration received and budgeted reimbursable out-of-pocket costs to support the build out of the manufacturing facility and technology transfer. The Company allocated the transaction price to the performance obligations in proportion to their standalone selling price, the relative standalone selling price basis. The drug substance and drug product performance obligations are recognized at the point in time the goods are transferred. The consulting performance obligations are recognized over a period of time based on the percentage of services rendered, meaning actual costs incurred divided by total costs budgeted to satisfy the performance obligation. Any consideration related to sales-based royalties will be recognized
8
when the drug product is manufactured as they are constrained. The revenue recognized in 2022 relates to consulting to support the build out of the manufacturing facility and technical transfer and consulting to support the phase 3 clinical trial.
Total deferred revenue as of March 31, 2022 and December 31, 2021 for the Vinbiocare agreement was $
Janssen Pharmaceuticals, Inc., Ultragenyx Pharmaceutical Inc., CureVac AG
For each of Janssen Pharmaceuticals, Inc. (“Janssen”), Ultragenyx Pharmaceutical Inc. (“Ultragenyx”) and CureVac AG (“CureVac”), the Company evaluated the respective agreement in accordance with ASC Topic 606. The Company concluded that the contract counterparty is a customer. The Company identified all promised goods/services within each agreement, and concluded that the promised goods/services are incapable of being distinct and consequently do not have any value on a standalone basis. Accordingly, the promised goods/services within each agreement were determined to represent a single performance obligation. Lastly, the Company concluded that any options to select additional collaboration targets and to license rights to selected targets were not priced at a discount and therefore do not represent performance obligations for which the transaction price would be allocated.
Janssen
In October 2017, the Company entered into a research collaboration and license agreement with Janssen (the “2017 Agreement”) to collaborate on developing candidates for treating HBV with RNA therapeutics. The 2017 Agreement allocated discovery, development, funding obligations, and ownership of related intellectual property among the Company and Janssen.
As of March 31, 2022, the remaining transaction price consisting of upfront consideration received and budgeted reimbursable out-of-pocket costs, is expected to be recognized using an input method over the remaining research period of
Total deferred revenue as of March 31, 2022 and December 31, 2021 for Janssen was $
Ultragenyx
In October 2015 the Company entered into a research collaboration and license agreement with Ultragenyx (as amended, the “Ultragenyx Agreement”), whereby Arcturus granted to Ultragenyx a co-exclusive license to certain Arcturus technology, which is in effect only during the reserve target exclusivity term as discussed in the following paragraphs. This collaboration agreement was amended in 2017, 2018 and during the second quarter of 2019. During the initial phase of the collaboration, the Company will design and optimize therapeutics for certain rare disease targets. Ultragenyx has the option under the Ultragenyx Agreement to add additional rare disease targets during the collaborative development period. Additionally, during the collaborative development period, the Company will participate with Ultragenyx in a joint steering committee.
The current potential development, regulatory and commercial milestone payments for the existing development targets as of March 31, 2022 are $
As of March 31, 2022, the transaction price included the upfront consideration received, option payments, exclusivity extension payments and additional consideration received pursuant to Amendment 3 of the Ultragenyx Agreement (“Amendment 3”).
9
Amendment 3 was deemed a contract modification and accounted for as part of the original Ultragenyx Agreement. The transaction price is recognized to revenue on a straight-line basis using an input method over the
CureVac
In
As of March 31, 2022, the transaction price included the upfront consideration received.
The upfront consideration of $
Other Agreements
In January 2022, the Company entered into an agreement with a pharmaceutical company, whereby the pharmaceutical company agreed to fund up to $
Israeli Ministry of Health
On August 17, 2020, the Company entered into an agreement with the Israeli Ministry of Health (the “MOH”) to supply the Company’s COVID-19 vaccine candidate to Israel (the “Israel Supply Agreement”) subject to certain conditions, including applicable regulatory approvals. In October 2020, and in association with the Israel Supply Agreement, the Company received a non-refundable payment of $
10
Note 3. Fair Value Measurements
The Company establishes the fair value of its assets and liabilities using the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company established a fair value hierarchy based on the inputs used to measure fair value.
The three levels of the fair value hierarchy are as follows:
Level 1: Quoted prices in active markets for identical assets or liabilities.
Level 2: Inputs, other than the quoted prices in active markets, that are observable either directly or indirectly.
Level 3: Unobservable inputs in which little or no market data exists and are therefore determined using estimates and assumptions developed by the Company, which reflect those that a market participant would use.
The carrying value of cash, restricted cash, accounts receivable, accounts payable, accrued liabilities and the Singapore loan approximate their respective fair values due to their relative short maturities. The carrying amounts of long-term debt for the amount drawn on the Company’s debt facility approximates fair value as the interest rate is variable and reflects current market rates.
As of March 31, 2022 and December 31, 2021, all assets measured at fair value on a recurring basis consisted of cash equivalents and money market funds, which were classified within Level 1 of the fair value hierarchy. The fair value of these financial instruments was measured based on quoted prices.
Note 4. Balance Sheet Details
Property and equipment, net balances consisted of the following:
(in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Research equipment |
|
$ |
|
|
$ |
|
||
Computers and software |
|
|
|
|
|
|
||
Office equipment and furniture |
|
|
|
|
|
|
||
Leasehold improvements |
|
|
|
|
|
|
||
Construction in progress |
|
|
|
|
|
|
||
Total |
|
|
|
|
|
|
||
Less accumulated depreciation and amortization |
|
|
( |
) |
|
|
( |
) |
Property and equipment, net |
|
$ |
|
|
$ |
|
||
Depreciation and amortization expense was $
Accrued liabilities consisted of the following:
(in thousands) |
|
March 31, 2022 |
|
|
December 31, 2021 |
|
||
Accrued compensation |
|
$ |
|
|
$ |
|
||
Cystic Fibrosis Foundation Liability (Note 9) |
|
|
|
|
|
|
||
|
|
|
|
|
|
|||
Clinical accruals |
|
|
|
|
|
|
||
Other accrued research and development expenses |
|
|
|
|
|
|
||
Total |
|
$ |
|
|
$ |
|
||
Note 5. Debt
Manufacturing Supply Agreement
On November 7, 2020, the Company’s wholly-owned subsidiary, Arcturus Therapeutics, Inc., entered into a Manufacturing Support Agreement (the “Support Agreement”) with the Economic Development Board of the Republic of Singapore (the “EDB”). Pursuant to the Support Agreement, the EDB agreed to make a term loan (the “Singapore Loan”) of S$
11
candidate up to an agreed-upon maximum amount, (iv) and the obligation to repay the Singapore Loan will be secured by an interest in the raw materials and manufacturing equipment purchased by the Company with the funds from the Singapore Loan in form and substance satisfactory to the EDB in its sole discretion. The Company elected to borrow the full amount available under the Support Agreement of S$
The Singapore Loan accrues interest at a rate of
payment of
The Singapore Loan is forgivable if the Company has not obtained regulatory approval by the final repayment date and net sales of the LUNAR-COV19 vaccine candidate are less than $
In connection with the entry into the Support Agreement, the Company entered into a consent agreement with Western Alliance Bank (the “Bank”) and an amendment to the Loan and Security Agreement, dated as of October 12, 2018, between Western Alliance Bank and the Company (the “Loan Agreement”), to exclude the Specified Assets from Western Alliance Bank’s lien on certain assets of the Company.
The Singapore Loan was initially recorded as long-term debt at $
Long-term debt with Western Alliance Bank
On October 12, 2018, Arcturus Therapeutics, Inc. entered into the Loan with the Bank, whereby it received $
On October 30, 2019, Arcturus Therapeutics, Inc. and the Bank entered into a Third Amendment (the “Third Amendment”) to the Loan (as amended, the “Loan Agreement”).
Pursuant to the amendment, the Bank agreed to make a term loan to Arcturus Therapeutics, Inc. on October 30, 2019, in the amount of $
Arcturus Therapeutics, Inc. paid a loan origination fee of $
The Term Loan may be prepaid in full at any time, subject to a prepayment fee ranging from
12
Upon maturity or prepayment (as previously discussed), Arcturus Therapeutics, Inc. will be required to pay a
Should an event of default occur, including the occurrence of a material adverse effect, the Company could be liable for immediate repayment of all obligations under the Loan Agreement. As of March 31, 2022, the Company was in compliance with all covenants under the Loan Agreement.
Principal payments, including the final payment due at repayment, on the long-term debt are as follows as of March 31, 2022:
|
|
|
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
Total |
|
$ |
|
|
The Company recognized interest expense related to its long-term debt of $
Note 6. Stockholders’ Equity
Alexion Pharmaceuticals License Agreement
On February 17, 2021, the Company entered into an exclusive license agreement with Alexion Pharmaceuticals, Inc. (“Alexion”) pursuant to which Alexion granted to the Company an exclusive, worldwide license to exploit certain specified Alexion patent applications. In accordance with the terms of the license agreement, and in exchange for the license, the Company issued
13
Net Loss per Share
Dilutive securities that were not included in the calculation of diluted net loss per share for the three months ended March 31, 2022 and 2021 as they were anti-dilutive totaled
Note 7. Share-Based Compensation Expense
In June 2020, the stockholders of the Company approved an increase to the number of shares authorized for use in making awards under the 2019 Omnibus Equity Incentive Plan (the “2019 Plan”) by
In October 2021, the Company adopted the 2021 Inducement Equity Incentive Plan which covers the award of up to
Stock Options
Share-based compensation expense included in the Company’s condensed consolidated statements of operations and comprehensive loss for the three March 31, 2022 and 2021 was as follows:
|
|
For the Three Months |
|
|
||||||
(in thousands) |
|
2022 |
|
|
|
2021 |
|
|
||
Research and development |
|
$ |
|
|
|
$ |
|
|
||
General and administrative |
|
|
|
|
|
|
|
|
||
Total |
|
$ |
|
|
|
$ |
|
|
||
Note 8. Income Taxes
The Company is subject to taxation in the United States and various states. The Company computes its quarterly income tax provision by using a forecasted annual effective tax rate and adjusts for any discrete items arising during the quarter. The primary difference between the effective tax rate and the federal statutory tax rate relates to the valuation allowances on the Company’s net operating losses.
For the three months ended March 31, 2022 and 2021, the Company recorded
Note 9. Commitments and Contingencies
COVID-19 Vaccine Development
On March 4, 2020, the Company was awarded a grant (“Grant 1”) from the Singapore EDB to support the co-development of a potential COVID-19 vaccine with the Duke-NUS Medical School. The Grant provides for up to S$
On October 2, 2020, the Company was awarded another grant (“Grant 2”) from the Singapore EDB to support the clinical development of a potential COVID-19 vaccine (ARCT-021). The grant provides for up to S$
14
as contra research and development expense as costs are incurred. During 2021, the Company recognized the remaining amount of the first installment as contra research and development expense for Grant 2. During the first quarter of 2022, the Company and EDB concluded negotiations on this Contract, and thereby reduced the overall amount received by the Company under the Grant to the first installment of $
Cystic Fibrosis Foundation Agreement
On August 1, 2019, the Company amended its Development Program Letter Agreement, dated May 16, 2017 and as amended July 13, 2018, with the Cystic Fibrosis Foundation (“CFF”). Pursuant to the amendment, (i) CFF increased the amount it will award to advance LUNAR-CF to $
Leases
In October 2017, the Company entered into a non-cancellable operating lease agreement for office space adjacent to its previously occupied headquarters. The commencement of the lease began in March 2018 and the lease extends for approximately
In February 2020, the Company entered into a non-cancellable operating lease agreement for office space near its current headquarters. The lease extended for
In February 2021, the Company entered into a third non-cancellable operating lease agreement for office space near its current headquarters. The lease extends for 12 months from the commencement date with monthly base rent of approximately $
Operating lease right-of-use asset and liability on the condensed consolidated balance sheets represent the present value of remaining lease payments over the remaining lease terms. The Company does not allocate lease payments to non-lease components; therefore, payments for common-area-maintenance and administrative services are not included in the operating lease right-of-use asset and liability. The Company uses its incremental borrowing rate to calculate the present value of the lease payments, as the implicit rate in the lease is not readily determinable.
As of March 31, 2022, the remaining payments of the operating lease liability were as follows:
(in thousands) |
|
Remaining Lease Payments |
|
|
2022 |
|
$ |
|
|
2023 |
|
|
|
|
2024 |
|
|
|
|
2025 |
|
|
|
|
Total remaining lease payments |
|
|
|
|
Less: imputed interest |
|
|
( |
) |
Total operating lease liabilities |
|
$ |
|
|
Weighted-average remaining lease term |
|
|
||
Weighted-average discount rate |
|
|
% |
|
Operating lease costs consist of the fixed lease payments included in operating lease liability and are recorded on a straight-line basis over the lease terms. Operating lease costs were $
15
In September 2021, the Company entered into a non-cancellable lease agreement for office, research and development, engineering and laboratory space near its current headquarters. The initial term of the lease will extend
Note 10. Related Party Transactions
Equity-Method Investment
In June 2018, the Company completed the sale of its intangible asset related to the ADAIR technology. Pursuant to the asset purchase agreement for ADAIR, the Company received a
See “Note 1, Joint Ventures, Equity Method Investments and Variable Interest Entities” for specific details surrounding the Company’s agreement with Axcelead to form the joint venture entity, Arcalis, Inc.
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following is a discussion of the financial condition and results of operations of Arcturus Therapeutics Holdings Inc. for the three month period ended March 31, 2022. Unless otherwise specified herein, references to the “Company,” “Arcturus,” “we,” “our” and “us” mean Arcturus Therapeutics Holdings Inc. and its consolidated subsidiaries. You should read the following discussion and analysis together with the interim condensed consolidated financial statements and related notes included elsewhere herein. For additional information relating to our management’s discussion and analysis of financial conditions and results of operations, please see our Annual Report on Form 10‑K for the year ended December 31, 2021 (the “2021 Annual Report”), which was filed with the U.S. Securities and Exchange Commission (the “Commission”) on March 1, 2022. Unless otherwise defined herein, capitalized words and expressions used herein shall have the same meanings ascribed to them in the 2021 Annual Report.
This report includes forward-looking statements which, although based on assumptions that we consider reasonable, are subject to risks and uncertainties which could cause actual events or conditions to differ materially from those currently anticipated and expressed or implied by such forward-looking statements.
You should read this report and the documents that we reference in this report and have filed as exhibits to this report completely and with the understanding that our actual future results may be materially different from what we expect. You should also review the factors and risks we describe in the reports we will file or submit from time to time with the Commission after the date of this report.
Overview
Arcturus is a global late-stage clinical messenger RNA medicines company focused on the development of infectious disease vaccines and significant opportunities within liver and respiratory rare diseases. In addition to our messenger RNA (“mRNA”) platform, our proprietary lipid nanoparticle delivery system, LUNAR®, has the potential to enable multiple nucleic acid medicines, and our proprietary self-amplifying mRNA technology (Self-Transcribing and Replicating RNA or STARR™) technology has the potential to provide longer-lasting RNA and sustained protein expression at lower dose levels.
We are leveraging our proprietary platform relating to LUNAR and our nucleic acid technologies to develop and advance a pipeline of mRNA based vaccines and therapeutics for the prevention of infectious diseases and treatment of rare genetic disorders with significant unmet medical needs. We continue to expand this platform with innovative delivery solutions that allow us to expand our discovery efforts. Our proprietary LUNAR technology is intended to address the major hurdles in RNA drug development, namely the effective and safe delivery of RNA therapeutics to disease-relevant target tissues. We believe the versatility of our platform to target multiple tissues, its compatibility with various nucleic acid therapeutics, and our expertise in developing scalable manufacturing processes will allow us to deliver on the next generation of nucleic acid medicines.
The following chart represents our current pipeline:
17
Key Updates on our COVID-19 Vaccine Program
Phase 1/2 Study in United States and Singapore
In January 2022, we published (01/24/2022) immunogenicity data for participants of a Phase 1/2 booster study being conducted in the U.S. and Singapore. Results from the arms where participants were dosed with 5 mcg of ARCT-154 as a booster after at least five months of being vaccinated with two doses of Comirnaty showed encouraging increases in levels of neutralizing antibody activity against D614G and several variants of concern (VoCs) and variants of interest (VoIs). In May 2022, we provided additional neutralization antibody activity data from Day 91 showing durability of neutralizing antibody response. Validated pseudovirus microneutralization (MNT) assay results for D614G variant showed a 28- and 40-fold increase in geometric mean fold rise (GMFR) on Day 15 and 29 after booster dose compared to pre-dose levels, respectively. The antibody levels remained elevated at 30-fold for D91 over pre-boost levels indicating the durability of the neutralizing antibody response. We also shared immunogenicity data obtained in a validated MNT assay against Beta variant and the data indicated similar durability of the neutralizing antibody response with the increases in GMFR of 26-, 31-, and -24 at days 15, 29, and 91, respectively.
Figure: Validated pseudovirus microneutralization (MNT) assay results (left: D614G; right: Beta), showing GMFR levels of neutralizing antibody responses over Day 1 (baseline levels prior to boosting with ARCT-154) based on geometric mean concentrations (with 95% confidence intervals) obtained for participants (for D614G: n = 12/12 for Days 1, 91 and 11/12 for Days 15 29; For Beta: n = 12/12 for Days 1, 29, 91 and 11/12 for Day 15)
18
In the May 2022 press release, we announced that ARCT-154 booster administered arms also demonstrated robust and durable neutralizing antibody responses against VOCs strains including the Beta and the Delta, and VOIs SARS-CoV-2 strains in a surrogate virus neutralization (sVNT) assay through Day 91.
Figure: Surrogate virus neutralization (sVNT) assay results for SARS-CoV-2 variants. The panel shows GMFR on Days 15, 29, and 91 over Day 1 (pre-boost baseline levels; n = 12/12 for Days 1, 29, 91; n = 11/12 for Day 15). VOCs = Variants of Concern; VOIs = Variants of Interest
From the same Phase 1/2 booster trial, we also reported data (exploratory MNT assay; Moore Laboratory, National Institute for Communicable Diseases and University of the Witwatersrand, South Africa) demonstrating neutralizing antibody immune response to SARS-CoV-2 Omicron variants, BA.1 and BA.2, in participants that received ARCT-154 as booster. Omicron-specific pseudovirus MNT assay results demonstrated neutralizing antibody titers of 54-fold (BA.1) and 46-fold (BA.2) GMFRs over baseline on Day 29 post-boost in ARCT-154 arm (n=12). The sera samples from study participants will be further analyzed for neutralizing antibody
19
activity post-boost with ARCT-154 against different strains of SARS-CoV-2 over a period of timepoints to assess magnitude and duration of response.
Figure: Pseudovirus MNT assay (exploratory assay; Moore Laboratory, National Institute for Communicable Diseases and University of the Witwatersrand, South Africa) showing GMFR levels of neutralizing antibody responses over Day 1 (baseline levels prior to boosting with ARCT-154) calculated using geometric mean concentrations (with 95% confidence intervals) obtained from participants measured at Days 1 and 29 (n = 12/12).
Phase 1/2/3 Study in Vietnam
During 2021, we entered into a significant collaboration with Vinbiocare Biotechnology Joint Stock Company (Vinbiocare), a member company of the Vingroup Joint Stock Company (Vingroup) group of companies, whereby we provide technical expertise and support services to Vinbiocare to assist in the build out of a manufacturing facility in Vietnam. Together with Vinbiocare, we advanced ARCT-154, our investigational next generation, self-amplifying mRNA-based vaccine for COVID-19, into a Phase 1/2/3 study in Vietnam, which is being funded and sponsored by Vinbiocare. The trial is randomized, observer-blinded, placebo and active-controlled and is intended to assess the safety, immunogenicity and efficacy of ARCT-154. The Phase 3 arm of the Phase 1/2/3 study was initiated in September 2021. The study enrolled over 19,000 adult subjects in Vietnam, including individuals with medical conditions putting them at higher risk of severe complications of COVID-19. The Phase 3 placebo-controlled efficacy portion of the study enrolled over 16,000 participants.
In February 2022, our partner, Vinbiocare, completed the submission to the Vietnam Ministry of Health of ARCT-154 Emergency Use Authorization (EUA) application, which includes the safety and immunogenicity data from the placebo-controlled Phase 1/2/3a portions of the study with approximately 1,000 participants. In April 2022, Vinbiocare submitted results from the vaccine safety and efficacy analysis of the Phase 3b portion study to the Vietnam Ministry of Health to complement the data package under review for potential EUA of ARCT-154. The vaccine primary efficacy endpoint in the placebo-controlled Phase 3b portion of the study was met. Analysis of the data demonstrated that two 5-mcg doses of ARCT-154 administered 28 days apart resulted in vaccine efficacy of 55.0% (95% CI; 46.9% - 61.9%) for protection against COVID-19 overall and 95.3% (95% CI; 80.4% - 98.9%) against severe and fatal COVID-19, respectively. Nine COVID-19 related deaths were reported in the placebo group and one in the ARCT-154 vaccinated group. The single death in the ARCT-154 vaccination arm occurred in an older age group participant who was also at increased risk of severe COVID-19. During the window when COVID-19 cases in the study were detected, the prevalent SARS-CoV-2 strains associated with COVID-19 infections in Vietnam were Delta and Omicron (https://covariants.org/per-country; https://covid19.who.int/region/wpro/country/vn; https://ourworldindata.org COVID-19 Data Explorer - Vietnam Link).
20
Review of safety data has been performed by Vinbiocare from over 17,000 participants in the placebo-controlled Phase 1/2/3 portions through one month after second dose of ARCT-154. The incidence of unsolicited events was found to be comparable in the vaccinated and placebo groups and no incidence of myocarditis or pericarditis have been reported so far. Analysis of solicited events also demonstrated that most events were mild or moderate in severity. An independent review by the Data Safety Monitoring Board has advised for the study to continue without modification.
Additional data shared by Vinbiocare shows that the study also met the immunogenicity primary endpoint, with 98.4% 4-fold seroconversion for ancestral (Wuhan) strain, measured by surrogate virus neuralization test (sVNT) 28 days after the second dose of ARCT-154. This analysis was conducted in the first approximately 1,000 participants enrolled in the Phase 1/2/3a study and was provided earlier by Vinbiocare to the Vietnam Ministry of Health as part of the filing for EUA. More comprehensive immunogenicity, efficacy and safety data from the study will be disclosed at a later time.
Pivotal Booster Study
Based on the encouraging Phase 3 results of ARCT-154, which became the first documented instance of a self-amplifying mRNA vaccine candidate to demonstrate meaningful protection against COVID-19 disease in a pivotal primary vaccination trial, we have initiated start-up activities with an international CRO toward a pivotal booster trial intended to support global registration as a booster vaccination.
Key Updates on our Other Development Candidates
Key Updates on our Research and Platform Activities
Results of Operations
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Report and our audited financial statements and related notes for the year ended December 31, 2021. Our historical results of operations and the year-to-year comparisons of our results of operations that follow are not necessarily indicative of future results.
21
Revenue
We enter into arrangements with pharmaceutical and biotechnology partners and government agencies that may contain upfront payments, license fees for research and development arrangements, research and development funding, milestone payments, option exercise and exclusivity fees, royalties on future sales, consulting fees and payments for technology transfers. The following table summarizes our total revenues for the periods indicated (in thousands):
|
|
Three Months Ended March 31, |
|
|
2021 to 2022 |
|
||||||||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ change |
|
|
% change |
|
||||
Revenue |
|
$ |
5,244 |
|
|
$ |
2,127 |
|
|
$ |
3,117 |
|
|
|
146.5 |
% |
Revenue increased by $3.1 million during the three months ended March 31, 2022 as compared to the three months ended March 31, 2021. The increase in revenue primarily relates to $2.9 million revenue from the new agreement with Vinbiocare. The remaining increase of $0.2 million was from our existing collaboration partners.
Our operating expenses consist of research and development and general and administrative expenses.
|
|
Three Months Ended March 31, |
|
|
2021 to 2022 |
|
||||||||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ change |
|
|
% change |
|
||||
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Research and development, net |
|
$ |
44,893 |
|
|
$ |
50,050 |
|
|
$ |
(5,157 |
) |
|
* |
|
|
General and administrative |
|
|
10,730 |
|
|
|
9,743 |
|
|
|
987 |
|
|
|
10.1 |
% |
Total |
|
$ |
55,623 |
|
|
$ |
59,793 |
|
|
$ |
(4,170 |
) |
|
* |
|
|
* Greater than 100%
The following table presents our total research and development expenses by category:
|
|
Three Months Ended March 31, |
|
|
2021 to 2022 |
|
||||||||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ change |
|
|
% change |
|
||||
External pipeline development expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
LUNAR-COVID, net |
|
$ |
27,816 |
|
|
$ |
29,312 |
|
|
$ |
(1,496 |
) |
|
|
-5.1 |
% |
LUNAR-CF, net |
|
|
1,127 |
|
|
|
1,404 |
|
|
|
(277 |
) |
|
|
-19.7 |
% |
LUNAR-OTC |
|
|
1,645 |
|
|
|
3,086 |
|
|
|
(1,441 |
) |
|
|
-46.7 |
% |
Discovery technologies |
|
|
1,365 |
|
|
|
7,845 |
|
|
|
(6,480 |
) |
|
* |
|
|
External platform development expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Partnered discovery technologies |
|
|
779 |
|
|
|
463 |
|
|
|
316 |
|
|
* |
|
|
Total development expenses |
|
$ |
32,732 |
|
|
$ |
42,110 |
|
|
$ |
(9,378 |
) |
|
* |
|
|
Personnel related expenses |
|
$ |
10,317 |
|
|
$ |
6,909 |
|
|
$ |
3,408 |
|
|
* |
|
|
Facilities and equipment expenses |
|
|
1,844 |
|
|
|
1,031 |
|
|
|
813 |
|
|
|
78.9 |
% |
Total research and development |
|
$ |
44,893 |
|
|
$ |
50,050 |
|
|
$ |
(5,157 |
) |
|
* |
|
|
* Greater than 100%
Research and Development Expenses, net
Our research and development expenses consist primarily of external manufacturing costs, in-vivo research studies and clinical trials performed by contract research organizations, clinical and regulatory consultants, personnel related expenses and laboratory supplies related to conducting research and development activities. Costs to acquire and manufacture pre-launch inventory, mRNA supply for preclinical studies and clinical trials are recognized and included in external pipeline development expenses for the specific program.
LUNAR-COVID expenses decreased by $1.5 million during the three months ended March 31, 2022, respectively, as compared to 2021. The decrease in the current period is primarily due increased manufacturing during the three months ended March 31, 2021 which was related to the build up of pre-launch inventory. The expense for the three months ended March 31, 2021 was partially offset by funds awarded by the Singapore EDB.
LUNAR-CF expenses were relatively consistent during the three months ended March 31, 2022 when compared to the three months ended March 31, 2021, decreasing by $0.3 million. Expenses incurred were partially offset with funds awarded by the CFF. We expect that our development efforts and associated costs will increase over the next several years as the LUNAR-CF program moves toward expected CTA submission in the third quarter of 2022.
22
LUNAR-OTC expenses decreased by $1.4 million during the three months ended March 31, 2022, respectively, as compared to 2021. The decrease is related to slower than expected recruiting for the ARCT-810 clinical trial caused in part by the ongoing Covid environment.
Discovery technologies represents our efforts to expand our product pipeline and are expected to remain relatively consistent in the near future. Partnered discovery technologies decreased by $6.5 million during the three months ended March 31, 2022, respectively, as compared to 2021. The decrease is primarily because in the first quarter of 2021 we acquired an exclusive license from Alexion Pharmaceuticals to certain intellectual property for approximately $5.0 million of our common stock, which we expensed in the first quarter of 2021. The remaining decrease of $1.5 million was primarily due to decreased utilization of external development resources.
Within our platform development expenses, our partnered discovery expenses with our current partners are expected to fluctuate based on the needs of our collaboration partners. Platform development expenses were relatively consistent, increasing by $0.3 million during the three months ended March 31, 2022 when compared to the three months ended March 31, 2021.
Personnel related expenses, net of funds received from CFF, increased by $3.4 million during the three months ended March 31, 2022, respectively, as compared to 2021. The increases were associated with increased headcount costs necessary to advance our external pipeline, platform and clinical trial efforts as well as increased share-based compensation expense.
Facilities and equipment expenses increased by $0.8 million during the three months ended March 31, 2022, respectively, as compared to 2021. The increase is primarily due to higher rent and costs associated with preparing our additional facility to be ready for occupancy in the second quarter of 2022.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related benefits for our executive, administrative and accounting functions and professional service fees for legal and accounting services as well as other general and administrative expenses.
General and administrative expenses increased by $1.0 million during the three months ended March 31, 2022, as compared to 2021. The increases resulted primarily from personnel expense due to increased headcount and increased share-based compensation expense.
Finance (expense) income, net
|
|
Three Months Ended March 31, |
|
|
2021 to 2022 |
|
||||||||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
|
$ change |
|
|
% change |
|
||||
Interest income |
|
$ |
154 |
|
|
$ |
188 |
|
|
$ |
(34 |
) |
|
|
-18.1 |
% |
Interest expense |
|
|
(718 |
) |
|
|
(546 |
) |
|
|
(172 |
) |
|
* |
|
|
Total |
|
$ |
(564 |
) |
|
$ |
(358 |
) |
|
$ |
(206 |
) |
|
* |
|
|
* Greater than 100%
Interest income is generated on cash and cash equivalents. The decrease in interest income for the three months ended March 31, 2022 as compared to the prior year period was a result of decreased cash and cash equivalents balances. Interest expense was incurred in conjunction with our Loan and Security Agreement with Western Alliance Bank and the Singapore Loan. The increase in interest expense for the three months ended March 31, 2022 as compared to the prior year period was primarily a result of additional accrued interest expense related to the Singapore Loan that was funded in January 2021.
Other income and expense
Other income and expense items relate to gains and losses from foreign currency transactions and from equity-method investments. During the three months ended March 31, 2022 and March 31, 2021, we recorded a loss of $0.4 million and a gain of $1.2 million, respectively, in connection with our equity-method investment in Vallon Pharmaceuticals, Inc., of which we hold approximately 12%.
23
Off-balance sheet arrangements
Through March 31, 2022, we have not entered into and did not have any relationships with unconsolidated entities or financial collaborations, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
Liquidity and Capital Resources
From the Company’s inception through the quarter ended March 31, 2022, the Company has funded its operations principally with the proceeds from the sale of capital stock, long-term debt and revenues earned through collaboration agreements. At March 31, 2022, we had $319.7 million in unrestricted cash and cash equivalents.
Loan and Security Agreement
On October 12, 2018, we entered into a Loan and Security Agreement with Western Alliance Bank whereby we received gross proceeds of $10.0 million under a long-term debt agreement (the “Loan Agreement”).
On October 30, 2019, we and the Bank entered into a Third Amendment (the “Third Amendment”) to the Loan Agreement and on December 31, 2020 Arcturus Therapeutics, Inc. and the Bank entered into a Fourth Amendment (the “Fourth Amendment”) to the Loan Agreement (as amended, the “Loan Agreement”). The Fourth Amendment was executed in connection with the Singapore Loan.
Pursuant to the Third Amendment, the Bank agreed to make a term loan to us on October 30, 2019, in the amount of $15.0 million (the “Term Loan”). The resulting net increase in the indebtedness of us was $5.0 million. The Term Loan bears interest at a floating rate ranging from 1.25% to 2.75% above the prime rate. The amendment further provides that the Term Loan has a maturity date of October 30, 2023. We shall make monthly payments of interest only until the interest-only end date of August 1, 2022.
Manufacturing Support Agreement
On November 7, 2020, we entered into a Manufacturing Support Agreement (the “Support Agreement”) with the EDB. Pursuant to the Support Agreement, the EDB agreed to make a term loan of S$62.1 million, subject to the satisfaction of customary deliveries, to support the manufacture of the LUNAR-COV19 vaccine candidate (the “Singapore Loan”). The EDB has agreed to an extension of the reconciliation period to March 31, 2022 with unused funds as of such date to be subsequently returned within thirty days, subject to any further agreed upon extension of the reconciliation date. The parties are in continued negotiations with respect to amendments of the Singapore Loan terms. Under current terms, (i) we are to provide a quarterly reconciliation report within forty-five days of each financial quarter end, (ii) we provided a schedule of expenditures through March 31, 2022 which will be followed by an audited statement of actual expenditures through March 31, 2022 by June 30, 2022, (iii) we are to provide EDB with a right of first refusal on GMP manufacturing slots of the LUNAR-COV19 vaccine candidate up to an agreed-upon maximum amount, (iv) and the obligation to repay the Singapore Loan will be secured by an interest in the raw materials and manufacturing equipment purchased by us with the funds from the Singapore Loan in form and substance satisfactory to the EDB in its sole discretion. We elected to borrow the full amount available under the Support Agreement of S$62.1 million ($46.6 million) on January 29, 2021. As of March 31, 2022, the Company has reported a portion of the Singapore Loan as current to reflect a potential principal repayment of approximately 20.9 million Singapore dollars (US $15.4 million) in fiscal year 2022 based on amounts not used toward the manufacture of ARCT-021 and is expecting to refund this portion during the third quarter of 2022.
The Singapore Loan accrues interest at a rate of 4.5% per annum calculated on a daily basis. At the end of each fiscal year, accrued interest is added to the principal amount of the loan and bears additional interest accordingly. Subject to certain exceptions, the Singapore Loan is intended to be a limited recourse loan that will be repaid solely through a royalty payment of 10% of net sales proceeds of the LUNAR-COV19 vaccine candidate, up to the amount of the outstanding principal and interest under the Singapore Loan. However, all unpaid principal and interest under the Singapore Loan will be due and payable five years after draw date, if net sales of the LUNAR-COV19 vaccine exceed a certain minimum threshold during this five year period or we obtain clearance to sell the vaccine in specified jurisdictions. Unpaid principal and interest under the Singapore Loan will also become due and payable upon an event of default under the Support Agreement. The first vaccine sales, including the amount of net sales, shall be reported to EDB within 10 days of delivery and quarterly reports of aggregate vaccine sales, including net sales proceeds shall be provided within 30 days after quarter end.
The Singapore Loan is forgivable if we have not obtained regulatory approval by the final repayment date and net sales of LUNAR-COV19 are less than $100 million. If, any portion of the Singapore Loan is required to be forgiven pursuant to the terms of the Support Agreement, the EDB has the right to take ownership of certain raw materials and equipment that were purchased by us with proceeds of the Singapore Loan (the “Specified Assets”). We entered into a security agreement (the “Security Agreement”) for the benefit of the EDB to provide that repayment of the Singapore Loan and related obligations are secured by a lien on the Specified Assets.
24
In connection with the entry into the Support Agreement, we entered into a consent agreement with Western Alliance Bank (the “Bank”) and an amendment to the Loan and Security Agreement, dated as of October 12, 2018, to exclude the Specified Assets from Western Alliance Bank’s lien on certain assets.
Vinbiocare Agreement
On August 2, 2021, we announced an agreement with Vinbiocare, a member of Vingroup Joint Stock Company, to establish a manufacturing facility in Vietnam for the manufacture of our investigational COVID-19 vaccine program, for sale and use within Vietnam. In addition, Vinbiocare agreed to execute a phase 1/2/3 study in Vietnam.
Under the terms of the arrangement, Vinbiocare is building out a manufacturing facility in Vietnam, and we have provided to Vinbiocare access to proprietary technologies and processes for the manufacture of our investigational COVID-19 vaccine candidate. We also provided Vinbiocare with an exclusive license to manufacture the vaccines in Vietnam at the facility solely for distribution in Vietnam. The license and technology transfer applies toward drug product manufacturing but not toward mRNA drug substance manufacturing. Vinbiocare made an upfront payment of $40 million and is responsible for costs associated with the technology transfer. Vinbiocare will also pay for mRNA drug substance supplied by us and royalties on vaccines produced at the manufacturing facility.
General Financial Resources
A significant portion of our current unrestricted cash and cash equivalents balance of $319.7 million is expected to be utilized during fiscal year 2022 to fund (i) a portion of the planned COVID Booster trial, (ii) further progress of our FLU vaccine programs, (iii) the continued Phase 2 trial of ARCT-810, our LUNAR-OTC candidate, (iv) advances to our LUNAR-CF program toward submission of a CTA during the second half of 2022 and (v) continued expansion of our platform and other general administrative activities.
Our future capital requirements are difficult to forecast and will depend on many factors that are out of our control. If we are unable to maintain sufficient financial resources, our business, financial condition and results of operations will be materially and adversely affected. There can be no assurance that we will be able to obtain additional needed financing on acceptable terms or at all. Additionally, equity or debt financings may have a dilutive effect on the holdings of our existing shareholders.
We expect to continue to incur additional losses for the foreseeable future, and we will need to raise additional debt or equity financing or enter into additional partnerships to fund development. The ability of our Company to transition to profitability is dependent on identifying and developing successful mRNA drug candidates. If we are not able to achieve planned milestones, incur costs in excess of our forecasts, or do not meet covenant requirements of our debt, we will need to reduce discretionary spending, discontinue the development of some or all of our products, which will delay part of our development programs, all of which will have a material adverse effect on our ability to achieve our intended business objectives.
Overview
The following table shows a summary of our cash flows for the three months ended March 31, 2022 and 2021 (in thousands):
|
|
Three Months Ended March 31, |
|
|||||
(Dollars in thousands) |
|
2022 |
|
|
2021 |
|
||
Cash provided by (used in): |
|
|
|
|
|
|
||
Operating activities |
|
$ |
(49,039 |
) |
|
$ |
(42,950 |
) |
Investing activities |
|
|
(2,111 |
) |
|
|
(118 |
) |
Financing activities |
|
|
336 |
|
|
|
47,012 |
|
Net (decrease) increase in cash, cash equivalents and restricted cash |
|
$ |
(50,814 |
) |
|
$ |
3,944 |
|
Operating Activities
Our primary use of cash is to fund operating expenses, which consist mainly of research and development, clinical studies, manufacturing drug substance and drug product and general and administrative expenditures. We have incurred significant expenses which have been partially offset by cash collected through our collaboration agreements. Cash collections under the collaboration agreements can vary from year to year depending on the terms of the agreement and work performed. These changes in cash flows primarily relate to the timing of cash receipts for upfront payments, reimbursable expenses and achievement of milestones under these collaborative agreements.
Net cash used in operating activities was $49.0 million on a net loss of $54.1 million for the three months ended March 31, 2022, compared to net cash used of $42.9 million on a net loss of $56.3 million for the three months ended March 31, 2021. Adjustments for non-cash charges which includes share-based compensation expense and depreciation and amortization were $8.7 million and $11.3 million for the three months ended March 31, 2022 and 2021, respectively. Changes in working capital resulted in
25
adjustments to operating net cash outflows of $3.7 million and inflows of $2.1 million for the three months ended March 31, 2022 and 2021, respectively. Changes in working capital for the three months ended March 31, 2022 were primarily driven by decreases in deferred revenue and accrued liabilities, partly offset by increases in accounts payable and prepaid expenses. Changes in working capital for the three months ended March 31, 2021 were primarily driven by an increase in accounts payable and accrued liabilities and a decrease in prepaid expenses, partly offset by a decrease in deferred revenue.
Investing Activities
Net cash used in investing activities of $2.1 million and $0.1 million for the three months ended March 31, 2022 and 2021, respectively, reflects cash used to purchase property and equipment.
Financing Activities
Net cash provided by financing activities of $0.3 million for the three months ended March 31, 2022 consisted of net proceeds from the exercise of stock options. Net cash provided by financing activities of $47.0 million for the three months ended March 31, 2021 consisted of net proceeds from debt related to the Singapore Loan of $46.6 million and proceeds from the exercises of stock options of $0.4 million.
Funding Requirements
We anticipate that we will continue to generate losses for the foreseeable future, and we expect the losses to increase as we continue the development of, and seek regulatory approvals for, our product candidates, and begin commercialization of our products. As a result, we will require additional capital to fund our operations in order to support our long-term plans. We believe that our current cash position will be sufficient to meet our anticipated cash requirements through at least the next twelve months, assuming, among other things, no significant unforeseen expenses, continued funding from partners at anticipated levels and our payment obligations continuing to follow the current maturity schedule under our long-term credit facility referenced in Note 5. We intend to seek additional capital through equity and/or debt financings, collaborative or other funding arrangements with partners or through other sources of financing. Should we seek additional financing from outside sources, we may not be able to raise such financing on terms acceptable to us or at all. If we are unable to raise additional capital when required or on acceptable terms, we may be required to scale back or discontinue the advancement of product candidates, reduce headcount, liquidate our assets, file for bankruptcy, reorganize, merge with another entity, or cease operations.
Our future funding requirements are difficult to forecast and will depend on many factors, including the following:
26
Critical Accounting Policies and Estimates
We prepare our condensed consolidated financial statements in conformity with GAAP. As such, we make certain estimates, judgments and assumptions that we believe are reasonable, based upon information available to us. These judgements involve making estimates about the effect of matters that are inherently uncertain and may significantly impact our reported results of operations and financial condition. We describe our significant accounting policies more fully in Note 2 to our consolidated financial statements for the year ended December 31, 2021.
There have been no material changes to our critical accounting policies and estimates from the information provided in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in the 2021 Annual Report.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Our primary exposure to market risk is interest income and expense sensitivity and foreign currency exchange rates. Interest income and expense sensitivity is affected by changes in the general level of interest rates in the United States. Foreign exchange market risks relate to the grants and loan from the Singapore Economic Development Board which is discussed in this Quarterly Report in “Notes to Condensed Consolidated Financial Statements, Note 1. Description of Business.” When deemed appropriate, we may manage our exposure to foreign exchange market risks through the use of derivative financial instruments. We may utilize such derivative financial instruments for hedging or risk management purposes. Due to the nature of our cash and cash equivalents and our evaluation of the potential impact of foreign currency exchange rates, we believe that we are not currently subject to any material market risk exposure.
Item 4. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15(b) and Rule 15d-15(b) of the Exchange Act, our management, including our principal executive officer, our principal financial officer and our principal accounting officer, conducted an evaluation as of the end of the period covered by this Quarterly Report on Form 10-Q of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, management has concluded that as of March 31, 2022, the Company’s disclosure controls and procedures were effective at the reasonable assurance level, and we believe the condensed consolidated financial statements included in this Form 10-Q for the quarterly period ended March 31, 2022 fairly present, in all material respects, our financial position, results of operations, comprehensive loss, statements of stockholders’ equity and cash flows for the periods presented in conformity with U.S. generally accepted accounting principles.
Changes in Internal Control over Financial Reporting
As required by Rule 13a-15(d) and Rule 15d-15(d) of the Exchange Act, our management, including our principal executive officer, our principal financial officer and our principal accounting officer, conducted an evaluation of the internal control over financial reporting to determine whether any other changes occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. Based on that evaluation, our principal executive officer, principal financial officer and principal accounting officer concluded that there were no changes in our internal controls over financial reporting during the period covered by this Quarterly Report on Form 10-Q that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.
27
PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
From time to time, we may be involved in various legal proceedings and subject to claims that arise in the ordinary course of business. Although the results of litigation and claims are inherently unpredictable and uncertain, we are not currently a party to any legal proceedings
Item 1A. Risk Factors.
Our business is subject to various risks, including those described in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, which we strongly encourage you to review. Other than as set forth below, there have been no material changes to the risk factors described in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the Commission on March 1, 2022.
Instability in geographies where the Company has operations and personnel or where the Company derives revenue could have a material adverse effect on the Company’s business, customers, operations and financial results.
Economic, civil, military and political uncertainty may arise or increase in regions where we, our collaborators, critical service providers or other key third parties operate or derive revenue. Further, countries from which we, our collaborators, critical service providers or other key third parties operate or derive revenue may experience military action and/or civil and political unrest. In late February 2022, Russian military forces launched significant military action against Ukraine. Sustained conflict and disruption in the region is likely. The aggregate impact to Eastern Europe and Europe as a whole, as well as actions taken by countries or global organizations, including but not limited to new and stricter sanctions and policies by the United States, Canada, the United Kingdom, the European Union and/or the United Nations, against Russia, Belarus and Ukraine, and officials or other individuals, regions, and industries therein, is not knowable at this time. Further, potential responses to such sanctions and policies by Russia, Belarus, Ukraine, or other actors, including but not limited to increased tensions and more dramatic military actions, is not knowable at this time. Beyond the impact this conflict has had on Eastern Europe and the surrounding regions, these events have roiled global financial markets and supply chains. Any of the foregoing, individually or collectively, may have a material adverse impact on our business, financial condition and results of operations.
Any booster study for ARCT-154 may have difficulty in its enrollment, initiation and completion. Further, the transition of the COVID-19 pandemic to an endemic stage may impact the commercial potential of ARCT-154 and our COVID-19 program.
We have initiated start-up activities with an international CRO toward a pivotal Phase 3 booster trial for ARCT-154, our lead next-generation self-amplifying mRNA vaccine candidate. The trial would be a necessary step toward an approval of ARCT-154 as a booster and possibly for any approval in any significant market. The trial could face many challenges, including enrollment, procurement of a comparator vaccine and regulatory approvals to proceed, and we expect that additional studies would also be required for approvals. If we are unable to proceed with or complete the trial for any reason, we might not be able to achieve an approval for ARCT-154, and our COVID-19 vaccine program would be materially adversely impacted. Further, as the COVID-19 pandemic transitions to an endemic stage, the commercial potential of ARCT-154 and our COVID-19 vaccine program may be significantly reduced. As we continue to evaluate the changing environment, we may reevaluate our activities and planned expenditures on our COVID-19 vaccine program. The development of ARCT-154 also remains subject to the other risks mentioned in our Annual Report on Form 10-K for the year ended December 31, 2021.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Mine Safety Disclosures.
Not applicable.
Item 5. Other Information.
None.
28
Item 6. Exhibits.
Exhibit Index
Exhibit Number |
|
Description |
|
|
|
3.1 |
|
|
|
|
|
3.2 |
|
|
|
|
|
3.3 |
|
|
|
|
|
4.1 |
|
|
|
|
|
10.1† |
|
|
|
|
|
10.2† |
|
|
|
|
|
10.3** |
|
|
|
|
|
10.4** |
|
|
|
|
|
10.5** |
|
|
|
|
|
10.6** |
|
|
|
|
|
10.7** |
|
|
|
|
|
10.8** |
|
|
|
|
|
10.9** |
|
|
|
|
|
10.10** |
|
|
|
|
|
10.11** |
|
|
|
|
|
10.12** |
|
|
|
|
|
10.13** |
|
|
29
|
|
|
10.14** |
|
|
|
|
|
10.15 |
|
|
|
|
|
10.16** |
|
|
|
|
|
10.17** |
|
|
|
|
|
10.18 |
|
|
|
|
|
10.19** |
|
|
|
|
|
10.20** |
|
|
|
|
|
10.21 |
|
|
|
|
|
10.22 |
|
|
|
|
|
10.23** |
|
|
|
|
|
10.24** |
|
|
|
|
|
10.25** |
|
|
|
|
|
10.26 |
|
|
|
|
|
10.27† |
|
|
|
|
|
10.28 |
|
|
|
|
|
10.29 |
|
|
|
|
|
10.30 |
|
30
|
|
|
10.31 |
|
|
|
|
|
10.32 |
|
|
|
|
|
10.33 |
|
|
|
|
|
10.34 |
|
|
|
|
|
10.35† |
|
|
|
|
|
10.36* |
|
|
|
|
|
31.1* |
|
|
|
|
|
31.2* |
|
|
|
|
|
32.1* |
|
|
|
|
|
32.2* |
|
|
|
|
|
101* |
|
The following financial statements and footnotes from the Registrant’s Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2022 formatted in Inline Extensible Business Reporting Language (Inline XBRL): |
|
|
101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document |
|
|
101.SCH Inline XBRL Taxonomy Extension Schema |
|
|
101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase |
|
|
101.DEF Inline XBRL Taxonomy Extension Definition Linkbase |
|
|
101.LAB Inline XBRL Taxonomy Extension Label Linkbase |
|
|
101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase |
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document) |
|
|
|
* Filed herewith.
** Certain confidential portions of this exhibit have been redacted from the publicly filed document because such portions are (i) not material and (ii) would be competitively harmful of publicly disclosed.
† Management compensatory plan, contract or arrangement.
31
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
ARCTURUS THERAPEUTICS HOLDINGS INC. |
|
|
|
|
Date: May 9, 2022 |
By: |
/s/ Andy Sassine |
|
|
Andy Sassine |
|
|
Chief Financial Officer |
32
Exhibit 10.36
SIXTH AMENDMENT TO LOAN AND SECURITY AGREEMENT
This Sixth Amendment to Loan and Security Agreement (this “Amendment”) is entered into as of April __, 2022, by and between WESTERN ALLIANCE BANK, an Arizona corporation (“Bank”), and ARCTURUS THERAPEUTICS, INC., a Delaware corporation (“Borrower”).
RECITALS
Borrower and Bank are parties to that certain Loan and Security Agreement dated as of October 12, 2018, as amended from time to time (the “Agreement”). The parties desire to amend the Agreement in accordance with the terms of this Amendment.
NOW, THEREFORE, the parties agree as follows:
“Amortization Date” means August 1, 2022.
“Interest Only End Date” means July 1, 2022.
“(ii) Repayment. Borrower shall make monthly payments of interest only on each Payment Date through and including the Payment Date immediately preceding the Amortization Date. Commencing on the Amortization Date, and continuing on the Payment Date of each month thereafter, Borrower shall make consecutive equal monthly payments of principal, together with applicable interest, in arrears, to Bank, as calculated by Bank (which calculations shall be deemed correct absent manifest error) based upon: (1) the amount of the Term Loan, (2) the effective rate of interest, as determined in Section 2.3(a), and (3) a repayment schedule equal to fifteen (15) months. All unpaid principal and accrued and unpaid interest with respect to the Term Loan is due and payable in full on the Term Loan Maturity Date. The Term Loan may only be prepaid in accordance with Section 2.1(a)(iii).”
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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the first date above written.
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ARCTURUS THERAPEUTICS, INC., a Delaware corporation |
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By: |
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Name: Joseph E. Payne Title: President and CEO |
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WESTERN ALLIANCE BANK, an Arizona corporation |
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By: |
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Name: Brian Kirkpatrick Title: Vice President |
Corporate Resolutions to Borrow
Borrower: ARCTURUS THERAPEUTICS, INC. |
I, the undersigned Secretary or Assistant Secretary of ARCTURUS THERAPEUTICS, INC. (the “Corporation”), HEREBY CERTIFY that the Corporation is organized and existing under and by virtue of the laws of the State of Delaware.
I FURTHER CERTIFY that attached hereto as Attachments 1 and 2 are true and complete copies of the Certificate of Incorporation, as amended, and the Bylaws of the Corporation, each of which is in full force and effect on the date hereof.
I FURTHER CERTIFY that at a meeting of the Directors of the Corporation, duly called and held, at which a quorum was present and voting (or by other duly authorized corporate action in lieu of a meeting), the following resolutions (the “Resolutions”) were adopted.
BE IT RESOLVED, that any one (1) of the following named officers, employees, or agents of this Corporation, whose actual signatures are shown below:
NAMES |
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ACTUAL SIGNATURES |
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Joseph Payne |
President and CEO |
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Pad Chiviukula |
COO, CSO and Secretary |
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acting for and on behalf of this Corporation and as its act and deed be, and they hereby are, authorized and empowered:
Borrow Money. To borrow from time to time from Western Alliance Bank, an Arizona corporation (“Bank”), on such terms as may be agreed upon between the officers, employees, or agents of the Corporation and Bank, such sum or sums of money as in their judgment should be borrowed, without limitation.
Execute Loan Documents. To execute and deliver to Bank one or more renewals, extensions, modifications, refinancings, consolidations, or substitutions to that certain Loan and Security Agreement dated as October 12, 2018 (the “Loan Agreement”) and any other agreement entered into between Corporation and Bank in connection with the Loan Agreement, including any amendments, all as amended or extended from time to time, including but not limited to that certain Sixth Amendment to Loan and Security Agreement dated as of April __, 2022 (collectively, with the Loan Agreement, the “Loan Documents”), or any portion thereof.
Grant Security. To grant a security interest to Bank in the Collateral described in the Loan Documents, which security interest shall secure all of the Corporation’s Obligations, as described in the Loan Documents.
Negotiate Items. To draw, endorse, and discount with Bank all drafts, trade acceptances, promissory notes, or other evidences of indebtedness payable to or belonging to the Corporation or in which the Corporation may have an interest, and either to receive cash for the same or to cause such proceeds to be credited to the account of the Corporation with Bank, or to cause such other disposition of the proceeds derived therefrom as they may deem advisable.
Letters of Credit. To execute letter of credit applications and other related documents pertaining to Bank’s issuance of letters of credit.
Corporate Credit Cards. To execute corporate credit card applications and agreements and other related documents pertaining to Bank’s provision of corporate credit cards.
Further Acts. In the case of lines of credit, to designate additional or alternate individuals as being authorized to request advances thereunder, and in all cases, to do and perform such other acts and things, to pay any and all fees and costs, and to execute and deliver such other documents and agreements as they may in their discretion deem reasonably necessary or proper in order to carry into effect the provisions of these Resolutions.
BE IT FURTHER RESOLVED, that any and all acts authorized pursuant to these resolutions and performed prior to the passage of these resolutions are hereby ratified and approved, that these Resolutions shall remain in full force and effect and Bank may rely on these Resolutions until written notice of their revocation shall have been delivered to and received by Bank. Any such notice shall not affect any of the Corporation’s agreements or commitments in effect at the time notice is given.
I FURTHER CERTIFY that the officers, employees, and agents named above are duly elected, appointed, or employed by or for the Corporation, as the case may be, and occupy the positions set forth opposite their respective names; that the foregoing Resolutions now stand of record on the books of the Corporation; and that the Resolutions are in full force and effect and have not been modified or revoked in any manner whatsoever.
IN WITNESS WHEREOF, I have hereunto set my hand on April __, 2022 and attest that the signatures set opposite the names listed above are their genuine signatures.
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CERTIFIED AND ATTESTED BY: |
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Pad Chiviukula, Secretary of Borrower |
ATTACHMENT A
CERTIFICATE OF INCORPORATION
ATTACHMENT B
BYLAWS OF THE CORPORATION
Exhibit 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
I, Joseph E. Payne, certify that:
Date: May 9, 2022 |
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By: |
/s/ Joseph E. Payne |
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Joseph E. Payne |
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President and Chief Executive Officer |
Exhibit 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
I, Andy Sassine, certify that:
Date: May 9, 2022 |
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/s/ Andy Sassine |
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Andy Sassine |
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Chief Financial Officer |
Exhibit 32.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the President and Chief Executive Officer of Arcturus Therapeutics Holdings Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended March 31, 2022 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 9, 2022 |
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By: |
/s/ Joseph E. Payne |
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Joseph E. Payne |
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President and Chief Executive Officer |
Exhibit 32.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned, the Chief Financial Officer of Arcturus Therapeutics Holdings Inc. (the "Company"), hereby certifies on the date hereof, pursuant to 18 U.S.C. 1350(a), as adopted pursuant to Section 906 of The Sarbanes-Oxley Act of 2002, that the Quarterly Report on Form 10-Q for the period ended March 31, 2022 (the "Form 10-Q"), filed concurrently herewith by the Company, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended, and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date: May 9, 2022 |
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By: |
/s/ Andy Sassine |
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Andy Sassine |
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Chief Financial Officer |