Business |
12 Months Ended |
|---|---|
Dec. 31, 2019 | |
| Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
| Business |
Business
Cerecor Inc. (the "Company" or "Cerecor") is a biopharmaceutical company focused on becoming a leader in development and commercialization of treatments for rare pediatric and orphan diseases. The Company is advancing an emerging clinical-stage pipeline of innovative therapies that address unmet patient needs within rare pediatric and orphan diseases. The Company's pediatric rare disease pipeline is led by CERC-801, CERC-802 and CERC-803 ("CERC-800 compounds"), which are therapies for inherited metabolic disorders known as Congenital Disorders of Glycosylation ("CDGs"). The U.S. Food and Drug Administration ("FDA") granted Rare Pediatric Disease designation ("RPDD") and Orphan Drug Designation ("ODD") to all three CERC-800 compounds, thus potentially qualifying the Company to receive a Priority Review Voucher ("PRV") upon approval of each New Drug Application ("NDA"). Each PRV may be sold or transferred an unlimited number of times. The Company plans to leverage the 505(b)(2) NDA pathway for all three compounds to accelerate development and approval. Additionally, CERC-801 and CERC-802 were granted Fast Track Designation ("FTD") from the FDA, which can help facilitate and potentially expedite development of each compound.
The Company is also developing CERC-002, CERC-006 and CERC-007. CERC-007 is an anti-IL-18 monoclonal antibody being developed for the treatment of autoimmune inflammatory diseases such as Adult Onset Stills Disease ("AOSD") and Multiple Myeloma. CERC-006 is a dual mTOR inhibitor being developed for the treatment of complex Lymphatic Malformations. CERC-002 is an anti-LIGHT (Lymphotoxin-like, exhibits Inducible expression, and competes with HSV Glycoprotein D for HVEM, a receptor expressed by T lymphocytes) monoclonal antibody being developed for the treatment of Pediatric-onset Crohn's Disease.
The Company continues to explore strategic alternatives for its non-core assets, including CERC-301, as well as its sole commercialized product, Millipred®, an oral prednisolone indicated across a wide variety of inflammatory conditions.
On February 3, 2020, the Company consummated its two-step merger (the "Merger") with Aevi Genomic Medicine, Inc. ("Aevi") in accordance with the terms of the Agreement and Plan of Merger and Reorganization (the "Merger Agreement") dated December 5, 2019. The Merger consideration included stock valued at approximately $15.6 million, resulting in the issuance of approximately 3.9 million shares of Cerecor common stock to Aevi stockholders, forgiveness of a $4.1 million loan that Cerecor loaned Aevi in December 2019 (the "Aevi Loan"), and contingent value rights ("CVRs") for up to an additional $6.5 million in subsequent payments based on clinical and/or regulatory milestones. As part of the Merger, Cerecor acquired CERC-002, CERC-006 and CERC-007, expanding Cerecor's pipeline to six clinical stage assets being developed for rare pediatric and orphan diseases. Effective upon the consummation of the Merger, Cerecor entered into an employment agreement with Mike Cola for him to serve as Cerecor's Chief Executive Officer, an employment agreement with Dr. Garry Neil for him to serve as Cerecor's Chief Medical Officer and appointed Mike Cola and Sol J. Barer, Ph.D. to the Company's Board of Directors. See Note 17 for more information.
During the fourth quarter of 2019, the Company entered into, and closed on, an asset purchase agreement (the "Aytu Purchase Agreement") with Aytu BioScience, Inc. (“Aytu”) to sell the Company’s rights, title and interest in, assets relating to its pediatric portfolio, namely Aciphex® Sprinkle™, Cefaclor for Oral Suspension, Karbinal™ ER, Flexichamber™, Poly-Vi-Flor® and Tri-Vi-Flor™ (the "Pediatric Portfolio"), as well as the corresponding commercial infrastructure consisting of the right to offer employment to Cerecor’s sales force and the assignment of supporting commercial contracts (the "Aytu Divestiture"). Aytu paid consideration of $4.5 million in cash and approximately 9.8 million shares of Aytu convertible preferred stock (the "Investment"), and assumed certain of the Company’s liabilities, including the Company’s payment obligations payable to Deerfield CSF, LLC of $15.1 million and other liabilities of $11.0 million. The Company recognized a gain of $8.0 million upon the closing of the Aytu Divestiture. As a result of the sale of the Pediatric Portfolio, the Pediatric Portfolio met all conditions required in order to be classified as discontinued operations. Therefore, operating results from the Pediatric Portfolio are reported within income (loss) from discontinued operations, net of tax (inclusive of gain on sale) for all periods presented and the gain recognized as a result of the sale is reported within income from discontinued operations, net of tax (inclusive of gain on sale) for the year ended December 31, 2019. In addition, assets and liabilities related to the Pediatric Portfolio are reported as assets and liabilities of discontinued operations in the accompanying consolidated balance sheets as of December 31, 2019 and 2018. See Note 3 for more information regarding the Aytu Divestiture and its accounting treatment.
Cerecor was incorporated in 2011, commenced operations in the second quarter of 2011 and completed an initial public offering in October 2015.
Liquidity
During the first quarter of 2019, the Company closed on an underwritten public offering of common stock for 1,818,182 shares of common stock of the Company, at a price to the public of $5.50 per share ("public price"). Armistice Capital Master Fund Ltd. ("Armistice"), the Company's largest stockholder, participated in the offering by purchasing 363,637 shares of common stock of the Company at the public price. Cerecor director, Steven J. Boyd, is Armistice's Chief Investment Officer. The net proceeds of the offering were approximately $9.0 million. During the third quarter of 2019, the Company entered into a securities purchase agreement with Armistice, pursuant to which, the Company sold 1,200,000 shares of its common stock for a purchase price of $3.132 per share. Net proceeds of the private placement were approximately $3.7 million. During the fourth quarter of 2019, the Company entered into, and subsequently closed on, the Aytu Purchase Agreement to sell the Company's rights, title and interest in, assets relating to its Pediatric Portfolio and related commercial infrastructure for a combination of cash and preferred stock ($4.5 million in cash, and approximately 9.8 million shares of Aytu convertible preferred stock) and the assumption of certain of the Company's liabilities including the Company’s payment obligations payable to Deerfield of $15.1 million and certain other liabilities of approximately $11.0 million. During the first quarter of 2020, the Company closed on a registered direct offering with institutional investors of 1,306,282 shares of the Company's common stock at a purchase price of $3.98 per share. Armistice participated in the offering by purchasing 1,256,282 shares of common stock from the Company. The net proceeds of the offering were approximately $5.0 million.
In order to meet its cash flow needs, the Company applies a disciplined decision-making methodology as it evaluates the optimal allocation of the Company's resources between investing in the Company's existing pipeline assets and acquisitions or in-licensing of new assets. For the year ended December 31, 2019, Cerecor generated a net loss of $16.1 million and negative cash flow from operations of $19.1 million. As of December 31, 2019, Cerecor had an accumulated deficit of $114.3 million and $3.6 million in cash and cash equivalents.
The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern; however, the Company expects to incur additional losses in the future in connection with research and development activities and will require additional financing to fund its operations and to continue to execute its strategy. The Company plans to use its current cash on hand and the anticipated cash flows from the Company's profits from Millipred product sales and/or the potential proceeds from the out-license or sale of Millipred to a third party to offset costs related to its orphan disease pipeline assets, business development, and costs associated with its organizational infrastructure; however, Cerecor expects to continue to incur significant expenses and operating losses for the immediate future as it continues to invest in the Company's pipeline assets. The Company’s ability to continue as a going concern through 2020 is dependent upon the Company’s ability to raise additional equity and/or debt capital; however, there can be no assurance that such capital will be available in sufficient amounts or on terms acceptable to the Company.
Over the long term, the Company's ultimate ability to achieve and maintain profitability is dependent on, among other things, the development, regulatory approval, and commercialization of its pipeline assets, and the potential sale of any PRVs it receives, all being adequate to support its cost structure and pipeline asset development.
These conditions raise substantial doubt about its ability to continue as a going concern within one year after the date that the financial statements are issued. To alleviate these conditions, the Company is evaluating the potential out-licensing or sale of Millipred to a third party and some combination of rights to future PRV sales, equity or debt financings, collaborations, out-licensing arrangements, strategic alliances, federal and private grants, marketing, distribution or licensing arrangements, the sale of current or future assets or possible monetization of the Company's holdings of Aytu equity. If the Company raises additional funds through collaborations, strategic alliances or licensing arrangements with third parties, the Company might have to relinquish valuable rights to its technologies, future revenue streams, research programs or product candidates. If the Company is not able to secure adequate additional funding, the Company may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible or suspend or curtail planned programs. Due to the uncertainty regarding future financings and/or other potential options to raise additional funds, management has concluded that substantial doubt exists with respect to the Company’s ability to continue as a going concern within one year after the date that the financial statements are issued.
|