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EX-32.2 - EX-32.2 - TETRALOGIC PHARMACEUTICALS Corptlog-20160331ex322a24a40.htm
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EX-31.2 - EX-31.2 - TETRALOGIC PHARMACEUTICALS Corptlog-20160331ex312113dc8.htm
EX-31.1 - EX-31.1 - TETRALOGIC PHARMACEUTICALS Corptlog-20160331ex3111eafc5.htm

 

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 


 

FORM 10-Q

 

(Mark One)

 

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

 

For the quarterly period ended March 31, 2016

 

or

 

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

 

For the transition period from             to             

 

Commission File Number 001-36208

 

TetraLogic Pharmaceuticals Corporation

(Exact Name of Registrant as Specified in Its Charter)

 

 

 

 

Delaware

 

42-1604756

(State or Other Jurisdiction of

 

(I.R.S. Employer

Incorporation or Organization)

 

Identification No.)

 

 

 

 

 

343 Phoenixville Pike

 

 

Malvern, Pennsylvania

 

19355

(Address of Principal Executive Offices)

 

(Zip Code)

 

(610) 889-9900

(Registrant’s Telephone Number, Including Area Code)

 

Not Applicable

(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)

 


 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.  Yes   No .

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes   No .

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

 

 

 

Large accelerated filer

 

Accelerated filer

 

 

 

Non-accelerated filer

 

Smaller reporting company

(Do not check if a smaller reporting company)

 

 

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes   No .

 

The number of shares outstanding of the registrant’s common stock, $0.0001 par value per share, as of April 28, 2016 was 24,769,083.

 

 

 

 


 

TABLE OF CONTENTS

 

 

 

 

Cautionary Note Regarding Forward-Looking Statements and Industry Data 

 

 

PART I — FINANCIAL INFORMATION 

 

 

 

Item 1. 

Unaudited Consolidated Financial Statements

 

 

 

 

Consolidated Balance Sheets — December 31, 2015 and March 31, 2016 (unaudited)

 

 

 

 

Unaudited Consolidated Statements of Operations and Comprehensive Loss — Three months ended March 31, 2015  and 2016

 

 

 

 

Unaudited Consolidated Statements of Cash Flows — Three months ended March 31, 2015 and 2016

 

 

 

 

Notes to Unaudited Consolidated Financial Statements

 

 

 

Item 2. 

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

20 

 

 

 

Item 4. 

Controls and Procedures

30 

 

 

PART II — OTHER INFORMATION 

 

 

 

Item 1. 

Legal Proceedings

31 

 

 

 

Item 1A. 

Risk Factors

31 

 

 

 

Item 2. 

Unregistered Sales of Equity Securities and Use of Proceeds

31 

 

 

 

Item 3. 

Defaults Upon Senior Securities

31 

 

 

 

Item 4. 

Mine Safety Disclosures

31 

 

 

 

Item 5. 

Other Information

32 

 

 

 

Item 6. 

Exhibits

32 

 

 

SIGNATURES 

33 

 

 

INDEX TO EXHIBITS 

34 

 

2


 

Cautionary Note Regarding Forward-Looking Statements and Industry Data

 

In addition to historical facts or statements of current condition, this report and the documents into which this report is and will be incorporated contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act.  We may, in some cases, use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “projects,” “intends,” “potential,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations.

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.

Actual results could differ materially from our forward-looking statements due to a number of factors, including risks related to:

·

our ability to successfully pursue strategic alternatives for our company or our product candidates;

·

our ability to raise additional capital to fund our operations and make payments on our existing indebtedness when due;

·

the dilution of existing stockholders from the conversion of our convertible notes or additional share issuances;

·

our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

·

our ability to continue as a going concern without raising additional capital;

·

our ability to comply with the listing requirements of the Nasdaq Global Market and continue to be listed on the Nasdaq Global Market;

·

the success and timing of our pre-clinical studies and clinical trials;

·

the difficulties and expenses associated with obtaining and maintaining regulatory approval of our product candidates, and the labeling under any approval we may obtain;

·

our plans and ability to develop and commercialize our product candidates;

·

our ability to acquire or license additional product candidates;

·

our failure to retain our remaining key scientific or management personnel or executive officers;

·

the size and growth of the potential markets for our product candidates, rate and degree of market acceptance of our product candidates and our ability to serve those markets;

·

legal and regulatory developments in the U.S. and foreign countries;

3


 

·

our ability to limit our exposure to product liability and securities related lawsuits;

·

the successful development of our commercialization capabilities, including sales and marketing capabilities;

·

recently enacted and future legislation regarding the healthcare system;

·

the success of competing therapies and products that are or become available;

·

obtaining and maintaining intellectual property protection for birinapant, SHAPE and our proprietary technology;

·

the decrease in the market price of our common stock; and

·

our dependence on third parties for certain intellectual property rights and for the conduct of our pre-clinical studies and clinical trials.

Birinapant and suberohydroxamic acid 4-methoxycarbonyl phenyl ester, or SHAPE, are our only investigational drugs undergoing clinical development and have not been approved by the U.S. Food and Drug Administration, or FDA, or submitted to the FDA for approval. Birinapant and SHAPE have not been, nor may ever be, approved by any regulatory agency or marketed anywhere in the world. Statements contained in this report should not be deemed to be promotional.

Any forward-looking statement that we make in this report speaks only as of the date of such statement, and, except as required by law, we undertake no obligation to update such statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

You should also read carefully the factors described in the “Risk Factors” section of this report and Part I, Item 1A of our annual report on Form 10-K for the year ended December 31, 2015, or the Annual Report, to better understand the risks and uncertainties inherent in our business and underlying any forward‑looking statements. As a result of these factors, we cannot assure you that the forward‑ looking statements in this quarterly report will prove to be accurate. Furthermore, if our forward‑looking statements prove to be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward‑looking statements, you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all.

We obtained the industry, market and competitive position data in this quarterly report from our own internal estimates and research as well as from industry and general publications and research surveys and studies conducted by third parties. Industry publications and surveys generally state that the information contained therein has been obtained from sources believed to be reliable. We believe this data is accurate in all material respects as of the date of this report.

 

4


 

PART I — FINANCIAL INFORMATION

 

ITEM 1. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

 

TETRALOGIC PHARMACEUTICALS CORPORATION

CONSOLIDATED BALANCE SHEETS

 

 

 

 

 

 

 

 

 

 

    

December 31, 

    

March 31, 

 

 

 

2015

 

2016

 

Assets

    

 

    

    

 

(unaudited)

 

Current assets:

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

15,302,382

 

$

14,541,669

 

Short-term investments

 

 

5,106,627

 

 

 —

 

Prepaid expenses and other current assets

 

 

1,561,705

 

 

1,444,676

 

Total current assets

 

 

21,970,714

 

 

15,986,345

 

Property and equipment, net

 

 

417,815

 

 

38,126

 

Intangible assets

 

 

41,575,516

 

 

41,575,516

 

Other assets

 

 

57,345

 

 

 —

 

Total assets

 

$

64,021,390

 

$

57,599,987

 

 

 

 

 

 

 

 

 

Liabilities and stockholders’ deficit

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

412,456

 

$

1,520,344

 

Accrued expenses

 

 

3,182,415

 

 

3,452,462

 

Derivative liabilities

 

 

64,877

 

 

1,925

 

Total current liabilities

 

 

3,659,748

 

 

4,974,731

 

Convertible notes payable, net of discount

 

 

28,278,875

 

 

29,082,496

 

Derivative liabilities

 

 

55,000

 

 

25,000

 

Deferred taxes

 

 

16,879,659

 

 

16,879,659

 

Contingent consideration and other liabilities

 

 

21,088,834

 

 

22,702,598

 

Total liabilities

 

 

69,962,116

 

 

73,664,484

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

Stockholders’ deficit:

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value; 25,000,000 shares authorized, none issued and outstanding

 

 

 —

 

 

 —

 

Common stock, $0.0001 par value; 100,000,000 shares authorized, 24,769,083 shares issued and outstanding at December 31, 2015 and March 31, 2016

 

 

2,477

 

 

2,477

 

Additional paidin capital

 

 

169,683,829

 

 

170,613,074

 

Cumulative translation adjustment

 

 

(70,790)

 

 

(59,507)

 

Cumulative unrealized loss on investments

 

 

(971)

 

 

 —

 

Accumulated deficit

 

 

(175,555,271)

 

 

(186,620,541)

 

Total stockholders’ deficit

 

 

(5,940,726)

 

 

(16,064,497)

 

Total liabilities and stockholders’ deficit

 

$

64,021,390

 

$

57,599,987

 

 

See accompanying notes to consolidated financial statements.

 

5


 

TETRALOGIC PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2015

    

2016

 

 

 

 

 

 

 

 

 

Revenue

    

$

 —

    

$

 —

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

General and administrative

 

 

3,135,849

 

 

2,972,135

 

Research and development

 

 

6,446,193

 

 

3,301,539

 

Restructuring charges

 

 

 —

 

 

2,013,024

 

Change in fair value of contingent consideration

 

 

1,048,000

 

 

1,054,000

 

Total expenses

 

 

10,630,042

 

 

9,340,698

 

 

 

 

 

 

 

 

 

Loss from operations

 

 

(10,630,042)

 

 

(9,340,698)

 

 

 

 

 

 

 

 

 

Change in fair value of derivative liabilities

 

 

289,666

 

 

92,952

 

Debt exchange expense

 

 

(818,541)

 

 

 —

 

Loss on sale of equipment

 

 

 —

 

 

(153,572)

 

Interest and other income

 

 

39,194

 

 

14,669

 

Interest expense

 

 

(1,563,259)

 

 

(1,678,621)

 

Net loss

 

$

(12,682,982)

 

$

(11,065,270)

 

 

 

 

 

 

 

 

 

Per share information:

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

Basic

 

$

(0.56)

 

$

(0.45)

 

Diluted

 

$

(0.56)

 

$

(0.45)

 

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

 

Basic

 

 

22,814,142

 

 

24,769,083

 

Diluted

 

 

22,858,014

 

 

24,769,083

 

 

 

 

 

 

 

 

 

Net loss

 

$

(12,682,982)

 

$

(11,065,270)

 

Foreign currency gains

 

 

21,516

 

 

11,283

 

Unrealized gains on available-for-sale securities

 

 

9,279

 

 

971

 

Comprehensive loss

 

$

(12,652,187)

 

$

(11,053,016)

 

 

See accompanying notes to consolidated financial statements.

 

6


 

TETRALOGIC PHARMACEUTICALS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

 

2015

 

2016

 

Cash flows from operating activities

    

 

    

    

 

    

 

Net loss

 

$

(12,682,982)

 

$

(11,065,270)

 

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

 

 

 

 

 

 

 

Depreciation and amortization

 

 

44,149

 

 

73,361

 

Stock‑based compensation expense

 

 

1,620,831

 

 

929,245

 

Change in fair value of derivative liabilities

 

 

(289,666)

 

 

(92,952)

 

Change in fair value of contingent consideration

 

 

1,048,000

 

 

1,054,000

 

Non‑cash interest expense

 

 

699,814

 

 

803,621

 

Debt exchange expense

 

 

818,541

 

 

 —

 

Loss on sale of equipment

 

 

 —

 

 

153,572

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(312,239)

 

 

174,374

 

Accounts payable, accrued expenses and other liabilities

 

 

1,817,838

 

 

1,938,333

 

Net cash used in operating activities

 

 

(7,235,714)

 

 

(6,031,716)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

 

 

Purchase of property and equipment

 

 

(34,488)

 

 

 —

 

Proceeds from sale of equipment

 

 

 —

 

 

152,756

 

Purchase of short‑term investments

 

 

(8,918,946)

 

 

 —

 

Sales and maturities of short‑term investments

 

 

20,861,548

 

 

5,107,598

 

Net cash provided by investing activities

 

 

11,908,114

 

 

5,260,354

 

 

 

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from exercise of stock options and warrants

 

 

28,506

 

 

 —

 

Retirement of convertible notes payable

 

 

(825,001)

 

 

 —

 

Net cash used in financing activities

 

 

(796,495)

 

 

 —

 

Effect of exchange rate changes on cash and cash equivalents

 

 

21,516

 

 

10,649

 

Net increase (decrease) in cash and cash equivalents

 

 

3,897,421

 

 

(760,713)

 

Cash and cash equivalents—beginning of period

 

 

13,073,137

 

 

15,302,382

 

Cash and cash equivalents—end of period

 

$

16,970,558

 

$

14,541,669

 

 

 

 

 

 

 

 

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

Noncash investing and financing activities:

 

 

 

 

 

 

 

Conversion of convertible notes to common stock

 

$

2,080,292

 

$

 —

 

Cash paid for interest

 

$

 —

 

$

 —

 

 

See accompanying notes to consolidated financial statements.

7


 

TETRALOGIC PHARMACEUTICALS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

March 31, 2016

(unaudited)

 

1. Organization and Description of the Business

 

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule therapeutics in oncology, infectious diseases and autoimmune diseases. We currently have two clinical-stage product candidates in development: birinapant and suberohydroxamic acid 4-methoxycarbonyl phenyl ester (SHAPE).  Our operations to date have been directed primarily toward developing business strategies, raising capital, research and development activities, conducting pre-clinical testing and human clinical trials of our product candidates and recruiting personnel.

 

Liquidity

 

At March 31, 2016, we had working capital of $11.0 million and cash and cash equivalents of $14.5 million. We have not generated any product revenues and have not yet achieved profitable operations. There is no assurance that profitable operations will ever be achieved, and if achieved, could be sustained on a continuing basis. In addition, development activities, clinical and pre-clinical testing, and commercialization of our products will require significant additional financing.

 

We received written notices from the Listing Qualifications Department of The NASDAQ Stock Market LLC (“Nasdaq”) on January 20, 2016 and February 23, 2016 notifying us that we did not meet certain minimum listing requirements for listing our common stock on the Nasdaq Global Market.  Specifically, we were not in compliance with the minimum bid price requirement of $1.00 for our common stock, the minimum publicly held market value requirement of $15 million for our outstanding common stock, or the minimum total market value requirement of $50 million for our outstanding common stock.  If we are not able to regain compliance with the Nasdaq listing rules within the specified time period (generally 180 days from the date of notice), we will be delisted from the Nasdaq Global Market.  This event would be considered a fundamental change under the indenture for our 8.00% convertible senior notes due June 15, 2019 (the “8% Notes”), and we could be required by the noteholders to purchase for cash all of the outstanding 8% Notes at a purchase price equal to 100% of the principal amount of the 8% Notes ($43.75 million of which are outstanding as of March 31, 2016) plus accrued and unpaid interest.  To regain compliance, the minimum total market value of our common stock would need to reach at least $50 million for 10 consecutive business days by July 18, 2016, the minimum bid price of our common stock would need to reach at least $1.00 for 10 consecutive business days by August 22, 2016, and the minimum publicly held market value of our common stock would need to reach at least $15 million for 10 consecutive business days by August 22, 2016.  All of these events are outside of our control at this time.  Should the delisting of our common stock occur during the second half of 2016, we do not currently have sufficient funds on hand to satisfy the put obligations for the 8% Notes if all holders exercise their put right.  Although we are currently considering available options to resolve our compliance with the Nasdaq listing rules, we have no assurance that such compliance will occur within the necessary time period to prevent delisting.  In addition, we have no assurance that we will be able to obtain sufficient funds to meet our obligations with respect to the 8% Notes in the event that delisting occurs and all holders exercise their put right.  Should we remain in compliance with the Nasdaq listing requirements, we believe our existing cash and investments will be sufficient to fund our current operating and investing activities through December 31, 2016.  In order for our existing cash and investments to fund operating and investing activities through December 31, 2016, we have limited our planned business activities to the completion of the Phase 2 clinical trial of SHAPE and the winding down of the Phase 2 clinical trial in birinapant in MDS, and we effectuated a reduction in force in January 2016, which reduced our headcount to 9 employees in April 2016.

We have retained Houlihan Lokey Capital, Inc. as our financial advisor, to provide financial advisory, restructuring and investment-banking services in connection with analyzing and considering a wide range of transactional and strategic alternatives.  We are currently focusing on our clinical programs as well as exploring various strategic alternatives with respect to our company and product candidates, including entertaining offers to purchase either one or both of our primary molecules: SHAPE and birinapant.  We are also exploring collaborative arrangements, including joint ventures and licensing agreements.  We can give no assurance that our clinical programs will yield any commercially viable products or that a transaction of any kind will occur.

8


 

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, or GAAP, for interim financial information. Certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission, or the SEC.

 

Unaudited Interim Financial Information

 

The accompanying unaudited consolidated balance sheet as of March 31, 2016, consolidated statements of operations and comprehensive loss for the three months ended March 31, 2015 and 2016, and consolidated statements of cash flows for the three months ended March 31, 2015 and 2016 are unaudited. The interim unaudited consolidated financial statements have been prepared on the same basis as the annual audited financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair presentation of our financial position as of March 31, 2016 and the results of our operations and comprehensive loss for the three months ended March 31, 2015 and 2016, and our cash flows for the three months ended March 31, 2015 and 2016.  The financial data and other information disclosed in these notes as of March 31, 2016 and for the three months ended March 31, 2015 and 2016 are unaudited. The results for the three months ended March 31, 2016 are not necessarily indicative of results to be expected for the year ending December 31, 2016, any other interim periods, or any future year or period.

 

Recent Accounting Pronouncements

 

In February 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2016-02, Leases (Topic 842) (ASU 2016-02). The new standard establishes a right-of-use (ROU) model that requires a lessee to record a ROU asset and a lease liability on the balance sheet for all leases with terms longer than 12 months. Leases will be classified as either finance or operating, with classification affecting the pattern of expense recognition in the income statement. ASU 2016-02 is effective for annual periods beginning after December 15, 2018, including interim periods within those annual periods, with early adoption permitted. A modified retrospective transition approach is required for lessees for capital and operating leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, with certain practical expedients available. The Company is currently evaluating the impact that the standard will have on the financial statements.

 

In November 2015, the FASB issued ASU 2015-17, Income Taxes: Balance Sheet Classification of Deferred Taxes (ASU 2015-17). ASU 2015-17 simplifies the balance sheet classification of deferred taxes and requires that all deferred taxes be presented as noncurrent. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016 with early adoption permitted. The adoption of this update is not expected to have a material effect on the Company’s financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (ASU 2014-15), to provide guidance on management’s responsibility in evaluating whether there is substantial doubt about a company’s ability to continue as a going concern and to provide related footnote disclosures. ASU 2014-15 is effective for the Company for annual periods beginning after December 15, 2016 and for interim periods after that, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2014-15 on its consolidated financial statements.

 

Use of Estimates

 

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from such estimates.

 

9


 

Significant Accounting Policies

 

Our significant accounting policies are disclosed in our annual report on Form 10-K for the year ended December 31, 2015 filed on March 16, 2016, or the Form 10-K. Since the date of those financial statements, there have been no changes to our significant accounting policies.

 

 

 

3. Fair Value Measurements

 

FASB accounting guidance defines fair value as the price that would be received to sell an asset or paid to transfer a liability (the exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance outlines a valuation framework and creates a fair value hierarchy in order to increase the consistency and comparability of fair value measurements and the related disclosures. In determining fair value, we use quoted prices and observable inputs. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from independent sources.

 

The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

 

·

Level 1 — Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities.

 

·

Level 2 — Valuations based on observable inputs and quoted prices in active markets for similar assets and liabilities.

 

·

Level 3 — Valuations based on inputs that are unobservable and models that are significant to the overall fair value measurement.

 

The following fair value hierarchy table presents information about each major category of our financial assets and liabilities measured at fair value on a recurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

Level 1

    

Level 2

    

Level 3

    

Total

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (cash equivalents)

 

$

12,243,104

 

$

 

$

 —

 

$

12,243,104

 

Short-term investments

 

 

 

 

5,106,627

 

 

 —

 

 

5,106,627

 

Total assets

 

$

12,243,104

 

$

5,106,627

 

$

 —

 

$

17,349,731

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest make-whole derivative

 

 

 —

 

 

 —

 

$

55,000

 

$

55,000

 

Shape contingent consideration

 

 

 —

 

 

 —

 

 

21,080,000

 

 

21,080,000

 

Common stock warrant liability

 

 

 —

 

 

 —

 

 

64,877

 

 

64,877

 

Total liabilities

 

$

 —

 

$

 —

 

$

21,199,877

 

$

21,199,877

 

March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds (cash equivalents)

 

$

11,407,374

 

$

 

$

 —

 

$

11,407,374

 

Total assets

 

$

11,407,374

 

$

 —

 

$

 —

 

$

11,407,374

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest make-whole derivative

 

 

 —

 

 

 —

 

$

25,000

 

$

25,000

 

Shape contingent consideration

 

 

 —

 

 

 —

 

 

22,134,000

 

 

22,134,000

 

Common stock warrant liability

 

 

 —

 

 

 —

 

 

1,925

 

 

1,925

 

Total liabilities

 

$

 —

 

$

 —

 

$

22,160,925

 

$

22,160,925

 

 

We had outstanding warrants to purchase our series B convertible preferred stock, or the 2006 Warrants, that converted into warrants to purchase our common stock at the time of our initial public offering in December 2013. The 2006 Warrants contain a provision whereby the exercise price may be reduced upon the occurrence of certain events within our control, such as the future issuance of equity securities or rights to purchase equity securities at a price below the current exercise price of the 2006 Warrants. Accordingly, the 2006 Warrants are recorded as a derivative liability on our balance sheets, with subsequent changes to fair value recorded through earnings at each reporting period on our statements of operations and comprehensive loss as change in fair value of derivative liabilities. Each subsequent change in fair value is reflected in our statements of cash flows as a noncash adjustment to net loss under operating activities.  Upon exercise of these warrants, the cash inflow is recorded as a financing activity on the statements of cash flows.  The fair value of the warrant liability is estimated using an option-pricing model, which requires inputs such as the expected

10


 

volatility based on comparable public companies (86%), the fair value of our common stock, and the remaining contractual term of the warrant (0.1 years). For this liability, we developed our own assumptions that do not have observable inputs or available market data to support the fair value.  A total of 10,904 of the 2006 Warrants expired unexercised on March 30, 2016.

 

In 2009 and 2010, we issued warrants to purchase our common stock, or the 2009/2010 Warrants, which contain a provision whereby the exercise price may be reduced upon the occurrence of certain events within our control, such as the future issuance of equity securities or rights to purchase equity securities at a price below the current exercise price of the 2009/2010 Warrants. Accordingly, the 2009/2010 Warrants are recorded as a derivative liability on our balance sheets, with subsequent changes to fair value recorded through earnings at each reporting period on our statements of operations and comprehensive loss as change in fair value of derivative liabilities. Each subsequent change in fair value is reflected in our statements of cash flows as a noncash adjustment to net loss under operating activities.  Upon exercise of these warrants, the cash inflow is recorded as a financing activity on the statements of cash flows.  The fair value of each 2009/2010 Warrant is estimated using an option-pricing model, which requires inputs such as the expected volatility based on comparable public companies (75%), the fair value of the common stock, and the contractual term of the warrant (3.7 to 4.0 years). For this liability, we developed our own assumptions that do not have observable inputs or available market data to support the fair value.

 

Significant decreases in our stock price volatility will significantly decrease the overall valuation of our derivative liabilities, while significant increases in our stock price volatility will significantly increase the overall valuation. As discussed above, the strike price of our 2009/2010 Warrants may be decreased. Accordingly, a significant decrease in the strike price of the 2009/2010 Warrants will substantially increase the overall valuation.  In addition, changes in the market price of our common stock will have a significant effect on the overall valuation of the warrant liabilities.

 

In April 2014, we acquired by merger 100% of Shape Pharmaceuticals.  The acquisition of Shape Pharmaceuticals includes a contingent consideration arrangement that may require us to pay additional consideration in the form of milestone payments and tiered royalty payments upon commercialization.  We account for contingent consideration in accordance with applicable guidance provided within Accounting Standards Codification (ASC) 805, Business Combinations.  It is currently estimated that the Shape Pharmaceuticals milestone payments will occur between mid-2017 and 2021. The range of undiscounted milestones we could be required to pay under our agreement is between zero and $64.5 million.  We determined the fair value of the liability for the contingent consideration based on a probability-weighted discounted cash flow analysis. This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the contingent consideration liability associated with future milestone payments was based on several factors including:

 

·

estimated cash flows projected from the success of unapproved product candidates in the U.S. and ROW;

·

the probability of success for product candidates including risks associated with uncertainty, achievement and payment of milestone events;

·

the time and resources needed to complete the development and approval of product candidates;

·

the life of the potential commercialized products and associated risks of obtaining regulatory approvals in the U.S. and ROW;

·

the risk adjusted discount rate for fair value measurement; and

·

the credit risk of TetraLogic.

 

In June 2014, we issued $47.0 million in aggregate principal amount of 8.00% convertible senior notes due June 15, 2019 (the “8% Notes”), of which $43.75 million are outstanding at March 31, 2016.  The 8% Notes include an interest make-whole feature whereby if a note holder converts any of the Notes after December 31, 2014, they are entitled, in addition to the other consideration payable or deliverable in connection with such conversion, to an interest make-whole payment through the earlier of (i) the date that is three years after the conversion date and (ii) the maturity date if the notes had not been so converted.  We have determined that this feature is an embedded derivative and have recognized the fair value of this derivative as a liability in our balance sheet, with subsequent changes to fair value recorded through earnings at each reporting period on our statements of operations and comprehensive loss as change in fair value of derivative liabilities.  The fair value of this embedded derivative was determined based on a binomial lattice model.

 

11


 

The following tables set forth a summary of changes in the fair value of Level 3 liabilities for the three months ended March 31, 2015 and 2016:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

December 31, 

  

 

 

  

 

 

  

 

 

  

Change in

  

March 31, 

 

 

 

2014

 

Additions

 

Deductions

 

Conversions

 

Fair Value

 

2015

 

Interest make-whole derivative

 

$

2,400,000

 

$

 —

 

 

 —

 

 

(165,957)

 

$

(257,043)

 

$

1,977,000

 

Shape contingent consideration

 

 

31,491,686

 

 

 —

 

$

 —

 

 

 —

 

 

1,048,000

 

 

32,539,686

 

Common stock warrant liability

 

 

256,027

 

 

 —

 

 

 —

 

$

 —

 

 

(32,623)

 

 

223,404

 

Total liabilities

 

$

34,147,713

 

$

 —

 

$

 —

 

$

 —

 

$

758,334

 

$

34,740,090

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

  

December 31, 

  

 

 

  

 

 

  

 

  

Change in

  

March 31, 

 

 

 

2015

 

Additions

 

Deductions

 

Conversions

 

Fair Value

 

2016

 

Interest make-whole derivative

 

$

55,000

 

 

 —

 

 

 —

 

$

 —

 

$

(30,000)

 

$

25,000

 

Shape contingent consideration

 

 

21,080,000

 

 

 —

 

 

 —

 

 

 —

 

 

1,054,000

 

 

22,134,000

 

Common stock warrant liability

 

 

64,877

 

 

 —

 

 

 —

 

 

 —

 

 

(62,952)

 

 

1,925

 

Total liabilities

 

$

21,199,877

 

$

 —

 

$

 —

 

$

 —

 

$

961,048

 

$

22,160,925

 

 

As of March 31, 2016, the fair value and carrying value of our convertible debt was as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value

 

Carrying Value

 

Face Value

 

 

 

 

 

 

 

 

 

 

 

 

8.00% convertible senior notes due June 15, 2019

    

$

11,366,000

    

$

29,082,496

    

$

43,750,000

 

 

The fair value shown above represents the fair value of the total debt instrument, inclusive of both the liability and equity components, while the carrying value represents the carrying value of the liability.  This fair value measurement is based on significant inputs not observable in the market and thus represents a Level 3 measurement within the fair value hierarchy. The fair value of the total debt instrument was based on several factors including the terms of the instrument, our common stock price at the valuation date, the expected stock price volatility, the remaining term of the convertible notes, and the risk-free interest rate.

 

 

4. Investments

 

The Company’s investments are classified as available-for-sale pursuant to ASC 320, Investments—Debt and Equity Securities. The Company classifies investments available to fund current operations as current assets on its balance sheets. We consider all investments that have maturities of three months or less when acquired to be cash equivalents.  Investments are classified as long-term assets on the balance sheets if (i) the Company has the intent and ability to hold the investments for a period of at least one year and (ii) the contractual maturity date of the investments is greater than one year.

 

Investments are carried at fair value with unrealized gains and losses included as a component of accumulated other comprehensive loss, until such gains and losses are realized. If a decline in the fair value is considered other-than-temporary, based on available evidence, the unrealized loss is transferred from other comprehensive loss to the statements of operations. There were no charges taken for other-than-temporary declines in fair value of short-term or long-term investments during the three months ended March 31, 2015 and 2016. The Company recorded $9,279 and $971 of unrealized gains during the three months ended March 31, 2015 and 2016, respectively. Realized gains and losses are included in interest income in the statements of operations. The Company did not record any realized gains or losses during the three months ended March 31, 2015 and 2016. The Company utilizes the specific identification method as a basis to determine the cost of securities sold.

 

12


 

The Company reviews investments for other-than-temporary impairment whenever the fair value of an investment is less than the amortized cost and evidence indicates that an investment’s carrying amount is not recoverable within a reasonable period of time. To determine whether an impairment is other-than-temporary, the Company considers the intent to sell, or whether it is more likely than not that the Company will be required to sell, the investment before recovery of the investment’s amortized cost basis. Evidence considered in this assessment includes reasons for the impairment, compliance with the Company’s investment policy, the severity and the duration of the impairment and changes in value subsequent to year end. As of March 31, 2016, there were no investments with a fair value that was significantly lower than the amortized cost basis or any investments that had been in an unrealized loss position for a significant period.

 

Cash, cash equivalents and investments at December 31, 2015 and March 31, 2016 consist of the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

 

    

Gross

    

Gross

    

    

 

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains

 

Losses

 

Value

 

December 31, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market accounts

 

$

15,302,382

 

 

 —

 

 

 —

 

$

15,302,382

 

Total cash and cash equivalents

 

$

15,302,382

 

$

 —

 

$

 —

 

$

15,302,382

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

Corporate bonds

 

$

3,108,516

 

 

 

$

(1,069)

 

$

3,107,447

 

Commercial paper

 

 

1,999,082

 

 

98

 

 

 

 

1,999,180

 

Total short-term investments

 

$

5,107,598

 

$

98

 

$

(1,069)

 

$

5,106,627

 

Total cash, cash equivalents, and investments

 

$

20,409,980

 

$

98

 

$

(1,069)

 

$

20,409,009

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

March 31, 2016

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and money market accounts

 

$

14,541,669

 

 

 

 

 

$

14,541,669

 

Total cash and cash equivalents

 

$

14,541,669

 

$

 —

 

$

 —

 

$

14,541,669

 

 

 

5. Restructuring

 

On January 19, 2016, we authorized the implementation of a 19 person reduction in staff to control operating expenses and reduce ongoing cash requirements.  The actions associated with the reductions were completed in April 2016.

As a result of the reductions, we recorded a one-time restructuring charge of $2.0 million in the first quarter of fiscal 2016. The restructuring charge is associated with one-time termination benefits that we expect to pay out in cash. We paid $0.5 million during the first quarter of fiscal 2016 and expect to pay the remainder over a period of 18 months beginning April 2016. The estimated liability for termination benefits which will be paid out over 18 months was recorded at fair value during the first quarter of 2016.  These termination benefits consist of a severance payment equal to 3 months’ salary or, in the case of certain senior executives, consist of benefits pursuant to the provisions of their employment agreements, and outplacement assistance.  Total charges and payments related to the restructuring plan recognized in the consolidated statement of operations are as follows:

 

 

 

 

 

 

 

 

Three Months Ended

 

 

March 31, 

 

 

 

2016

 

Restructuring accrual, January 1, 2016

    

$

 -

    

Severance costs

 

 

2,013,024

 

Payments

 

 

(520,302)

 

Restructuring accrual, March 31, 2016

 

$

1,492,722

 

 

 

 

 

 

Current portion, included in Accrued Liabilities, at March 31, 2016

 

$

931,191

 

Long-term portion, included in other liabilities, at March 31, 2016

 

$

561,531

 

 

In March 2016, we sold all of our laboratory equipment for proceeds of $152,756, which resulted in a loss on sale of equipment of $153,572 during the three months ended March 31, 2016.

13


 

 

6.  Notes Payable

 

8% Convertible Senior Notes Due 2019

 

On June 23, 2014, we issued through a private placement $47.0 million in aggregate principal amount of 8% convertible senior notes due June 15, 2019 (the “8% Notes”), of which $43.75 million remain outstanding as of March 31, 2016. Interest on the 8% Notes is payable semi-annually in arrears on June 15 and December 15 of each year, commencing December 15, 2014.

 

The 8% Notes are general unsecured and unsubordinated obligations and will rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the notes, rank equal in right of payment to our existing and future indebtedness and other liabilities that are not so subordinated, are effectively subordinated to any of our future secured indebtedness to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all indebtedness and other liabilities incurred by our subsidiaries, including trade payables. We may not redeem the 8% Notes at our option prior to maturity based on the terms of the indenture. The 8% Notes are convertible prior to maturity, subject to certain conditions described below, into shares of our common stock at an initial conversion rate of 148.3019 shares per $1,000 principal amount of the 8% Notes (equivalent to an initial conversion price of approximately $6.74 per share of common stock).  This conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest.  We may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination thereof, at our election.

 

The Holders of the 8% Notes may surrender their notes for conversion any time prior to the close of business immediately preceding February 15, 2019 only if any of the following conditions is satisfied:

 

·

during any fiscal quarter (and only during such fiscal quarter) commencing after December 31, 2015, if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending on the last trading day of the immediately preceding fiscal quarter, the last reported sale price of our common stock for each such trading day is greater than or equal to 100% of the applicable conversion price on such trading day;

 

·

during the five consecutive business day period immediately following any 10 consecutive trading day period, or the “measurement period”, in which, for each trading day of such measurement period, the “trading price” per $1,000 principal amount of notes for such trading day was less than 98% of the product of the last reported sale price of our common stock for such trading day and the applicable conversion rate on such trading day; or

 

·

upon the occurrence of specified corporate events.

 

Holders also may surrender their 8% Notes for conversion at any time on or after February 15, 2019 and on or prior to the close of business on the business day immediately prior to the stated maturity date regardless if any of the foregoing conditions have been satisfied.  As of December 31, 2015 and March 31, 2016, the 8% Notes were not convertible.

 

Each $1,000 principal amount of 8% Notes is convertible into shares of our common stock equal to the conversion rate in effect on the conversion date, together with cash in lieu of fractional shares issuable upon conversion.  We may deliver upon conversion cash, shares, or a combination thereof, at our election.  With respect to any conversions, settlement amounts will be computed as follows:

 

·

if we elect (or are deemed to have elected) physical settlement, we will deliver to the converting holder in respect of each $1,000 principal amount of notes being converted a number of shares of common stock equal to the conversion rate in effect on the conversion date together with cash in lieu of fractional shares issuable upon conversion and the interest make-whole payment, if applicable;

 

·

if we elect cash settlement, we will pay to the converting holder in respect of each $1,000 principal amount of notes being converted cash in an amount equal to the sum of the daily conversion values for

14


 

each of the 60 consecutive trading days during the related observation period and the interest make-whole payment, if applicable; and

 

·

if we elect combination settlement, we will pay or deliver, as the case may be, to the converting holder in respect of each $1,000 principal amount of notes being converted a “settlement amount” equal to the sum of the daily settlement amounts for each of the 60 consecutive trading days during the relevant observation period (plus cash in lieu of any fractional share of our common stock issuable upon conversion) and the interest make-whole payment, if applicable.

 

“Daily settlement amount” means, for each of the 60 consecutive trading days in the relevant observation period:

 

·

cash equal to the lesser of (i) the maximum cash amount per $1,000 principal amount of notes to be received upon conversion as specified in the notice specifying our chosen settlement method (the “specified dollar amount”), if any, divided by 60 (such quotient, the “daily measurement value”) and (ii) the daily conversion value; and

 

·

if the daily conversion value exceeds the daily measurement value, a number of shares equal to (i) the difference between the daily conversion value and the daily measurement value, divided by (ii) the daily volume-weighted average price for such trading day.

 

“Daily conversion value” means, for each of the 60 consecutive trading days in the observation period for a note, one sixtieth (1/60th) of the product of (i) the applicable conversion rate on such trading day and (ii) the daily volume-weighted average price on such trading day.

 

If the 8% Notes are converted in connection with certain fundamental changes that occur prior to maturity of the 8% Notes, we may also be obligated to pay an additional (or “make whole”) premium with respect to the 8% Notes so converted. In addition, if certain fundamental changes occur with respect to TetraLogic, holders of the 8% Notes will have the option to require us to purchase for cash all or a portion of the 8% Notes at a purchase price equal to 100% of the principal amount of the 8% Notes plus accrued and unpaid interest.

 

On or after December 31, 2014, if, for at least 20 trading days (whether or not consecutive) during the 30 consecutive trading day period ending within five trading days prior to a conversion date the last reported sale price of our common stock exceeds the applicable conversion price on each such trading day, we will, in addition to the other consideration payable or deliverable in connection with such conversion, make an interest make-whole payment to the converting holder equal to the present value of all scheduled payments of interest (using a discount rate equal to 2%) through the earlier of (i) the date that is three years after the conversion date and (ii) the maturity date if the notes had not been so converted.  We may pay any interest make-whole payment either in cash or in shares of our common stock, at our election.  If we pay an interest make-whole payment in shares of our common stock, then the number of shares of common stock a holder will receive will be that number of shares that have a value equal to the amount of the interest make-whole payment to be paid to such holder in shares, divided by the product of the simple average of the daily value weighted average price of our common stock for the 10 trading days immediately preceding the conversion date multiplied by 92.5%.  Notwithstanding the foregoing, if in connection with any conversion the conversion rate is adjusted for a make-whole fundamental change, then such holder will not receive the interest make-whole payment with respect to such note.

 

The indenture for the notes contains certain covenants which limit our and our subsidiaries’ ability to incur certain additional indebtedness except for certain permitted debt, and to incur liens except for certain permitted liens.

 

We account for convertible debt instruments that may be settled in cash upon conversion (including partial cash settlement) by recording the liability and equity components of the convertible debt separately. The liability component is computed based on the fair value of a similar liability that does not include the conversion option. The liability component includes both the value of the embedded interest make-whole derivative and the carrying value of the 8% Notes.  The equity component is computed based on the total debt proceeds less the fair value of the liability component. The equity component is also recorded as debt discount and amortized as interest expense over the expected term of the 8% Notes.  The carrying value of our 8% Notes is net of debt discount of $13,541,516 and $15,471,125 at March 31, 2016 and December 31, 2015, respectively.

15


 

 

The liability component of the 8% Notes on the date of issuance was computed as $30.8 million, consisting of the value of the embedded interest make-whole derivative of $3.1 million and the carrying value of the 8% Notes of $27.7 million. Accordingly, the equity component on the date of issuance was $16.2 million.  The discount on the 8% Notes is being amortized to interest expense over the term of the Notes, using the effective interest method.

 

The liability component of our convertible notes will be classified as current liabilities and presented in current portion of long-term debt and the equity component of our convertible debt will be considered a redeemable security and presented as redeemable equity on our consolidated balance sheet if our debt is considered current at the balance sheet date.  As of December 31, 2015 and March 31, 2016, the 8% Notes were classified as long-term liabilities.

 

Transaction costs of $2.9 million related to the issuance of the 8% Notes were allocated to the liability and equity components in proportion to the allocation of the proceeds and accounted for as deferred financing costs and equity issuance costs, respectively. Approximately $1.0 million of this amount was allocated to equity and the remaining $1.9 million have been capitalized as deferred financing costs and are being amortized over the term of the 8% Notes.

 

In March 2015, we agreed to exchange $3.25 million aggregate principal amount of our 8% Notes in separately negotiated transactions for cash payments totaling $0.8 million and the issuance of 0.5 million shares of our common stock.  We recognized $0.8 million of debt exchange expense for the three months ended March 31, 2015 in connection with these exchanges, which represents the additional consideration (cash and shares) that was provided to these noteholders pursuant to their exchange agreements.

 

The following table summarizes how the 8% Notes are reflected in our balance sheet at March 31, 2016:

 

 

 

 

 

 

March 31, 2016

 

Face value of outstanding notes

$

43,750,000

 

Conversion option reported in equity

 

(15,002,020)

 

Interest make-whole derivative

 

(2,889,043)

 

Unamortized debt issuance costs

 

(1,125,988)

 

Cumulative amortization of debt discount

 

4,349,547

 

Carrying value

$

29,082,496

 

 

The following table sets forth our interest expense incurred for the three months ended March 31, 2015 and 2016:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

    

2015

    

2016

 

 

 

 

 

 

 

 

 

8% Convertible Senior Notes due 2019 - coupon

 

$

863,445

 

$

875,000

 

8% Convertible Senior Notes due 2019 - amortization of debt discount

 

 

608,306

 

 

717,006

 

Amortization of deferred financing costs

 

 

91,508

 

 

86,615

 

 

 

$

1,563,259

 

$

1,678,621

 

 

 

 

7. Stockholders’ Equity

 

Common Stock

 

We are authorized to issue 100,000,000 shares of common stock, with a par value of $0.0001, or Common Stock, of which 24,769,083 were issued and outstanding at December 31, 2015 and March 31, 2016.

 

At the Market Offering

 

On March 13, 2015, we entered into a Sales Agreement with Guggenheim Securities, LLC, or Guggenheim, to offer shares of our Common Stock from time to time through Guggenheim, as our sales agent for the offer and sale of the shares.  We may offer and sell shares for an aggregate offering price of up to $25 million.  We did not make any sales under the Sales Agreement during the three months ended March 31, 2015 and 2016.

 

16


 

Purchase Agreement

 

On August 24, 2015, we entered into a purchase agreement (the “Purchase Agreement”) with Lincoln Park Capital Fund, LLC (“LPC”), pursuant to which we have the right to sell to LPC up to $17,000,000 in shares of our Common Stock, subject to certain limitations and conditions set forth in the Purchase Agreement, over the period from August 24, 2015 to March 1, 2018.

 

As consideration for entering into the Purchase Agreement, we issued to LPC 103,364 shares of Common Stock on the date of the Purchase Agreement.  As consideration for LPC’s purchase of up to an additional $15,000,000 in shares of Common Stock, we will issue up to 34,455 shares of Common Stock to LPC on a pro-rata basis on each purchase date.  We will not receive any cash proceeds from the issuance of these shares.

 

Under the Purchase Agreement, on any business day and as often as every business day over the 30-month term of the Purchase Agreement, and up to an aggregate amount of an additional $15,000,000 (subject to certain limitations) in shares of Common Stock, we have the right at our sole discretion and subject to certain conditions to direct LPC to purchase up to 100,000 shares of Common Stock (with such amounts increasing up to 175,000 shares as the stock price increases, but not to exceed $1,000,000 in total purchase proceeds per purchase date).  The purchase price of shares of Common Stock pursuant to the Purchase Agreement will be based on the prevailing market price at the time of sale as set forth in the Purchase Agreement.  We will control the timing and amount of any sales of Common Stock to LPC.  In addition, we may direct LPC to purchase additional amounts as accelerated purchases if on the date of a regular purchase the closing sale price of the Common Stock is not below the “threshold price” as set forth in the Purchase Agreement.  We have the right to terminate the Purchase Agreement at any time, on one business days’ notice, at no cost or penalty.  We have agreed with LPC that we will not enter into any “variable rate” transactions with any third party from the date of the Purchase Agreement until the expiration of the 30-month period following the date of the Purchase Agreement, subject to certain exceptions.

 

From the effective date of the Purchase Agreement through December 31, 2015, we issued a total of 1,435,612 shares of Common Stock to LPC, including 105,379 shares of Common Stock issued to LPC as consideration for entering into the Purchase Agreement and purchasing additional shares, for gross proceeds of $2.9 million. We did not issue any shares under the Purchase Agreement during the three months ended March 31, 2016.

 

Stock-based compensation expense

 

Stock-based payments to employees, including grants of employee stock options, are recognized in the statements of operations and comprehensive loss based on fair value. Stock-based payments to non-employees are recognized at fair value on the date of grant and re-measured at each subsequent reporting date through the settlement of the instrument.

 

Stock-based compensation expense recognized by award type is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2015

    

2016

Options awards

    

$

1,327,207

    

$

1,040,808

Restricted stock awards

 

 

293,624

 

 

(111,563)

Total stock-based compensation expense

 

$

1,620,831

 

$

929,245

 

Total compensation cost recognized for all stock-based compensation awards in the statements of operations and comprehensive loss is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2015

    

2016

Research and development

 

$

469,678

 

$

37,051

General and administrative

 

 

1,151,153

 

 

892,194

Total stock-based compensation expense

 

$

1,620,831

 

$

929,245

 

17


 

A summary of activity for all options for the three months ended March 31, 2016 is presented below:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

    

 

    

 

 

    

 

    

 

 

 

 

 

 

 

Weighted Average

 

Weighted Average

 

Aggregate

 

 

 

 

 

Exercise Price

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Per Share

 

Life (In Years)

 

Value

 

Outstanding—December 31, 2015

 

4,020,783

 

$

5.48

 

7.8

 

$

 —

 

Granted

 

 —

 

 

 —

 

 

 

 

 

 

Exercised

 

 —

 

 

 —

 

 

 

 

 

 

Forfeited

 

(157,561)

 

 

3.96

 

 

 

 

 

 

Outstanding—March 31, 2016

 

3,863,222

 

$

5.54

 

7.5

 

$

 —

 

Vested and expected to vest—March 31, 2016

 

3,849,794

 

$

5.54

 

7.5

 

$

 —

 

Exercisable at March 31, 2016

 

3,078,407

 

$

5.51

 

7.2

 

$

 —

 

 

We had 450,000 shares of unvested restricted stock outstanding at March 31, 2016 and December 31, 2015.  There were no grants, vesting, or forfeitures of restricted stock during the three months ended March 31, 2016.  We reversed $0.2 million of previously recognized stock compensation expense related to restricted stock during the three months ended March 31, 2016 due to the expected forfeiture of unvested restricted stock that occurred in April 2016.

 

As of March 31, 2016, there was $3.8 million, net of estimated forfeitures, of total unrecognized compensation expense related to unvested stock options which we expect to recognize as compensation expense over a weighted average attribution period of 1.1 years, subject to acceleration if the market condition is met for those awards that contain a market condition.  In addition, there was $1.0 million of total unrecognized compensation expense related to unvested shares of restricted stock which we expect to recognize as compensation expense over a weighted average attribution period of 1.8 years, subject to acceleration if the market condition is met for those awards that contain a market condition.

 

Warrants

 

We currently have the following warrants outstanding to purchase shares of our Common Stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

    

    

    

Number of

    

    

 

    

                                                                 

 

 

 

 

 

Shares

 

Exercise

 

 

 

Warrant Series

 

Underlying Equity Security

 

Issuable

 

Price

 

Expiration Date

 

2007 Warrant

 

common stock

 

1,961

 

$

7.65

 

May 2017

 

2006 Warrants

 

common stock

 

10,882

 

$

7.65

 

May 2016

 

2009/2010 Warrants

 

common stock

 

52,815

 

$

0.85

 

November 2019-March 2020

 

 

Our 2006 Warrants and 2009/2010 Warrants are classified as derivative liabilities on our balance sheets with subsequent changes to fair value recorded through earnings at each reporting period on our statements of operations and comprehensive loss as change in fair value of derivative liabilities. See Note 3 with respect to fair value.

 

8. Loss Per Share of Common Stock

 

Basic net loss per common share is computed by dividing net loss by the weighted average number of common shares outstanding for the period.  Diluted net loss per common share is computed by giving effect to all potentially dilutive securities outstanding for the period.

 

In accordance with ASC Topic 260, Earnings per Share, when calculating diluted net loss per common share, the gain associated with the decrease in the fair value of certain warrants classified as derivative liabilities results in an adjustment to the net loss; and the dilutive impact of the assumed exercise of the warrants results in an adjustment to the weighted average common shares outstanding. We utilize the treasury stock method to calculate the dilutive impact of the assumed exercise of the warrants.  For the three months ended March 31, 2015, the effect of the adjustments for our 2006 Warrants and our 2009/2010 Warrants were dilutive.  For the three months ended March 31, 2016, the effect of the adjustments for our 2006 Warrants and our 2009/2010 Warrants were non-dilutive.

 

18


 

The following table sets forth the computation of diluted net loss per share for the three months ended March 31, 2015 and 2016:

 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

 

2015

    

2016

 

Numerator:

 

 

 

 

 

 

Net loss

$

(12,682,982)

 

$

(11,065,270)

 

Less: income from change in fair value of warrant liability

 

(32,623)

 

 

 —

 

Numerator for diluted net loss per common share

$

(12,715,605)

 

$

(11,065,270)

 

Denominator:

 

 

 

 

 

 

Basic weighted average common shares outstanding

 

22,814,142

 

 

24,769,083

 

Dilutive common shares from assumed warrant exercises

 

43,872

 

 

 —

 

Diluted weighted average shares of common stock outstanding

 

22,858,014

 

 

24,769,083

 

Diluted net loss per share of common stock

$

(0.56)

 

$

(0.45)

 

 

The following potentially dilutive securities outstanding for the three months ended March 31, 2015 and 2016 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive: 

 

 

 

 

 

 

 

 

Three Months Ended March 31, 

 

    

2015

    

2016

Warrants

 

23,747

 

65,658

Stock options

 

3,650,605

 

3,942,003

Common shares issuable upon conversion of the 8% Notes

 

7,137,031

 

8,058,271

 

 

10,811,383

 

12,065,932

 

 

19


 

 

 

 

ITEM 2.  MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes appearing in this report, and in conjunction with our financial statements included in the Annual Report.  Some of the information contained in this discussion and analysis or set forth elsewhere in this report, including information with respect to our plans and strategy for our business and related financing, includes forward-looking statements that involve risks and uncertainties.  As a result of many factors, including those factors set forth in under the caption “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this quarterly report and Part I, Item 1A “Risk Factors” of the Annual Report, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

 

Overview

 

We are a clinical-stage biopharmaceutical company focused on developing novel small molecule therapeutics in oncology, infectious diseases and autoimmune diseases. We currently have two clinical-stage product candidates in development: birinapant and SHAPE.   In May 2015, we halted a birinapant chronic hepatitis B virus, or HBV, clinical trial in Australia, and in January 2016 we terminated the birinapant myelodysplastic syndromes, or MDS, clinical trial due to negative results in the trial. In July 2015, we announced that we intend to initiate a combination single ascending dose/multiple ascending dose clinical trial, with birinapant as a single agent, in chronic HBV subjects in India.  We submitted a phase 2 study proposal of birinapant in patients with chronic hepatitis B for review by the Indian regulatory authorities.  The Indian Subject Expert Committee (the “Committee”), Gastroenterology and Hepatology met on April 19, 2016 to discuss the proposed study.  The Committee stated that they could not recommend this trial to the Indian regulatory authorities at this time.  TetraLogic is continuing to interface with the Indian regulatory authorities to explore a path forward for this study, as well as consider alternative opportunities for this study in other geographical regions.

In January 2016, our board of directors authorized a reduction in our staff which reduced our head count to 9 employees in April 2016. Our Chief Scientific Officer and our Chief Operating Officer were included in those reductions.  As a result of these reductions, we recorded a one–time restructuring charge of $2.0 million in the first quarter of fiscal 2016. 

We received written notices from the Listing Qualifications Department of Nasdaq on January 20, 2016 and February 23, 2016 notifying us that we did not meet certain minimum listing requirements for listing our common stock on the Nasdaq Global Market.  Specifically, we were not in compliance with the minimum bid price requirement of $1.00 for our common stock, the minimum publicly held market value requirement of $15 million for our outstanding common stock, or the minimum total market value requirement of $50 million for our outstanding common stock.  If we are not able to regain compliance with the Nasdaq listing rules within the specified time period (generally 180 days from the date of notice), we will be delisted from the Nasdaq Global Market.  This event would be considered a fundamental change under the indenture for our 8% Notes, and we could be required by the noteholders to purchase for cash all of the outstanding 8% Notes at a purchase price equal to 100% of the principal amount of the 8% Notes ($43.75 million of which are outstanding as of March 31, 2016) plus accrued and unpaid interest.  To regain compliance, the minimum total market value of our common stock would need to reach at least $50 million for 10 consecutive business days by July 18, 2016, the minimum bid price of our common stock would need to reach at least $1.00 for 10 consecutive business days by August 22, 2016, and the minimum publicly held market value of our common stock would need to reach at least $15 million for 10 consecutive business days by August 22, 2016.  All of these events are outside of our control at this time.  Should the delisting of our common stock occur during the second half of 2016, we do not currently have sufficient funds on hand to satisfy the put obligations for the 8% Notes if all holders exercise their put right.  Although we are currently considering available options to resolve our compliance with the Nasdaq listing rules, we have no assurance that this will occur within the necessary time period to prevent delisting.  In addition, we have no assurance that we will be able to obtain sufficient funds to meet our obligations with respect to the 8% Notes in the event that delisting occurs and all holders exercise their put right. 

Should we remain in compliance with the Nasdaq listing requirements, we believe our existing cash and investments will be sufficient to fund our current operating and investing activities through December 31, 2016.  In order for our existing cash and investments to fund operating and investing activities through December 31, 2016, we have

20


 

limited our planned business activities to the completion of the Phase 2 clinical trial of SHAPE and the winding down of the Phase 2 clinical trial in birinapant in MDS, and we effectuated a reduction in force.

The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2015 contains explanatory language that substantial doubt exists about our ability to continue as a going concern, without raising additional capital.  In addition, the report notes that the 8% Notes may become due and payable during 2016 should our common stock be delisted from the Nasdaq Global Market.

The recent failure of our MDS clinical trial with birinapant has seriously damaged our ability to raise new financing in the near future.  If we are unable to obtain necessary financing, our ability to complete the development and potential commercialization of our product candidates will be compromised and we will need to downsize or wind down our operations through liquidation, bankruptcy or a sale of our company or our assets.  We cannot assure you that we will be able to obtain additional financing on terms we deem to be commercially reasonable, if at all or that the third-party financing that we do obtain will be sufficient to cover our operating expenses, debt expenses and other payment obligations.  If we fail to obtain the third-party financing we require, we may be unable to continue our operations at the planned levels or at all.  We may then have to sell our company or our assets or file for, or be forced to resort to, bankruptcy protection or liquidation.

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this quarterly report.  Although we believe that we have a reasonable basis for the forward-looking statements contained in this report, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

We have retained Houlihan Lokey Capital, Inc., as our financial advisor, to provide financial advisory, restructuring and investment banking services in connection with analyzing and considering a wide range of transactional and strategic alternatives. We are currently focusing on our clinical programs as well as exploring various alternatives with respect to our company and product candidates, including entertaining offers to purchase either one or both of our primary molecules: SHAPE and birinapant.  We are also exploring collaborative arrangements, including joint ventures and licensing agreements.  We can give no assurance that our clinical programs will yield any commercially viable products or that a transaction of any kind will occur.

SHAPE is our proprietary histone deacetylase, or HDAC, inhibitor that we are developing for topical use for the treatment of early-stage cutaneous T-cell lymphoma, or CTCL, and we are exploring studying SHAPE in alopecia areata, an autoimmune skin disease resulting in the loss of hair on the scalp and elsewhere on the body. SHAPE has been granted U.S. orphan drug designation for CTCL. CTCL is a form of non-Hodgkin T-cell lymphoma which primarily manifests in the skin.  The majority of CTCL cases are indolent; however, there are rare cases of CTCL that are aggressive and life-threatening.  HDAC is a validated cancer target, and HDAC inhibitors, or HDACi, are a proven class of anti-cancer drugs for CTCL.  SHAPE is a novel therapeutic, designed to maximize HDAC inhibition locally in the skin with limited systemic exposure, and it has characteristics that could allow its topical use over large body surface areas with minimal systemic absorption.  By potentially avoiding toxicities typical of systemically-administered HDACi’s, SHAPE may provide a more favorable safety profile than current HDACi’s delivered orally or intravenously.  SHAPE has been evaluated in a randomized, placebo-controlled dose escalation Phase 1 clinical trial in early-stage CTCL.  SHAPE was well-tolerated, and it demonstrated evidence of clinical activity with partial responses, or PRs, observed in certain subjects after 28 days of application. 

On January 6, 2016, we announced that we had undertaken an interim analysis of our randomized Phase 2 clinical trial of SHAPE.  The clinical trial was designed to investigate the safety and efficacy of three different dosing regimens of SHAPE in patients suffering from earlier stage CTCL.  All patients in the clinical trial had received prior therapy either in the form of topical steroids, UV light therapy, topical nitrogen mustard, or some other agent.  Twenty-eight of 34 patients were evaluable for response at the six month time point. Within six months of treatment, twelve of 34 patients exhibited a response to treatment as assessed by the Composite Assessment of Index Lesion Severity, or CAILS, the primary endpoint, and a further 21 had stable disease.  Using the modified Severity Weighted Assessment Tool, or mSWAT, a secondary endpoint in the clinical trial, 14 of 34 patients responded and a further 20 patients had stable disease within the six month treatment period. 

21


 

The interim results taken during this Phase 2 clinical trial demonstrated that SHAPE also showed improvement in pruritus (itch), a significant symptom associated with CTCL.  Forty-five percent of all patients enrolled in the trial, entered with significant pruritus at baseline as defined by VAS score.  Of these, 50% saw a clinically meaningful reduction in pruritus.  In addition, the pruritus response appeared to be dose dependent, and all 8 patients on the highest dose arm experienced a clinically meaningful reduction in pruritus. SHAPE was well tolerated by patients in the clinical trial.  The 60 patient clinical trial is now fully enrolled, and we expect that final results will be available in mid-2016.

SHAPE’s composition of matter patent in the U.S. extends until at least 2028.  We have acquired worldwide development and commercialization rights to SHAPE for all indications.

Birinapant is a novel small molecule therapeutic that mimics Second Mitochondrial Activator of Caspases, or SMAC-mimetic, which leads to apoptosis, or cell-death, in damaged cells.  In June 2014, we commenced a randomized, double-blind placebo-controlled Phase 2 clinical trial of birinapant administered with azacitidine in subjects with previously untreated, higher risk MDS. On January 6, 2016, we announced interim results from this study in which birinapant did not demonstrate any clinical benefit over placebo on the primary endpoint of response rate after four months of therapy and met the bounds for futility.  This interim analysis included the first 62 patients randomized in the trial. As a result, the MDS clinical trial was terminated as of January 6, 2016.

We have generated pre-clinical data indicating that birinapant induces apoptosis in-vivo in mouse hepatocytes infected with HBV.  In a mouse model, we have seen clearance of HBV surface antigen, or HBsAg, and the appearance of antibodies directed against HBsAg, a clinical finding considered equivalent to a functional cure.  We have also seen activity of birinapant in other infectious disease models, including human mononuclear cells infected with human immunodeficiency virus, or HIV, in-vitro, and in-vivo in mouse models of Mycobacterium tuberculosis and Legionella pneumophila.

In May 2015, we halted the birinapant chronic HBV multiple ascending dose trial being conducted in Australia due to cranial nerve palsies observed in the first cohort.  In July 2015, we announced that we intend to initiate a combination single ascending dose/multiple ascending dose clinical trial, with birinapant as a single agent, in chronic HBV subjects in India.  We submitted a phase 2 study proposal of birinapant in patients with chronic hepatitis B for review by the Indian regulatory authorities.  The Indian Subject Expert Committee (the “Committee”), Gastroenterology and Hepatology met on April 19, 2016 to discuss the proposed study.  The Committee stated that they could not recommend this trial to the Indian regulatory authorities at this time.  TetraLogic is continuing to interface with the Indian regulatory authorities to explore a path forward for this study, as well as consider alternative opportunities for this study in other geographical regions.

We discovered birinapant, and its composition of matter patent in the U.S. extends until at least 2030.  We have retained worldwide development and commercialization rights for all indications.

We are also exploring strategic alternatives with respect to birinapant, including the potential out-licensing of birinapant to interested partners.

 

We have incurred operating losses since inception, have not generated any product sales revenues and have not achieved profitable operations. Our accumulated deficit through March 31, 2016 was $186.6 million, and we expect to continue to incur substantial losses in future periods.

 

We incurred research and development expenses of $6.4 million and $3.3 million during the three months ended March 31, 2015 and 2016, respectively. We anticipate that a significant portion of our operating expenses will continue to be related to research and development as we continue to advance our clinical-stage product candidates, birinapant and SHAPE. We funded our operations as a private company primarily through the sale of preferred stock and the issuance of convertible notes for gross proceeds totaling $85.4 million, which have been converted into shares of our Common Stock in connection with our initial public offering. We also received amounts under collaboration and grant arrangements totaling $13.7 million. In December 2013 we sold 8,222,115 shares of Common Stock in our initial public offering for net proceeds of $49.1 million after payment of underwriting fees and other expenses, and in June 2014 we issued convertible notes for proceeds of $44.1 million, net of underwriting fees and other expenses.  In 2015 we sold 1,435,612 shares of Common Stock under a purchase agreement with Lincoln Park Capital Fund, LLC (“LPC”) for net

22


 

proceeds of $2.6 million.  As of December 31, 2015 and March 31, 2016, we had $20.4 million and $14.5 million in cash, cash equivalents and short-term investments, respectively.

 

We are highly dependent on the success of our research, development and licensing efforts and, ultimately, upon regulatory approval and market acceptance of birinapant and SHAPE. Our short- and long-term capital requirements depend upon a variety of factors, including, but not limited to:

 

·

initiation, progress, timing, costs and results of pre-clinical studies and clinical trials for birinapant, SHAPE or any other future product candidates;

 

·

clinical development plans we establish for birinapant, SHAPE and any other future product candidates;

 

·

our obligation to make royalty and non-royalty sublicense receipt payments to third-party licensors, if any, under our licensing agreements;

 

·

number and characteristics of product candidates that we discover or in-license and develop;

 

·

outcome, timing and cost of regulatory review by the FDA and comparable foreign regulatory authorities, including the potential for the FDA or comparable foreign regulatory authorities to require that we perform more studies than those that we currently expect;

 

·

costs of filing, prosecuting, defending and enforcing any patent claims and maintaining and enforcing or defending other intellectual property rights;

 

·

effect of competing technological and market developments;

 

·

costs and timing of the implementation of commercial-scale manufacturing activities;

 

·

costs and timing of establishing sales, marketing and distribution capabilities for birinapant, SHAPE and any other future product candidates for which we may receive regulatory approval; and

 

·

whether we are able to maintain our listing under Nasdaq.

 

The following discussion and analysis provides information that we believe is relevant to an assessment and understanding of our results of operations for the three months ended March 31, 2015 and 2016, and our financial condition as of December 31, 2015 and March 31, 2016.

 

Critical Accounting Policies and Significant Judgments and Estimates

 

Our critical accounting policies and significant judgments and estimates are disclosed in our Annual Report. Since the date of those financial statements, there have been no changes to our critical accounting policies and significant judgments and estimates.

 

Financial Overview

 

Revenue

 

We have not generated any revenue from commercial product sales since we commenced operations. In the future, if either birinapant or SHAPE is approved for commercial sale, we may generate revenue from product sales, or alternatively, we may choose to select a collaborator or licensee to commercialize birinapant or SHAPE.

 

General and Administrative Expenses

 

General and administrative expenses consist principally of salaries and related costs for executive and other administrative personnel, including stock-based compensation and travel expenses. Other general and administrative

23


 

expenses include professional fees for legal, patent review, consulting and accounting services. General and administrative expenses are expensed when incurred.

 

For the three months ended March 31, 2015 and 2016, our general and administrative expenses totaled $3.1 million and $3.0 million, respectively. General and administrative expenses remained relatively flat for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015, as the increase in consulting and legal expenses was offset by decreases in personnel and stock compensation expenses resulting from the reduction in force implemented in the first quarter of 2016.

 

Research and Development Expenses

 

Our research and development expenses have consisted primarily of costs incurred for the development of our product candidates, which include:

 

·

employee-related expenses, including salaries, benefits, travel and stock-based compensation expense;

 

·

expenses incurred under agreements with CROs and investigative sites that conduct our clinical trials and pre-clinical studies;

 

·

the cost of acquiring, developing and manufacturing clinical trial materials;

 

·

facilities, depreciation and other expenses, which include direct and allocated expenses for rent and maintenance of facilities, insurance and other supplies; and

 

·

costs associated with pre-clinical activities and regulatory operations.

 

Research and development costs are expensed when incurred. We record costs for some development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as subject enrollment, clinical site activations or information provided to us by our vendors.

 

During the three months ended March 31, 2015 and 2016, we incurred $6.4 million and $3.3 million, respectively, in research and development expenses. Research and development expenses decreased for the three months ended March 31, 2016 as compared to the three months ended March 31, 2015, due to decreases in clinical trial expenses for MDS, ovarian cancer, and HBV, offset by an increase in the costs of the SHAPE CTCL clinical trial, decreases in manufacturing, product development, and pre-clinical expenses, and decreases in personnel and stock compensation expenses resulting from the reduction in force implemented in the first quarter of 2016.  The MDS trial was terminated in January 2016 due to disappointing results.  The HBV trial was temporarily halted in May 2015. We completed enrollment in the Phase 1/2 open-label, non –randomized clinical trial of birinapant administered with conatumumab in third-line ovarian cancer trial in the second quarter of 2015, and based on results observed to date, we do not expect to advance this program beyond this study at this time.

 

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We do not currently utilize a formal time allocation system to capture expenses on a project-by-project basis as the majority of our past expenses have been in support of birinapant, and our future expenses will be in support of birinapant and SHAPE. However, we do allocate some portion of our research and development expenses by functional area, as shown below.

24


 

 

The following table summarizes our research and development expenses for the three months ended March 31, 2015 and 2016:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

 

2015

 

2016

 

Clinical development

    

$

2,731,056

    

$

2,107,461

    

Manufacturing and formulation

 

 

753,346

 

 

159,776

 

Personnel related

 

 

1,770,662

 

 

997,251

 

Stock-based compensation

 

 

469,678

 

 

37,051

 

Consulting

 

 

225,027

 

 

 —

 

Other research and non-clinical development

 

 

496,424

 

 

 —

 

 

 

$

6,446,193

 

$

3,301,539

 

 

The following table summarizes our research and development expenses by targeted indication for the three months ended March 31, 2015 and 2016:

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 

 

 

 

2015

 

2016

 

Blood cancers (MDS)

    

$

3,367,034

    

$

2,270,423

 

Solid tumors

 

 

663,196

 

 

 —

 

Infectious diseases (HBV)

 

 

394,944

 

 

 —

 

Shape (CTCL)

 

 

1,217,155

 

 

1,031,116

 

Other pre-clinical and non-indication specific

 

 

803,864

 

 

 —

 

 

 

$

6,446,193

 

$

3,301,539

 

 

We will need to secure additional funding in the future in order to carry out all of our planned research and development activities with respect to our product candidates.  We will incur substantial costs beyond our present and planned clinical trials in order to file NDAs in target indications for both birinapant and SHAPE, and in each case, the nature, design, size and cost of further studies and trials will depend in large part on the outcome of preceding studies and trials and discussions with regulators.

 

It is difficult to determine with certainty the costs and duration of our current or future clinical trials and pre-clinical studies, or if, when or to what extent we will generate revenues from the commercialization and sale of our product candidates if we obtain regulatory approval. We may never succeed in achieving regulatory approval for our product candidates. The duration, costs and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical trials and pre-clinical studies, uncertainties in clinical trial enrollment rate and significant and changing government regulation.

 

In addition, the probability of success for our product candidates will depend on numerous factors, including competition, manufacturing capability and commercial viability. See Risk Factors below and in Part I, Item 1A of our Annual Report.

 

Market acceptance of our product candidates, if we receive approval, depends on a number of factors, including the:

 

·

efficacy and safety of our product candidates administered alone or with other drugs, and post-marketing experience of the drugs;

 

·

clinical indications for which our product candidates are approved;

 

·

acceptance by physicians, major operators of cancer or infectious disease clinics and patients of our product candidates as safe and effective treatments;

 

·

potential and perceived advantages of our product candidates over alternative treatments;

25


 

 

·

prevalence and severity of any side effects;

 

·

product labeling or package insert requirements of the FDA or other regulatory authorities;

 

·

timing of market introduction of our product candidates as well as competitive products;

 

·

cost of treatment in relation to alternative treatments;

 

·

availability of coverage and adequate reimbursement and pricing by third-party payors and government authorities;

 

·

relative convenience and ease of administration; and

 

·

effectiveness of our sales and marketing efforts.

 

We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of our product candidates, as well as an assessment of their commercial potential.

 

Restructuring charge

 

On January 19, 2016, we authorized the implementation of a 19 person reduction in staff to control operating expenses and reduce ongoing cash requirements.  The actions associated with the reductions were completed in April 2016.  As a result of the reductions, we recorded a one-time restructuring charge of $2.0 million in the first quarter of fiscal 2016. These termination benefits consist of a severance payment equal to 3 months’ salary or, in the case of certain senior executives, consist of benefits pursuant to the provisions of their employment agreements, and outplacement assistance.  The estimated liability for termination benefits which will be paid out over 18 months was recorded at fair value during the first quarter of 2016.

 

Change in fair value of contingent consideration

 

The acquisition of Shape includes a contingent consideration arrangement that may require us to pay additional consideration in the form of milestone payments and tiered royalties.  We recorded the liability for the contingent consideration based on its fair value on the date of the acquisition, and we record any change in fair value of the contingent consideration in our consolidated statements of operations and comprehensive loss as a change in fair value of contingent consideration included in loss from operations.  For the three months ended March 31, 2015 and 2016, we recorded a change in fair value of contingent consideration of $1.0 million, and $1.1 million, respectively. The change in fair value of the contingent consideration recorded for the three months ended March 31, 2015 and 2016 was due primarily to accretion related to the passage of time.

 

Change in fair value of derivative liabilities

 

Certain of our warrants to purchase our Common Stock are classified as derivative liabilities and recorded at fair value. These derivative liabilities are subject to re-measurement at each balance sheet date and we recognize any change in fair value in our consolidated statements of operations and comprehensive loss as a change in fair value of the derivative liability.  For the three months ended March 31, 2015 and 2016, we recorded a change in fair value of these derivative liabilities of $0.1 million and $0.1 million, respectively.  The change in the fair value of these derivative liabilities is due primarily to the decrease in the value of our Common Stock during those periods.

 

We have classified the interest make-whole provision of our 8% Notes due 2019 issued in June 2014 as a derivative liability that is recorded at fair value.  This derivative liability is subject to re-measurement at each balance sheet date and we recognize any change in fair value in our consolidated statements of operations and comprehensive loss as a change in fair value of the derivative liability.  For the three months ended March 31, 2015 and 2016, we recorded a change in fair value of this derivative liability of $0.3 million and $30,000, respectively.  The change in the fair value of this derivative liability is due primarily to the change in the value of our Common Stock during those periods.

26


 

 

Interest and Other Income

 

Interest and other income consist principally of interest income earned on cash and cash equivalent balances.

 

Loss on sale of equipment

 

In March 2016, we sold all of our laboratory equipment with a net book value of $306,000 for net proceeds after selling costs of $152,000, resulting in a loss on sale of equipment of $154,000.

 

Interest Expense

 

Interest expense of $1.6 million and $1.7 million for the three months ended March 31, 2015 and 2016, respectively, is attributable to coupon interest on our 8% Notes and to non-cash interest expense resulting from the accretion of the debt discount and beneficial conversion feature associated with our 8% Notes issued in June 2014.

 

Cash Flows

 

Operating Activities.  Cash used in operating activities during the three months ended March 31, 2016 decreased to $6.0 million from $7.2 million used in the three months ended March 31, 2015. This decrease was driven primarily by lower operating costs and by the decrease in prepaid expenses and other assets during 2016 as compared to the decrease during 2015.

 

Investing Activities.  Cash provided by investing activities was $5.3 million for the three months ended March 31, 2016 as compared to cash provided by investing activities of $11.9 million for the three months ended March 31, 2015.  Cash provided by investing activities for 2015 and 2016 is attributable primarily to the excess of maturities over purchases of short-term investments during the period.

 

Financing Activities.  There were no cash flows from financing activities during the three months ended March 31, 2016.  Cash used in financing activities was $0.8 million for the three months ended March 31, 2015, due primarily to payments made to retire convertible notes during the period.

 

JOBS Act

 

We are an “emerging growth company” under Section 107 of the JOBS Act. As an emerging growth company, we can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act for complying with new or revised accounting standards. In other words, an “emerging growth company” can delay the adoption of new or revised accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, we will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

 

Liquidity and Capital Resources

 

Since our inception, we have incurred net losses and negative cash flows from our operations. We incurred net losses of $12.7 million and $11.1 million for the three months ended March 31, 2015 and 2016, respectively. Our operating activities used $7.2 million and $6.0 million of cash flows during the three months ended March 31, 2015 and 2016, respectively. At March 31, 2016, we had an accumulated deficit of $186.6 million, working capital of $11.0 million and cash and cash equivalents of $14.5 million. We funded our operations as a private company primarily through the sale of preferred stock and the issuance of convertible notes for gross proceeds totaling $85.4 million, which were converted into shares of our Common Stock in connection with our initial public offering.  We also received amounts under collaboration and grant arrangements totaling $13.7 million. In December 2013 we sold 8,222,115 shares of Common Stock in our initial public offering for net proceeds of $49.1 million after payment of underwriting fees and other expenses, and in June 2014 we issued our 8% Notes for proceeds of $44.1 million, net of underwriting fees and other expenses.  In 2015 we sold 1,435,612 shares of Common Stock under a purchase agreement with LPC for net proceeds of $2.6 million.

27


 

 

On June 23, 2014, we issued through a private placement $47.0 million in aggregate principal amount of our 8% Notes, of which $43.75 million remain outstanding as of March 31, 2016. Interest on our 8% Notes is payable semi-annually in arrears on June 15 and December 15 of each year, which commenced December 15, 2014.  Our 8% Notes are general unsecured and unsubordinated obligations and rank senior in right of payment to all of our indebtedness that is expressly subordinated in right of payment to the notes, rank equal in right of payment to our existing and future indebtedness and other liabilities that are not so subordinated, are effectively subordinated to any of our future secured indebtedness to the extent of the value of the assets securing such indebtedness, and rank structurally junior to all indebtedness and other liabilities incurred by our subsidiaries, including trade payables. We may not redeem our 8% Notes at our option prior to maturity. Our 8% Notes are convertible prior to maturity, subject to certain conditions described below, into shares of our common stock at an initial conversion rate of 148.3019 shares per $1,000 principal amount of our 8% Notes (equivalent to an initial conversion price of approximately $6.74 per share of common stock).  This conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for accrued and unpaid interest.  We may satisfy our conversion obligation by paying or delivering, as the case may be, cash, shares of our common stock or a combination thereof, at our election.  See Note 6 to Notes to Consolidated Financial Statements for additional information.  The indenture for our 8% Notes contains certain covenants which limit our and our subsidiaries’ ability to incur certain additional indebtedness except for certain permitted debt, and to incur liens except for certain permitted liens. We are in compliance with all the covenants set forth in the indenture governing our 8% Notes.

 

In April 2014, we acquired by merger Shape Pharmaceuticals, a development stage pharmaceutical company developing SHAPE.  We acquired this company to add a second clinical-stage oncology compound to the TetraLogic portfolio.  We paid $13.0 million in cash at closing and entered into a contingent consideration arrangement that may require us to pay additional consideration, including milestone payments and tiered royalty payments upon commercialization.  We currently estimate that the milestone payments will occur between mid-2017 and 2021.  The range of undiscounted amounts that we could be required to pay under our agreement for the milestone payments is between zero and $64.5 million.

 

Similar to other clinical-stage biopharmaceutical companies, our access to traditional bank credit is limited. Although we have had a revolving line of credit in the past, we do not currently have an open revolving line of credit or access to bank finance. We have limited assets which can be used as collateral to secure potential indebtedness. Moreover, as noted above, we have not received any material revenues since inception. Therefore, our ability to fund our operations and sustain our clinical development programs is dependent on equity and equity-linked investments. None of our current investors is required to invest any additional capital in us. Thus, there can be no assurances that we will be able to raise sufficient capital in the future from these or other similar sources or the public markets to fund our operations, and failure to do so could have a material adverse effect on our operations. In addition, the need to raise capital is expected to consume management resources, time and attention and, to a lesser extent, the time and attention of our scientific staff.

 

We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect our cash expenditures to increase in the near term as we fund our planned clinical trials for our product candidates. Following our initial public offering, we are now a publicly traded company and have incurred significant additional legal, accounting and other expenses that we were not required to incur as a private company. In addition, the Sarbanes‑Oxley Act, as well as rules adopted by the SEC and the NASDAQ Stock Market, requires public companies to implement specified corporate governance practices that were inapplicable to us as a private company. These rules and regulations have increased our legal and financial compliance costs and will make some activities more time‑consuming and costly.

 

We received written notices from the Listing Qualifications Department of The NASDAQ Stock Market LLC (“Nasdaq”) on January 20, 2016 and February 23, 2016 notifying us that we did not meet certain minimum listing requirements for listing our common stock on the Nasdaq Global Market.  Specifically, we were not in compliance with the minimum bid price requirement of $1.00 for our common stock, the minimum publicly held market value requirement of $15 million for our outstanding common stock, or the minimum total market value requirement of $50 million for our outstanding common stock.   If we are not able to regain compliance with the Nasdaq listing rules within the specified time period (generally 180 days from the date of notice), we would be delisted from the Nasdaq Global Market.  This event would be considered a fundamental change under the indenture for our 8% Notes, and we could be

28


 

required by the noteholders to purchase for cash all of the outstanding 8% Notes at a purchase price equal to 100% of the principal amount of the 8% Notes ($43.75 million of which are outstanding as of March 31, 2016) plus accrued and unpaid interest.  To regain compliance, the minimum total market value of our common stock would need to reach at least $50 million for 10 consecutive business days by July 18, 2016, the minimum bid price of our common stock would need to reach at least $1.00 for 10 consecutive business days by August 22, 2016, and the minimum publicly held market value of our common stock would need to reach at least $15 million for 10 consecutive business days by August 22, 2016.   All of these events are outside of our control at this time.  Should the delisting of our common stock occur during the second half of 2016, we do not currently have sufficient funds on hand to satisfy the obligations for the 8% Notes if all holders exercise their put rights.  Although we are currently considering available options to resolve our compliance with Nasdaq listing rules, we have no assurance that this will occur within the necessary time period to prevent delisting.  In addition, we have no assurance that we will be able to obtain sufficient funds to meet our obligations with respect to the 8% Notes in the event that delisting occurs and all holders exercise their put rights.  Should we remain in compliance with the Nasdaq listing requirements, we believe our existing cash and investments will be sufficient to fund our current operating and investing activities through December 31, 2016.  In order for our existing cash and investments to fund operating and investing activities through December 31, 2016, we have limited our planned business activities to the completion of the Phase 2 clinical trial of SHAPE and the winding down of the Phase 2 clinical trial in birinapant in MDS, and we announced a reduction in force in January 2016, which reduced our headcount to 9 employees by April 2016.

 

Our failure to obtain sufficient funds on acceptable terms when needed could have a negative impact on our business, results of operations, and financial condition. Our future capital requirements will depend on many factors, including:

·

the results of our pre-clinical studies and clinical trials;

 

·

the development and commercialization of birinapant and SHAPE;

 

·

the scope, progress, results and costs of researching and developing birinapant, SHAPE or any other future product candidates, and conducting pre-clinical studies and clinical trials;

 

·

the timing of, and the costs involved in, obtaining regulatory approvals for birinapant, SHAPE or any other future product candidates;

 

·

the cost of commercialization activities if birinapant, SHAPE or any other future product candidates are approved for sale, including marketing, sales and distribution costs;

 

·

the cost of manufacturing birinapant, SHAPE or any other future product candidates in pre-clinical studies, clinical trials and, if approved, in commercial sale;

 

·

our ability to establish and maintain strategic collaborations, licensing or other arrangements and the financial terms of such agreements;

 

·

any product liability infringement or other lawsuits related to our products;

 

·

the expenses needed to attract and retain skilled personnel;

 

·

the costs associated with being a public company;

 

·

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims, including litigation costs and the outcome of such litigation;

 

·

the timing, receipt and amount of sales of, or royalties on, future approved products, if any; and

 

·

the costs associated with any future acquisitions or in-licensing of additional assets or companies to further expand our technology base.

 

29


 

In April 2014, we acquired by merger Shape Pharmaceuticals, a development stage pharmaceutical company developing SHAPE.  We acquired this company to add a second clinical-stage oncology compound to the TetraLogic portfolio.  We paid $13 million in cash at closing and entered into a contingent consideration arrangement that may require us to pay additional consideration, including milestone payments and tiered royalty payments upon commercialization.  We may in-license or acquire additional assets or companies in the future to further expand our technology base.  However, we may not have sufficient cash reserves or other liquid assets to consummate such acquisitions and it may be necessary for us to raise additional funds to complete future transactions.

 

The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2015 contains explanatory language that substantial doubt exists about our ability to continue as a going concern, without raising additional capital.  In addition, the report notes that the 8% Notes may become due and payable during 2016 should our common stock be delisted from the Nasdaq Global Market.

 

The recent failure of our MDS clinical trial with birinapant has seriously damaged our ability to raise new financing in the near future.  If we are unable to obtain necessary financing, our ability to complete the development and potential commercialization of our product candidates will be compromised and we will need to downsize or wind down our operations through liquidation, bankruptcy or a sale of our company or our assets.  We cannot assure you that we will be able to obtain additional financing on terms we deem to be commercially reasonable, if at all, or that any third-party financing that we do obtain will be sufficient to cover our operating expenses, debt expenses and other payment obligations.  If we fail to obtain the third-party financing we require, we may be unable to continue our operations at the planned levels or at all.  We may then have to sell our company or our assets or file for, or be forced to resort to, bankruptcy protection or liquidation.

 

Our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this quarterly report.  Although we believe that we have a reasonable basis for the forward-looking statements contained in this report, we have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources sooner than we currently expect.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements, as defined by applicable SEC regulations.

 

 

ITEM 4. CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended, or the Exchange Act, and the rules and regulations thereunder, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow for timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

 

As required by Rule 13a-15(b) under the Exchange Act, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of March 31, 2016. Based on such evaluation, our principal executive officer and principal financial officer have concluded that, as of March 31, 2016, our disclosure controls and procedures were effective at the reasonable assurance level.

 

30


 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

PART II — OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

We are not currently a party to any legal proceedings.

 

ITEM 1A.  RISK FACTORS

 

There are no material changes from the risk factors previously disclosed in Item 1A “Risk Factors” in Part I of our Annual Report.  In addition to the other information set forth in this quarterly report on Form 10-Q, you should carefully consider the factors discussed in Part 1, Item 1A “Risk Factors” of the Annual Report.  The risks described in the Annual Report and under the caption “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this quarterly report are not the only risks that we face.  Additional risks not presently known to us or that we do not currently consider significant may also have an adverse effect on us.  If any of the risks actually occur, our business, results of operations, cash flows or financial condition could suffer.  We cannot assure you that any of the events discussed under the caption “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this quarterly report or in the risk factors in the Annual Report will not occur.  These risks could have a material and adverse impact on our business, results of operations, financial condition and cash flows and, if so, our future prospects would likely be materially and adversely affected.  If any of such events were to happen, the trading price of our common stock could decline, and you could lose all or part of your investment.  You should understand that it is not possible to predict or identify all such risks.  Consequently, you should not consider the risk factors in the Annual Report or under the caption “Cautionary Note Regarding Forward-Looking Statements and Industry Data” in this quarterly report to be a complete discussion of all potential risks or uncertainties.

 

 

ITEM 2.  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

Recent Sales of Unregistered Securities

 

None.

 

Use of Proceeds

 

None.

 

Issuer Purchases of Equity Securities

 

None.

 

ITEM 3.  DEFAULTS UPON SENIOR SECURITIES.

 

Not applicable.

 

ITEM 4.  MINE SAFETY DISCLOSURES

 

Not applicable.

 

31


 

ITEM 5.  OTHER INFORMATION

 

Company Website

 

From time to time we will post updated versions of our corporate presentation slides on our website.  Such updates may include information regarding our pipeline, including adjustments of expected timing of certain events, and other information about the progress of our business. The information contained in, or that can be accessed through, our website is not part of this quarterly report.

 

Separation Agreements

 

On April 15, 2016, Dr. C. Glenn Begley, the Company’s Chief Scientific Officer, and Dr. Lesley Russell, the Company’s Chief Operating Officer, signed separation agreements with the Company.  These separation agreements are identical in form and content with the separation agreements included as part of their employment agreements previously filed as exhibits to the Company’s Registration Statement on Form S-1 (File No. 333-191811) filed on October 18, 2013.

 

ITEM 6.  EXHIBITS

 

Reference is made to the Exhibit Index to this quarterly report for a list of exhibits required by Item 601 of Regulation S-K to be filed as part of this quarterly report on Form 10-Q.

 

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SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

 

 

 

TETRALOGIC PHARMACEUTICALS CORPORATION

 

 

Date:  May 4, 2016

By:

/s/ J. KEVIN BUCHI

 

 

J. Kevin Buchi

 

 

President and Chief Executive Officer

(Principal Executive Officer)

 

 

 

 

 

Date:  May 4, 2016

By:

/s/ PATRICK HUTCHISON

 

 

Patrick Hutchison

 

 

Chief Financial Officer and Treasurer

 

 

(Principal Financial and Accounting Officer)

 

33


 

INDEX TO EXHIBITS

 

 

 

 

Exhibit
Number

 

Exhibit Description

 

 

 

31.1 

 

Certifying Statement of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 

 

Certifying Statement of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 

 

Certifying Statement of the Chief Executive Officer pursuant to Section 1350 of Title 18 of the United States Code.

32.2 

 

Certifying Statement of the Chief Financial Officer pursuant to Section 1350 of Title 18 of the United States Code.

101.ins

 

XBRL Instance Document

101.sch

 

XBRL Taxonomy Extension Schema

101.cal

 

XBRL Taxonomy Extension Calculation Linkbase

101.def

 

XBRL Taxonomy Extension Definition Linkbase

101.lab

 

XBRL Taxonomy Extension Label Linkbase

101.pre

 

XBRL Taxonomy Extension Presentation Linkbase

 

 

 

 

 

 

 

 

Exhibits 32.1 and 32.2 are being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act of 1934, as amended, or the Exchange Act, or otherwise subject to the liability of that section, nor shall any of such exhibits be deemed to be incorporated by reference in any filing of TetraLogic Pharmaceuticals Corporation under the Securities Act of 1933, as amended, or the Exchange Act, except as otherwise stated in such filing.

 

 

 

 

 

 

 

 

 

 

 

 

 

34