SEC Filing | Flexion Therapeutics, Inc.

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2019

☐	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: 001-36287

Flexion Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

Delaware		26-1388364
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

10 Mall Road, Suite 301 Burlington, Massachusetts		01803
(Address of Principal Executive Offices)		(Zip Code)

(781) 305-7777

(Registrant’s Telephone Number, Including Area Code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.001 par value per share	FLXN	NASDAQ

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

Large accelerated filer	☒	Accelerated filer	☐

Non-accelerated filer	☐	Smaller reporting company	☐

Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

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

As of November 1, 2019, the registrant had 38,174,760 shares of Common Stock ($0.001 par value) outstanding.

FLEXION THERAPEUTICS, INC.

TABLE OF CONTENTS

PART I. FINANCIAL INFORMATION
	Item 1. Financial Statements	3
	Condensed Consolidated Balance Sheets as of September 30, 2019 and December 31, 2018 (Unaudited)	3
	Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and nine months ended September 30, 2019 and 2018 (Unaudited)	4
	Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)	5
	Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2019 and 2018 (Unaudited)	6
	Notes to Condensed Consolidated Financial Statements (Unaudited)	7
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	Item 3. Quantitative and Qualitative Disclosures about Market Risk	32
	Item 4. Controls and Procedures	33
PART II. OTHER INFORMATION
	Item 1. Legal Proceedings	34
	Item 1A. Risk Factors	34
	Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	61
	Item 3. Defaults Upon Senior Securities	61
	Item 4. Mine Safety Disclosures	61
	Item 5. Other Information	61
	Item 6. Exhibits	62
	Signatures	63

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Flexion Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited in thousands, except share amounts)

	September 30, 2019			December 31, 2018
Assets
Current assets
Cash and cash equivalents	$	87,769		$	87,229
Marketable securities		87,991			171,555
Accounts receivable, net		29,316			13,121
Inventories		14,773			7,637
Prepaid expenses and other current assets		5,235			5,500
Total current assets	$	225,084		$	285,042
Property and equipment, net		10,651			10,710
Right-of-use assets		8,618			—
Total assets	$	244,353		$	295,752
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	12,088		$	12,340
Accrued expenses and other current liabilities		24,419			14,310
Operating lease liabilities		1,283			—
Current portion of long-term debt		—			9,967
Total current liabilities	$	37,790		$	36,617
Long-term operating lease liability, net		7,865			—
Long-term debt, net		40,070			3,640
2024 convertible notes, net		151,204			144,879
Other long-term liabilities		251			537
Total liabilities	$	237,180		$	185,673
Commitments and contingencies
Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2019 and December 31, 2018 and 0 shares issued and outstanding at September 30, 2019 and December 31, 2018		—			—
Stockholders' equity
Common stock, $0.001 par value; 100,000,000 shares authorized; 38,152,405 and 37,946,341 shares issued and outstanding, at September 30, 2019 and December 31, 2018, respectively		38			38
Additional paid-in capital		642,087			628,944
Accumulated other comprehensive income (loss)		131			(77	)
Accumulated deficit		(635,083	)		(518,826	)
Total stockholders' equity		7,173			110,079
Total liabilities and stockholders' equity	$	244,353		$	295,752

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

Flexion Therapeutics, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(Unaudited in thousands, except per share amounts)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
Revenues
Product revenue, net	$	21,786		$	6,990		$	49,303		$	12,981
Operating expenses
Cost of sales		2,872			1,619			6,032			5,264
Research and development		20,938			13,578			52,488			38,223
Selling, general and administrative		32,136			32,804			97,461			90,739
Total operating expenses		55,946			48,001			155,981			134,226
Loss from operations		(34,160	)		(41,011	)		(106,678	)		(121,245	)
Other (expense) income
Interest income		721			1,157			2,563			3,572
Interest expense		(4,652	)		(3,930	)		(12,537	)		(11,775	)
Other (expense) income		(141	)		144			395			364
Total other (expense) income		(4,072	)		(2,629	)		(9,579	)		(7,839	)
Net loss	$	(38,232	)	$	(43,640	)	$	(116,257	)	$	(129,084	)
Net loss per common share, basic and diluted	$	(1.00	)	$	(1.15	)	$	(3.06	)	$	(3.42	)
Weighted average common shares outstanding, basic and diluted		38,125			37,818			38,043			37,712
Other comprehensive (loss) income:
Unrealized (losses) gains from available-for-sale securities, net of tax of $0		(99	)		153			208			250
Total other comprehensive (loss) income		(99	)		153			208			250
Comprehensive loss	$	(38,331	)	$	(43,487	)	$	(116,049	)	$	(128,834	)

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

Flexion Therapeutics, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(Unaudited in thousands)

	Common Stock				Additional		Accumulated Other						Total
	Shares		Par Value		Paid-in- Capital		Comprehensive Income (Loss)			Accumulated Deficit			Stockholders' Equity
Balance at December 31, 2018		37,946	$	38	$	628,944	$	(77	)	$	(518,826	)	$	110,079
Issuance of common stock for equity awards		47				—								—
Stock-based compensation expense						3,853								3,853
Net loss											(41,538	)		(41,538	)
Other comprehensive income								182						182
Balance at March 31, 2019		37,993	$	38	$	632,797	$	105		$	(560,364	)	$	72,576
Issuance of common stock for equity awards		8				—								—
Employee stock purchase plan		106				1,040								1,040
Stock-based compensation expense						4,217								4,217
Net loss											(36,487	)		(36,487	)
Other comprehensive income								125						125
Balance at June 30, 2019		38,107	$	38	$	638,054	$	230		$	(596,851	)	$	41,471
Issuance of common stock for equity awards		45				8								8
Employee stock purchase plan														—
Stock-based compensation expense						4,025								4,025
Net loss											(38,232	)		(38,232	)
Other comprehensive loss								(99	)					(99	)
Balance at September 30, 2019		38,152	$	38	$	642,087	$	131		$	(635,083	)	$	7,173

	Common Stock				Additional		Accumulated Other						Total
	Shares		Par Value		Paid-in- Capital		Comprehensive Income (Loss)			Accumulated Deficit			Stockholders' Equity
Balance at December 31, 2017		37,611	$	38	$	609,810	$	(407	)	$	(349,167	)	$	260,274
Issuance of common stock for equity awards		22		—		414								414
Stock-based compensation expense						3,657								3,657
Net loss											(41,569	)		(41,569	)
Other comprehensive loss								(169	)					(169	)
Balance at March 31, 2018		37,633	$	38	$	613,881	$	(576	)	$	(390,736	)	$	222,607
Issuance of common stock for equity awards		122		—		1,396								1,396
Employee stock purchase plan		53				1,129								1,129
Stock-based compensation expense						3,984								3,984
Net loss											(43,875	)		(43,875	)
Other comprehensive income								266						266
Balance at June 30, 2018		37,808	$	38	$	620,390	$	(310	)	$	(434,611	)	$	185,507
Issuance of common stock for equity awards		17				86								86
Employee stock purchase plan														—
Stock-based compensation expense						3,999								3,999
Net loss											(43,640	)		(43,640	)
Other comprehensive income								153						153
Balance at September 30, 2018		37,825	$	38	$	624,475	$	(157	)	$	(478,251	)	$	146,105

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

Flexion Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows

(Unaudited in thousands)

	Nine Months Ended
	September 30,
	2019			2018
Cash flows from operating activities
Net loss	$	(116,257	)	$	(129,084	)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation		733			1,494
Amortization of right-of-use assets		942			—
Stock-based compensation expense		12,095			11,640
Non cash interest expense		459			—
Accretion of discount on marketable securities		(1,155	)		(803	)
Loss from debt extinguishment		352			—
Amortization of debt discount and debt issuance costs		6,505			5,786
Premium paid on securities purchased		(27	)		(215	)
Changes in operating assets and liabilities:
Accounts receivable		(16,195	)		(8,388	)
Inventory		(6,151	)		(3,044	)
Prepaid expenses, other current and long-term assets		265			(1,273	)
Accounts payable		(576	)		2,300
Accrued expenses and other current liabilities		10,033			3,826
Lease liabilities and other long-term liabilities		(839	)		—
Net cash used in operating activities