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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

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: 001-36287

 

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

 

 

2


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.

 

 

3


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.

4


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.

5


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

 

 

(109,816

)

 

 

(117,761