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iXBRL+

 

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 June 30, 2020  

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 August 1, 2020, the registrant had 49,298,390 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 June 30, 2020 and December 31, 2019 (Unaudited)

3

 

Condensed Consolidated Statements of Operations and Comprehensive Loss for the three and six months ended June 30, 2020 and 2019 (Unaudited)

4

 

Condensed Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

5

 

Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2020 and 2019 (Unaudited)

6

 

Notes to Condensed Consolidated Financial Statements (Unaudited)

7

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

26

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

36

 

Item 4. Controls and Procedures

37

PART II. OTHER INFORMATION

 

 

Item 1. Legal Proceedings

38

 

Item 1A. Risk Factors

38

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

70

 

Item 3. Defaults Upon Senior Securities

70

 

Item 4. Mine Safety Disclosures

70

 

Item 5. Other Information

70

 

Item 6. Exhibits

71

 

Signatures

72

 

 

2


PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Flexion Therapeutics, Inc.

Condensed Consolidated Balance Sheets

(Unaudited in thousands, except share amounts)

 

 

 

June 30,

2020

 

 

December 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

183,099

 

 

$

82,253

 

Marketable securities

 

 

17,509

 

 

 

54,407

 

Accounts receivable, net

 

 

21,524

 

 

 

37,115

 

Inventories

 

 

19,392

 

 

 

16,529

 

Prepaid expenses and other current assets

 

 

5,043

 

 

 

5,371

 

Total current assets

 

$

246,567

 

 

$

195,675

 

Property and equipment, net

 

 

17,795

 

 

 

13,662

 

Right-of-use assets

 

 

7,414

 

 

 

8,223

 

Total assets

 

$

271,776

 

 

$

217,560

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

Accounts payable

 

$

7,886

 

 

$

15,258

 

Accrued expenses and other current liabilities

 

 

15,410

 

 

 

19,610

 

Deferred revenue

 

 

5,000

 

 

 

 

Operating lease liabilities

 

 

1,422

 

 

 

1,351

 

Current portion of long-term debt

 

 

7,639

 

 

 

 

Total current liabilities

 

$

37,357

 

 

$

36,219

 

Long-term operating lease liability, net

 

 

6,790

 

 

 

7,609

 

Long-term debt, net

 

 

52,829

 

 

 

40,176

 

2024 convertible notes, net

 

 

157,990

 

 

 

153,413

 

Other long-term liabilities

 

 

295

 

 

 

251

 

Total liabilities

 

$

255,261

 

 

$

237,668

 

Commitments and contingencies

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at June 30, 2020

   and December 31, 2019 and 0 shares issued and outstanding at June 30, 2020

   and December 31, 2019

 

 

 

 

 

 

Stockholders' equity

 

 

 

 

 

 

 

 

Common stock, $0.001 par value; 100,000,000 shares authorized; 49,270,392 and

   38,361,476 shares issued and outstanding, at June 30, 2020 and

   December 31, 2019, respectively

 

 

49

 

 

 

38

 

Additional paid-in capital

 

 

754,483

 

 

 

648,391

 

Accumulated other comprehensive income

 

 

3

 

 

 

62

 

Accumulated deficit

 

 

(738,020

)

 

 

(668,599

)

Total stockholders' equity (deficit)

 

 

16,515

 

 

 

(20,108

)

Total liabilities and stockholders' equity

 

$

271,776

 

 

$

217,560

 

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

 

 

Six Months Ended

 

 

 

June 30,

 

 

June 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

15,451

 

 

$

16,953

 

 

$

35,578

 

 

$

27,517

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of sales

 

 

5,481

 

 

 

1,398

 

 

 

7,757

 

 

 

3,160

 

Research and development

 

 

12,507

 

 

 

16,125

 

 

 

33,641

 

 

 

31,550

 

Selling, general and administrative

 

 

24,730

 

 

 

33,103

 

 

 

54,029

 

 

 

65,325

 

Total operating expenses

 

 

42,718

 

 

 

50,626

 

 

 

95,427

 

 

 

100,035

 

Loss from operations

 

 

(27,267

)

 

 

(33,673

)

 

 

(59,849

)

 

 

(72,518

)

Other (expense) income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

95

 

 

 

831

 

 

 

522

 

 

 

1,842

 

Interest expense

 

 

(5,002

)

 

 

(3,949

)

 

 

(9,723

)

 

 

(7,885

)

Other (expense) income

 

 

(197

)

 

 

304

 

 

 

(123

)

 

 

536

 

Total other (expense) income

 

 

(5,104

)

 

 

(2,814

)

 

 

(9,324

)

 

 

(5,507

)

Loss before income taxes

 

 

(32,371

)

 

 

(36,487

)

 

 

(69,173

)

 

 

(78,025

)

Income tax expense

 

 

248

 

 

 

 

 

 

248

 

 

 

 

Net loss

 

$

(32,619

)

 

$

(36,487

)

 

 

(69,421

)

 

 

(78,025

)

Net loss per common share, basic and diluted

 

$

(0.76

)

 

$

(0.96

)

 

$

(1.71

)

 

$

(2.05

)

Weighted average common shares outstanding, basic and diluted

 

 

42,776

 

 

 

38,010

 

 

 

40,664

 

 

 

38,001

 

Other comprehensive (loss) income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized (losses) gains from available-for-sale securities, net

   of tax of $0

 

 

(3

)

 

 

125

 

 

 

(59

)

 

 

307

 

Total other comprehensive (loss) income

 

 

(3

)

 

 

125

 

 

 

(59

)

 

 

307

 

Comprehensive loss

 

$

(32,622

)

 

$

(36,362

)

 

$

(69,480

)

 

$

(77,718

)

 

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

Stockholders'

 

 

 

 

Shares

 

 

Par Value

 

 

Paid-in-

Capital

 

 

Comprehensive

Income (Loss)

 

 

Accumulated

Deficit

 

 

Equity

(Deficit)

 

Balance at December 31, 2019

 

 

 

38,361

 

 

$

38

 

 

$

648,391

 

 

$

62

 

 

$

(668,599

)

 

$

(20,108

)

Issuance of common stock for equity

   awards, net of shares withheld for taxes

 

 

 

201

 

 

 

1

 

 

 

8

 

 

 

 

 

 

 

 

 

 

 

9

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

4,651

 

 

 

 

 

 

 

 

 

 

 

4,651

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(36,802

)

 

 

(36,802

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(56

)

 

 

 

 

 

 

(56

)

Balance at March 31, 2020

 

 

 

38,562

 

 

$

39

 

 

$

653,050

 

 

$

6

 

 

$

(705,401

)

 

$

(52,306

)

Issuance of common stock net of issuance costs

 

 

 

10,615

 

 

 

10

 

 

 

96,754

 

 

 

 

 

 

 

 

 

 

 

96,764

 

Issuance of common stock for equity

   awards, net of shares withheld for taxes

 

 

 

11

 

 

 

 

 

 

 

1

 

 

 

 

 

 

 

 

 

 

 

1

 

Employee stock purchase plan

 

 

 

82

 

 

 

 

 

 

 

891

 

 

 

 

 

 

 

 

 

 

 

891

 

Stock-based compensation expense

 

 

 

 

 

 

 

 

 

 

 

3,787

 

 

 

 

 

 

 

 

 

 

 

3,787

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(32,619

)

 

 

(32,619

)

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3

)

 

 

 

 

 

 

(3

)

Balance at June 30, 2020

 

 

 

49,270

 

 

$

49

 

 

$

754,483

 

 

$

3

 

 

$

(738,020

)

 

$

16,515

 

 

 

 

 

 

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

 

 

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)

 

 

 

Six Months Ended

 

 

 

June 30,

 

 

 

2020

 

 

2019

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(69,421

)

 

$

(78,025

)

Adjustments to reconcile net loss to cash used in operating activities

 

 

 

 

 

 

 

 

Depreciation

 

 

751

 

 

 

435

 

Amortization of right-of-use assets

 

 

809

 

 

 

553

 

Stock-based compensation expense

 

 

8,438

 

 

 

8,070

 

Non cash interest expense

 

 

292

 

 

 

 

Accretion of discount on marketable securities

 

 

(52

)

 

 

(836

)

Loss on disposal of fixed assets

 

 

262

 

 

 

 

Amortization of debt discount and debt issuance costs

 

 

4,577

 

 

 

4,184

 

Premium paid on securities purchased

 

 

(17

)

 

 

(26

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable

 

 

15,591

 

 

 

(9,468

)

Inventory

 

 

(2,502

)

 

 

(4,512

)

Prepaid expenses and other current assets

 

 

328

 

 

 

1,287

 

Accounts payable

 

 

(7,540

)

 

 

(271

)

Accrued expenses and other current liabilities

 

 

(4,375

)

 

 

787

 

Deferred revenue

 

 

5,000

 

 

 

 

Lease liabilities

 

 

(748

)

 

 

(541

)

Net cash used in operating activities

 

 

(48,607

)

 

 

(78,363

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of property and equipment

 

 

(5,538

)

 

 

(1,068

)

Purchases of marketable securities

 

 

(12,490

)

 

 

(96,198

)

Sale and redemption of marketable securities

 

 

49,398

 

 

 

138,061

 

Net cash provided by investing activities

 

 

31,370

 

 

 

40,795

 

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from borrowings under term loan

 

 

15,000

 

 

 

 

Proceeds from revolving line of credit

 

 

20,000

 

 

 

 

Repayments of revolving line of credit

 

 

(15,000

)

 

 

 

Proceeds from the offering of common stock

 

 

97,289

 

 

 

 

Payments of public offering costs

 

 

(107

)

 

 

 

Payments on notes payable

 

 

 

 

 

(5,000

)

Proceeds from the exercise of stock options

 

 

10

 

 

 

 

Proceeds from employee stock purchase plan

 

 

891

 

 

 

1,040

 

Net cash provided by (used in) financing activities

 

 

118,083

 

 

 

(3,960

)

Net increase (decrease) in cash and cash equivalents

 

 

100,846

 

 

 

(41,528

)

Cash and cash equivalents at beginning of period

 

 

82,253

 

 

 

87,229

 

Cash and cash equivalents at end of period

 

$

183,099

 

 

$

45,701

 

Non-cash investing and financing activities

 

 

 

 

 

 

 

 

Right-of-use asset obtained in exchange for operating lease obligation

 

 

 

 

 

7,046

 

Purchases of property and equipment in accounts payable and accrued expenses

 

 

2,126

 

 

 

 

Public offering costs included in accounts payable or accrued

 

 

418

 

 

 

 

Supplemental disclosures of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

 

5,048

 

 

 

3,699

 

 

 

 

 

 

 

 

 

 

 

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

 

6


Flexion Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Overview and Nature of the Business

Flexion Therapeutics, Inc. (“Flexion” or the “Company”) was incorporated under the laws of the state of Delaware on November 5, 2007. Flexion is a biopharmaceutical company focused on the discovery, development and commercialization of novel, local therapies for the treatment of patients with musculoskeletal conditions, beginning with osteoarthritis, or OA, a type of degenerative arthritis. The Company has an approved product, ZILRETTA®, which it markets in the United States.  ZILRETTA is the first and only extended-release, intra-articular, or IA (meaning in the joint), injection indicated for the management of OA knee pain. ZILRETTA is a non-opioid therapy that employs Flexion’s proprietary microsphere technology to provide pain relief. The pivotal Phase 3 trial, on which the approval of ZILRETTA was based, showed that ZILRETTA met the primary endpoint of pain reduction at Week 12, with statistically significant pain relief extending through Week 16. The Company also has two pipeline programs focused on the local treatment of musculoskeletal conditions: FX201, which is an investigational IA gene therapy product candidate in clinical development for the treatment of OA, and FX301, a preclinical product candidate, which is being developed as a locally administered peripheral nerve block for control of post-operative pain.

The accompanying condensed consolidated financial statements have been prepared on a basis which assumes that the Company will continue as a going concern and which contemplates the realization of assets and satisfaction of liabilities and commitments in the normal course of business. The Company has incurred recurring losses and negative cash flows from operations. As of June 30, 2020, the Company had cash, cash equivalents, and marketable securities of approximately $200.6 million.

The Company is subject to risks and uncertainties common to companies in the biopharmaceutical industry, including, but not limited to, new technological innovations, dependence on key personnel, protection of proprietary technology, compliance with government regulations, and the ability to secure additional capital to fund operations. Successfully commercializing ZILRETTA requires significant sales and marketing efforts and the Company’s pipeline programs will require significant additional research and development efforts, including extensive preclinical and clinical testing. These activities will in turn require significant amounts of capital, qualified personnel and adequate infrastructure. There can be no assurance when, if ever, the Company will realize significant revenue from the sales of ZILRETTA or if the development efforts supporting the Company’s pipeline, including future clinical trials, will be successful.

The Company’s operations have been and continue to be affected by the ongoing global pandemic of a novel strain of coronavirus (“COVID-19”) and the resulting volatility and uncertainty it has caused. In March 2020, the World Health Organization declared COVID-19 a pandemic and recommended containment and mitigation measures worldwide. The COVID-19 pandemic has caused significant volatility and uncertainty, which could result in a prolonged economic downturn that has disrupted and is expected to continue to disrupt the Co