10-Q 1 arav-10q_20210331.htm 10-Q arav-10q_20210331.htm

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

For the quarterly period ended March 31, 2021

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: 001-36361

 

Aravive, Inc.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Delaware

 

2834

 

26-4106690

(State or Other Jurisdiction of

Incorporation or Organization)

 

(Primary Standard Industrial

Classification Code Number)

 

 

(I.R.S. Employer

Identification Number)

River Oaks Tower

3730 Kirby Drive, Suite 1200

Houston, Texas 77098

(Address of principal executive offices)

(936) 355-1910

(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, par value $0.0001 per share

 

ARAV

 

Nasdaq Global Select Market

 

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 an 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 May 3, 2021, there were 20,388,029 outstanding shares of common stock, par value $0.0001 per share, of Aravive, Inc.

 

 

 

 


 

 

ARAVIVE, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2021

PART I. FINANCIAL INFORMATION

 

Item

  

 

  

Page

1.

  

Financial Statements (unaudited):

  

 

 

  

a. Condensed Consolidated Balance Sheets at March 31, 2021 and December 31, 2020

  

3

 

  

b. Condensed Consolidated Statements of Operations for the three months ended March 31, 2021 and 2020

  

4

 

 

c. Condensed Consolidated Statements of Stockholders’ Equity for the three months ended March 31, 2021 and 2020

 

5

 

  

d. Condensed Consolidated Statements of Cash Flows for the three months ended March 31, 2021 and 2020

  

6

 

  

e. Notes to Condensed Consolidated Financial Statements

  

7

2.

  

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

  

21

3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

26

4.

  

Controls and Procedures

  

27

 

PART II. OTHER INFORMATION

1.

  

Legal Proceedings

  

28

1A.

  

Risk Factors

  

28

6.

  

Exhibits

  

32

 

 

Signatures

 

33

 

 

 

2

 


 

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ARAVIVE, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

March 31,

 

 

December 31,

 

 

2021

 

 

2020

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

Current Assets

 

 

 

 

 

 

 

Cash and cash equivalents

$

78,682

 

 

$

60,541

 

Prepaid expenses and other current assets

 

2,804

 

 

 

1,148

 

Total current assets

 

81,486

 

 

 

61,689

 

Restricted cash

 

2,430

 

 

 

2,430

 

Property and equipment, net

 

505

 

 

 

526

 

Operating lease right-of-use assets

 

2,770

 

 

 

2,958

 

Intangible asset, net

 

66

 

 

 

97

 

Other assets

 

10

 

 

 

10

 

Total assets

$

87,267

 

 

$

67,710

 

Liabilities and stockholders' equity

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

Accounts payable

$

2,943

 

 

$

2,500

 

Accrued liabilities

 

1,309

 

 

 

2,323

 

Operating lease obligation, current portion

 

2,401

 

 

 

2,086

 

Current portion of deferred revenue

 

2,449

 

 

 

2,552

 

Total current liabilities

 

9,102

 

 

 

9,461

 

Deferred revenue, net of current portion

 

3,610

 

 

 

3,763

 

Operating lease obligation, net of current portion

 

5,839

 

 

 

6,431

 

Total liabilities

 

18,551

 

 

 

19,655

 

Stockholders' equity

 

 

 

 

 

 

 

Common stock, $0.0001 par value, 100,000,000 shares authorized at

   March 31, 2021 and December 31, 2020; 20,318,652 and 16,481,099 shares

   issued and outstanding at March 31, 2021 and December 31, 2020, respectively

 

2

 

 

 

2

 

Additional paid-in capital

 

577,372

 

 

 

548,707

 

Accumulated deficit

 

(508,658

)

 

 

(500,654

)

Total stockholders' equity

 

68,716

 

 

 

48,055

 

Total liabilities and stockholders’ equity

$

87,267

 

 

$

67,710

 

 

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

 

 

3

 


 

 

ARAVIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited)

(in thousands, except per share data)

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

 

2020

 

Revenue

 

 

 

 

 

 

 

Collaboration revenue

$

256

 

 

$

 

Total revenue

 

256

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

Research and development

 

5,884

 

 

 

3,491

 

General and administrative

 

2,380

 

 

 

3,951

 

Loss on impairment of long-lived assets

 

 

 

 

2,870

 

Total operating expenses

 

8,264

 

 

 

10,312

 

Loss from operations

 

(8,008

)

 

 

(10,312

)

Interest income

 

9

 

 

 

217

 

Other income (expense), net

 

(5

)

 

 

(701

)

Net loss

$

(8,004

)

 

$

(10,796

)

Net loss per share - basic and diluted

$

(0.44

)

 

$

(0.72

)

Weighted-average common shares used to compute

   basic and diluted net loss per share

 

18,067

 

 

 

15,013

 

 

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

4

 


 

ARAVIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(unaudited)

(in thousands, except share data)

 

 

 

Three Months Ended

 

 

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2021

 

 

16,481,099

 

 

$

2

 

 

$

548,707

 

 

$

(500,654

)

 

$

48,055

 

Issuance of common stock upon exercise of

   options

 

 

77,858

 

 

 

 

 

 

260

 

 

 

 

 

 

260

 

Issuance of common stock in direct offering, net of issuance costs of $98

 

 

2,875,000

 

 

 

 

 

 

 

20,866

 

 

 

 

 

 

 

20,866

 

Issuance of common stock in at-the-market offering

 

 

884,695

 

 

 

 

 

 

 

7,034

 

 

 

 

 

 

 

7,034

 

Stock-based compensation

 

 

 

 

 

 

 

 

505

 

 

 

 

 

 

505

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(8,004

)

 

 

(8,004

)

Balances at March 31, 2021

 

 

20,318,652

 

 

$

2

 

 

$

577,372

 

 

$

(508,658

)

 

$

68,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

 

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Total

 

 

 

Common Stock

 

 

Paid-In

 

 

Accumulated

 

 

Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Deficit

 

 

Equity

 

Balances at January 1, 2020

 

 

15,001,795

 

 

$

2

 

 

$

539,158

 

 

$

(470,111

)

 

$

69,049

 

Issuance of common stock upon exercise of

   options

 

 

5,645

 

 

 

 

 

 

33

 

 

 

 

 

 

33

 

Issuance of common stock under employee

   benefit plans

 

 

8,492

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 

 

 

 

 

717

 

 

 

 

 

 

717

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(10,796

)

 

 

(10,796

)

Balances at March 31, 2020

 

 

15,015,932

 

 

$

2

 

 

$

539,908

 

 

$

(480,907

)

 

$

59,003

 

 

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

5

 


 

ARAVIVE, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited)

(in thousands)

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

Net loss

$

(8,004

)

 

$

(10,796

)

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

 

 

 

 

 

 

 

Depreciation and amortization

 

240

 

 

 

125

 

Impairment of long-lived assets

 

 

 

 

2,870

 

Stock-based compensation expense

 

505

 

 

 

717

 

Write-off lease receivable/prepaid commission assets

 

 

 

 

1,383

 

Changes in assets and liabilities

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

(1,656

)

 

 

1,188

 

Accounts payable

 

443

 

 

 

110

 

Deferred revenue

 

(256

)

 

 

 

Accrued and other liabilities

 

(1,291

)

 

 

(59

)

Net cash used in operating activities

 

(10,019

)

 

 

(4,462

)

Cash flows from financing activities

 

 

 

 

 

 

 

Proceeds from issuance of common stock in connection with employee benefit plans

 

 

 

 

33

 

Proceeds from issuance of common stock in connection with exercise of options

 

260

 

 

 

 

Proceeds from issuance of common stock in direct offering, net of issuance costs

 

20,866

 

 

 

 

Proceeds from issuance of common stock in at-the-market offering

 

7,034

 

 

 

 

Net cash provided by financing activities

 

28,160

 

 

 

33

 

Net change in cash, cash equivalents, and restricted cash

 

18,141

 

 

 

(4,429

)

Cash, cash equivalents, and restricted cash at beginning of period

 

62,971

 

 

 

67,557

 

Cash, cash equivalents, and restricted cash at end of period

$

81,112

 

 

$

63,128

 

 

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

 

 

6

 


 

 

ARAVIVE, INC

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

 

1. Formation and Business of the Company

Aravive, Inc. (“Aravive” or the “Company”) was incorporated on December 10, 2008 in the State of Delaware. Aravive Biologics, Inc. (“Aravive Biologics”) our wholly owned subsidiary was incorporated in 2007. Aravive is a clinical-stage biopharmaceutical company developing treatments designed to halt the progression of life-threatening diseases, including cancer and fibrosis.

The Company’s lead product candidate, AVB-500, is an ultrahigh-affinity, decoy protein that targets the GAS6-AXL signaling pathway. By capturing serum GAS6, AVB-500 starves the AXL pathway of its signal, potentially halting the biological programming that promotes disease progression. AXL receptor signaling plays an important role in multiple types of malignancies by promoting metastasis, cancer cell survival, resistance to treatments, and immune suppression.

The Company’s current development program benefits from the availability of a proprietary serum-based biomarker that accelerated AVB-500 drug development by allowing the Company to select a pharmacologically active dose and may potentially identify the cancer patients that have the best chance of responding to AVB-500.

In the Company’s completed Phase 1 clinical trial in healthy volunteers with its lead product candidate, AVB-500, the Company demonstrated proof of mechanism for AVB-500 in neutralizing GAS6. Importantly, AVB-500 had a favorable safety profile preclinically and in the first in human trial and Phase 1b clinical trial in cancer patients.

In August 2018, the U.S. Food and Drug Administration (“FDA”) designated as a Fast Track development program the investigation of the Company’s lead development candidate, AVB-500, for platinum-resistant recurrent ovarian cancer.

In December 2018, the Company initiated a Phase 1b clinical trial of AVB-500 combined with standard of care therapies in patients with platinum-resistant ovarian cancer, or PROC, for which it reported results in July 2020.

In January 2020, the Company announced that the FDA has cleared its Investigational New Drug (“IND”) application for investigation of AVB-500, in the treatment of its second oncology indication, clear cell renal cell carcinoma (“ccRCC”).

In April 2020, the Company entered into a license and collaboration agreement with WuXi Biologics (Hong Kong) Limited, the objective of which is to identify and develop novel high-affinity bispecific antibodies against CCN2, also known as connective tissue growth factor (CTGF), implicated in cancer and fibrosis and identified from a similar target discovery screen that identified the significance of the AXL/GAS6 pathway in cancer. The goal is to generate a best-in-class therapeutic targeting desmoplasia and tumor growth for initial investigation in the clinic in 2023.

On November 6, 2020, the Company entered into a collaboration and license agreement with 3D Medicines Inc., or 3D Medicines, whereby the Company granted 3D Medicines an exclusive license to develop and commercialize products that contain AVB-500 as the sole drug substance for the diagnosis, treatment or prevention of human oncological diseases, in mainland China, Taiwan, Hong Kong and Macau. In April 2021, the Company dosed the first patient in our Phase 3 trial of AVB-500 in platinum resistant ovarian cancer. Based upon this event, we have completed our first clinical milestone with 3D Medicines and expect to receive a $6 million cash payment related the completion of this milestone.

During the fourth quarter of 2020, the Company initiated its Phase 1b/2 trial of AVB-500 in ccRCC and the Company dosed its first patient in the trial in March 2021.

During the first quarter of 2021, the Company initiated a registrational Phase 3 trial of AVB-500 in PROC and the Company dosed its first patient in the trial in April 2021.

With the global spread of the ongoing novel coronavirus, or COVID-19 pandemic, the Company has implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on its employees and its business. While the Company is experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, the Company’s business, financial condition, results of operations and growth prospects could be materially adversely affected, including increased expense if the Company experiences delays in patient enrollment and deems it necessary or advisable to improve patient recruitment including by opening additional clinical sites. As the Company advances its clinical programs, the Company is in close contact with its clinical research

7


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

organizations and clinical sites and is assessing the impact of COVID-19 on its planned studies and current timelines and costs. Although the Company has experienced delays in patient enrollment due to the COVID-19 pandemic, the delays have not been significant and have not materially impacted the Company’s clinical timelines.  Accordingly, the Company currently does not anticipate any interruptions in its clinical timelines or operations due to COVID-19.  However, if the COVID-19 pandemic continues and persists for an extended period of time, the Company could experience significant disruptions to its clinical development timeline, which would adversely affect the Company’s business, financial condition, results of operations and growth prospects.

In July 2016, Aravive Biologics was approved for a $20.0 million Product Development Award from the Cancer Prevention and Research Institute of Texas (“CPRIT Grant”). The CPRIT Grant was expected to allow Aravive Biologics to develop the product candidate referenced above through clinical trials. The CPRIT Grant was effective as of June 1, 2016 and terminated on November 30, 2019. Aravive Biologics’ royalty and other obligations, including its obligation to repay the disbursed grant proceeds under certain circumstances, survive the termination of the agreement. The CPRIT Grant is subject to customary CPRIT funding conditions including a matching funds requirement where Aravive Biologics matched 50% of funding from the CPRIT Grant. Consequently, Aravive Biologics was required to raise $10.0 million in matching funds over the three-year project. Aravive Biologics raised all its required $10.0 million in matching funds.

Aravive Biologics’ award from CPRIT requires it to pay CPRIT a portion of its revenues from sales of certain products, or received from its licensees or sublicensees, at tiered percentages of revenue in the low- to mid-single digits until the aggregate amount of such payments equals 400% of the grant award proceeds, and thereafter at a rate of less than one percent for as long as Aravive Biologics maintains government exclusivity. In addition, the grant contract also contains a provision that provides for repayment to CPRIT of the full amount of the grant proceeds under certain specified circumstances involving relocation of Aravive Biologics’ principal place of business outside Texas.

As consideration for the rights granted as part of a license agreement with Stanford University, Aravive Biologics is obligated to pay yearly license fees and milestone payments, and a royalty based on net sales of products covered by the patent-related rights. More specifically, Aravive Biologics is obligated to pay Stanford University (i) annual license payments (ii) milestone payments of up to an aggregate of $1,000,000 upon achievement of clinical and regulatory milestones, and (iii) royalties equal to a percentage (in the low single digits) of net sales of licensed products; provided that the annual license payments made will offset (and be credited against) any royalties due in such license year. In the event of a sublicense to a third party of any rights based on the patents that are solely owned by Stanford University, Aravive Biologics is obligated to pay royalties to Stanford University equal to a percentage of what Aravive Biologics would have been required to pay to Stanford University had it sold the products under sublicense itself. In addition, in such event it is required to pay to Stanford University a percent of sublicensing income. In the event of a termination, Aravive Biologics will be obligated to pay all amounts that accrued prior to such termination.

 

 

Unaudited Interim Financial Information

In the opinion of the Company’s management, the accompanying unaudited condensed consolidated financial statements contain all adjustments, consisting of only normal recurring adjustments, necessary for a fair statement of its financial position as of March 31, 2021 and, its results of operations for the three month periods ended March 31, 2021 and 2020, and cash flows for the three month periods ended March 31, 2021, and 2020. The December 31, 2020 consolidated balance sheet was derived from audited financial statements but does not include all disclosures required by generally accepted accounting principles in the United States of America (“GAAP”). The results for interim periods are not necessarily indicative of the results for the entire year or any other interim period. The accompanying consolidated financial statements and related financial information should be read in conjunction with the audited financial statements and the related notes thereto for the year ended December 31, 2020 included in the Company’s Annual Report on Form 10-K filed by the Company on March 16, 2021, with the U.S. Securities and Exchange Commission (the “SEC”).

 

 

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the accompanying consolidated financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.

8

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

The accompanying unaudited condensed consolidated statement of financial position as of March 31, 2021 and the results of operations for the three months ended March 31, 2021 and 2020 and cash flows for the three months ended March 31, 2021 and 2020 include the accounts of Aravive, Inc. and its wholly-owned subsidiary Aravive Biologics. All intercompany accounts and transactions have been eliminated.

Liquidity and Capital Resources

Since inception, the Company has incurred net losses and negative cash flows from operations. At March 31, 2021, the Company had an accumulated deficit of $508.7 million and working capital of $72.4 million. The Company expects to continue to incur losses from expenses related to the development of AVB-500 and related administrative activities for the foreseeable future. As of March 31, 2021, the Company had a cash and cash equivalents balance of approximately $78.7 million consisting of cash and investments in highly liquid U.S. money market funds. While the Company believes that its existing cash and cash equivalents will be sufficient to sustain operations for at least the next 12 months from the issuance of these financial statements, based on its current business plan, the Company will need to obtain additional financing to advance its clinical development program to later stages of development and commercialize its clinical product candidate. Although management has been successful in raising capital in the past, there can be no assurance that the Company will be successful or that any needed financing will be available in the future at terms acceptable to the Company.

Segments

The Company operates in one segment. Management uses one measurement of performance and does not segregate its business for internal reporting. All long-lived assets are maintained in the United States of America.

 

Concentration of credit risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. All of the Company’s cash and cash equivalents are held at several financial institutions that management believes are of high credit quality. Such deposits may exceed federally insured limits.

 

Risk and Uncertainties

The Company’s future results of operations involve a number of risks and uncertainties. Factors that could affect the Company’s future operating results and cause actual results to vary materially from expectations include, but are not limited to, uncertainty of results of clinical trials and reaching milestones, uncertainty of regulatory approval of the Company’s potential drug candidates, uncertainty of market acceptance of the Company’s products, competition from substitute products and larger companies, securing and protecting proprietary technology, strategic relationships and dependence on key individuals and sole source suppliers.

Products developed by the Company require clearances from the U.S. Food and Drug Administration (“FDA”), the Pharmaceuticals Medicines and Devices Agency (“PMDA”), or other international regulatory agencies prior to commercial sales. There can be no assurance that the products will receive the necessary clearances. If the Company is denied clearance, clearance is delayed or the Company is unable to maintain clearance, it could have a material adverse impact on the Company.

The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to launch and commercialize any product candidates for which it receives regulatory approval.

Cash and cash equivalents, Restricted Cash

The Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. At March 31, 2021 and December 31, 2020, the Company’s cash and cash equivalents were held at multiple institutions in the United States and included deposits in money market funds which were unrestricted as to withdrawal or use. Restricted cash consists of a letter of credit to secure the Company’s obligations under the right-of-use lease.

Property and equipment, Net

Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets, generally between three and five years. Leasehold improvements are amortized on a straight-line basis over the lesser of their useful life or the term of the lease. Maintenance and repairs are charged to expense as incurred, and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the balance sheet and any resulting gain or loss is reflected in operations in the period realized.

9

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Leases

The Company leases all of its office space in conducting its business. At inception, the Company determines whether an agreement represents a lease and at commencement the Company evaluates each lease agreement to determine whether the lease is an operating or financing lease.

The Company records an operating lease ROU asset and an operating lease obligation on the consolidated balance sheet when entering into a lease. ROU assets represent the Company’s ROU of the underlying asset for the lease term and the lease obligation represents the Company’s commitment to make the lease payments arising from the lease. Lease obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term and ROU assets are calculated as the lease liability, adjusted by unamortized initial direct costs, unamortized lease incentives received, cumulative deferred or prepaid lease payments, and accumulated impairment losses. As the Company’s leases do not provide an implicit rate, the Company has used an estimated incremental borrowing rate based on the information available at the lease inception date in determining the present value of lease payments. The lease term may include options to extend or terminate the lease and the Company includes renewal options in its calculation of the estimated lease term when it is reasonably certain that the Company will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. Variable lease costs and short-term lease payments not included in the lease liability are classified within operating activities in the consolidated statements of cash flows. For all lease agreements, the Company has combined lease and nonlease components. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheet. These expenses are recognized within operating expenses in the consolidated statements of operations.

Impairment of Long-Lived Assets

The Company reviews property and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability is measured by the comparison of the carrying amount to the future net cash flows which the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value (i.e., determined through estimating projected discounted future net cash flows or other acceptable methods of determining fair value) arising from the asset. There were no such impairments of long-lived assets as of March 31, 2021.

The Company accounts for the sublease with EVA Automation, Inc. (“EVA”) as an operating lease and reviews the ROU asset recorded associated with the sublease for impairment whenever events or changes in circumstances indicate that the carrying amount of the ROU asset may not be recoverable in accordance with ASC 360-10. Recoverability is measured if the lease cost for the term of the sublease exceeds the anticipated sublease income for the same period on an undiscounted basis and the Company shall treat this circumstance as an indicator that the carrying amount of the ROU asset may not be recoverable.

At the end of the first quarter ended March 31, 2020, the Company was informed by EVA, its sublease tenant, that EVA will not be in a position to pay future sublease rental payments and intends to exit the sublease. Given the uncertainty of the sublease tenant’s ability to pay the remaining sublease rental payments, the Company determined the carrying amounts of the ROU asset and leasehold improvements associated with the 1020 Marsh Road facility may not be recoverable. Accordingly, the Company performed a recoverability test, using an undiscounted cash flow analysis as of March 31, 2020. Based on the undiscounted cash flow analysis, the Company determined that the ROU and leasehold improvement assets had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then measured the impairment of the asset group using a discounted cash flow analysis of the estimated future sublease payments to be received from an expected sublessee as the Company is currently marketing the 1020 Marsh Road location for subletting. In determining the fair value of the asset group, the Company utilized current real estate market rates, time needed to sublet the building and estimated a discount rate of 9.5%. As a result of the impairment analysis, the Company recognized an impairment charge against its ROU asset of and leasehold improvement assets of $2.4 million and $0.5 million, respectively, for the quarter ended March 31, 2020.

At the end of the third quarter ended September 30, 2020, the Company continued to evaluate the estimates used in the valuation used in the first quarter of 2020. Given the continued uncertainty due to the COVID-19 shut down and the significant negative impact to the real estate market as of the end of the third quarter, the Company determined the carrying amounts of the ROU asset and leasehold improvements associated with the 1020 Marsh Road facility may not be recoverable. Accordingly, the Company performed a recoverability test, using an undiscounted cash flow analysis as of September 30, 2020. Based on the undiscounted cash flow analysis, the Company determined that the ROU and leasehold improvement assets had net carrying values that exceeded their estimated undiscounted future cash flows. The Company then measured the impairment of the asset group using a discounted cash

10

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

flow analysis of the estimated future sublease payments to be received from an expected sublessee as the Company is currently marketing the 1020 Marsh Road location for subletting. In determining the fair value of the asset group, the Company utilized current real estate market estimated rates, time needed to sublet the building and estimated a discount rate of 9.5%. As a result of the impairment analysis, the Company recognized an impairment charge against its ROU asset and leasehold improvement assets of $2.4 million and $0.5 million, respectively, for the quarter ended September 30, 2020. A total of $5.8 million was reported as an impairment loss on the Company’s long-lived asset balances within the statement of operations for the nine month period ended September 30, 2020.

Fair Value of Financial Instruments

The carrying value of the Company’s cash and cash equivalents, restricted cash, accounts payable and accrued liabilities approximate fair value due to the short-term nature of these items.

Fair value is defined as the exchange price that would be received for an asset or an exit price paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair value hierarchy defines a three-level valuation hierarchy for disclosure of fair value measurements as follows:

Level 1Unadjusted quoted prices in active markets for identical assets or liabilities;

Level 2Inputs other than quoted prices included within Level 1 that are observable, unadjusted quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3Unobservable inputs that are supported by little or no market activity for the related assets or liabilities.

The categorization of a financial instrument within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company’s financial instruments consist of Level 1 assets as of March 31, 2021 and December 31, 2020.  Level 1 securities are comprised of highly liquid money market funds.

Preclinical and Clinical Trial Accruals

The Company’s clinical trial accruals are based on estimates of patient enrollment and related costs at clinical investigator sites as well as estimates for the services received and efforts expended pursuant to contracts with multiple research institutions and clinical research organizations (“CROs”) that conduct and manage clinical trials on the Company’s behalf.

The Company estimates preclinical and clinical trial expenses based on the services performed, pursuant to contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on its behalf. In accruing service fees, the Company estimates the time period over which services will be performed and the level of patient enrollment and activity expended in each period. If the actual timing of the performance of services or the level of effort varies from the estimate, the Company will adjust the accrual accordingly. Payments made to third parties under these arrangements in advance of the receipt of the related services are recorded as prepaid expenses until the services are rendered.

Research and development

Research and development costs are charged to operations as incurred. Research and development costs include, but are not limited to, payroll and personnel expenses, laboratory supplies, consulting costs, external research and development expenses and allocated overhead, including rent, equipment depreciation, and utilities. Costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use are expensed to research and development costs when incurred.

11

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Income taxes

The Company accounts for income taxes under the asset and liability approach. Under this method, deferred tax assets and liabilities are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amounts expected to be realized.

The Company assesses all material positions taken in any income tax return, including all significant uncertain positions, in all tax years that are still subject to assessment or challenge by relevant taxing authorities. Assessing an uncertain tax position begins with the initial determination of the position’s sustainability and is measured at the largest amount of benefit that is greater than percent likely of being realized upon ultimate settlement. As of each balance sheet date, unresolved uncertain tax positions must be reassessed, and the Company will determine whether (i) the factors underlying the sustainability assertion have changed and (ii) the amount of the recognized tax benefit is still appropriate. The recognition and measurement of tax benefits requires significant judgment. Judgments concerning the recognition and measurement of a tax benefit might change as new information becomes available.     

Stock-Based compensation

For stock options granted to employees, the Company recognizes compensation expense for all stock-based awards based on the grant-date estimated fair value. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service period. The fair value of stock options is determined using the Black-Scholes option pricing model. The determination of fair value for stock-based awards on the date of grant using an option pricing model requires management to make certain assumptions regarding a number of complex and subjective variables.

Stock-based compensation expense related to stock options granted to nonemployees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model, as they are earned. The awards generally vest over the time period the Company expects to receive services from the nonemployee.

Stock-based compensation expense, net of estimated forfeitures, is reflected in the condensed consolidated statements of operations as follows (in thousands):

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

 

2020

 

Operating Expenses

 

 

 

 

 

 

 

Research and development

$

219

 

 

$

121

 

General and administrative

 

286

 

 

 

596

 

Total

$

505

 

 

$

717

 

 

Net Loss per Share of Common Stock

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period. For purposes of the diluted net loss per share calculation, stock options and restricted stock units are considered to be potentially dilutive securities. Because the Company has reported a net loss for the periods ended March 31, 2021 and 2020, diluted net loss per common share is the same as basic net loss per common share for those periods.

Intangible Asset

Intangible assets consist of an assembled workforce which was acquired as part of the Merger with Versartis, Inc. Intangible assets with definite lives are amortized based on their pattern of economic benefit over their estimated useful lives and reviewed periodically for impairment. The estimated useful life of the assembled workforce is 3 years.

Collaborative Arrangements

The Company records the elements of its collaboration agreements that represent joint operating activities in accordance with ASC Topic 808, Collaborative Arrangements (ASC 808). Accordingly, the elements of the collaboration agreements that represent activities in which both parties are active participants and to which both parties are exposed to the significant risks and rewards that

12

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

are dependent on the commercial success of the activities are recorded as collaborative arrangements. The Company considers the guidance in ASC 606-10-15, Revenue from Contracts with Customers – Scope and Scope Exceptions, in determining the appropriate treatment for the transactions between the Company and its collaborative partner and the transactions between the Company and third parties. Generally, the classification of transactions under the collaborative arrangements is determined based on the nature and contractual terms of the arrangement along with the nature of the operations of the participants. Currently, the Company has one collaboration agreement with 3D Medicines, see Note 4 for further discussion.

Revenue Recognition

The Company’s sole source of revenue for 2021 and 2020 has been generated through its collaboration and license agreement. The Company’s collaboration and license agreement contains multiple elements including (i) intellectual property licenses, and (ii) research and development services. Consideration received under these arrangements may include upfront payments, research and development funding, cost reimbursements, milestone payments, payments for product sales and royalty payments. The Company’s customer includes 3D Medicines Inc. (“3D Medicines”).

The Company follows ASC 606, Revenue from Contracts with Customers (ASC 606) for recognition of its collaboration and license agreement. Under ASC 606, revenue is recognized when a customer obtains control of promised goods or services. The amount of revenue recognized reflects the consideration that the Company expects to be entitled to receive in exchange for goods or services and excludes sales incentives and amounts collected on behalf of third parties. The Company analyzes the nature of these performance obligations in the context of individual agreements in order to assess the distinct performance obligations.

The Company applies the following five-step model to recognize revenue: (i) identification of the promised goods or services in the contract; (ii) determination of whether the promised goods or services are performance obligations, including whether they are distinct in the context of the contract; (iii) measurement of the transaction price, including the constraint on variable consideration; (iv) allocation of the transaction price to the performance obligations; and (v) recognition of revenue when (or as) the Company satisfies each performance obligation.

i) Identify the contract with a customer. The Company considers the terms and conditions of its agreements to identify contracts within the scope of ASC 606. The Company concludes it has a contract with a customer when the contract is approved, each party's rights regarding the goods and services to be transferred can be identified, the payment terms for the goods and services can be identified, it has been determined that the customer has the ability and intent to pay and the contract has commercial substance. The Company uses judgment in determining the customer's ability and intent to pay, which is based upon factors including the customer's historical payment experience or, for new customers, credit and financial information pertaining to the customers.

ii) Identify the performance obligations in the contract. Performance obligations in the agreements are identified based on the goods and services that will be transferred to the customer that are both capable of being distinct, whereby the customer can benefit from the service either on its own or together with other resources that are readily available from third parties or from the Company, and are distinct in the context of the contract, whereby the transfer of the services is separately identifiable from other promises in the contract. The Company’s performance obligations generally consist of intellectual property licenses and research and development services with respect to license and service agreements, and the manufacture and supply of product for product sales agreements.

iii) Determine the transaction price. The Company determines the transaction price based on the consideration to which the Company expects to be entitled in exchange for transferring goods and services to the customer. In determining the transaction price, any variable consideration would be considered, to the extent applicable, if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue under the contract will not occur. In accordance with the royalty exception under ASC 606 for licenses of intellectual property, the transaction price excludes future royalty payments to be received from the Company’s customers. None of the Company’s revenue generating contracts contain consideration payable to its customer or a significant financing component.

iv) Allocate the transaction price to performance obligations in the contract. If the contract contains a single performance obligation, the entire transaction price is allocated to that performance obligation. Contracts that contain multiple performance obligations require an allocation of the transaction price to each performance obligation based on a relative standalone selling price.

v) Recognize revenue when or as we satisfy a performance obligation. Revenue is recognized at the time the related performance obligation is satisfied by transferring the promised goods or services to a customer. The Company recognizes revenue when control of the goods or services is transferred to the customers for an amount that reflects the consideration that the Company expect to receive in exchange for those goods or services.

13

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Performance Obligations.

The following is a general description of principal goods and services from which the Company generates revenue.

License to intellectual property

The Company generates revenue from licensing its intellectual property including know-how and development and commercialization rights. The license provides a customer with the right to further research, develop and commercialize internally-discovered or collaborated drug candidates, or the right to use AVB-500 to further research, develop and commercialize customer drug candidates. The consideration the Company receives is in the form of nonrefundable upfront consideration related to the functional intellectual property licenses and is recognized when the Company transfers such license to the customer unless the license is combined with other goods or services into one performance obligation, in which case the revenue is recognized over a period of time based on the estimated pattern in which the Company satisfies the combined performance obligation. The Company’s licensing agreements are generally cancelable. 

Research and development services

The Company generates revenue from research and development services it provides to its customer and primarily includes clinical trials, and assistance during regulatory approval application process. Revenue associated with these services is recognized based on the Company’s estimate of total consideration to be received for such services and the pattern in which the Company perform the services. The pattern of performance is generally determined to be the amount of incurred costs related to the service portion of the contract with the customer as a percentage of total expected costs associated with the service portion of the contract.

Contracts with Multiple Performance Obligations.

The Company’s collaboration and license agreement with its customer contains multiple promised goods or services. Based on the characteristics of the promised goods and services the Company analyzes whether they are separate or combined performance obligations. The transaction price is allocated to the separate performance obligations on a relative standalone selling price basis. The estimated standalone selling price is based on the adjusted market assessment approach including estimated present value of future cash flows and cost-plus margin approach, taking into consideration the type of services, estimates of hourly market rates, and stage of the development.

Variable Consideration.

The Company’s contracts with its customer primarily include two types of variable consideration: (i) development and regulatory milestone payments, which are due to the Company upon achievement of specific development and regulatory milestones and (ii) one-time sales-based payments and sales-based royalties associated with licensed intellectual property.

Due to uncertainty associated with achievement of the development and regulatory milestones, the related milestone payments are excluded from the contract consideration and the corresponding revenue is not recognized until the Company concludes it is probable that reversal of such milestone revenue will not occur.  As part of the Company’s evaluation of the constraint, the Company considers numerous factors, including whether the achievement of the milestone is outside of the Company’s control, contingent upon regulatory approval or dependent on licensee efforts.

Product sales-based royalties under licensed intellectual property and one-time payments are accounted for under the royalty exception. The Company recognizes revenue for sales-based royalties under licensed intellectual property and one-time payments at the later of when the sales occur or the performance obligation is satisfied or partially satisfied.

The transaction price is reevaluated each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Recent Accounting Pronouncements

From time to time, new accounting pronouncements are issued by the Financial Accounting Standards Board, or FASB, or other standard setting bodies and adopted by us as of the specified effective date. Unless otherwise discussed, the impact of recently issued standards that are not yet effective is not expected to have a material impact on the Company’s financial position or results of operations upon adoption.

14

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This guidance is intended to improve consistent application and simplify the accounting for income taxes. This ASU removes certain exceptions to the general principles in Topic 740 and clarifies and amends existing guidance. This standard is effective for annual reporting periods beginning after December 15, 2020, including interim reporting periods within those annual reporting periods, with early adoption permitted. The Company adopted this guidance as of January 1, 2021, the adoption did not have a material impact on the Company’s consolidated financial statements.

In August 2020, the FASB issued ASU No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging-Contracts in Entity's Own Equity (Subtopic 815-40)-Accounting For Convertible Instruments and Contracts in an Entity's Own Equity. The ASU simplifies accounting for convertible instruments by removing major separation models required under current GAAP. Consequently, more convertible debt instruments will be reported as a single liability instrument with no separate accounting for embedded conversion features. The ASU removes certain settlement conditions that are required for equity contracts to qualify for the derivative scope exception, which will permit more equity contracts to qualify for it. The ASU also simplifies the diluted net income per share calculation in certain areas. The new guidance is effective for annual and interim periods beginning after December 15, 2021, and early adoption is permitted for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years. The Company adopted this guidance as of January 1, 2021, the adoption did not have a material impact on the Company’s consolidated financial statements.

 

 

3. Fair Value Measurements

The Company’s financial instruments consist principally of cash and cash equivalents, accounts payable and accrued liabilities. The remaining financial instruments are reported on the Company’s consolidated balance sheets at amounts that approximate current fair value. The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):

 

 

 

Fair Value Measurements at

March 31, 2021

 

 

 

(unaudited)

 

 

 

Total

 

 

Level 1

 

Assets

 

 

 

 

 

 

 

 

Money market funds

 

$

49,209

 

 

$

49,209

 

 

 

 

 

 

 

 

 

 

 

 

Fair Value Measurements at

December 31, 2020

 

 

 

Total

 

 

Level 1

 

Assets

 

 

 

 

 

 

 

 

Money market funds

 

$

49,207

 

 

$

49,207

 

 

The Company recognizes transfers between levels of the fair value hierarchy as of the end of the reporting period. There were no transfers within the hierarchy during the periods ended March 31, 2021 or December 31, 2020.

Nonrecurring fair value measurements

As disclosed in Note 2, the Company recorded an impairment charge of approximately $2.9 million related to right-of-use and leasehold improvement assets for the three months ended March 31, 2020. This impairment charge was derived using Level 3 inputs and the fair value of the long-lived assets was derived by using a discounted cash flow analysis of the 1020 Space.

 

4. Collaboration and License Agreement

On November 6, 2020, the Company entered into a collaboration and license agreement (the “Agreement”) with 3D Medicines, whereby the Company granted 3D Medicines an exclusive license to develop and commercialize products that contain AVB-500 as the sole drug substance, for the diagnosis, treatment or prevention of human oncological diseases, in mainland China, Taiwan, Hong Kong and Macau (the “Territory”).

Under the terms of the Agreement, the Company was paid $12 million and is eligible to receive from 3D Medicines cash payments of up to an aggregate of $207 million in clinical development, regulatory and commercial milestone payments. There can be no guarantee that any such milestones will in fact be met. The Company is obligated to make certain payments to The Board of Trustees of the Leland Stanford Junior University (“Stanford”) based on certain amounts received from 3D Medicines under the

15

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Agreement pursuant to the existing license agreement by and between the Company and Stanford, dated January 25, 2012, and as amended to date. As of March 31, 2021, the Company estimated $132 thousand due to Stanford. For the year ended December 31, 2020, the Company received payments of $12 million from 3D Medicines.

The Company will also be entitled to receive tiered royalties ranging from low double digits to mid-teens on sales in the Territory, if any, of products containing AVB-500. Royalties are payable with respect to each jurisdiction in the Territory until the latest to occur of: (i) the last-to-expire of specified patent rights in such jurisdiction in the Territory; (ii) expiration of marketing or regulatory exclusivity in such jurisdiction in the Territory; or (iii) ten (10) years after the first commercial sale of a product in such jurisdiction in the Territory. In addition, royalties payable under the Agreement will be subject to reduction on account of generic competition under certain specified conditions, with any such reductions capped at certain percentages of the amounts otherwise payable during the applicable royalty payment period.

Under the terms and conditions of the Agreement, 3D Medicines will be solely responsible for the development and commercialization of licensed products in the Territory.

If either the Company or 3D Medicines materially breaches the Agreement and does not cure such breach, the non-breaching party may terminate the Agreement in its entirety. Either party may also terminate the Agreement, upon written notice, if the other party files for bankruptcy, is dissolved or has a receiver appointed for substantially all of its property. The Company may terminate the Agreement if 3D Medicines, its affiliates or its sublicensees challenges the validity or enforceability of any of the Company’s patents covering any of the licensed compounds or products or ceases substantially all development and commercialization of licensed products in the Territory for a specified period, subject to certain exceptions. 3D Medicines may also terminate the Agreement for convenience provided certain notice is provided to the Company.

The Agreement contemplates that the Company will enter into ancillary arrangements with 3D Medicines, including a clinical supply agreement and a manufacturing technology transfer agreement.

The Company assessed this arrangement in accordance with ASC 606 and identified the following performance obligations: 1) license to intellectual property, AVB-500, and 2) research and development services, including conducting clinical trials.  The Company concluded that each of these performance obligations were distinct because 3D Medicines can benefit from the good or service either on its own or together with other resources that are readily available, and each performance obligation is separately identifiable from other promises within the contract.

The estimated total transaction price was allocated between performance obligations based on their relative standalone selling prices. The Company uses a discounted cash flow approach and an expected cost plus a margin approach to estimate the standalone selling price for the performance obligations. The Company allocated the $12.0 million transaction price of the upfront payments as such: $6.4 million to the research and development services performance obligation and $5.6 million to the license to intellectual property. Accordingly, the Company will recognize revenue related to the allocable research and development services obligation on a proportional performance basis as the underlying services are performed pursuant to the current development plan which is commensurate with the period and consistent with the pattern over which the Company’s research and development services obligation is satisfied. The Company will recognize the revenue related to the license to intellectual property at a point in time. This is due to the fact the license was determined to be a functional license due to current stage in development of AVB-500. AVB-500 has been developed, dosing levels have already been determined and the drug is currently in a Phase 3 clinical trial related to its PROC ovarian cancer trial. As of March 31, 2021, no clinical or regulatory milestones have been assessed as probable of being reached and thus have been fully constrained.

The Company recognized in revenue $0.3 million related to the research and development services for the three months ended March 31, 2021. As of March 31, 2021, the Company had a contract liability balance of $6.0 million of which $2.4 million is classified as current and $3.6 million is classified as long-term, consisting of deferred revenue related to a portion of the payment received from 3D Medicines. The service period for the future research and development services is expected to occur over the next 2.2 years.

5. Leases

In March 2017, the Company entered into an operating facility lease agreement for approximately 34,500 rentable square feet located at the 1020 Space. The lease commenced in August 2017 for a period of 87 months with one renewal option for a five-year term. The Company did not include the renewal option period as the Company determined it was not reasonably certain the lease would be renewed as of the modification date.

16

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

In October 2018, the Company executed a sublease agreement in Palo Alto, California for approximately 4,240 square feet for office space. The rental term of the sublease commenced on October 30, 2018 and expired August 31, 2020.  

In August 2020, the Company entered into a lease agreement in North Carolina for approximately 4,128 square feet for office space. The monthly lease payments will be approximately $9 thousand per month for a period of 63 months with a three-month rent abatement period. The lease commenced in the fourth quarter of 2020.

The Company’s rent expense including both short-term and variable lease components of $0.1 million associated with the facility leases was $0.4 million and $0.8 million for the three months ended March 31, 2021 and 2020, respectively. Cash paid for amounts included in the measurement of lease obligations for operating cash flows from operating leases was $0.3 million and $0.7 million for the three months ended March 31, 2021 and 2020, respectively. As of March 31, 2021, the Company’s operating leases had a weighted average remaining lease term of 3.7 years and a weighted average discount rate of 7.64%, which approximates the Company’s incremental borrowing rate.

As of March 31, 2021, minimum lease payments under non-cancelable operating leases by period were expected to be as follows (in thousands):

 

Year Ending December 31,

 

 

 

 

2021 (9 months remaining)

 

$

2,182

 

2022

 

 

2,983

 

2023

 

 

3,067

 

2024

 

 

2,643

 

2025

 

 

116

 

Thereafter

 

 

30

 

Total future minimum lease payments

 

 

11,021

 

Less: discount

 

 

(2,781

)

Total lease liabilities

 

$

8,240

 

 

 

1020 Marsh Sublease

In August 2018, the Company entered into an operating sublease agreement with EVA Automation, Inc. (“EVA”) for the 1020 Space referenced above. The 1020 Space sublease commenced on October 1, 2018 for 72 months. EVA was entitled to an abatement of base rent of approximately $0.9 million for the first five full calendar months of the term of the sublease. Lease income associated with this sublease is recorded in other income in the accompanying consolidated statement of operations. At the end of the first quarter ended March 31, 2020, the Company was informed by EVA that it will not be in a position to pay future sublease rental payments and intends to exit the sublease. For the period ended March 31, 2020, the Company recorded an impairment charge to long-lived assets as previously discussed in Note 2. In addition, associated with this impairment charge the Company recorded a write down totaling $1.4 million related to a straight-line sublease rent receivable balance and previously capitalized commission charges, which has been recorded in other expense within the condensed consolidated statement of operations for the period ended March 31, 2020. Overall, for the three months ended March 31, 2020 and for the year ended December 31, 2020, the Company recorded sublease loss associated with this sublease of $0.7 million and $13 thousand, respectively. During the three months ended March 31, 2020 and for the year ended December 31, 2020, cash received from EVA was $0.4 million and $1.2 million, respectively, which amount was included in the change in prepaid expenses and other assets for operating cash flows.

6. Commitments and Contingencies

Purchase Commitments

The Company conducts research and development programs through a combination of internal and collaborative programs that include, among others, arrangements with contract manufacturing organizations and contract research organizations. The Company had contractual arrangements with these organizations including license agreements with milestone obligations and service agreements with obligations largely based on services performed.

In the normal course of business, the Company enters into various firm purchase commitments related to certain preclinical and clinical studies.

17

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Contingencies

In the normal course of business, the Company enters into contracts and agreements that contain a variety of representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made against the Company in the future but have not yet been made. The Company accrues a liability for such matters when it is probable that future expenditures will be made and such expenditures can be reasonably estimated.  

Indemnification

In accordance with the Company’s amended and restated Certificate of Incorporation and amended and restated bylaws, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date and the Company has a director and officer insurance policy that may enable it to recover a portion of any amounts paid for future claims.

Litigation

The Company may from time to time be involved in legal proceedings arising from the normal course of business. There are no pending or threatened legal proceedings as of March 31, 2021.

7. Common Stock

 

Private Placement

On April 6, 2020, the Company, entered into an investment agreement (the “Investment Agreement”), by and among the Company, Eshelman Ventures, LLC, a North Carolina limited liability company (the “Eshelman Ventures”), and, solely for purposes of Article IV and Article V of the Investment Agreement, Fredric N. Eshelman, Pharm.D., who immediately became the Company’s chairman of the board.

On April 8, 2020, pursuant to the Investment Agreement, Eshelman Ventures purchased 931,098 shares of the Company’s unregistered common stock for an aggregate purchase price of approximately $5.0 million. The Company recorded the amount received net of expenses of approximately $78 thousand.

Related Party Transaction

On February 12, 2021, the Company entered into a Securities Purchase Agreement (the “Purchase Agreement”), with Eshelman Ventures relating to the issuance and sale (the “Offering”) of 2,875,000 shares of the Company’s common stock at a price per share of $7.29. The Offering closed on February 18, 2021 and the Company received aggregate proceeds from the Offering of approximately $20.9 million, net of offering costs. Eshelman Ventures is an entity wholly owned by the Company’s chairman of the board.

At the Market Offering Program

In September 2020, the Company filed a shelf registration statement on Form S-3 with the SEC which was declared effective by the SEC on November 20, 2020 (the “Form S-3”). On September 4, 2020, and pursuant to the Form S-3, the Company entered into an equity distribution agreement (the “Equity Distribution Agreement”) with Piper Sandler & Co. (“Piper Sandler”) and Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) to sell shares of the Company’s common stock, par value $0.0001 per share, from time to time, through an “at the market offering” program having an aggregate offering price of up to $60,000,000 through which Piper Sandler and Cantor Fitzgerald will act as sales agents (the “Sales Agents”). During the three-month period ended March 31, 2021, the Company sold 884,649 shares for net proceeds of $7.0 million under the Equity Distribution Agreement.

 

8. Stock Based Awards

Equity Incentive Plans

The Company’s Board of Directors, or Board, and stockholders approved the 2019 Equity Incentive Plan, or the 2019 Plan, which became effective on September 12, 2019. The 2019 Plan is a successor to and continuation of all prior plans including the Company’s 2014 Equity Incentive Plan and Private Aravive’s 2017 Equity Incentive Plan and the 2010 Equity Incentive Plan, as amended (Prior Plans). As of March 31, 2021, the total number of shares of common stock available for issuance under the 2019 Plan was approximately 2,189,932. In addition, if the shares subject to outstanding stock options or other awards under the Prior Plans: (I) terminate or expire prior to exercise or settlement; (II) are not issued because the award is settled in cash; (III) are forfeited because of failure to vest; (IV) or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price, if any, such shares will become available for issuance under the 2019 Plan. Unless the Board provides otherwise, beginning

18

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

January 1, 2021 with an expiration date of January 1, 2029, the total number of shares of common stock available for issuance will automatically increase annually on January 1 of each calendar year by 4.5% of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year. The 2019 Plan provides for granting of equity awards to employees, directors and consultants, including incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards and performance awards.

Activity under the Company’s stock option plan is set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Average

 

 

 

 

 

 

 

 

 

 

 

 

Weighted

 

 

Remaining

 

 

Aggregate

 

 

 

 

 

 

 

 

Average

 

 

Contractual

 

 

Intrinsic

 

 

 

 

Number of

 

 

Exercise

 

 

Life

 

 

Value

 

 

 

 

Shares

 

 

Price

 

 

(in years)

 

 

(in thousands)

 

Balances, January 1, 2021

 

 

 

2,173,776

 

 

$

9.59

 

 

 

 

 

 

 

 

 

Options granted

 

 

 

511,950

 

 

 

6.10

 

 

 

 

 

 

 

 

 

Options cancelled

 

 

 

(67,131

)

 

 

10.40

 

 

 

 

 

 

 

 

 

Options exercised

 

 

 

(77,858

)

 

 

3.32

 

 

 

 

 

 

 

 

 

Balances, March 31, 2021

 

 

 

2,540,737

 

 

$

9.06

 

 

 

6.5

 

 

$

7,446

 

Outstanding and expected to vest as of March 31, 2021

 

 

 

2,357,071

 

 

$

9.23

 

 

 

6.3

 

 

$

7,332

 

Exercisable as of March 31, 2021

 

 

 

1,581,920

 

 

$

10.36

 

 

 

4.8

 

 

$

6,833

 

 

The intrinsic values of outstanding, vested and exercisable options were determined by multiplying the number of shares by the difference in exercise price of the options and the fair value of the common stock. The intrinsic value of stock options exercised during the three months ended March 31, 2021, was $0.4 million.

Stock Options Granted to Employees

During the three months ended March 31, 2021 and 2020, the Company granted stock options to officers, directors and employees to purchase shares of common stock with a weighted-average grant date fair value of $5.13 and $9.77 per share, respectively. The fair value is being expensed over the vesting period of the options, which is usually 4 years on a straight-line basis as the services are being provided. No tax benefits were realized from options and other share-based payment arrangements during the periods.

As of March 31, 2021, total unrecognized employee stock-based compensation related to stock options granted was $4.3 million, which is expected to be recognized over the weighted-average remaining vesting period of 3 years.

The fair value of employee stock options was estimated using the Black-Scholes model with the following weighted-average assumptions:

 

 

 

March 31,

 

 

March 31,

 

 

 

2021

 

 

2020

 

Expected volatility

 

 

113.5

%

 

 

111.0

%

Risk-free interest rate

 

 

0.6

%

 

 

1.6

%

Dividend yield

 

 

0.0

%

 

 

0.0

%

Expected life (in years)

 

 

6.1

 

 

 

6.1

 

 

Determining Fair Value of Stock Options – The fair value of each grant of stock options was determined by the Company using the methods and assumptions discussed below. Each of these inputs is subjective and generally requires significant judgment to determine.

Expected Volatility – The expected volatility is based on the historical volatility of our common stock over the most recent period commensurate with the estimated expected term of our stock options. 

Risk-Free Interest Rate – The risk-free rate assumption was based on the U.S. Treasury instruments with terms that were consistent with the expected term of the Company’s stock options.

19

 


ARAVIVE, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (unaudited)

 

Expected Dividend – The expected dividend assumption was based on the Company’s history and expectation of dividend payouts.

Expected Term – The expected term of stock options represents the weighted average period the stock options are expected to be outstanding. For option grants that are considered to be “plain vanilla”, the Company has opted to use the simplified method for estimating the expected term as provided by the Securities and Exchange Commission. The simplified method calculates the expected term as the average time-to-vesting and the contractual life of the options.

Forfeiture Rate – Forfeitures were estimated based on historical experience.

Fair Value of Common Stock – The fair value of the underlying common stock is based upon quoted prices on the Nasdaq Global Select Market.

 

9. Net loss per share of Common Stock

The following table summarizes the computation of basic and diluted net loss per share of the Company (in thousands, except per share data):

 

 

Three Months Ended

 

 

March 31,

 

 

2021

 

 

2020

 

Net loss

$

(8,004

)

 

$

(10,796

)

Basic and diluted net loss per share

$

(0.44

)

 

$

(0.72

)

Weighted-average shares used to compute basic and diluted net

   loss per share

 

18,067

 

 

 

15,013

 

 

Basic net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding for the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and dilutive common stock equivalents outstanding for the period, determined using the treasury-stock method and the as-if converted method, for convertible securities, if inclusion of these is dilutive. Because the Company has reported a net loss for each of the three months ended March 31, 2021 and 2020, the Company did not have dilutive common stock equivalents and therefore diluted net loss per common share is the same as basic net loss per common share for those periods.

The following potentially dilutive securities outstanding at the end of the three months ending March 31, 2021 and 2020 have been excluded from the computation of diluted shares outstanding:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Options to purchase common stock

 

 

2,540,737

 

 

 

2,174,159

 

Restricted stock units

 

 

 

 

 

90,620

 

 

10. Subsequent Event

In April 2021, the Company dosed the first patient in its Phase 3 trial of AVB-500 in platinum resistant ovarian cancer. Based upon this event, the Company has completed its first clinical milestone with 3D Medicines and expects to receive a $6 million cash payment related to the completion of this milestone. A portion of collaboration revenue related to the completion of this milestone will be recorded in the second quarter of 2021 and the remaining amount will be deferred over the development period.

 

 

20

 


 

 

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

You should read the following management’s discussion and analysis of our financial condition and results of operations in conjunction with our unaudited consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and notes thereto for the year ended December 31, 2020, included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed on March 16, 2021 (the “Annual Report”) with the U.S. Securities and Exchange Commission (the “SEC”). This discussion, particularly information with respect to our future results of operations or financial condition, business strategy, plans and objectives for future operations and the uncertain negative impacts that current uncertainty in the global markets resulting from the worldwide COVID-19 pandemic may have on our business, includes forward-looking statements that involve risks and uncertainties as described under the heading “Special note regarding forward-looking statements” in this Quarterly Report on Form 10-Q. You should review the disclosure under the heading “Risk Factors” in this Quarterly Report on Form 10-Q for a discussion of important factors that could cause our actual results to differ materially from those anticipated in these forward-looking statements. References in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and similar first-person expressions refer to Aravive, Inc. (formerly known as Versartis, Inc.) and its subsidiary, Private Aravive. References to “Versartis, Inc.” or “Private Aravive” refer to those respective companies prior to the completion of their merger in October 2018.

Special note regarding forward-looking statements

This Quarterly Report on Form 10-Q contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those discussed in the forward-looking statements. The statements contained in this report that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “project,” “seek,” “should,” “strategy,” “target,” “will,” “would” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Risk Factors” included under Part II, Item 1A below and those identified under Part 1, Item 1A of the Annual Report. Furthermore, such forward-looking statements speak only as of the date of this report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.

Overview

We are a clinical-stage oncology company developing transformative treatments designed to halt the progression of life-threatening diseases, including cancer and fibrosis.

Our lead product candidate, AVB-500, is an ultrahigh-affinity, decoy protein that targets the GAS6-AXL signaling pathway. By capturing serum GAS6, AVB-500 starves the AXL pathway of its signal, potentially halting the biological programming that promotes disease progression. AXL receptor signaling plays an important role in multiple types of malignancies by promoting metastasis, cancer cell survival, resistance to treatments, and immune suppression.

Our current development program benefits from the availability of a proprietary serum-based biomarker that has accelerated AVB-500 drug development by allowing us to select a pharmacologically active dose and may potentially identify the cancer patients that have the best chance of responding to AVB-500.

In our completed Phase 1 clinical trial in healthy volunteers with our lead product candidate, AVB-500, we have demonstrated proof of mechanism for AVB-500 in neutralizing GAS6. Importantly, AVB-500 had a favorable safety profile preclinically and in the first in human trial and Phase 1b clinical trial in cancer patients.

In August 2018, the U.S. Food and Drug Administration or FDA designated as a Fast Track development program the investigation of our lead development candidate, AVB-500, for platinum-resistant recurrent ovarian cancer.

In December 2018, we initiated our Phase 1b clinical trial of AVB-500 combined with standard of care therapies in patients with platinum-resistant ovarian cancer or PROC, for which we reported results in July 2020.

In January 2020, we announced that the FDA has cleared our Investigational New Drug or IND application for investigation of AVB-500, in the treatment of our second oncology indication, Clear Cell Renal Cell Carcinoma or ccRCC.

21

 


 

In April 2020, we entered into a license and collaboration agreement with WuXi Biologics (Hong Kong) Limited, the objective of which is to identify and develop novel high-affinity bispecific antibodies against CCN2, also known as connective tissue growth factor (CTGF), implicated in cancer and fibrosis and identified from a similar target discovery screen that identified the significance of the AXL/GAS6 pathway in cancer. The goal is to generate a best-in-class therapeutic targeting desmoplasia and tumor growth for initial investigation in the clinic in 2023.

On November 6, 2020, we entered into a collaboration and license agreement with 3D Medicines Inc. or 3D Medicines, whereby we granted 3D Medicines an exclusive license to develop and commercialize products that contain AVB-500 as the sole drug substance, for the diagnosis, treatment or prevention of human oncological diseases, in mainland China, Taiwan, Hong Kong and Macau.

During the fourth quarter of 2020, we initiated our Phase 1b/2 trial of AVB-500 in ccRCC and we dosed our first patient in the trial in March 2021.

During the first quarter 2021, we initiated our registrational P3 trial of AVB-500 in PROC and we dosed our first patient in the trial in April 2021.

In May 2021, we announced plans to investigate AVB-500 in a clinical trial as a first line treatment for patients with pancreatic cancer. This is another cancer with an urgent, unmet medical need to improve patient survival. The National Cancer Institute’s Surveillance, Epidemiology, and End Results (SEER) Program estimates that there will be 60,430 people diagnosed with pancreatic cancer in the United States and some 48,220 deaths from these cancers in 2021. Pancreatic cancer typically has a poor prognosis and is projected to become the second leading cause of cancer death in the United States behind lung cancer by 2030. Currently, the five-year survival rate for pancreatic cancer is 10.8%.

The expected trial design in pancreatic cancer will investigate AVB-500 in combination with gemcitabine and nab-paclitaxel (Abraxane®) in patients with advanced metastatic pancreatic cancer eligible to receive gemcitabine and nab-paclitaxel (Abraxane®) combination therapy in a Phase1b/P2 trial. The Phase1b portion will be designed to assess safety and tolerability and clinical activity in the triplet (AVB-500 + gemcitabine + nab-paclitaxel (Abraxane®)) followed by a randomized, controlled Phase 2 portion to look at the AVB-500 triplet combination vs gemcitabine + nab-paclitaxel (Abraxane®) alone. The primary endpoint of the Phase 2 trial will be progression-free survival and secondary endpoints will be overall survival, safety, objective response rate and duration of response. This Phase 1b portion of the trial is expected to initiate in the second half of 2021.   

With the global spread of the ongoing novel coronavirus or COVID-19 pandemic, we have implemented business continuity plans designed to address and mitigate the impact of the COVID-19 pandemic on our employees and our business. While we are experiencing limited financial impacts at this time, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic, our business, financial condition, results of operations and growth prospects could be materially adversely affected, including increased expense if we experience delays in patient enrollment and we deem it necessary or advisable to improve patient recruitment including by opening additional clinical sites. As we advance our clinical programs, we are in close contact with our clinical research organizations and clinical sites and are assessing the impact of COVID-19 on our planned studies and current timelines and costs. Although we have experienced delays in patient enrollment due to the COVID-19 pandemic, the delays have not been significant and have not materially impacted our clinical timelines.  Accordingly, we currently do not anticipate any interruptions in our clinical timelines or operations due to COVID-19.  However, if the COVID-19 pandemic continues and persists for an extended period of time, we could experience significant disruptions to its clinical development timeline, which would adversely affect our business, financial condition, results of operations and growth prospects.

Important Note

This Management’s Discussion and Analysis of Financial Condition and Results of Operations includes a discussion of our operations for the periods ended March 31, 2021 and 2020.

References in this report to “we,” “us,” “our” and similar first-person expressions refer to Aravive, Inc. (formerly known as Versartis, Inc.) and its subsidiaries, including Aravive Biologics. References to “Versartis, Inc.” or “Private Aravive” refer to those respective companies prior to the completion of their merger in October 2018.

Recent developments

On February 12, 2021, we entered into a Securities Purchase Agreement (the “Purchase Agreement”), with Eshelman Ventures relating to the issuance and sale (the “Offering”) of 2,875,000 shares of our common stock at a price per share of $7.29. The Offering closed on February 18, 2021 and we received aggregate gross proceeds from the Offering of approximately $21.0 million.

22

 


 

During the three-month period ended March 31, 2021, we sold 884,649 shares for net proceeds of $7.0 million under the Equity Distribution Agreement.

In April 2021, we dosed the first patient in our Phase 3 trial of AVB-500 in platinum resistant ovarian cancer. Based upon this event, we have completed our first clinical milestone with 3D Medicines and expect to receive a $6 million cash payment related the completion of this milestone.

In April 2021 we also announced that we have simplified the Phase 3 trial’s statistical analysis plan to include a single prospectively defined interim analysis to determine whether randomization will continue with all patients, regardless of prior bevacizumab treatment, or only with patients who are medically ineligible to receive bevacizumab or chose not to receive bevacizumab. Analysis of pretreatment serum sAXL/GAS6 will be an exploratory endpoint in the trial and conducted to determine whether it can identify patients who benefit from AVB-500 plus paclitaxel, but it will not be used in an interim analysis to select patients. The primary endpoint of the trial remains progression free survival by RECIST 1.1, a standard method of assessing clinical activity in this patient population and the accepted endpoint for full regulatory approval. The secondary endpoint is overall survival.

Financial overview

Revenue

To date, we have not generated any revenue from commercial sales of any of our product candidates. However, for the three months ended March 31, 2021, we generated $0.3 million from our collaboration agreement with 3D Medicines collaboration agreement. This revenue is recognized based upon our remaining deferred revenue balance as the underlying services are performed pursuant to our current development plan for our Phase 3 trial of AVB-500 in PROC.

In the future, we may generate revenue from a variety of sources, including product sales if we develop products which are approved for sale, license fees, milestones, research and development and royalty payments in connection with strategic collaborations or government contracts, or licenses of our intellectual property.

Research and development expenses

We recognize both internal and external research and development expenses as incurred. Our external research and development expenses consist primarily of:

 

the cost of acquiring and manufacturing clinical trial and other materials, including expenses incurred under agreements with contract manufacturing organizations;

 

expenses incurred under agreements with contract research organizations, investigative sites, and consultants that conduct our clinical trials;

 

other costs associated with development activities, including additional studies;

Internal research and development costs consist primarily of salaries and related fringe benefit costs for our employees (such as workers’ compensation and health insurance premiums), stock-based compensation charges and travel costs.

General and administrative expenses

General and administrative expenses consist principally of personnel-related costs, professional fees for legal, consulting, audit and tax services, rent and other general operating expenses not included in research and development.

Other income (expense), net

Other income (expense), net is primarily comprised of sublease income for our 1020 Marsh property lease in 2020 and gains and losses on foreign currency transactions related to third party contracts with foreign-based contract manufacturing organizations in 2021 and 2020.

Critical accounting policies, significant judgments and use of estimates

Our management’s discussion and analysis of financial condition and results of operations are based upon our unaudited consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America. The preparation of these consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses. On an ongoing basis, we evaluate our critical accounting policies and estimates. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable in the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not

23

 


 

readily apparent from other sources. Actual results may differ from these estimates under different assumptions and conditions. Our significant accounting policies are more fully described in Note 2 of the accompanying unaudited consolidated financial statements and in Note 2 to our audited consolidated financial statements contained in the Annual Report.

 

Results of operations

Comparison of the Three Months Ended March 31, 2021 and 2020

The following table summarizes our net loss during the periods indicated (in thousands, except percentages):

 

 

 

Three Months Ended

 

 

 

 

 

 

March 31,

 

 

Increase/

 

 

 

2021

 

 

2020

 

 

(Decrease)

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Collaboration revenue

 

$

256

 

 

$

 

 

$

256

 

 

NM(1)

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

 

5,884

 

 

 

3,491

 

 

 

2,393

 

 

 

69

%

General and administrative

 

 

2,380

 

 

 

3,951

 

 

 

(1,571

)

 

 

-40

%

Loss on impairment of long-lived assets

 

 

 

 

 

2,870

 

 

 

(2,870

)

 

NM(1)

 

Total operating expenses

 

 

8,264

 

 

 

10,312

 

 

 

(2,048

)

 

 

-20

%

Loss from operations

 

 

(8,008

)

 

 

(10,312

)

 

 

(2,304

)

 

 

-22

%

Interest income

 

 

9

 

 

 

217

 

 

 

(208

)

 

 

-96

%

Other income (expense), net

 

 

(5

)

 

 

(701

)

 

 

696

 

 

 

-99

%

Net loss

 

$

(8,004

)

 

$

(10,796

)

 

$

(2,792

)

 

 

-26

%

 

(1)

Not meaningful

 

Collaboration revenue

In November 2020, we entered into a collaboration and license agreement with 3D Medicines. Collaboration revenue was $0.3 million in 2021 and $6.0 million of deferred revenue as of March 31, 2021, to be recognized in a future period.

Research and development expense

Research and development expense increased by $2.4 million, or 69%, to $5.9 million in the three months ended March 31, 2021 from $3.5 million for the same period in 2020. The increase was primarily due to our clinical trial expenses and an increase in our compensation expense as we further built out our research and development team for our clinical trials. The initiation of our Phase 3 trial of AVB-500 in PROC has been a significant driver to the recent increase in research and development expense in the three months ended March 31, 2021 when compared to the same period in 2020.   

General and administrative expense

General and administrative expense decreased by $1.6 million, or 40%, to $2.4 million in the three months ended March 31, 2021 from $4.0 million for the same period in 2020. The decrease was primarily driven by lower stock-based compensation expense along with reduced rent expense, legal and consulting fees.  

Loss on impairment of long-lived assets

The Company incurred non-cash charges for impairment of our long-lived assets of $2.9 million for the three months ended March 31, 2020. We measured the impairment of the asset group using a discounted cash flow analysis of the estimated future sublease payments to be received from an expected sublessee as we currently plan to market the 1020 Marsh Road location for subletting.

Other income (expense), net

Other expense, decreased by $0.7 million, or 99%, to $5 thousand in the three months ending March 31, 2021 from $0.7 million for the same period in 2020. The decrease relates to a write-down of $1.4 million related to our sublease receivable balance and previously capitalized commission charges from the EVA sublease partially offset by sublease income recorded in the three months ended March 31, 2020 as compared to no write-down or sublease income recorded for the three months ended March 31, 2021.

24

 


 

Liquidity and capital resources

Since our inception and through March 31, 2021, we have financed our operations through private placements of our equity securities, public offerings of our common stock, debt financing, CPRIT grant proceeds, sales of common stock through our at-the-market facility as well as upfront payments received from license agreements. At March 31, 2021, we had an accumulated deficit of approximately $508.7 million and working capital of $72.4 million, primarily as a result of research and development and general and administrative expenses. At March 31, 2021, we had cash and cash equivalents of approximately $78.7 million, a majority of which is invested in money market funds at several highly rated financial institutions. In March 2020, we received approximately $1.6 million of additional funding from our CPRIT Grant. In November 2020, we received $12 million in upfront payments from 3D Medicines pursuant to our collaboration and license agreement with them. On February 18, 2021, we received approximately $21 million from the purchase by Eshelman Ventures of 2,875,000 shares of our common stock.

In September 2020, we filed a shelf registration statement on Form S-3 with the SEC which was declared effective by the SEC on November 20, 2020, or the Form S-3. On September 4, 2020, we entered into an equity distribution agreement or the Equity Distribution Agreement, with Piper Sandler & Co., or Piper Sandler, and Cantor Fitzgerald & Co., or Cantor Fitzgerald, to sell shares of our common stock, par value $0.0001 per share, from time to time, through an “at the market offering” program having an aggregate offering price of up to $60,000,000 through which Piper Sandler and Cantor Fitzgerald will act as sales agents, or the Sales Agents.  During the three-month period ended December 31, 2020, we sold 377,400 shares for proceeds net of discounts and offering costs of $2.4 million under the Equity Distribution Agreement. During the three-month period ended March 31, 2021, we sold 884,649 shares for net proceeds of $7.0 million under the Equity Distribution Agreement.

We believe that our existing cash and cash equivalents will be sufficient to sustain operations for at least the next 12 months from the issuance of these financial statements as we continue the development of AVB-500. We will need to obtain additional financing to advance our clinical development program to later stages of development and fund operations for the foreseeable future and we will continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing.

We will need to obtain additional financing to pursue our clinical development programs, build out our pipeline and fund operations for the foreseeable future and we will continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing. Although management has been successful in raising capital in the past, there can be no assurance that we will be successful or that any needed financing will be available in the future at terms acceptable to us.  Our failure to raise capital as and when needed could have a negative impact on our financial condition and our ability to pursue our business strategies. We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

 

the rate of progress and cost of our clinical studies;

 

the timing of, and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities;

 

the cost of preparing to manufacture on a larger scale;

 

the costs of commercialization activities if any future product candidate is approved, including product sales, marketing, manufacturing and distribution;

 

the degree and rate of market acceptance of any products launched by us or future partners;

 

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

 

our ability to enter into additional collaboration, licensing, commercialization or other arrangements and the terms and timing of such arrangements; and

 

the emergence of competing technologies or other adverse market developments.

If we are unable to raise additional funds when needed, we may be required to delay, reduce, or terminate some or all of our development programs and clinical trials. We may also be required to sell or license to others technologies or clinical product candidates or programs that we would prefer to develop and commercialize ourselves.

25

 


 

Cash flows

The following table sets forth the primary sources and uses of cash and cash equivalents for each of the periods presented below:

 

 

Three Months

 

 

March 31,

 

 

2021

 

 

2020

 

 

(In thousands)

 

Net cash (used in) provided by:

 

 

 

 

 

 

 

Operating activities

$

(10,019

)

 

$

(4,462

)

Financing activities

 

28,160

 

 

 

33

 

Net increase (decrease) in cash and cash equivalents

$

18,141

 

 

$

(4,429

)

 

Cash used in operating activities

Net cash used in operating activities was $10.0 million and $4.5 million during the three months ended March 31, 2021 and 2020, respectively, which was primarily due to the use of funds in our operations related to the development of AVB-500, our product candidate. Cash used in operating activities for the three months ended March 31, 2021 increased compared to the same period in 2020 due primarily to the ramp up in our Phase 3 trial of AVB-500 in PROC along with continuing costs related to our trial of our second oncology indication, ccRCC.

Cash provided by investing activities

Net cash from investing activities during the periods ended March 31, 2021 and 2020 was zero.

Cash provided by financing activities

Net cash provided by financing activities was $28.2 million during the three months ended March 31, 2021 related to $20.9 million in net proceeds from the issuance and sale of shares of our common stock to Eshelman Ventures and $7.0 in net proceeds from the issuance and sales of our common stock pursuant to the Equity Distribution Agreement.

Contractual obligations and commitments

During the three months ended March 31, 2021, there were no other material changes to our contractual obligations and commitments described under “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Annual Report.

 

Off-balance sheet arrangements

Since our inception, we have not engaged in any off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

 

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Interest rate and market risk

The primary objective of our investment activities is to preserve our capital to fund our operations. We also seek to maximize income from our cash and cash equivalents without assuming significant risk. To achieve our objectives, we invest our cash and cash equivalents in money market funds. As of March 31, 2021, we had cash and cash equivalents of approximately $78.7 million consisting of cash and investments in highly liquid U.S. money market funds. A portion of our investments may be subject to interest rate risk and could decrease in value if market interest rates increase. However, because our investments are substantially all short-term in duration, we believe that our exposure to interest rate risk is not significant and a 1% movement in market interest rates would not have a significant impact on the total value of our portfolio. We actively monitor changes in interest rates.

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Item 4. Controls and Procedures

 

Evaluation of Disclosure Controls and Procedures

An evaluation as of March 31, 2021 was carried out under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our “disclosure controls and procedures.”  Rule 13a-15(e) under the Exchange Act defines “disclosure controls and procedures” as controls and other procedures of a company that are designed to ensure that the information required to be disclosed by a company in the reports that it files or submits under the Exchange Act 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 a company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at March 31, 2021.

 

Changes in Internal Control over Financial Reporting

Our management, including our Chief Executive Officer and Chief Financial Officer, has evaluated any changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2021, and has concluded that there was no change during such quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

Limitations on the Effectiveness of Controls

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, if any, within a company have been detected. Accordingly, our disclosure controls and procedures are designed to provide reasonable, not absolute, assurance that the objectives of our disclosure control system are met.  As set forth above, our Chief Executive Officer and Chief Financial Officer have concluded, based on the evaluation as of the end of the period covered by this report, that our disclosure controls and procedures were effective to provide reasonable assurance that the objectives of our disclosure control system were met.

 

 

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PART II: OTHER INFORMATION

 

Item 1. Legal proceedings

We are not currently subject to any material legal proceedings.

Item 1A. Risk Factors.

Investing in our common stock involves a high degree of risk. You should consider carefully the following risks, together with all the other information in this Quarterly Report on Form 10-Q, including our condensed consolidated financial statements and notes thereto. If any of the following risks actually materializes, our operating results, financial condition and liquidity could be materially adversely affected. As a result, the trading price of our common stock could decline and you could lose part or all of your investment. The following information updates, and should be read in conjunction with, the information disclosed in Part I, Item 1A, “Risk Factors,” contained in the Annual Report. Except as disclosed below, there have been no material changes from the risk factors disclosed in the Annual Report.

Risks related to our financial position and capital requirements.

 

We have incurred significant losses since inception and expect to continue to incur significant losses for the foreseeable future and may never achieve or maintain profitability.

We have incurred significant operating losses in each year since our inception and expect to incur substantial and increasing losses for the foreseeable future. As of March 31, 2021, we had an accumulated deficit of approximately $508.7. Our historical financial statements prior to the fourth quarter of 2018 are solely those of Versartis, Inc., and our accumulated deficit does not reflect the cumulative deficit of Private Aravive.

To date, we have financed our operations primarily through private placements of our equity securities, debt financing, CPRIT Grant proceeds, and our initial public offering in 2014 along with additional common stock offerings in January 2015, October 2016, and December 2019 as well as a $40.0 million upfront payment received from our strategic license agreement with Teijin. A significant portion of Private Aravive’s funding has been through the $20.0 million CPRIT Grant. We have devoted substantially all of our efforts to research and development, including clinical studies, but have not completed development of any product candidate, and our Phase 3 clinical trial of somavaratan failed to meet its primary endpoint. We anticipate that our expenses will increase to the extent we:

 

continue the research and development of our only product candidate, AVB-500, and any future product candidates;

 

conduct additional clinical studies of AVB-500 in the future, including our planned pivotal PROC trial, P1b/2 ccRCC trial and other later stage clinical trials with larger patient populations;

 

seek to discover or in-license additional product candidates;

 

seek regulatory approvals for AVB-500 and any future product candidates that successfully complete clinical studies;

 

establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize AVB-500 or other future product candidates if they obtain regulatory approval, including process improvements in order to manufacture AVB-500 at commercial scale; and

 

enhance operational, financial and information management systems and hire more personnel, including personnel to support development of AVB-500 and any future product candidates and, if a product candidate is approved, our commercialization efforts.

To be profitable in the future, we must succeed in developing and eventually commercializing AVB-500 as well as other products with significant market potential. This will require us to be successful in a range of activities, including advancing AVB-500 and any future product candidates, completing clinical studies of these product candidates, obtaining regulatory approval for these product candidates and manufacturing, marketing and selling those products for which we may obtain regulatory approval. We may not succeed in these activities and may never generate revenue that is sufficient to be profitable in the future. Even if we are profitable, we may not be able to sustain or increase profitability on a quarterly or annual basis. Our failure to achieve sustained profitability would depress the value of our company and could impair our ability to raise capital, expand our business, diversify our product candidates, market our product candidates, if approved, or continue our operations.

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We expect our research and development expenses to increase significantly as our product candidates advance in clinical development. Because of numerous risks and uncertainties involved in our business, the timing or amount of increased development expenses cannot be accurately predicted and, our expenses could increase beyond expectations if we are required by the FDA, or comparable non-U.S. regulatory authorities, to perform studies or clinical trials in addition to those we currently anticipate or if we experience delays in studies due to unforeseen events such as the COVID-19 pandemic. Even if our product candidate, AVB-500, is approved for commercial sale, we anticipate incurring significant costs associated with the commercial launch of and the related commercial-scale manufacturing requirements for AVB-500. As a result, we expect to continue to incur significant and increasing operating losses and negative cash flows for the foreseeable future. Because of the numerous risks and uncertainties associated with biopharmaceutical product development and commercialization, we are unable to accurately predict the timing or amount of future expenses or when, or if, we will be able to achieve or maintain profitability. These losses have had and will continue to have an adverse effect on our financial position and working capital.

We will need additional funds to support our operations, and such funding may not be available to us on acceptable terms, or at all, which would force us to delay, reduce or suspend our research and development programs and other operations or commercialization efforts. Raising additional capital may subject us to unfavorable terms, cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates and technologies.

The completion of the development and the potential commercialization of AVB-500 and any future product candidates, should they receive approval, will require substantial funds. As of March 31, 2021, we had approximately $78.7 million in cash and cash equivalents. We believe that our existing cash and cash equivalents, will be sufficient to sustain operations for at least the next 12 months based on our existing business plan; however, our existing cash and cash equivalents will not be sufficient to enable us to complete the clinical development and commercialization of AVB-500. Our future financing requirements will depend on many factors, some of which are beyond our control, including the following:

 

the rate of progress and cost of our future clinical studies;

 

the timing of, and costs involved in, seeking and obtaining approvals from the FDA and other regulatory authorities;

 

the cost of preparing to manufacture AVB-500 on a larger scale, should we elect to do so;

 

the costs of commercialization activities if AVB-500 or any future product candidate is approved, including product sales, marketing, manufacturing and distribution;

 

the degree and rate of market acceptance of any products launched by us or future partners;

 

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

 

our ability to enter into additional collaboration, licensing, commercialization or other arrangements and the terms and timing of such arrangements;

 

the emergence of competing technologies or other adverse market developments;

 

the costs of attracting, hiring and retaining qualified personnel; and

 

the impact to the global capital markets resulting from the COVID-19 pandemic.

We do not have any material committed external source of funds or other support for our development efforts. Although we have entered into an at-the-market facility with Piper Sandler & Co., and Cantor Fitzgerald & Co., as sales agents, there can be no assurance that we will meet all of the conditions necessary to continue to use such facility or that we can generate sufficient proceeds from the sale of securities pursuant to such facility to support our operations. Until we can generate a sufficient amount of product revenue to finance our cash requirements, which we may never do, we expect to finance future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing and distribution arrangements. Additional financing may not be available to us when we need it or it may not be available on favorable terms. In addition, certain SEC and Nasdaq limitations with respect to fundraising may make it more difficult to raise additional funds. If we are unable to obtain adequate financing when needed, we may have to delay, reduce the scope of, or suspend one or more of our clinical studies or research and development programs or our commercialization efforts.

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Risks related to our business

Reliance on government funding for our programs may impose requirements that limit our ability to take certain actions, and subject us to potential financial penalties, which could materially and adversely affect our business, financial condition and results of operations.

A significant portion of our funding has been through a grant Private Aravive received from CPRIT. The CPRIT Grant (as described below) includes provisions that reflect the government’s substantial rights and remedies, many of which are not typically found in commercial contracts, including powers of the government to potentially require repayment of all or a portion of the grant award proceeds, in certain cases with interest, in the event we violate certain covenants pertaining to various matters that include any potential relocation outside of the State of Texas. Although the CPRIT Grant terminated on November 30, 2019, our royalty and other obligations, including our obligation to repay the disbursed grant proceeds under certain circumstances, to maintain certain records and documentation, to notify CPRIT of certain unexpected adverse events  and our obligation to use reasonable efforts to ensure that any new or expanded preclinical testing, clinical trials, commercialization or manufacturing related to any aspect to our CPRIT project  take place in Texas, survive the termination of the agreement. In addition, if we relocate our principal place of business outside of Texas within the three-year period after the date of final payment of grant funds (which final payment occurred in March 2020), we are required to repay to CPRIT all grant funds received. We have received the full $20.0 million of the grant proceeds and have expended all of the grant award proceeds by the agreement termination date.

Our award from CPRIT requires us to pay CPRIT a portion of our revenues from sales of certain products by us, or received from our licensees or sublicensees, at tiered percentages of revenue in the low- to mid-single digits until the aggregate amount of such payments equals 400% of the grant award proceeds, and thereafter at a rate of less than one percent for as long as we maintain government exclusivity, subject to our right, under certain circumstances, to make a one-time payment in a specified amount to CPRIT to terminate such payment obligations. In addition, the grant contract also contains a provision that provides for repayment to CPRIT of some amount not to exceed the full amount of the grant proceeds under certain specified circumstances involving relocation of our principal place of business outside Texas.

In order to meet the requirements that any new or expanded preclinical testing, clinical trials, commercialization or manufacturing related to any aspect of our CPRIT project take place in Texas, we will need to hire additional qualified personnel and vendors with expertise in preclinical testing, clinical research and testing, government regulation, formulation and manufacturing, sales and marketing and accounting and financing located in Texas. We will compete for qualified individuals, vendors, clinical trial sites, manufacturers with numerous biopharmaceutical companies, universities and other research institutions. Competition for such individuals is intense, and there can be no assurance that the search for such personnel will be successful, especially in light of the territorial restrictions imposed by CPRIT.

If we fail to maintain compliance with any such requirements that may apply to us now or in the future, we may be subject to potential liability and to termination of our contracts, including potentially the repayment of the full CPRIT Grant, which could result in significant expense to us.

Risks related to the ownership of our common stock

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future, and as a result, investors in our common stock could incur substantial losses.

Our stock price has fluctuated in the past, has recently been volatile and may be volatile in the future. From January 1, 2020 through December 31, 2020 the reported sale price of our common stock has fluctuated between $3.50 and $14.81 per share. From January 1, 2021 through March 31, 2021 the reported closing price of our common stock has fluctuated between $5.11 and $9.24 per share. The ongoing COVID-19 pandemic has caused broad stock market and industry fluctuations, including a significant decline in our stock price. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock. The market price for our common stock may be influenced by many factors, including the following:

 

investor reaction to our business strategy and clinical data;

 

the success of competitive products or technologies;

 

results of clinical studies of AVB-500 or future product candidates or those of our competitors;

 

regulatory or legal developments in the United States and other countries, especially changes in laws or regulations applicable to our products;

 

introductions and announcements of new products by us, results of clinical trials, our commercialization partners, or our competitors, and the timing of these introductions or announcements;

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actions taken by regulatory agencies with respect to our products, clinical studies, manufacturing process or sales and marketing terms;

 

variations in our financial results or those of companies that are perceived to be similar to us;

 

the success of our efforts to acquire or in-license additional products or product candidates;

 

developments concerning our collaborations, including but not limited to those with our sources of manufacturing supply and our commercialization partners;

 

developments concerning our ability to bring our manufacturing processes to scale in a cost-effective manner;

 

announcements by us or our competitors of significant acquisitions, strategic partnerships, joint ventures or capital commitments;

 

developments or disputes concerning patents or other proprietary rights, including patents, litigation matters and our ability to obtain patent protection for our products;

 

our ability or inability to raise additional capital and the terms on which we raise it;

 

the recruitment or departure of key personnel;

 

changes in the structure of healthcare payment systems;

 

market conditions in the pharmaceutical and biotechnology sectors;

 

declines in the market prices of stocks generally;

 

actual or anticipated changes in earnings estimates or changes in stock market analyst recommendations regarding our common stock, other comparable companies or our industry generally;

 

trading volume of our common stock;

 

sales of our common stock by us or our stockholders;

 

general economic, industry and market conditions;

 

other events or factors, including those resulting from such events, or the prospect of such events, including war, terrorism and other international conflicts, public health issues including health epidemics or pandemics, such as the ongoing COVID-19 pandemic, and natural disasters such as fire, hurricanes, earthquakes, tornados or other adverse weather and climate conditions, whether occurring in the United States or elsewhere, could disrupt our operations, disrupt the operations of our suppliers or result in political or economic instability; and

 

the other risks described in this “Risk factors” section.

These broad market and industry factors may seriously harm the market price of our common stock, regardless of our operating performance. Since the stock price of our common stock has fluctuated in the past, has been recently volatile and may be volatile in the future, investors in our common stock could incur substantial losses. In the past, following periods of volatility in the market, securities class-action litigation has often been instituted against companies. Such litigation, if instituted against us, could result in substantial costs and diversion of management’s attention and resources, which could materially and adversely affect our business, financial condition, results of operations and growth prospects.

Our current executive officers, directors, and entities under our control will continue to maintain the ability to control or significantly influence all matters submitted to stockholders for approval.

As of March 31, 2021, our current executive officers, directors and entities under their control, in the aggregate, owned shares representing approximately 28.6% of our common stock. As a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these stockholders, if they choose to act together, will control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of our company on terms that other stockholders may desire.

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Item 6. Exhibits

 

 

 

 

 

Incorporation by Reference

Exhibit

Number

 

Exhibit Description

 

Form

 

SEC File No.

 

Exhibit

 

Filing Date

3.1

 

Amended and Restated Bylaws

 

S-1/A

 

333-193997

 

3.4

 

03/06/2014

 

 

 

 

 

 

 

 

 

 

 

3.2

 

Amended and Restated Certificate of Incorporation

 

8-K

 

001-36361

 

3.1

 

03/26/2014

 

 

 

 

 

 

 

 

 

 

 

3.3

 

Certificate of Amendment to the Amended and Restated Certificate of Incorporation

 

8-K

 

001-36361

 

3.1

 

06/01/2017

 

 

 

 

 

 

 

 

 

 

 

3.4

 

Certificate of Amendment of Amended to the Amended and Restated Certificate of Incorporation, as amended

 

8-K

 

001-36361

 

3.1

 

09/12/2017

 

 

 

 

 

 

 

 

 

 

 

3.5

 

Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended

 

8-K

 

001-36361

 

3.1

 

10/16/2018

 

 

 

 

 

 

 

 

 

 

 

3.6

 

Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended

 

8-K

 

001-36361

 

3.2

 

10/16/2018

 

 

 

 

 

 

 

 

 

 

 

3.7

 

Certificate of Correction to Certificate of Amendment to the Amended and Restated Certificate of Incorporation, as amended

 

10-K

 

001-36361

 

3.6

 

03/15/2019

 

 

 

 

 

 

 

 

 

 

 

10.1

 

Amendment to Offer Letter dated as of January 25, 2021 by and between Aravive, Inc. and Gail McIntyre, Ph.D.

 

8-K

 

001-36361

 

10.1

 

01/27/2021

 

 

 

 

 

 

 

 

 

 

 

10.2

 

Securities Purchase Agreement, dated February 12, 2021, by and between Aravive, Inc. and Eshelman Ventures, LLC

 

8-K

 

001-36361

 

10.1

 

02/16/2021

 

 

 

 

 

 

 

 

 

 

 

31.1*

 

Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

31.2*

 

Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.1*+

 

Certification of Chief Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

32.2*+

 

Certification of Chief Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.INS

 

XBRL Instance Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.SCH

 

XBRL Taxonomy Extension Schema Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.CAL

 

XBRL Taxonomy Extension Calculation Linkbase Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.DEF

 

XBRL Taxonomy Extension Definition Linkbase Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.LAB

 

XBRL Taxonomy Extension Label Linkbase Document

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101.PRE

 

XBRL Taxonomy Extension Presentation Linkbase Document

 

 

 

 

 

 

 

 

 

*

Filed Herewith.

+

This certification accompanies the Quarterly Report pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

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SIGNATURES

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

 

 

 

ARAVIVE, INC.

 

 

(Registrant)

 

 

 

Date: May 6, 2021

 

By:/s/ Gail McIntyre 

 

 

Gail McIntyre

Chief Executive Officer

(Principal Executive Officer)

 

 

 

ARAVIVE, INC.

 

 

(Registrant)

 

 

 

Date: May 6, 2021

 

By:/s/ Vinay Shah 

 

 

Vinay Shah

Chief Financial Officer

(Principal Financial Officer and Principal Accounting Officer)

 

33