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Table of Contents

 

 

 

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 001-37635

 

AXSOME THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

45-4241907

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

 

22 Cortlandt Street

16th Floor

New York, New York

10007

(Address of principal executive offices)

(Zip Code)

 

Registrant’s telephone number, including area code: (212) 332-3241

Former Address: 200 Broadway, 3rd Floor, New York, NY 10038

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 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 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

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

 

AXSM

 

The Nasdaq Global Market

 

There were 37,570,390 shares of the registrant’s common stock, $0.0001 par value, outstanding as of May 3, 2021.

 

 

 

 


Table of Contents

 

 

AXSOME THERAPEUTICS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED MARCH 31, 2021

 

TABLE OF CONTENTS

 

 

 

 

Page

CAUTIONARY NOTE REGARDING FORWARD LOOKING STATEMENTS

 

3

PART I — FINANCIAL INFORMATION

 

 

ITEM 1

Financial Statements

 

4

ITEM 2

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

 

20

ITEM 3

Quantitative and Qualitative Disclosure About Market Risk

 

33

ITEM 4

Controls and Procedures

 

34

PART II — OTHER INFORMATION

 

 

ITEM 1

Legal Proceedings

 

35

ITEM 1A

Risk Factors

 

35

ITEM 6

Exhibits

 

85

Signatures

 

 

86

 

 

2


Table of Contents

 

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

Certain matters discussed in this report, including matters discussed under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” may constitute forward-looking statements for purposes of the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from the future results, performance or achievements expressed or implied by such forward-looking statements. The words “anticipate,” “believe,” “estimate,” “may,” “expect” and similar expressions are generally intended to identify forward-looking statements. Our actual results may differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including, without limitation, those discussed under the captions “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and elsewhere in this report, as well as other factors which may be identified from time to time in our other filings with the Securities and Exchange Commission, or the SEC, or in the documents where such forward-looking statements appear. All written or oral forward-looking statements attributable to us are expressly qualified in their entirety by these cautionary statements. Such forward-looking statements include, but are not limited to, statements about:

 

our expectations for increases or decreases in expenses;

 

our expectations for the clinical and preclinical development, manufacturing, regulatory approval, and commercialization of our pharmaceutical product candidates or any other products that we may acquire or in-license;

 

our estimates of the sufficiency of our existing capital resources combined with future anticipated cash flows to finance our operating requirements;

 

our expectations for incurring capital expenditures to expand our research and development and manufacturing capabilities;

 

unforeseen circumstances or other disruptions to normal business operations arising from or related to COVID-19;

 

our expectations for generating revenue or becoming profitable on a sustained basis;

 

our expectations or ability to enter into marketing and other partnership agreements;

 

our expectations or ability to enter into product acquisition and in-licensing transactions;

 

our expectations or ability to build our own commercial infrastructure to manufacture, market and sell our product candidates;

 

our expected losses;

 

our ability to obtain and maintain intellectual property protection for our product candidates;

 

the acceptance of our products by doctors, patients, or payors;

 

our stock price and its volatility;

 

our ability to attract and retain key personnel;

 

the performance of our third-party manufacturers;

 

our expectations for future capital requirements; and

 

our ability to successfully implement our strategy.

The forward-looking statements contained in this report reflect our views and assumptions only as of the date that this report is signed. Except as required by law, we assume no responsibility for updating any forward-looking statements.

We qualify all of our forward-looking statements by these cautionary statements. In addition, with respect to all of our forward-looking statements, we claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995.

3


Table of Contents

 

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Axsome Therapeutics, Inc.

Consolidated Balance Sheets

 

 

 

March 31,

 

 

December 31,

 

 

 

2021

 

 

2020

 

 

 

(Unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

164,660,132

 

 

$

183,876,453

 

Prepaid and other current assets

 

 

375,306

 

 

 

148,373

 

Total current assets

 

 

165,035,438

 

 

 

184,024,826

 

Equipment, net

 

 

74,316

 

 

 

52,647

 

Right-of-use asset - operating lease

 

 

1,476,711

 

 

 

1,739,475

 

Other assets

 

 

317,375

 

 

 

317,375

 

Total assets

 

$

166,903,840

 

 

$

186,134,323

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

14,621,717

 

 

$

13,504,022

 

Accrued expenses and other current liabilities

 

 

5,864,526

 

 

 

8,713,249

 

Operating lease liability, current portion

 

 

1,196,539

 

 

 

1,220,587

 

Total current liabilities

 

 

21,682,782

 

 

 

23,437,858

 

Loan payable, long-term

 

 

48,597,943

 

 

 

48,321,848

 

Operating lease liability, long-term

 

 

329,916

 

 

 

581,708

 

Total liabilities

 

 

70,610,641

 

 

 

72,341,414

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock, $0.0001 par value per share (10,000,000 shares authorized, none issued and outstanding at March 31, 2021 and December 31, 2020, respectively)

 

 

 

 

 

 

Common stock, $0.0001 par value per share (150,000,000 shares authorized, 37,563,882 and 37,374,088 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively)

 

 

3,756

 

 

 

3,737

 

Additional paid-in capital

 

 

404,345,506

 

 

 

392,585,265

 

Accumulated deficit

 

 

(308,056,063

)

 

 

(278,796,093

)

Total stockholders’ equity

 

 

96,293,199

 

 

 

113,792,909

 

Total liabilities and stockholders’ equity

 

$

166,903,840

 

 

$

186,134,323

 

 

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

4


Table of Contents

 

Axsome Therapeutics, Inc.

Consolidated Statements of Operations

(Unaudited)

 

 

 

Three Months

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

16,595,689

 

 

$

27,521,400

 

General and administrative

 

 

11,248,372

 

 

 

4,970,057

 

Total operating expenses

 

 

27,844,061

 

 

 

32,491,457

 

Loss from operations

 

 

(27,844,061

)

 

 

(32,491,457

)

Interest and amortization of debt discount (expense) income

 

 

(1,415,909

)

 

 

7,311

 

Net loss

 

$

(29,259,970

)

 

$

(32,484,146

)

Net loss per common share, basic and diluted

 

$

(0.78

)

 

$

(0.88

)

Weighted average common shares outstanding, basic and diluted

 

 

37,429,450

 

 

 

37,061,356

 

 

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

5


Table of Contents

 

Axsome Therapeutics, Inc.

Consolidated Statements of Stockholders’ Equity

(Unaudited)

 

 

 

Common stock

 

 

Additional

 

 

Accumulated

 

 

Total

stockholders’

 

 

 

Shares

 

 

Amount

 

 

paid-in capital

 

 

deficit

 

 

equity

 

Balance at December 31, 2019

 

 

36,933,217

 

 

 

3,693

 

 

 

354,614,189

 

 

 

(175,895,493

)

 

 

178,722,389

 

Stock-based compensation

 

 

 

 

 

 

 

 

2,133,530

 

 

 

 

 

 

2,133,530

 

Issuance of common stock upon exercise of options

 

 

60,186

 

 

 

6

 

 

 

629,750

 

 

 

 

 

 

629,756

 

Issuance of common stock related to license agreement

 

 

82,019

 

 

 

8

 

 

 

7,155,329

 

 

 

 

 

 

7,155,337

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(32,484,146

)

 

 

(32,484,146

)

Balance at March 31, 2020

 

 

37,075,422

 

 

 

3,707

 

 

 

364,532,798

 

 

 

(208,379,639

)

 

 

156,156,866

 

Balance at December 31, 2020

 

 

37,374,088

 

 

 

3,737

 

 

 

392,585,265

 

 

 

(278,796,093

)

 

 

113,792,909

 

Stock-based compensation

 

 

 

 

 

 

 

 

3,731,097

 

 

 

 

 

 

3,731,097

 

Issuance of common stock upon exercise of options

 

 

94,000

 

 

 

10

 

 

 

1,913,289

 

 

 

 

 

 

1,913,299

 

Issuance of common stock upon vesting of RSUs

 

 

1,917

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock upon financing

 

 

93,877

 

 

 

9

 

 

 

6,115,855

 

 

 

 

 

 

6,115,864

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

(29,259,970

)

 

 

(29,259,970

)

Balance at March 31, 2021

 

 

37,563,882

 

 

 

3,756

 

 

 

404,345,506

 

 

 

(308,056,063

)

 

 

96,293,199

 

 

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

6


Table of Contents

 

Axsome Therapeutics, Inc.

Consolidated Statements of Cash Flows

(Unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(29,259,970

)

 

$

(32,484,146

)

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

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

3,731,097

 

 

 

2,133,530

 

Non-cash research and development license expense

 

 

 

 

 

7,155,337

 

Amortization of debt discount

 

 

276,095

 

 

 

177,652

 

Amortization of operating lease right-of-use asset

 

 

262,764

 

 

 

 

Change in operating lease liability

 

 

(275,840

)

 

 

 

Depreciation

 

 

8,326

 

 

 

5,436

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other current assets

 

 

(226,933

)

 

 

103,725

 

Other assets

 

 

 

 

 

(3,700

)

Accounts payable

 

 

1,117,695

 

 

 

1,248,389

 

Accrued expenses and other current liabilities

 

 

(2,848,723

)

 

 

(1,609,407

)

Net cash used in operating activities

 

 

(27,215,489

)

 

 

(23,273,184

)

Cash flows from investing activities

 

 

 

 

 

 

 

 

Purchases of equipment

 

 

(29,995

)

 

 

(9,331

)

Net cash used in investing activities

 

 

(29,995

)

 

 

(9,331

)

Cash flows from financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock upon financing, net

 

 

6,115,864

 

 

 

 

Proceeds from issuance of common stock upon exercise of options

 

 

1,913,299

 

 

 

629,756

 

Net cash (used in) provided by financing activities

 

 

8,029,163

 

 

 

629,756

 

Net (decrease) increase in cash

 

 

(19,216,321

)

 

 

(22,652,759

)

Cash at beginning of period

 

 

183,876,453

 

 

 

219,966,167

 

Cash at end of period

 

$

164,660,132

 

 

$

197,313,408

 

Supplemental disclosures of cash flow information:

 

 

 

 

 

 

 

 

Interest paid

 

$

1,143,750

 

 

$

379,167

 

 

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

7


Table of Contents

 

Axsome Therapeutics, Inc.

Notes to Consolidated Financial Statements (Unaudited)

Note 1. Nature of Business and Basis of Presentation

Axsome Therapeutics, Inc. (“Axsome” or the “Company”) is a biopharmaceutical company developing novel therapies for central nervous system (“CNS”) disorders for which there are limited treatment options. By focusing on this therapeutic area, the Company is addressing significant and growing markets where current treatment options are limited or inadequate. The Company’s core CNS portfolio includes five product candidates, AXS-05, AXS-07, AXS-09, AXS-12, and AXS-14, which are being developed for multiple indications. The Company aims to become a fully integrated biopharmaceutical company that develops and commercializes differentiated therapies that expand the treatment options available to caregivers and improve the lives of patients living with CNS disorders. The Company was incorporated on January 12, 2012 in the State of Delaware.

The accompanying unaudited interim consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”) for interim information and pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for reporting on Form 10-Q. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. These unaudited interim consolidated financial statements should be read in conjunction with the audited financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 1, 2021.

In the opinion of management, the unaudited interim consolidated financial statements reflect all adjustments, which are normal recurring adjustments, necessary for the fair presentation of the financial information for the interim periods. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results for the full fiscal year or any future period.

Liquidity and Capital Resources

The Company has incurred operating losses since its inception, and expects to continue to incur operating losses for the foreseeable future and may never become profitable. As of March 31, 2021, the Company had an accumulated deficit of $308.1 million.

The Company’s primary sources of cash have been proceeds from the issuance and sale of its common stock in public offerings. The Company has not yet commercialized any of its product candidates and cannot be sure if it will ever be able to do so. The Company’s ability to achieve profitability depends on a number of factors, including its ability to obtain regulatory approval for its product candidates, successfully complete any post-approval regulatory obligations and successfully commercialize its product candidates alone or in partnership. The Company may continue to incur substantial operating losses even if it begins to generate revenues from its product candidates.

The Company believes its existing cash will be sufficient to fund its anticipated operating cash requirements for at least twelve months following the date of this filing. The actual amount of cash that the Company will need to operate is subject to many factors, including, but not limited to, the timing, design and conduct of clinical trials for its product candidates. The Company may use a combination of public and private equity offerings, debt financings, other third-party funding, strategic alliances, licensing arrangements or marketing and distribution arrangements if market conditions are favorable or in light of other strategic considerations to finance its future cash needs.

The Company’s common stock is listed on the Nasdaq Global Market and trades under the symbol “AXSM”.

Impact of COVID-19

In December 2019, a novel (new) coronavirus known as SARS-CoV-2 was first detected in Wuhan, Hubei Province, People’s Republic of China, causing outbreaks of the coronavirus disease, known as COVID-19, that has now spread globally. On January 30, 2020, the World Health Organization (WHO) declared COVID-19 a public health emergency. The Secretary of Health and Human Services declared a public health emergency in the United States on January 31, 2020, under section 319 of the Public Health Service Act (42 U.S.C. 247d), in response to the COVID-19 outbreak. On March 11, 2020, the WHO declared COVID-19 a pandemic. The full impact of the COVID-19 pandemic is unknown and rapidly evolving. While the potential economic impact brought by and over the duration of the COVID-19 pandemic may be difficult to assess or predict, the COVID-19 pandemic has resulted in significant disruption of global financial markets, which could in the future negatively affect the Company’s liquidity. In addition, a recession or market volatility resulting from the COVID-19 pandemic could affect the Company’s business. Given the nature and type of the Company’s short-term investments, the Company does not believe the COVID-19 pandemic has had or will have a material impact on the Company’s current investment liquidity.

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Note 2. Summary of Significant Accounting Policies

Significant Risks and Uncertainties

The Company’s operations are subject to a number of factors that can affect its operating results and financial condition. Such factors include, but are not limited to: the results of clinical testing and trial activities of the Company’s product candidates; the Company’s ability to obtain regulatory approval to market its products, if approved; competition from products manufactured and sold or being developed by other companies; the price of, and demand for, the Company’s products, if approved; the Company’s ability to negotiate favorable licensing or other manufacturing and marketing agreements for its products, if approved; and the Company’s ability to raise additional financing. If the Company does not successfully commercialize any of its product candidates, it will be unable to generate recurring product revenue or achieve and maintain profitability.

Use of Estimates

Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made. In preparing these financial statements, management used significant estimates in the following areas, among others: stock‑based compensation expense; the determination of the fair value of the warrants; the accounting for research and development costs; and the recoverability of the Company’s net deferred tax assets and related valuation allowance.

Foreign Currency Translation

Expenses denominated in foreign currency are translated into U.S. dollars at the exchange rate on the date the expense is incurred. Assets and liabilities of foreign operations are translated at period-end exchange rates. The effect of exchange rate fluctuations on translating foreign currency into U.S. dollars is included in the Statements of Operations and is not material to the Company’s financial statements.

Segment and Geographic Information

Operating segments are defined as components of an enterprise for which separate discrete information is available for evaluation by the chief operating decision maker or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business as one operating segment, which is the business of developing novel therapies for the management of CNS disorders.

Cash Equivalents

The Company considers all highly liquid investments that have maturities of three months or less when acquired to be cash equivalents. The Company’s cash and cash equivalents includes holdings in checking and overnight sweep accounts. The Company’s cash equivalents, which are money market funds held in a sweep account, are measured at fair value on a recurring basis. As of March 31, 2021, the balance of cash and cash equivalents was $164.7 million, which approximates fair value and was determined based upon Level 1 inputs. The sweep account is valued using quoted market prices with no valuation adjustments applied. Accordingly, these securities are categorized as Level 1.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash. The Company maintains its cash at financial institutions, which at times, exceed federally insured limits. At March 31, 2021, the majority of the Company’s cash was held by one financial institution and the amount on deposit was in excess of Federal Deposit Insurance Corporation insurance limits. The Company has not recognized any losses from credit risks on such accounts since inception. The Company believes it is not exposed to significant credit risk on cash.

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Fair Value of Financial Instruments

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants at the measurement date. Assets and liabilities that are measured at fair value are reported using a three‑level fair value hierarchy that prioritizes the inputs used to measure fair value. This hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs. The three levels of inputs used to measure fair value are as follows:

Level 1—Quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices in active markets that are observable for the asset or liability, either directly or indirectly.

Level 3—Inputs that are unobservable for the asset or liability.

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

The Company’s financial instruments are cash, accounts payable, accrued liabilities, and current and long-term debt. The carrying values for cash, accounts payable and accrued liabilities reported in the accompanying consolidated financial statements approximate their respective fair values due to their short-term maturities. The carrying value of debt on the Company’s balance sheet (see Note 6 – Loan and Security Agreement), is estimated to approximate its fair value as the interest rate approximates the market rate for loans with similar terms and risk characteristics.

Debt Issuance Costs

Debt issuance costs consist of costs incurred in obtaining long-term financing. These costs are classified on the consolidated balance sheet as a direct deduction from the carrying amount of the related debt liability. These expenses are deferred and amortized as part of interest expense in the consolidated statement of operations using the effective interest rate method over the term of the debt agreement.

Equipment

Equipment consists primarily of computer equipment and is recorded at cost. Equipment is depreciated on a straight‑line basis over its estimated useful life, which the Company estimates to be three years. When equipment is sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts and the resulting gain or loss is included in operating expenses.

Research and Development Costs

Research and development costs are expensed as incurred. Research and development expenses consist primarily of personnel costs for our research and development employees, costs incurred to third-party service providers for the conduct of research, preclinical and clinical studies, laboratory supplies, product license fees, consulting and other related expenses. We estimate research, preclinical and clinical study expenses based on services performed, pursuant to contracts with third-party research and development organizations that conduct and manage research, preclinical and clinical activities on our behalf. We estimate these expenses based on discussions with internal management personnel and external service providers as to the progress or stage of completion of services and the contracted fees to be paid for such services. If the actual timing of the performance of services or the level of effort varies from the original estimates, we will adjust the accrual accordingly. Payments associated with licensing agreements to acquire licenses to develop, use, manufacture and commercialize products that have not reached technological feasibility and do not have alternative future use are expensed as incurred. Payments made to third parties under these arrangements in advance of the performance of the related services by the third parties are recorded as prepaid expenses until the services are rendered.

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Income Taxes

Income taxes are accounted for under the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, operating losses, and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date. Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

The Company estimates an annual effective tax rate of 0% for the year ending December 31, 2021 and has not recorded an income tax benefit for the three months ended March 31, 2021 and 2020 since it determined that a full valuation allowance is required against the Company’s deferred tax assets.

The Company recognizes the tax benefit from an uncertain tax position only if it is more likely than not to be sustained upon examination based on the technical merits of the position as well as consideration of the available facts and circumstances. When uncertain tax positions exist, the Company recognizes the tax benefit of tax positions to the extent that the benefit will more likely than not be realized. As of March 31, 2021, the Company does not believe any material uncertain tax positions are present. In the event the Company determines that accrual of interest or penalties are necessary in the future, the amount will be presented as a component of income tax expense.

Stock-Based Compensation

For stock options issued, the Company estimates the grant date fair value of each option using the Black‑Scholes option pricing model. The Black-Scholes model takes into account the expected volatility of the Company’s common stock, the risk-free interest rate, the estimated life of the option, the closing market price of the Company’s common stock and the exercise price. The estimates utilized in the Black-Scholes calculation involve inherent uncertainties and the application of management’s judgment. In addition, the Company recognizes expense for equity award forfeitures as they occur. For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term.

For restricted stock units (“RSUs”), the Company issues them in the form of Company common stock. The fair market value of these awards is based on the market closing price per share on the grant date. Prior to January 1, 2020, the Company only granted stock options. Beginning in 2020, for grants to employees, the Company granted a mix of stock options and RSUs.

For awards subject to service-based vesting conditions, the Company recognizes stock-based compensation expense on a straight-line basis over the requisite service period, which is generally the vesting term. For awards subject to performance-based vesting conditions, the Company recognizes stock-based compensation expense using the accelerated attribution method when it is probable that the performance condition will be achieved. The expense related to the stock-based compensation is recorded within the same financial statement line item as the grantee’s cash compensation.

The Company’s policy upon exercise of stock options and RSUs is that shares will be issued as new shares drawing on the Company’s 2015 Omnibus Incentive Compensation Plan share pool that was adopted by the stockholders in November 2015.

Basic and Diluted Net Loss per Common Share

Basic net loss per share of common stock is computed by dividing net loss by the weighted average number of shares of common stock outstanding during the period. Diluted net loss per share of common stock includes the effect, if any, from the potential exercise or conversion of securities, such as warrants, stock options, and RSUs, which would result in the issuance of incremental shares of common stock. As the impact of these items is anti-dilutive during periods of net loss, there was no difference between basic and diluted net loss per share of common stock for the three months ended March 31, 2021 and 2020.

Leases

The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company’s right to use an underlying asset for the lease term and operating lease liabilities represent the Company’s obligation to make lease payments arising from the lease. When evaluating whether a contract contains a lease, the Company considers whether (1) the contract explicitly or implicitly identifies assets that are contractually defined and (2) the Company obtains substantially all of the economic benefits from the use of that underlying asset and directs how and for what purpose the asset is used during the term of the contract.

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The Company’s lease agreement contains lease and non-lease components. Non-lease components primarily include payments for maintenance and utilities. The Company has applied the practical expedient to combine fixed payments for non-lease components with lease payments and account for them together as a single lease component, which increases the amount of lease assets and corresponding liabilities. Payments under the Company’s lease arrangement are primarily fixed, however variable payments, are expensed as incurred and not included in the operating lease asset and liability.

Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option. The Company uses the implicit interest rate when readily determinable and uses the Company’s incremental borrowing rate when the implicit rate is not readily determinable based upon the information available at the commencement date in determining the present value of the lease payments.

The Company’s operating leases are reflected in the right-of-use operating asset; operating lease liability, current portion; and operating lease liability, long-term portion in the Company’s consolidated balance sheets. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Short-term leases, defined as leases that have a lease term of 12 months or less at the commencement date, and do not include an option to extend the term or purchase the underlying asset that that the Company is reasonably certain to exercise, are excluded from this treatment and are recognized on a straight-line basis over the term of the lease.

Recent Accounting Pronouncements

In December 2019, the FASB issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes, enhances and simplifies various aspects of the income tax accounting guidance, including requirements such as tax basis step-up in goodwill obtained in a transaction that is not a business combination, ownership changes in investments, and interim-period accounting for enacted changes in tax law. ASU 2019-12 is effective for annual periods, and interim periods within those annual periods, beginning after December 15, 2020. Early adoption is permitted, including adoption in an interim period. The Company adopted this standard on January 1, 2021, and the standard did not have a significant impact on its consolidated financial statements.

In October 2020, the FASB issued ASU 2020-10, Codification Improvements, which clarifies various topics in the Accounting Standards Codification, including the addition of existing disclosure requirements to the relevant disclosure sections. The amendments in ASU 2020-10 do not change GAAP and, therefore, are not expected to result in a significant change in practice. ASU 2020-10 should be applied retrospectively to the beginning of the period that includes the adoption date. ASU 2020-10 is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020. The Company adopted this standard on January 1, 2021, and the standard did not have a significant impact on its consolidated financial statements.

Note 3. Accrued Expenses and Other Current Liabilities

At March 31, 2021 and December 31, 2020 accrued expenses and other current liabilities consisted of the following:

 

 

March 31,

2021

 

 

December 31,

2020

 

Accrued research and development

 

$

1,183,367

 

 

$

4,293,522

 

Accrued compensation

 

 

1,165,548

 

 

 

2,870,261

 

Accrued general and administrative

 

 

3,121,653

 

 

 

1,155,508

 

Accrued Interest

 

 

393,958

 

 

 

393,958

 

Total

 

$

5,864,526

 

 

$

8,713,249

 

 

 

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Note 4. Loan and Security Agreement

Hercules Capital, Inc.

In September 2020, the Company entered into a Loan and Security Agreement (the “Loan Agreement”) with Hercules Capital, Inc., in its capacity as administrative agent and collateral agent and as a lender (in such capacity, the “Agent” or “Hercules”) and the other financial institutions that from time to time become parties to the Loan Agreement as lenders (collectively, the “Lenders”). The Loan Agreement provides for term loans in an aggregate principal amount of up to $225.0 million under multiple tranches (the “2020 Term Loan”). The tranches consist of (i) a first tranche consisting of term loans in an aggregate principal amount of $60.0 million, of which $50.0 million was funded to the Company on the Closing Date (the “First Advance”), and of which the remaining $10.0 million is available at the Company’s option at any time through September 15, 2021; (ii) subject to the approval of the Company’s AXS-05 product candidate for the treatment of major depressive disorder (the “First Milestone”), a second tranche consisting of additional term loans in an aggregate principal amount of up to $35.0 million, available at the Company’s option beginning on the date that the First Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022; (iii) subject to the approval of the Company’s AXS-07 product candidate for the treatment of migraine (the “Second Milestone”), a third tranche consisting of additional term loans in an aggregate principal amount of up to $20.0 million, available at the Company’s option beginning on the date that the Second Milestone is achieved through the earlier of (A) 181 days following such date and (B) June 30, 2022; (iv) subject to the achievement of either the First Milestone or the Second Milestone and so long as the Company is in compliance with a required ratio of Lender indebtedness to net product revenue, a fourth tranche consisting of additional term loans in an aggregate principal amount of up to $60.0 million, available at the Company’s option beginning on January 1, 2022 and continuing through March 31, 2023; and (v) subject to approval by the Lenders’ in their discretion, a fifth tranche of additional term loans in an aggregate principal amount of up to $50.0 million, available through December 31, 2023. The Company intends to use the proceeds of the Term Loan Advances for working capital and general corporate purposes. In addition, approximately $21.5 million of the proceeds from the First Advance was used to satisfy in full and retire the Company’s indebtedness under the 2019 Term Loan (as defined below), as amended.

The outstanding principal balance of the term loans bears interest at an annual rate equal to the greater of either (i) the prime rate as reported in The Wall Street Journal plus 5.90% or (ii) 9.15%, subject to an ability by the Company, during certain periods (each, a “PIK Deferral Period”), to request a reduction of the then-effective cash-pay interest rate by up to 1.00% per annum (the “Cash Interest Reduction Amount”). Accrued interest is payable monthly following the funding of each term loan. During each PIK Deferral Period, the term loans will bear cash-pay interest, at the reduced amount, and will accrue paid-in-kind interest at a rate equal to the Cash Interest Reduction Amount multiplied by 1.15, which amount will be capitalized and added to the outstanding principal balance of the term loans on each monthly interest payment date during the PIK Deferral Period.‌

The Company is required to repay the term loans in equal installments of principal and interest commencing on May 1, 2023 through October 1, 2025 (the “Maturity Date”). However, if either the First Milestone or the Second Milestone are achieved prior to May 1, 2023, and no default exists, the amortization commencement date will be automatically extended to November 1, 2023; if both the First Milestone and the Second Milestone are achieved prior to November 1, 2023, and no default exists, the amortization commencement date will be further automatically extended to May 1, 2024 and if any term loans are funded under the fourth tranche noted above prior to May 1, 2024, and no default exists, the amortization commencement date will be further automatically extended to November 1, 2024. On the Maturity Date, all unpaid term loans will be due and payable.

As collateral for the obligations, the Company has granted to Hercules a senior security interest in all of Company’s right, title, and interest in, to and under all of Company’s property, inclusive of intellectual property, which includes one of the Company’s existing license agreements (the “License Agreement”) with Antecip Bioventures II LLC (“Antecip”), an entity owned by Axsome’s Chief Executive Officer and Chairman of the Board, Herriot Tabuteau, M.D., subject to limited exceptions. Antecip consented to the collateral assignment of the License Agreement, among other things, under a direct agreement (the “Direct Agreement”) with the Company and Hercules.

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The Loan Agreement contains customary representations, warranties and covenants, including covenants by the Company limiting additional indebtedness, liens (including a negative pledge on intellectual property and other assets), guaranties, mergers and consolidations, substantial asset sales, investments and loans, certain corporate changes, transactions with affiliates and fundamental changes. At the initial closing, there were no applicable financial covenants contained in the Loan Agreement. Only after additional amounts are drawn down by the Company in the future, if the Company decides to do so, under the terms set forth in the Loan Agreement, there will be certain limited financial covenants that will apply, including:

 

Effective upon the date the outstanding principal amount of the advances under the Loan Agreement equals or exceeds $55.0 million, which has not yet occurred, the Company at all times thereafter must maintain cash in an account or accounts in which Hercules has a first priority security interest, in an aggregate amount greater than or equal to $15.0 million, plus the amount of the Company’s accounts payable under U.S. GAAP not paid after the 180th day following the invoice for such account payable (such amount, the “Qualified Cash A/P Amount”).

 

Effective upon the later of (i) the last calendar month of the calendar quarter that is twelve months following the earlier of (x) the date that the First Milestone is achieved and (y) the date that the Second Milestone is achieved, or (ii) the date on which the outstanding principal amount of the term loan advances under the Loan Agreement is equal to or greater than $65.0 million, the Company is required to (A) ensure that at all times its market capitalization exceeds $2.0 billion, and that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 65% of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, (B) ensure that at all times that it maintains cash in an account which Hercules has a first priority security interest in an amount not less than 100% of the sum of the outstanding principal amount of the term loan advances plus the Qualified Cash A/P Amount, or (C) achieve at least 60% of the net product revenue solely from the sale of AXS-05 and AXS-07 (which may include royalty, profit sharing, or sales-based milestone revenue recognized in accordance with GAAP, but will not include any upfront or non-sales-based milestone payments under business development or licensing transactions), measured on a trailing six-month basis as of the date of the Company’s most recent quarterly financial statement, determined on a quarterly basis.

 

Restrictions on the Company’s ability to incur additional indebtedness, pay dividends, encumber its intellectual property, or engage in certain fundamental business transactions, such as mergers or acquisitions of other businesses, with certain exceptions.

The Company’s obligations under the Loan Agreement are subject to acceleration upon the occurrence of specified events of default, including payment default, insolvency and a material adverse change in the Borrower’s business, operations or financial or other condition.

In addition, the Company is required to pay a final payment fee equal to the greater of (A) $2,910,000 and (B) 4.85% of the aggregate amount of all term loan advances minus the aggregate amount of repayments made. The final payment fee is being accreted and amortized into interest expense using the effective interest rate method over the term of the loan.

The Company may, at its option prepay the term loans in full or in part, subject to a prepayment penalty equal to (i) 2.0% of the principal amount prepaid if the prepayment occurs prior to the first anniversary of the Closing Date, (ii) 1.5% of the principal amount prepaid if the prepayment occurs on or after the first anniversary and prior to the second anniversary of the Closing Date, and (iii) 1.0% of the principal amount prepaid if the prepayment occurs on or after the second anniversary and prior to the third anniversary of the Closing Date.

Silicon Valley Bank

In March 2019, the Company entered into a $24.0 million growth capital term loan facility (the “2019 Term Loan”) with Silicon Valley Bank, or SVB and West River Innovation Lending Fund VIII, L.P., or WestRiver. In September 2020, the Company used a portion of the 2020 Term Loan to terminate and repay all amounts outstanding under the 2019 Term Loan and recorded a loss on extinguishment of the 2019 Term Loan.

Loan Interest Expense and Amortization

The Company incurred interest expense of $1,143,750 and $379,167 for the three months ended March 31, 2021 and 2020, respectively. In addition, amortization of the final payment fee was $143,589 and $119,014 for the three months ended March 31, 2021 and 2020, respectively.

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The outstanding debt and unamortized debt discount balances are as follows:

 

 

March 31,

2021

 

 

December 31,

2020

 

Total Outstanding Debt

 

$

50,000,000

 

 

$

50,000,000

 

Add: accreted liability of final payment fee

 

 

295,493

 

 

 

151,912

 

Less: unamortized debt discount, long-term

 

 

(1,697,550

)

 

 

(1,830,064

)

Less: current portion of long-term debt

 

 

 

 

 

 

Loan payable, long-term

 

$

48,597,943

 

 

$

48,321,848

 

 

In connection with the entry into the Hercules Term Loan, the Company issued to Hercules a warrant to purchase a number of shares of the Company’s common stock equal to 2.5% of the aggregate amount of the Term Loan Advances that are funded. Further information on warrants issued related to this loan and prior debt financings and amendments are disclosed in Note 7 - Stockholders’ Equity under the “Warrants” section.

Amortization of the debt discount in relation to warrants issued as described above was $132,508 and $58,638 for three months ended March 31, 2021 and 2020, respectively.

Scheduled Principal Payments on Outstanding Debt, as of March 31, 2021, are as follows:

 

2021

 

 

 

2022

 

 

 

2023

 

 

12,193,153

 

2024

 

 

19,761,468

 

2025

 

 

18,045,379

 

Total principal payments outstanding

 

$

50,000,000

 

 

The Company was in compliance with all covenants and requirements of its financing arrangements as of and during the three months ended March 31, 2021.

Note 5. Net Loss per Common Share

The following table sets forth the computation of basic and diluted net loss per common share:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Basic and diluted net loss per common share:

 

 

 

 

 

 

 

 

Net loss

 

$

(29,259,970

)

 

$

(32,484,146

)

Weighted average common shares outstanding—basic and diluted

 

 

37,429,450

 

 

 

37,061,356

 

Net loss per common share—basic and diluted

 

$

(0.78

)

 

$

(0.88

)

 

The following potentially dilutive securities outstanding at March 31, 2021 and 2020 have been excluded from the computation of diluted weighted average shares outstanding, as they would be anti-dilutive:

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Stock options

 

 

4,385,598

 

 

 

3,962,733

 

Restricted stock units

 

 

303,983

 

 

 

149,389

 

Warrants

 

 

15,541

 

 

 

69,656

 

Total

 

 

4,705,122

 

 

 

4,181,778

 

 

Note 6. Commitments and Contingencies

Operating Leases

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For the three months ended March 31, 2021, the Company had the following operating lease expense:

 

 

 

Statement of Operations Location

 

Three Months Ended

March 31, 2021

 

Operating lease expense

 

General and administrative and Research and development

 

$

286,923

 

Total operating lease expense

 

 

 

$

286,923

 

Future minimum lease payments of our operating leases as of March 31, 2021 were as follows:

 

2021

 

$

950,000

 

2022

 

 

630,000

 

2023

 

 

 

2024

 

 

 

2025

 

 

 

Thereafter

 

 

 

Total lease payments

 

 

1,580,000

 

Less imputed interest

 

 

(53,545

)

Present value of operating lease liabilities

 

$

1,526,455

 

As of March 31, 2021, the remaining lease term for our operating lease was 1.3 years with a discount rate of 6.0%. The interest rate implicit in lease contracts is typically not readily determinable and as such, the Company uses its incremental borrowing rate based on the information available at the lease commencement date, which represents an internally developed rate that would be incurred to borrow, on a collateralized basis, over a similar term, an amount equal to the lease payments in a similar economic environment.

Note 7. Stockholders’ Equity

Capital Structure

In May 2019, the Company entered into the May 2019 Sales Agreement with SVB Leerink, pursuant to which the Company may sell up to $50 million in shares of the Company’s common stock from time to time through SVB Leerink, acting as the Company’s sales agent, in one or more at-the-market offerings utilizing the 2016 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the May 2019 Sales Agreement. Due to expiration of the 2016 Shelf Registration Statement, at the Company’s option, the shares that were unsold of approximately $29.9 million under the May 2019 Sales Agreement, may be rolled over to the December 2019 Sales Agreement (see below).

In December 2019, the Company entered into the December 2019 Sales Agreement with SVB Leerink, pursuant to which the Company may sell up to $80 million in shares of the Company’s common stock from time to time through SVB Leerink, acting as the Company’s sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement. For the three months ended March 31, 2021, the Company received approximately $6.3 million in gross proceeds through the sale of 93,877 shares, of which net proceeds were approximately $6.1 million. For the three months ended March 31, 2020, the Company did not issue any shares of common stock pursuant to the December 2019 Sales Agreement.

In December 2019, the Company completed an underwritten public offering, whereby the Company sold 2,300,000 shares of our common stock at a public offering price of $87.00 per share. The Company received gross proceeds of approximately $200.1 million and net proceeds of approximately $187.1 million, net of underwriting discounts and offering expenses.

The holders of shares of common stock are entitled to one vote for each share of common stock held at all meetings of stockholders and written actions in lieu of meetings. The holders of shares of common stock are entitled to receive dividends, if and when declared by the board of directors.

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Shelf Registration Statement

On December 5, 2019, the Company filed an automatic shelf registration statement (“2019 Shelf Registration”) with the Securities and Exchange Commission (“SEC”) for the issuance of common stock, preferred stock, warrants, rights, debt securities and units. It became effective upon filing with the SEC and is currently the Company’s only active shelf registration. Through the date of this report, the Company has issued common stock of approximately $228.2 million pursuant to such shelf registration statement.

Under SEC rules, the 2019 Shelf Registration Statement allows for the potential future offer and sale by the Company, from time to time, in one or more public offerings, of an indeterminate amount of the Company’s common stock, preferred stock, debt securities, and units at indeterminate prices. At the time any of the securities covered by the 2019 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

Equity Incentive Plans

There were 4,727,326 shares available for the issuance of stock options or stock-based awards under the Company’s 2015 Omnibus Incentive Compensation Plan at March 31, 2021.

Stock Options

The following table sets forth the stock option activity for the three months ended March 31, 2021:

 

 

 

​Number

of shares

 

 

​Weighted

average

exercise price

 

 

Weighted

average

contractual

term

 

 

​Aggregate

intrinsic

value

 

Outstanding at December 31, 2020

 

 

3,725,648

 

 

$

16.06

 

 

 

 

 

 

 

 

 

Granted

 

 

780,440

 

 

 

66.72

 

 

 

 

 

 

 

 

 

Exercised

 

 

(94,000

)

 

 

22.20

 

 

 

 

 

 

 

 

 

Forfeited

 

 

(25,844

)

 

 

80.72

 

 

 

 

 

 

 

 

 

Expired

 

 

(646

)

 

 

87.76

 

 

 

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

4,385,598

 

 

$

24.04

 

 

 

7.5

 

 

$

248,407,010

 

Vested and expected to vest at March 31, 2021

 

 

4,379,429

 

 

$

24.94

 

 

 

7.5

 

 

$

247,912,432

 

Exercisable at March 31, 2021

 

 

2,529,258

 

 

$

11.03

 

 

 

5.9

 

 

$

178,255,864

 

 

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The expected term of the Company’s stock options has been determined utilizing the “simplified” method as described in the SEC’s Staff Accounting Bulletin No. 107 relating to stock-based compensation. The simplified method was chosen because the Company has limited historical option exercise experience due to its short operating history. The risk-free interest rate is based on the U.S. Treasury yield in effect at the time of grant for a period approximately equal to the expected term of the award. Expected dividend yield is based on the fact that the Company has never paid cash dividends and does not expect to pay any cash dividends in the foreseeable future. Expected volatility is based on historical volatilities of similar entities within the Company’s industry which were commensurate with the Company’s expected term assumption.

The weighted average grant date fair value of options granted was $49.26 per option for the three months ended March 31, 2021. As of March 31, 2021, there was $54.8 million of total unrecognized compensation cost related to non-vested stock options which is expected to be recognized over a weighted average period of 3.5 years. These amounts do not include 9,788 options outstanding as of March 31, 2021, which are performance-based and vest upon the achievement of certain corporate milestones. Stock‑based compensation will be measured and recorded if and when it is probable that the milestone will occur.

Restricted Stock Units

In 2020, the Company began granting RSUs covering an equal number of its shares of common stock to employees. The fair value of RSUs is determined on the date of the grant based on the market price of its shares of common stock as of that date. The fair value of the RSUs is recognized as an expense ratably over the vesting period of four years. As of March 31, 2021, total

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compensation cost not yet recognized related to unvested RSUs was $12.0 million, which is expected to be recognized over a weighted-average period of 3.7 years.

The following table sets forth the RSU activity for the three months ended March 31, 2021:

 

 

Number

of shares

 

 

Weighted

average

grant date

fair value

 

Outstanding at December 31, 2020

 

 

136,067

 

 

$

35.76

 

Granted

 

 

174,688

 

 

 

49.37

 

Vested

 

 

(3,151

)

 

 

45.14

 

Forfeited

 

 

(3,621

)

 

 

74.57

 

Outstanding at March 31, 2021

 

 

303,983

 

 

$

41.06

 

 

Stock-based compensation expense recognized for the three months ended March 31, 2021 and 2020 was allocated as follows:

 

 

Three Months Ended March 31,

 

 

2021

 

 

2020

 

Research and development

 

$

1,534,395

 

 

$

634,375

 

General and administrative

 

 

2,196,702

 

 

 

1,499,155

 

Total

 

$

3,731,097

 

 

$

2,133,530

 

 

Warrants

The following table summarizes warrant activity for the three months ended March 31, 2021:

 

 

 

 

 

 

 

Weighted

 

 

 

 

 

 

 

average

 

 

 

Warrants

 

 

exercise price

 

Outstanding at December 31, 2020

 

 

15,541

 

 

$

80.43

 

Issued

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Outstanding at March 31, 2021

 

 

15,541

 

 

$

80.43

 

 

Outstanding Warrants

In connection with the first advance of the 2020 Term Loan, Hercules Capital Inc. received warrants to purchase an aggregate 15,541 shares of the Company’s common stock at an exercise price of $80.43 per share, which was the volume weighted average price of the Company’s common stock over the ten-day trading period immediately preceding the initial closing, subject to certain limited adjustments as specified in the warrant. The warrants are exercisable for seven years from the date of issuance. The warrants were classified as a component of stockholders’ equity. The relative fair value of the warrants of approximately $0.9 million at the time of issuance, which was determined using the Black-Scholes option-pricing model, was recorded as additional paid-in capital and reduced the carrying value of the debt. The discount on the debt is being amortized to interest expense over the term of the debt utilizing the effective interest rate method.

Note 8. License Agreements

Exclusive License Agreement with Pfizer

In January 2020, the Company entered into an exclusive license agreement with Pfizer Inc. (“Pfizer”) for Pfizer’s clinical and nonclinical data, and intellectual property for reboxetine, the active pharmaceutical ingredient in AXS-12 which the Company is developing for the treatment of narcolepsy. The agreement also provides the Company exclusive rights to develop and commercialize esreboxetine, a new late-stage product candidate now referred to as AXS-14, in the U.S. for the treatment of fibromyalgia.

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Under the terms of the agreement, Pfizer received 82,019 shares of the Company’s common stock having a stated value of $8.0 million, based on the average closing price of the Company’s common stock for the ten prior trading days of $97.54, in consideration for the license and rights and also received an upfront cash payment of $3.0 million. The Company determined that the fair value of each share of common stock granted to Pfizer on the closing date of January 9, 2020 was $87.24, based on the closing price of the Company’s stock on that date. As a result, the fair value of the stock issued was $7.2 million and therefore, the total research and development expense recognized was $10.2 million related to the Pfizer license agreement during the three months ended March 31, 2020.

Pfizer can also receive up to $323 million in regulatory and sales milestones, and tiered mid-single to low double-digit royalties on future sales. Pfizer will also have a right of first negotiation on any potential future strategic transactions involving AXS-12 and AXS-14. During the three months ended March 31, 2021, no milestone payments or royalties were paid to Pfizer by the Company.

Exclusive License Agreements with Antecip

In 2012, the Company entered into three exclusive license agreements with Antecip, in which it was granted exclusive licenses to develop, manufacture, and commercialize Antecip’s patents and applications related to the development of AXS-02, AXS-05, and AXS-04, a product candidate that is currently in early stage development, anywhere in the world for human therapeutic, veterinary, and diagnostic use. Pursuant to the agreements, the Company is required to use commercially reasonable efforts to develop, obtain regulatory approval for and commercialize AXS-02, AXS-05, and AXS-04. Under the terms of the agreements, the Company is required to pay to Antecip a royalty equal to 4.5% for AXS-02, 3.0% for AXS-05, and 1.5% for AXS-04, of net sales of products containing the licensed technology by the Company, its affiliates, or permitted sublicensees. These royalty payments are subject to reduction by an amount up to 50.0% of any required payments to third parties. Unless earlier terminated by a party for cause or by the Company for convenience, the agreements shall remain in effect on a product-by-product and country-by-country basis until the later to occur of (i) the applicable product is no longer covered by a valid claim in that country or (ii) 10 years from the first commercial sale of the applicable product in that country. Upon expiration of the agreements with respect to a product in a country, the Company’s license grant for that product in that country will become a fully paid-up, royalty-free, perpetual non-exclusive license. If Antecip terminates any of the agreements for cause, or if the Company exercises its right to terminate any of the agreements for convenience, the rights granted to the Company under such terminated agreement will revert to Antecip. To date, the Company has not been required to make any payments to Antecip under any of the license agreements.

In connection with the 2020 Term Loan, the Company entered into a Direct Agreement with Antecip pursuant to which Antecip consented to the collateral assignment of the License Agreement to Hercules, among other things.

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

The following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors.” See also the “Cautionary Note Regarding Forward-Looking Statements” set forth at the beginning of this report.

You should read the following discussion and analysis in conjunction with the unaudited interim consolidated financial statements, and the related footnotes thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2020 which was filed with the Securities and Exchange Commission, or SEC, on March 1, 2021.

Overview

We are a biopharmaceutical company developing novel therapies for the management of central nervous system, or CNS, disorders for which there are limited treatment options. By focusing on this therapeutic area, we are addressing significant and growing markets where current treatment options are limited or inadequate. Our core CNS portfolio includes five CNS product candidates, AXS-05, AXS-07, AXS-09, AXS-12, and AXS-14 which are being developed for multiple indications. AXS-05 is being developed for the treatment of major depressive disorder, or MDD, for which we have completed a Phase 2 controlled trial and Phase 3 controlled trial, which we refer to as the ASCEND study and the GEMINI study, respectively, and a Phase 3 long-term open-label study, which we refer to as the COMET study. A New Drug Application, or NDA, has been submitted and accepted for filing for AXS-05 for the treatment of MDD. The FDA has set a Prescription Drug User Fee Act (PDUFA) target action date for the AXS-05 NDA of August 22, 2021. AXS-05 is also under development for the treatment of Alzheimer's disease agitation, or AD agitation. We have completed one Phase 2/3 controlled trial, which we refer to as the ADVANCE-1 study, for this indication. We are conducting a Phase 3 placebo-controlled, randomized withdrawal trial in AD agitation, which we refer to as the ACCORD study, and one open-label long-term safety study in AD agitation. AXS-05 is also being developed for smoking cessation and a Phase 2 trial in this indication has been completed. AXS-07 is being developed for the acute treatment of migraine, for which we have completed two Phase 3 controlled trials, which we refer to as the MOMENTUM study and the INTERCEPT study, and one Phase 3 long-term open-label trial, which we refer to as the MOVEMENT study. We plan to submit an NDA for AXS-07 for the acute treatment of migraine. AXS-09 is being developed for the treatment of CNS disorders. AXS-12 is being developed for the treatment of narcolepsy. We have completed a Phase 2 trial with AXS-12, which we refer to as the CONCERT study. A Phase 3 trial with AXS-12 in narcolepsy is planned. AXS-14 is being developed for the treatment of fibromyalgia. Additionally, we are currently evaluating other product candidates, which we intend to develop for CNS disorders. We aim to become a fully integrated biopharmaceutical company that develops and commercializes differentiated therapies that increase available treatment options and improve the lives of patients living with CNS disorders.

AXS-05 is a novel, oral, investigational NMDA, or N-methyl-D-aspartate, receptor antagonist with multimodal activity under development for the treatment of CNS disorders. AXS-05 consists of a proprietary formulation and dose of bupropion and dextromethorphan and utilizes our metabolic inhibition technology. The dextromethorphan component of AXS-05 is an uncompetitive NMDA, receptor antagonist, also known as a glutamate receptor modulator. The dextromethorphan component of AXS-05 is also a sigma-1 receptor agonist, nicotinic acetylcholine receptor antagonist, and inhibitor of the serotonin and norepinephrine transporters. The bupropion component of AXS-05 serves to increase the bioavailability of dextromethorphan, and is a norepinephrine and dopamine reuptake inhibitor, and a nicotinic acetylcholine receptor antagonist. We are seeking U.S. Food and Drug Administration, or FDA, approval for AXS‑05 utilizing the 505(b)(2) regulatory development pathway. AXS-05 has been granted FDA Breakthrough Therapy designation for both the treatment of MDD and the treatment of Alzheimer’s disease agitation, as well as Fast Track designations for the treatment of Alzheimer’s disease agitation and treatment resistant depression.

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We have completed two pivotal, one Phase 2 and one Phase 3, trials of AXS-05 in MDD, which we refer to as the ASCEND and GEMINI trials, respectively. AXS-05 achieved the primary endpoint in both the ASCEND and GEMINI trials. A Phase 3, open-label, long-term safety study with AXS-05 in patients with MDD and TRD known as the COMET trial has also been completed. Additionally, three Phase 2 open-label efficacy sub-studies of the COMET trial have been completed. These sub-studies evaluated the efficacy and safety of AXS-05 in three clinically pertinent MDD patient populations: the COMET-TRD trial in treatment resistant MDD (TRD), the COMET-AU trial in antidepressant unresponsive MDD, and the COMET-SI trial in MDD with suicidal ideation. In the overall COMET trial, AXS-05 treatment resulted in rapid, substantial, and durable improvement in depressive symptoms, measured using the MADRS, which was sustained or increased with long-term treatment. Additionally, AXS-05 was well tolerated with long-term dosing. Similar findings of rapid and durable improvements in depressive symptoms were demonstrated in the COMET-AU and COMET-TRD sub-studies. In the COMET-SI trial, a rapid reduction in suicidal ideation was observed with AXS-05 treatment, as demonstrated by reductions in the MADRS-SI score. We have completed a Phase 3 trial of AXS-05 in TRD, which we refer to as the STRIDE-1 trial, which met key secondary endpoints but did not reach statistical significance on the primary endpoint. Additionally, we have initiated the MERIT (Mechanistic Evaluation of Response in TRD) trial, a Phase 2, double-blind, placebo-controlled, randomized withdrawal study in patients with TRD. We have also completed a Phase 2/3 trial of AXS-05 in AD agitation, which we refer to as the ADVANCE-1 trial. AXS-05 achieved the primary endpoint in the ADVANCE-1 trial. We have initiated the ACCORD (Assessing Clinical Outcomes in Alzheimer’s Disease Agitation) trial, a Phase 3, double blind, placebo-controlled, randomized withdrawal trial in patients with AD agitation, and one open-label long-term safety study in AD agitation. AXS-05 is also being developed as an aid to smoking cessation treatment and a positive Phase 2 trial in this indication has been completed under a research collaboration between us and Duke University. We have submitted a New Drug Application, or NDA, for AXS-05 for the treatment of MDD supported by the positive results from the ASCEND and GEMINI trials which has been accepted for filing by the FDA and has granted the application Priority Review resulting in a Prescription Drug User Fee Act (PDUFA) target action date of August 22, 2021.

AXS-07 is a novel, oral, rapidly absorbed, multi-mechanistic, investigational medicine under development for the acute treatment of migraine. AXS-07 consists of MoSEIC™, or Molecular Solubility Enhanced Inclusion Complex, meloxicam and rizatriptan. Meloxicam is a long-acting nonsteroidal anti-inflammatory drug, or NSAID, with COX-2, an enzyme involved in inflammation and pain pathways, preferential inhibition and potent pain-relieving effects. However, standard meloxicam has an extended time to maximum plasma concentration, or Tmax, which delays its onset of action. AXS-07 utilizes our proprietary MoSEIC™ technology to substantially increase the solubility and speed the absorption of meloxicam while potentially maintaining durability of action. Meloxicam is a new molecular entity for migraine enabled by our MoSEIC™ technology. Rizatriptan is a 5-HT1B/1D agonist that inhibits calcitonin gene-related peptide (CGRP)-mediated vasodilation, has been shown to have central trigeminal antinociceptive activity, and may reduce the release of inflammatory mediators from trigeminal nerves. Rizatriptan is approved as a single agent for the acute treatment of migraine. We intend to seek FDA approval for AXS-07 utilizing the 505(b)(2) regulatory development pathway.

We have completed two Phase 3 trials of AXS-07 for the acute treatment of migraine, which we refer to as the MOMENTUM and INTERCEPT trials. AXS-07 achieved the co-primary endpoints in both the MOMENTUM and INTERCEPT trials. We plan to submit an NDA for AXS-07 for the acute treatment of migraine supported by the positive results from the MOMENTUM and INTERCEPT trials. An open-label, long-term, safety study of AXS-07 in patients with migraine known as the MOVEMENT trial has also been completed. In the MOVEMENT trial, administration of AXS-07 resulted in rapid, and substantial relief of migraine pain and associated symptoms and was well tolerated with long term dosing.

AXS-09 is an oral, investigational NMDA receptor antagonist with multimodal activity consisting of esbupropion and dextromethorphan, which is being developed for the treatment of CNS disorders. AXS-09 contains esbupropion, the chirally pure S-enantiomer of bupropion, as compared to the company’s first generation product candidate AXS-05 which contains racemic bupropion, equal amounts of the S- and R-enantiomers. We have demonstrated in a Phase 1 trial that dextromethorphan plasma levels are substantially increased into a potentially therapeutic range with repeated administration of AXS-09. Results of this Phase 1 trial coupled with preclinical data also indicate the potential for enhanced absorption and therapeutic effect of the S-enantiomer as compared to the R-enantiomer.

AXS-12, reboxetine, is a novel, oral, investigational medicine in development for the treatment of narcolepsy. AXS-12 is a highly selective and potent norepinephrine reuptake inhibitor. AXS-12 has been granted FDA Breakthrough Therapy designation and Orphan Drug Designation for the treatment of narcolepsy. We have completed a Phase 2 trial with AXS-12, which we refer to as the CONCERT trial. AXS-12 achieved the primary endpoint in the CONCERT trial.

AXS-14, esreboxetine, is a novel, oral, investigational medicine in development for the treatment of fibromyalgia. AXS-14 is a highly selective and potent norepinephrine reuptake inhibitor. We are initially developing esreboxetine for the treatment of fibromyalgia. Esreboxetine, the SS-enantiomer of reboxetine, is more potent and selective than racemic reboxetine. We have in-licensed data from Pfizer which includes a completed Phase 2 trial and Phase 3 trial in fibromyalgia, both of which were positive.

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Since our incorporation in January 2012, our operations to date have included organizing and staffing our company, business planning, raising capital, developing our compounds, and engaging in other discovery and preclinical activities. Prior to our initial public offering, or IPO, in November 2015, we financed our operations primarily through private placements of our convertible notes and subsequent to our IPO, through proceeds from sales of our common stock and warrants to purchase shares of our common stock to equity investors and debt borrowings. For a further discussion, see the section entitled “Liquidity and Capital Resources” below.

Our ability to become profitable depends on our ability to generate revenue. We do not expect to generate significant revenue unless and until we or our collaborators obtain marketing approval for and successfully commercialize one of our product candidates.

We have incurred significant operating expenses and net losses since inception. We incurred net losses of $29.3 million and $32.5 million for the three months ended March 31, 2021 and 2020, respectively. Our accumulated deficit as of March 31, 2021 was $308.1 million, and we expect to incur significant expenses and increasing operating losses for the foreseeable future. We expect to continue to incur expenses in connection with the development of our product candidates, including with respect to conducting clinical trials and seeking regulatory approval for our current product candidates and any other product candidates that we develop or in-license and advance to clinical development. In preparation for obtaining regulatory approval for our product candidates, we expect to incur significant expenses in order to create an infrastructure and market readiness to support the commercialization of the product candidate, including manufacturing, sales, marketing, and distribution functions. Further, we have incurred and will continue to incur additional costs associated with operating as a public company. Accordingly, we will need additional financing to support our continuing operations. We will seek to fund our operations through public and/or private equity, debt financings or other sources. Adequate additional financing may not be available to us on acceptable terms, or at all. Our failure to raise capital as and when needed would have a negative impact on our financial condition and our ability to pursue our business strategy. We will need to generate significant revenue to achieve profitability, and we may never do so.

Year to Date and Recent Developments

AXS-05

In April 2021, we announced that the FDA has accepted for filing the NDA for AXS-05 for the treatment of MDD, and has granted the application Priority Review resulting in a PDUFA target action date of August 22, 2021.

Financial Overview

Revenue

We have not generated any revenue and have incurred significant operating losses since inception, and we do not expect to generate any revenue from the sale of any products unless or until we obtain regulatory approval. If we fail to complete the development of our product candidates in a timely manner or obtain regulatory approval for them, our ability to generate future revenue, and our results of operations and financial position, would be materially and adversely affected. If we enter into licensing or collaboration arrangements, such agreements may generate revenue in the future.

Research and Development Expenses

Research and development expenses primarily include preclinical studies, clinical trials, manufacturing costs, employee salaries and benefits, stock‑based compensation expense, contract services, including external research and development expenses incurred under arrangements with third parties, such as contract research organizations, or CROs, facilities costs, overhead costs, depreciation, and other related costs.

Research and development activities are central to our business model. We have and will incur substantial costs beyond our present and planned clinical trials in order to file a new drug application, or NDA, for any of our product candidates. It is difficult to determine with certainty the costs and duration of our current or future clinical trials and preclinical studies, or if, when, or to what extent we will generate revenue from the commercialization and sale of our product candidates if we obtain regulatory approval. We may never succeed in achieving regulatory approval. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including the uncertainties of future clinical trials and preclinical studies, uncertainties in clinical trial enrollment rate, and significant and changing government regulation. In addition, the probability of success for each product candidate will depend on numerous factors, including competition, manufacturing capability, and commercial viability. We will determine which programs to pursue and how much to fund each program in response to the scientific and clinical success of each product candidate, as well as an assessment of each product candidate’s commercial potential.

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Management considers many factors in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of the financial statements if these results differ from historical experience, or other assumptions do not turn out to be substantially accurate, even if such assumptions are reasonable when made.

The following table summarizes our research and development expenses for our primary programs for the three months ended March 31, 2021 and 2020:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

AXS-05

 

$

10,044,146

 

 

$

9,317,822

 

AXS-07

 

 

2,531,549

 

 

 

6,010,278

 

AXS-12

 

 

733,858

 

 

 

5,557,062

 

AXS-14

 

 

 

 

 

5,077,669

 

Other research and development

 

 

1,751,741

 

 

 

924,194

 

Stock-based compensation

 

 

1,534,395

 

 

 

634,375

 

Total research and development expenses

 

$

16,595,689

 

 

$

27,521,400

 

 

Other research and development expenses primarily consist of employee salaries and benefits, facilities and overhead costs.

General and Administrative Expenses

General and administrative expenses primarily consist of salaries and related costs for personnel in executive, commercial, finance, and operational functions, including stock based compensation and travel expenses. Also included in general and administrative expenses are pre-commercialization costs, facility related costs, insurance expense, professional fees for legal and accounting services and patent filing and prosecution costs. General and administrative expenses are expensed when incurred.

Interest and amortization of debt discount (expense) income

Interest and amortization of debt discount (expense) income primarily consists of cash interest and non-cash costs related to our term loans (see “Liquidity and Capital Resources” below for a further discussion). We amortize these costs over the term of our debt agreements as interest expense in our consolidated statement of operations. Interest and amortization of debt discount (expense) income also includes interest income earned on cash.

Critical Accounting Policies and Significant Judgments and Estimates

This discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States of America, or U.S. GAAP. The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of expenses during the reported period. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes to our critical accounting policies since the beginning of our fiscal year. Our critical accounting policies are described in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K for the year ended December 31, 2020 and in the notes to the condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.

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Results of Operations

The following table summarizes our results of operations for the periods indicated:

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2021

 

 

2020

 

Operating expenses:

 

 

 

 

 

 

 

 

Research and development

 

$

16,595,689

 

 

$

27,521,400

 

General and administrative

 

 

11,248,372

 

 

 

4,970,057

 

Total operating expenses

 

 

27,844,061

 

 

 

32,491,457

 

Loss from operations

 

 

(27,844,061

)

 

 

(32,491,457

)

Interest and amortization of debt discount (expense) income

 

 

(1,415,909

)

 

 

7,311

 

Net loss

 

$

(29,259,970

)

 

$

(32,484,146

)

 

Comparison of the three months ended March 31, 2021 and 2020

Research and Development Expenses. Our research and development expenses for the three months ended March 31, 2021 were $16.6 million, compared to $27.5 million for the three months ended March 31, 2020, a decrease of $10.9 million. The decrease was driven by a one-time charge of $10.2 million for the Pfizer license agreement in the comparable prior period along with conclusion of several clinical trials, which were ongoing in the comparable prior period. The current period included a $2.9 million PDUFA fee related to the NDA submission for AXS-05. This fee will be refunded subsequent to the end of the first quarter, as our Small Business Waiver request for the fee was recently granted by the FDA.

General and Administrative Expenses. Our general and administrative expenses for the three months ended March 31, 2021 were $11.2 million, compared to $5.0 million for the three months ended March 31, 2020, an increase of $6.2 million. The increase was primarily due to pre-commercial activities along with increased stock compensation expense.

Interest and amortization of debt discount (expense) income. Interest and amortization of debt discount expense for the three months ended March 31, 2021 was $1.4 million, compared to interest income of less than $0.1 million for the three months ended March 31, 2020, a change of $1.4 million. The change is mainly due to a higher outstanding principal amount on our debt in 2021 as compared to the comparable period in 2020.

Liquidity and Capital Resources

Since our inception through March 31, 2021, we have financed our operations primarily through proceeds from equity offerings and debt borrowings. See discussion below.

In November 2015, we completed our IPO, in which we sold 5,666,667 shares of common stock at an offering price to the public of $9.00 per share. We received gross proceeds of approximately $51.0 million and net proceeds of approximately $45.5 million, after deducting underwriting discounts and commissions and offering-related transaction costs.

In November 2016, we entered into a loan and security agreement with SVB for a term loan of up to $20.0 million, which we refer to as the Original Term Loan. The initial tranche of $10.0 million was funded shortly after executing the loan agreement. Because we did not achieve the conditional criteria to access the second and third tranches before the specified dates, the $10.0 million in additional term loan advances expired. In November 2018, we amended the loan and security agreement with SVB to provide an additional $4 million growth capital loan, related to our narcolepsy clinical program with AXS-12. We refer to this amendment as the First Amendment to the Original Term Loan. The additional capital was available to be drawn, at our option, subject to the achievement of a specified clinical milestone. Our obligations under the loan and security agreement, as amended, along with our ability to draw down on the additional $4.0 million tranche, were subsequently extinguished in connection with the establishment of a new term loan facility with SVB during March 2019 (see below).

On December 1, 2016, we filed a shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an aggregate amount of $150.0 million, which we refer to as the 2016 Shelf Registration Statement. On December 16, 2016, the 2016 Shelf Registration Statement was declared effective by the SEC. As discussed in greater detail below, we completed an offering of common stock in March 2017, entered into a sales agreement in October 2017 pursuant to which we sold shares of our common stock from time to time in an at-the-market offering until completion of the offering in January 2019, completed a registered direct offering priced at the market in December 2017 and September 2018, entered into a sales agreement in May 2019 pursuant to which we sold shares of our common stock from time to time in an at-the-market offering each utilizing the 2016 Shelf Registration Statement. The 2016 Shelf Registration expired in December 2019.

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In March 2017, we completed an underwritten public offering, whereby we sold 4,304,813 shares of our common stock at a public offering price of $3.74 per share. We received gross proceeds of approximately $16.1 million and net proceeds of approximately $14.8 million, net of underwriting discounts and offering expenses.

In October 2017, we entered into an “at-the-market” sales agreement, or the Sales Agreement, with Leerink Partners LLC, or now known as SVB Leerink, pursuant to which we could sell up to $30 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings. In January 2019, we raised approximately $25.8 million in gross proceeds through the sale of 3,164,015 shares under the Sales Agreement. Upon completion of this final sale, the Sales Agreement was automatically terminated. SVB Leerink received a commission of 3.0% of the gross proceeds for all shares sold under the Sales Agreement.

In December 2017, we completed a registered direct offering priced at the market, whereby we sold an aggregate of $9.5 million worth of units, or Units, at a purchase price of $5.325 per Unit, with each Unit consisting of (i) one share of our common stock, and (ii) a warrant to purchase one share of our common stock, or Common Warrant, at an exercise price equal to $5.25 per share. We sold an aggregate of 1,783,587 Units in the offering for gross proceeds of approximately $9.5 million and net proceeds of approximately $8.8 million, net of underwriting discounts and offering expenses. Additionally, we issued warrants to purchase up to 107,015 shares of our common stock at an exercise price of $6.6562 per share to certain investors affiliated with H.C. Wainwright & Co., LLC, placement agent for the offering, which we refer to as the Placement Agent Warrants. The Placement Agent Warrants had the same terms as the Common Warrants, except for the difference in exercise price noted above. Both the Common Warrants and the Placement Agent Warrants expired on December 11, 2018.

In September 2018, we entered into a purchase agreement with certain institutional and accredited investors, which we refer to as the RDO Investors, for the sale by us directly to the RDO Investors of an aggregate of 2,966,667 shares of our common stock, at a purchase price of $3.00 per share, which we refer to as the 2018 Registered Direct Offering, for gross proceeds of approximately $8.9 million. The 2018 Registered Direct Offering closed on October 1, 2018, and we received estimated net proceeds of approximately $8.8 million, after deducting transaction expenses. The 2,966,667 shares of common stock sold in the 2018 Registered Direct Offering were offered and sold by us directly to the RDO Investors, without a placement agent, underwriter, broker or dealer.

In March 2019, we entered into a loan and security agreement, the 2019 Term Loan with SVB and WestRiver, for a term loan up to $24.0 million. The initial tranche of $20.0 million was funded shortly after executing the loan agreement. The second tranche of $4.0 million was available to be drawn, at our option, subject to the achievement of positive data, on or prior to August 15, 2019, with respect to our ongoing Phase 2 clinical trial for AXS 12 in narcolepsy, sufficient to submit a Phase 3 protocol to FDA, provided that we had not received any objections from the FDA within thirty days after submission of such Phase 3 protocol A portion of the initial tranche was used to satisfy our existing obligations under our November 2016 term loan facility with SVB, as amended in November 2018, and such obligations are considered fully repaid and extinguished. In September 2020, we terminated and repaid all amounts outstanding under 2019 Term Loan in connection with our entry into the Loan Agreement (see below).

In May 2019, we entered into the May 2019 Sales Agreement with SVB Leerink, pursuant to which we may sell up to $50 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the 2016 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the May 2019 Sales Agreement. Due to expiration of the 2016 Shelf Registration Statement, the shares that were unsold under the May 2019 Sales Agreement, were rolled over to the December 2019 Sales Agreement (see below).

In July 2019, we entered into the first amendment to the 2019 Term Loan, or the First Amendment to the 2019 Term Loan. Under the First Amendment to the 2019 Term Loan, the interest-only monthly payment period of the 2019 Term Loan was extended to 18 months after the date of the 2019 Term Loan, which could have been further extended to 24 months upon receipt by us of the Term B Loan Advance. Our ability to draw down the Term B Loan Advance was extended to December 31, 2019, subject to our achievement of the Milestone Event prior to or on December 31, 2019. The Loan Advances mature on February 1, 2023. See the subsection titled “July 2019 First Amendment to Loan and Security Agreement – Silicon Valley Bank” under the “Contractual Obligations and Commitments” section below for a further description of the First Amendment to the 2019 Term Loan.

On December 5, 2019, we filed an automatic shelf registration statement with the SEC for the issuance of common stock, preferred stock, warrants, rights, debt securities and units up to an unlimited amount, which we refer to as the 2019 Shelf Registration Statement. It was declared effective by the SEC upon filing. As discussed in greater detail below, we entered into a sales agreement in December 2019 pursuant to which we sold shares of our common stock from time to time in an at-the-market offering and completed an offering of common stock in December 2019, each utilizing the 2019 Shelf Registration Statement. In the future, we may conduct additional offerings of one or more of these securities utilizing the 2019 Shelf Registration Statement in such amounts, prices and terms to be announced when and if the securities are offered. At the time any of our securities covered by the 2019 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

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In December 2019, we entered into the December 2019 Sales Agreement with SVB Leerink, pursuant to which we may sell up to $80 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement. For the year ended December 31, 2020, the Company received approximately $14.6 million in gross proceeds through the sale of 167,243 shares, of which net proceeds were approximately $14.1 million. For the year ended December 31, 2019, we received approximately $7.3 million in gross proceeds through the sale of 89,390 shares, of which net proceeds were approximately $7.1 million.

In December 2019, we entered into a new Sales Agreement with SVB Leerink, or the December 2019 Sales Agreement, pursuant to which we may sell up to $80 million in shares of our common stock from time to time through SVB Leerink, acting as our sales agent, in one or more at-the-market offerings utilizing the 2019 Shelf Registration Statement. SVB Leerink is entitled to receive a commission of 3.0% of the gross proceeds for any shares sold under the December 2019 Sales Agreement. We received approximately $6.3 million in gross proceeds through the sale of 93,877 shares, of which net proceeds were approximately $6.1 million during the three months ended March 31, 2021.

In September 2020, we entered into the Loan Agreement with Hercules for the 2020 Term Loan, which consists of several tranches in an aggregate amount of up to $225.0 million. The first tranche consists of term loans in the amount of $60.0 million, of which $50.0 million was funded shortly after executing the Loan Agreement and the remaining $10.0 million is available at our option at any time through September 15, 2021. A portion of the initial tranche was used to repay the 2019 Term Loan along with associated final payment fees. The remaining $115 million may be drawn at our option, in three separate tranches, as described below under “Contractual Obligations - September 2020 Loan and Security Agreement – Hercules.” An additional $50 million is available, subject to the approval of Hercules, to support future strategic initiatives, including further pipeline advancement or expansion. The 2020 Term Loan bears interest at a calculated prime-based variable rate currently at 9.15%. It matures in October 2025 and has an initial interest-only payment period of 30 months, which may be extended to up to 48 months upon the drawing of future tranches.

In the future, we may conduct additional offerings of one or more of the securities covered by the 2019 Shelf Registration Statement in such amounts, prices and terms to be announced when and if the securities are offered. At the time any of our securities covered by the 2019 Shelf Registration Statement are offered for sale, a prospectus supplement will be prepared and filed with the SEC containing specific information about the terms of any such offering.

We believe our current cash, along with the committed capital from the term loan facility, will be sufficient to fund our anticipated operations, based on our current operating plans which includes costs for the commercial launch of AXS-05 in MDD and AXS-07 in migraine into at least 2024. Because the process of commercializing products and evaluating product candidates in clinical trials is costly and the timing of progress in these trials is uncertain, it is possible that the assumptions upon which we have based this estimate may prove to be wrong, and we could use our capital resources sooner than we currently expect.

Cash Flows

The following table summarizes our primary sources and uses of cash for the periods indicated:

 

 

 

Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

Net cash (used in) provided by:

 

 

 

 

 

 

 

 

Operating activities

 

$

(27,215,489

)