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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended June 30, 2019

 

OR

 

o         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 001-35619

 

STEMLINE THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

 

Delaware

 

45-0522567

(State or other jurisdiction of incorporation or
organization)

 

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

 

750 Lexington Avenue

Eleventh Floor

New York, New York 10022

(Address including zip code of principal executive offices)

 

(646) 502-2311

(Registrant’s telephone number, including area code)

 

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

 

Title of each class:

 

Trading Symbol(s)

 

Name of each exchange on which registered:

Common Stock

 

STML

 

Nasdaq Capital Market

 

There were 43,955,624 shares of the registrant’s common stock, $0.0001 par value, outstanding as of August 5, 2019.

 

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 x No o

 

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

 

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

 

Large accelerated filer

o

 

 

Accelerated filer

x

Non-accelerated filer

o

 

 

Smaller reporting company

x

 

 

 

 

Emerging growth company

o

 

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. o

 

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

 

 

 


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TABLE OF CONTENTS

 

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

i

 

 

PART I: FINANCIAL INFORMATION

1

 

Item 1.

Financial Statements

1

 

Item 2.

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

25

 

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

37

 

Item 4.

Controls and Procedures

38

 

 

 

 

PART II: OTHER INFORMATION

39

 

Item 1.

Legal Proceedings

39

 

Item 1A.

Risk Factors

39

 

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

70

 

Item 3.

Defaults upon Senior Securities

70

 

Item 4.

Mine Safety Disclosures

70

 

Item 5.

Other Information

70

 

Item 6.

Exhibits

70

 

 

 

 

EXHIBIT INDEX

70

 

 

SIGNATURES

72

 


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This Quarterly Report on Form 10-Q contains trademarks and trade names of Stemline Therapeutics, Inc., including our name and logo. All other trademarks, service marks, or trade names referenced in this Quarterly Report on Form 10-Q are the property of their respective owners.

 

SPECIAL CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS

 

This quarterly report on Form 10-Q (“Form 10-Q”) includes statements that are, or may be deemed, “forward-looking statements.” In some cases, these forward-looking statements can be identified by the use of forward-looking terminology, including the terms “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or, in each case, their negative or other variations thereon or comparable terminology, although not all forward-looking statements contain these words. They appear in a number of places throughout this Form 10-Q and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our history of net operating losses and uncertainty regarding our ability to obtain capital and achieve profitability, our ability to develop and commercialize our product candidates, our ability to advance our development programs, enroll our trials, and achieve clinical endpoints, our ability to use or expand our technology to build a pipeline of product candidates, our ability to obtain and maintain regulatory approval of our products and product candidates and comply with ongoing regulatory requirements, our ability to successfully operate in a competitive industry and gain market acceptance by physician, provider, patient, and payor communities, our reliance on third parties, unstable economic or market conditions, and our ability to obtain and adequately protect intellectual property rights for our product candidates.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics, and healthcare, regulatory and scientific developments and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Form 10-Q, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Form 10-Q, they may not be predictive of results or developments in future periods.

 

Some of the factors that we believe could cause actual results or outcomes to differ from those anticipated or predicted include:

 

·                  the success of our launch and commercialization of ELZONRIS® in the U.S.;

 

·                  the success and timing of our clinical trials for ELZONRIS in unapproved indications and our other product candidates, including risks relating to regulatory authority approval, institutional review board approval, scientific review committee approval, site initiation, patient accrual, trial results including safety and efficacy, and the relevance of trial results to potentially viable regulatory pathways and commercialization efforts;

 

·                  the possibility that results of clinical trials are not predictive of safety and efficacy results of our products or product candidates in broader or additional patient populations;

 

·                  our ability to adhere to ongoing compliance requirements of all health authorities to which we are subject, in the U.S. and abroad;

 

·                  our ability to obtain and maintain adequate reimbursement for our products;

 

·                  product quality, efficacy or safety concerns resulting in product recalls or regulatory action;

 

·                  the risk that estimates regarding the number of patients with the diseases that our products and product candidates are designed to treat are inaccurate, do not predict, or are not reflective of actual numbers;

 

·                  our products not gaining acceptance among patients, providers and/or third party payors, including governmental agencies, for certain approved indications, due to cost or otherwise;

 

·                  our ability to maintain or increase sales of ELZONRIS;

 

·                  the adequacy, and outcomes, of our pharmacovigilance and drug safety reporting processes, and reports, in the U.S., Europe and other regions;

 

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·                  the loss of key management, scientific, or other personnel;

 

·                  the success and timing of any regulatory filings for ELZONRIS, or any of our other product candidates, including for approval in the U.S., Europe, and other regions for any indication(s);

 

·                  the success of our commercial infrastructure buildout, launch, and commercialization in the U.S. and potentially in other regions of the world should ELZONRIS be approved for marketing by ex-U.S. regulatory authorities for any indication or by U.S. regulatory authorities for any as yet unapproved indication or should any of our other product candidates be approved for marketing in the U.S. or abroad;

 

·                  changes in regulations in the U.S., Europe and other regions;

 

·                  new products, new product candidates or new uses for existing products or technologies introduced or announced, by our competitors, and the timing of these introductions or announcements;

 

·                  our available cash and investments;

 

·                  the accuracy of our estimates regarding expenses, future income or revenue, capital requirements and needs for additional financing;

 

·                  our ability to obtain additional funding;

 

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

 

·                  delays, interruptions, or failures in the manufacture, supply and distribution of our products and/or our product candidates;

 

·                  our ability to maintain the license agreements for our products and product candidates;

 

·                  the ability of our third-party manufacturers to manufacture and supply our products, and the performance of, and our reliance on, our third-party manufacturers and suppliers;

 

·                  the performance of our third-party vendors, including clinical research organizations, clinical trial sponsors, and clinical trial investigators;

 

·                  the success of our preclinical, non-clinical, and pre-investigational new drug, or pre-IND, efforts; and

 

·                  our ability to gain access to products we may plan to use in combination studies; and

 

·                  our ability to form corporate partnerships, should that be an avenue we choose to pursue.

 

Any forward-looking statements that we make in this Form 10-Q speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this Form 10-Q. You should also read carefully the factors described in the “Risk Factors” section of this Form 10-Q to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these risks and uncertainties, our actual results may differ materially from those reflected in the forward-looking statements in this Form 10-Q.

 

This Form 10-Q includes statistical and other industry and market data that we obtained from industry publications and research, surveys and studies conducted by third parties. Industry publications and third-party research, surveys and studies generally indicate that their information has been obtained from sources believed to be reliable, although they do not guarantee the accuracy or completeness of such information. While we believe these industry publications and third-party research, surveys and studies are reliable, we have not independently verified such data.

 

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.

 

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PART I:  FINANCIAL INFORMATION

 

Item 1.                                 Financial Statements.

 

STEMLINE THERAPEUTICS, INC.
Balance Sheets

 

 

 

June 30, 2019
(Unaudited)

 

December 31,
2018

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

 

$

16,965,619

 

$

9,443,667

 

Short-term investments

 

86,918,164

 

50,662,189

 

Accounts receivable

 

15,093,121

 

 

Inventories

 

3,655,017

 

 

Prepaid expenses and other current assets

 

3,596,436

 

2,952,996

 

Total current assets

 

126,228,357

 

63,058,852

 

Property and equipment, net

 

238,729

 

222,413

 

Right-of-use asset, net

 

1,469,714

 

 

Other assets

 

212,305

 

212,305

 

Total assets

 

$

128,149,105

 

$

63,493,570

 

Liabilities and stockholders’ equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable and accrued expenses

 

$

25,748,958

 

$

21,153,062

 

Right-of-use liability - current portion

 

1,042,526

 

 

Other current liabilities

 

6,142

 

65,862

 

Total current liabilities

 

26,797,626

 

21,218,924

 

Right-of-use liability

 

550,496

 

 

Other liabilities

 

9,496

 

72,591

 

Total liabilities

 

27,357,618

 

21,291,515

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock $0.0001 par value, 5,000,000 shares authorized, none issued and outstanding at June 30, 2019 and December 31, 2018

 

 

 

Common stock $0.0001 par value, 83,750,000 shares authorized at June 30, 2019 and 53,750,000 shares authorized at December 31, 2018. 43,875,679 shares issued and outstanding at June 30, 2019 and 31,943,186 shares issued and outstanding at December 31, 2018

 

4,388

 

3,194

 

Additional paid-in capital

 

434,071,363

 

331,343,484

 

Accumulated other comprehensive income (loss)

 

52,488

 

(56,559

)

Accumulated deficit

 

(333,336,752

)

(289,088,064

)

Total stockholders’ equity

 

100,791,487

 

42,202,055

 

Total liabilities and stockholders’ equity

 

$

128,149,105

 

$

63,493,570

 

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statements of Operations
(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

Product revenue, net

 

$

13,006,709

 

 

$

18,055,299

 

 

Income:

 

 

 

 

 

 

 

 

 

Grant income

 

 

$

500,000

 

 

$

500,000

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

583,159

 

 

668,888

 

 

Research and development

 

10,891,394

 

11,184,064

 

27,845,216

 

23,892,122

 

Selling, general and administrative

 

19,002,508

 

8,622,616

 

34,956,475

 

14,561,216

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

30,477,061

 

19,806,680

 

63,470,579

 

38,453,338

 

 

 

 

 

 

 

 

 

 

 

Loss from operations

 

(17,470,352

)

(19,306,680

)

(45,415,280

)

(37,953,338

)

Other expense

 

(262

)

(123

)

(4,878

)

(4,020

)

Interest income

 

610,692

 

378,100

 

1,149,276

 

611,902

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

(16,859,922

)

(18,928,703

)

(44,270,882

)

(37,345,456

)

 

 

 

 

 

 

 

 

 

 

Income tax benefit

 

18,500

 

 

22,194

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,841,422

)

$

(18,928,703

)

$

(44,248,688

)

$

(37,345,456

)

 

 

 

 

 

 

 

 

 

 

Net loss per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$

(0.42

)

$

(0.66

)

$

(1.14

)

$

(1.34

)

 

 

 

 

 

 

 

 

 

 

Weighted-average shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

40,108,267

 

28,567,982

 

38,836,664

 

27,851,707

 

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statements of Comprehensive Loss
(Unaudited)

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,841,422

)

$

(18,928,703

)

$

(44,248,688

)

$

(37,345,456

)

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gain on investments, net of tax

 

79,649

 

27,404

 

104,723

 

19,088

 

Reclassification adjustment for loss on investments included in net loss

 

 

 

4,324

 

3,897

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive gain

 

79,649

 

27,404

 

109,047

 

22,985

 

Comprehensive loss

 

$

(16,761,773

)

$

(18,901,299

)

$

(44,139,641

)

$

(37,322,471

)

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statement of Stockholders’ Equity
(Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

Total

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Capital

 

Capital

 

Income (Loss)

 

Deficit

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2019

 

43,576,081

 

$

4,358

 

$

425,410,295

 

$

(27,161

)

$

(316,495,330

)

$

108,892,162

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grants

 

257,000

 

26

 

(26

)

 

 

 

Forfeiture of restricted stock grants

 

(31,971

)

(3

)

3

 

 

 

 

Stock-based compensation expense

 

 

 

8,311,729

 

 

 

8,311,729

 

Employee Stock Purchase Plan compensation expense

 

 

 

45,500

 

 

 

45,500

 

Issuance of common stock in connection with the ESPP

 

2,348

 

 

26,204

 

 

 

26,204

 

Issuance of common stock in connection with the exercise of stock options

 

72,221

 

7

 

277,658

 

 

 

277,665

 

Net loss

 

 

 

 

 

(16,841,422

)

(16,841,422

)

Other comprehensive income, net of tax

 

 

 

 

79,649

 

 

79,649

 

Balance, June 30, 2019

 

43,875,679

 

$

4,388

 

$

434,071,363

 

$

52,488

 

$

(333,336,752

)

$

100,791,487

 

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statement of Stockholders’ Equity (cont.)
(Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

Total

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Capital

 

Capital

 

Income (Loss)

 

Deficit

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2018

 

31,943,186

 

$

3,194

 

$

331,343,484

 

$

(56,559

)

$

(289,088,064

)

$

42,202,055

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock award — in-licensing

 

43,822

 

4

 

500,005

 

 

 

500,009

 

Restricted stock grants

 

1,623,471

 

163

 

(163

)

 

 

 

Forfeiture of restricted stock grants

 

(45,096

)

(4

)

4

 

 

 

 

Stock-based compensation expense

 

 

 

15,517,821

 

 

 

15,517,821

 

Employee Stock Purchase Plan compensation expense

 

 

 

70,353

 

 

 

70,353

 

Issuance of common stock in connection with the ESPP

 

13,353

 

1

 

128,769

 

 

 

128,770

 

Issuance of common stock in connection with the exercise of stock options

 

74,721

 

7

 

293,483

 

 

 

293,490

 

Issuance of common stock in connection with secondary public offering, net

 

10,222,222

 

1,023

 

86,217,607

 

 

 

86,218,630

 

Net loss

 

 

 

 

 

(44,248,688

)

(44,248,688

)

Other comprehensive income, net of tax

 

 

 

 

109,047

 

 

109,047

 

Balance, June 30, 2019

 

43,875,679

 

$

4,388

 

$

434,071,363

 

$

52,488

 

$

(333,336,752

)

$

100,791,487

 

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statement of Stockholders’ Equity (cont.)
(Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

Total

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Capital

 

Capital

 

Income (Loss)

 

Deficit

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, March 31, 2018

 

30,216,530

 

$

3,022

 

$

310,857,448

 

$

(150,377

)

$

(222,692,443

)

$

88,017,650

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grants

 

198,278

 

20

 

(20

)

 

 

 

Forfeiture of restricted stock grants

 

(40,562

)

(4

)

4

 

 

 

 

Stock-based compensation expense

 

 

 

3,405,641

 

 

 

3,405,641

 

Adoption of accounting standard update related to stock compensation accounting (ASU 2018-07)

 

 

 

(211,991

)

 

211,991

 

 

Employee Stock Purchase Plan compensation expense

 

 

 

6,474

 

 

 

6,474

 

Issuance of common stock in connection with the ESPP

 

9,021

 

1

 

67,477

 

 

 

67,478

 

Issuance of common stock in connection with the exercise of stock options

 

91,859

 

9

 

443,398

 

 

 

443,407

 

Issuance of common stock in connection with secondary public offering

 

442,579

 

44

 

8,317,871

 

 

 

8,317,915

 

Net loss

 

 

 

 

 

(18,928,703

)

(18,928,703

)

Other comprehensive income, net of tax

 

 

 

 

27,404

 

 

27,404

 

Balance, June 30, 2018

 

30,917,705

 

$

3,092

 

$

322,886,302

 

$

(122,973

)

$

(241,409,155

)

$

81,357,266

 

 

—  See accompanying unaudited notes  —

 

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STEMLINE THERAPEUTICS, INC.
Statement of Stockholders’ Equity (cont.)
(Unaudited)

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

Additional

 

Other

 

 

 

Total

 

 

 

Common Stock

 

Paid-in

 

Comprehensive

 

Accumulated

 

Stockholders’

 

 

 

Shares

 

Capital

 

Capital

 

Income (Loss)

 

Deficit

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, December 31, 2017

 

25,313,595

 

$

2,531

 

$

251,489,546

 

$

(145,958

)

$

(204,275,690

)

$

47,070,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Restricted stock grants

 

739,532

 

74

 

(74

)

 

 

 

Forfeiture of restricted stock grants

 

(40,562

)

(4

)

4

 

 

 

 

Stock-based compensation expense

 

 

 

5,612,068

 

 

 

5,612,068

 

Adoption of accounting standard update related to stock compensation accounting (ASU 2018-07)

 

 

 

(211,991

)

 

211,991

 

 

Employee Stock Purchase Plan compensation expense

 

 

 

25,350

 

 

 

25,350

 

Issuance of common stock in connection with the ESPP

 

15,671

 

2

 

117,218

 

 

 

117,220

 

Issuance of common stock in connection with the exercise of stock options

 

161,060

 

16

 

1,533,307

 

 

 

1,533,323

 

Issuance of common stock in connection with the exercise of warrants

 

30,830

 

3

 

352,527

 

 

 

352,530

 

Issuance of common stock in connection with follow-on public offering, net

 

4,697,579

 

470

 

63,968,347

 

 

 

63,968,817

 

Net loss

 

 

 

 

 

(37,345,456

)

(37,345,456

)

Other comprehensive income, net of tax

 

 

 

 

22,985

 

 

22,985

 

Balance, June 30, 2018

 

30,917,705

 

$

3,092

 

$

322,886,302

 

$

(122,973

)

$

(241,409,155

)

$

81,357,266

 

 

—  See accompanying unaudited notes  —

 

7


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Statements of Cash Flows
(Unaudited)

 

 

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

Cash flows from operating activities

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$

(44,248,688

)

$

(37,345,456

)

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

 

 

 

 

 

Depreciation

 

58,179

 

24,064

 

Stock-based compensation expense

 

15,517,821

 

5,612,068

 

Stock award — in-licensing

 

500,009

 

 

Employee Stock Purchase Plan compensation expense

 

70,353

 

25,350

 

Amortization of premium paid on marketable securities

 

(431,097

)

(6,440

)

Net gain loss on sale of marketable securities

 

4,324

 

3,897

 

Changes in operating assets and liabilities:

 

 

 

 

 

Accounts receivable

 

(15,093,121

)

 

Inventories

 

(3,655,017

)

 

Prepaid expenses and other current assets

 

(643,440

)

(1,752,915

)

Right-of-use asset, net

 

(1,469,714

)

 

Accounts payable and accrued expenses

 

4,595,896

 

(1,563,431

)

Right-of-use liability - current portion

 

1,042,526

 

 

Right-of-use liability

 

550,496

 

 

Other liabilities

 

(122,815

)

(48,412

)

Net cash used in operating activities

 

(43,324,288

)

(35,051,275

)

 

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

 

Purchase of fixed assets

 

(74,495

)

 

Purchase of marketable securities

 

(90,047,109

)

(54,273,982

)

Sale and maturities of marketable securities

 

54,326,954

 

35,467,670

 

Net cash used in investing activities

 

(35,794,650

)

(18,806,312

)

 

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

 

Proceeds from issuance of common stock from follow-on public offerings, net

 

86,218,630

 

63,968,817

 

Proceeds from issuance of common stock from ESPP

 

128,770

 

117,219

 

Proceeds from exercise of stock options

 

293,490

 

1,533,323

 

Proceeds from exercise of warrants

 

 

352,530

 

Net cash provided by financing activities

 

86,640,890

 

65,971,889

 

 

 

 

 

 

 

Net increase in cash and cash equivalents

 

7,521,952

 

12,114,302

 

Cash and cash equivalents at beginning of period

 

9,443,667

 

4,795,098

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

16,965,619

 

$

16,909,400

 

 

—  See accompanying unaudited notes  —

 

8


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

1.             Organization

 

Stemline Therapeutics, Inc. (the “Company”) is a commercial-stage biopharmaceutical company focused on discovering, acquiring, developing and commercializing novel oncology therapeutics. The Company’s activities to date have primarily consisted of advancing ELZONRIS® (tagraxofusp-erzs; SL-401) through the clinical and regulatory process, launching and commercializing ELZONRIS, including building out a sales, marketing, and reimbursement infrastructure, developing and implementing its global regulatory and commercial strategies, developing its clinical and preclinical stage programs, including evaluating ELZONRIS in additional indications and other product candidates in various indications, expanding and strengthening its intellectual property portfolio, identifying and acquiring additional product and technology rights, investor relations efforts, and raising capital. The Company was incorporated in Delaware on August 8, 2003 and has its principal office in New York, New York.

 

The Company has incurred losses from operations since inception of $345.0 million. Since its inception, most of its resources have been dedicated to drug discovery and acquisition, intellectual property, manufacturing, preclinical and clinical development of product candidates, regulatory strategy and implementation, and commercialization of ELZONRIS, an FDA-approved product. In particular, the Company has expended and will continue to expend, substantial resources for the foreseeable future commercializing its approved product in the U.S. and potentially abroad, should it be approved outside the U.S., developing its approved product for potential additional indications, developing its additional clinical stage product candidates, developing its preclinical stage product candidates, and continuing its asset acquisition efforts. These expenditures include costs associated with general and administrative, facilities, research and development, acquiring new technologies, manufacturing product and product candidates, conducting clinical trials and preclinical experiments, seeking regulatory input, including approvals, as well as commercializing any products approved for sale, including its approved product, ELZONRIS, in blastic plasmacytoid dendritic cell neoplasm (“BPDCN”). The Company anticipates incurring additional losses until such time, if ever, that it can generate significant sales from its approved product and/or from the potential approval of its currently approved product in additional indications, and/or in additional territories, or its other product candidates. The Company expects its research and development expenses to increase in connection with its ongoing and planned clinical trials and related manufacturing efforts, as well as for expenses related to the U.S. commercial launch of ELZONRIS and pursuit of potential regulatory approval and commercialization in additional ex-U.S. territories. The Company also anticipates that its selling, general and administrative expenses will be higher in future periods due to commercialization and ongoing optimization and build out of its commercial infrastructure and regulatory compliance systems to support the continued commercialization of ELZONRIS in the U.S. and potentially additional ex-U.S. territories.

 

As a result, the Company expects to continue to incur operating losses for the foreseeable future. If adequate funds are not available to the Company on a timely basis, or at all, the Company may be required to delay or terminate commercialization, clinical trials or other development activities for its product and product candidates, for one or more indications or territories, or delay or terminate its establishment of sales and marketing capabilities, or other activities, that may be necessary to commercialize its products and product candidates.

 

Basis of Presentation

 

The accompanying unaudited financial statements have been prepared in accordance with the United States generally accepted accounting principles (“GAAP”) and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments (including normal recurring adjustments) considered necessary for fair presentation of the Company’s financial position, results of operations and cash flows for the periods presented. Operating results for the current interim period are not necessarily indicative of the results that may be expected for the fiscal year ending December 31, 2019, or any future periods. This Form 10-Q should be read in conjunction with the audited financial statements and accompanying notes in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. The Company believes that its existing cash, cash equivalents, and investments will be sufficient to cover its cash flow requirements for at least the next twelve months from the issuance date of these financial statements.

 

Use of Estimates

 

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported financial position at the date of the financial statements and the reported results of operations during the reporting period. Such estimates and assumptions affect the reported amounts of assets, liabilities, income and expenses and disclosure of contingent assets and liabilities in the financial statements and accompanying notes. Actual results could differ from those estimates.

 

9


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

2.                                      Summary of Significant Accounting Policies

 

The Company’s significant accounting policies are described in Note 2 of the Notes to the Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018. During the six months ended June 30, 2019, the changes to the significant accounting policies mainly relate to the commercialization of ELZONRIS, which includes product net revenue, accounts receivable, and inventory.

 

Revenue Recognition

 

Effective January 1, 2018, the Company adopted Accounting Standards Codification (“ASC”) 606. This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements, and financial instruments. Under ASC 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration which the entity expects to receive in exchange for those goods or services. To determine revenue recognition for arrangements that an entity determines are within the scope of ASC 606, the entity performs the following five step assessment: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the entity satisfies a performance obligation. The Company only applies the five-step model to contracts when it is probable that the entity will collect the consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception and once the contract is determined to be within the scope of ASC 606, the Company assesses the goods or services promised within each contract, determines which goods and services are performance obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. The Company determined that the delivery of its product to its customer constitutes a single performance obligation as there are no other promises to deliver goods or services. Shipping and handling are considered to be fulfillment activities and are not considered separate performance obligations. The Company has assessed the existence of a significant financing component in the agreement with its customer. The payment terms with its customer do not exceed one year and therefore no amount of consideration has been allocated as a financing component. Taxes collected related to product sales are remitted to governmental authorities and are excluded from revenue.

 

Product Revenue, Net

 

The Company has obtained marketing approval from the U.S. Food and Drug Administration, (“FDA”) to sell ELZONRIS in the United States market. The Company sells ELZONRIS to its customer through its title distribution channel. The customer subsequently resells ELZONRIS to a limited number of specialty distributors who, in turn, distribute ELZONRIS to specialty hospitals.

 

The Company recognizes revenue on sales of ELZONRIS when its customer obtains control of the product, which occurs at a point in time, typically upon delivery. Product revenues are recorded at the product’s wholesale acquisition costs, net of applicable reserves for variable consideration. Components of variable consideration include government contracts, product returns, commercial co-payment assistance program transactions, and distribution service fees. These reserves, as detailed below, are based on the amounts earned, or to be claimed on the related sales, and are classified as a current liability. Overall, these reserves reflect our best estimates of the amount of consideration against product revenue that has been recognized.

 

The amount of variable consideration which is included in the transaction price may be constrained and is included in the net sales price only to the extent that it is probable that a significant reversal in the amount of the cumulative revenue recognized under contracts will not occur in a future period. The Company’s analyses contemplate the application of the constraint in accordance with ASC 606. For the six months ended June 30, 2019, the Company determined a material reversal of revenue would not likely occur in a future period for the estimates detailed below and, therefore, the transaction price was not reduced further. Actual amounts of consideration ultimately received may differ from the Company’s estimates. If actual results in the future vary from the Company’s estimates, the Company will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known.

 

Government Contracts

 

The Company have entered into contracts (i) to participate in the Medicaid Drug Rebate Program and the Medicare Part D program, and (ii) to sell to the U.S. Department of Veterans Affairs, 340b entities and other government agencies (“Government Payors”) so that ELZONRIS will be eligible for purchase by, in partial or full reimbursement from, such Government Payors. These reserves are recorded in the same period the revenue is recognized, resulting in a reduction of product revenue and the establishment of a current

 

10


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

liability, which is included in accrued expenses and other current liabilities. For Medicare Part D, the Company estimates the number of patients in the prescription drug coverage gap for whom it will owe an additional discount under the Medicare Part D program.

 

The Company estimates the rebates that it will provide to Government Payors for those programs that require rebates. These rebate estimates are based upon (i) the government-mandated discounts applicable to government-funded programs, (ii) information obtained from its customers and (iii) information obtained from other third parties regarding the payor mix for ELZONRIS. The liability for these rebates consists of estimates of claims for the current year and estimated future claims that will be made for product shipments that have been recognized as revenue but remain in the distribution channel inventories at the end of each reporting period.

 

Product Returns

 

Consistent with industry practice, the Company offers a limited right of return for product that has been purchased. To estimate sales with a right of return, the Company will assess, on a quarterly basis, the number of vials that are held in inventory throughout the distribution channel. Amounts for estimated product returns are established in the same period that the related gross revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities.

 

Commercial Co-payment Assistance Program

 

The Company offers a co-payment assistance program where permitted by law and which is intended to provide financial assistance to qualified commercially-insured patients who are required to pay prescription drug copayments based on the terms of their prescription drug insurance plans. The calculation of the accrual for co-payment assistance is based on an estimate of claims and the cost per claim that the Company expects to receive associated with product that has been recognized as revenue but remains in the distribution channel at the end of each reporting period. The adjustments are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability which is included as a component of accrued expenses and other current liabilities.

 

Distribution Fees

 

Distribution fees include fees paid to the Company’s distributors for the distribution of ELZONRIS based on contractual rates. In addition, the Company compensates for data and other administrative activities. Therefore, estimates for these costs are recorded as a reduction of revenue, based on contractual terms.

 

Accounts Receivable, Net

 

Accounts receivable, net primarily relates to amounts due from the Company’s customer, net of applicable revenue reserves. The Company analyzes accounts that are past due for collectability and provides an allowance for receivables when collection becomes doubtful. No reserve has been recorded relating to an allowance for doubtful accounts at June 30, 2019.

 

Inventory

 

The Company capitalizes inventory costs associated with the manufacturing of ELZONRIS after regulatory approval or when, based on management’s judgment, future commercialization is considered probable and the future economic benefit is expected to be realized. Otherwise, such costs are expensed as research and development. The majority of manufacturing costs for ELZONRIS units recognized as revenue during the six months ended June 30, 2019 were expensed to research and development prior to FDA approval on December 21, 2018.

 

The Company values its inventories at the lower of cost or estimated net realizable value. The Company determines the cost of its inventories, which includes amounts related to materials and manufacturing overhead, on a first-in, first-out basis. The Company performs an assessment of the recoverability of capitalized inventory during each reporting period, and it writes down any excess and obsolete inventories to their estimated realizable value in the period in which the impairment is first identified. Such impairment charges, should they occur, are recorded within cost of product revenues. The determination of whether inventory costs will be realizable requires estimates by management. If actual market conditions are less favorable than projected by management, additional write-downs of inventory may be required which would be recorded as a cost of product sales in the statement of operations and comprehensive loss.

 

11


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

Recently Issued Accounting Pronouncements

 

In May 2014, the Financial Accounting Standards Board (“FASB”), issued a comprehensive new revenue recognition Accounting Standards Update (“ASU”) 2014-09, Revenue From Contracts With Customers (Topic 606). ASU 2014-09 provides guidance to clarify the principles for recognizing revenue. This guidance includes the required steps to achieve the core principle that an entity should recognize income to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. This guidance is effective for fiscal years and interim periods beginning after December 15, 2017. Early adoption is permitted for fiscal years and interim periods beginning after December 15, 2016. The Company adopted this guidance on January 1, 2018, using the full retrospective method. Any future contracts with customers will be accounted for under the new guidance effective January 1, 2018.

 

As noted below in Note 14 to the Company’s Financial Statements, the Company has received grant income from the Leukemia and Lymphoma Society (“LLS”) to fund the Company’s development program related to the Company’s preclinical and clinical product development activities. The Company has determined that LLS is not a customer as defined by Topic 606. The Company recognizes grant income when there is reasonable assurance of compliance with the conditions of the grant and reasonable assurance that the grant income will be received based on the Company’s best estimates of work performed and qualifying costs incurred.

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes ASC 840, Leases. The amendments in this update will increase the transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. Under ASU 2016-02, a lessee will recognize in the statement of financial position a liability to make lease payments (the lease liability) and a right-of-use asset representing its right to use the underlying asset for the lease term. The recognition, measurement, and presentation of expenses and cash flows arising from a lease by a lessee have not significantly changed from current GAAP. ASU 2016-02 retains a distinction between finance leases and operating leases. The classification criteria for distinguishing between finance leases and operating leases will be substantially similar to the classification criteria for distinguishing between capital leases and operating leases under prior GAAP. Under the standard, disclosures are required to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

 

The guidance permits a practical expedient with regards to initial adoption, allowing adopters the option to apply the new leases standard prospectively at the adoption date and recognize a cumulative-effect adjustment to the opening balance of retained earnings in the period of adoption. Under this expedient, comparative periods presented in the financial statements in which the new lease standard is adopted will continue to be presented in accordance with prior GAAP.

 

The Company adopted this standard on January 1, 2019 using the prospective application method practical expedient. The adoption of this standard had an impact on our balance sheet, recognizing a right-of-use asset and lease liability of approximately $2 million. Refer to Note 8 for disclosure requirements related to the adoption of this standard.

 

12


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. ASU 2016-13 amends the impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. In November 2018, the FASB issued ASU No. 2018-19, Codification Improvements to Topic 326, Financial Instruments - Credit Losses. ASU 2018-19 will affect loans, debt securities, trade receivables, net investments in leases, off balance sheet credit exposures, reinsurance receivables, and any other financial assets not excluded from the scope of this amendment that represent the contractual right to receive cash. ASU 2016-13 and ASU 2018-19 are effective for public entities for fiscal years beginning after December 15, 2019, with early adoption permitted. The Company is currently evaluating the impact of adopting ASU 2016-13 on the Company’s financial statements.

 

On June 20, 2018, the FASB issued ASU No. 2018-07, Compensation — Stock Compensation (Topic 718):  Improvements to Nonemployee Share-Based Payment Accounting, which expands the scope of Topic 718 to include share-based payment transactions for acquiring goods and services from nonemployees. Entities should apply the requirements of Topic 718 to nonemployee awards except for specific guidance on inputs to an option pricing model and the period of time equity awards vest and the pattern of cost recognition over that period. ASU No. 2018-07 is effective for public business entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Early adoption is permitted and the Company adopted ASU No. 2018-07 on April 1, 2018. The net impact relating to the early adoption was a $0.2 million decrease to accumulated deficit for the impact prior to April 1, 2018. In addition, the Company has elected to account for forfeitures of nonemployee awards as they occur.

 

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement, which adds disclosure requirements to Topic 820 for the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. This ASU is effective for interim and annual reporting periods beginning after December 15, 2019. The adoption of ASU 2018-13 is not expected to have an impact on the Company’s financial statements.

 

In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, Disclosure Update and Simplification, amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheets must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive income is required to be filed. As such, the Company adopted these SEC amendments on November 5, 2018 and will present the analysis of changes in stockholders’ equity in its interim financial statements in its June 30, 2019 Form 10-Q. The Company does not anticipate that the adoption of these SEC amendments will have a material effect on the Company’s financial statements.

 

In November 2018, ASU 2018-18 was issued to provide clarity on when transactions between entities in a collaborative arrangement should be accounted for under the new revenue standard, ASC 606. In determining whether transactions in collaborative arrangements should be accounted under the revenue standard, the update specifies that entities shall apply unit of account guidance to identify distinct goods or services and whether such goods and services are separately identifiable from other promises in the contract. ASU 2018-18 also precludes entities from presenting transactions with a collaborative partner which are not in scope of the new revenue standard together with revenue from contracts with customers. The accounting update is effective January 1, 2020 and early adoption is permitted. The adoption of ASU 2018-18 is not expected to have an impact on the Company’s financial statements.

 

In December 2018, the FASB issued ASU 2018-20, Leases (Topic 842): Narrow-Scope Improvements for Lessors, which addressed implementation questions arising from stakeholders in regard to ASU 2016-02, Leases. Specifically addressed in this update were issues related to 1) sales taxes and other similar taxes collected from lessees, 2) certain lessor costs, and 3) recognition of variable payments for contracts with lease and nonlease components. The amendments in this ASU are effective in the same time-frame as ASU 2016-02, as discussed above. The Company incorporated this ASU into its assessment and adoption of ASU 2016-02.

 

13


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

3.                                      Liquidity and Capital Resources

 

As of June 30, 2019, the Company has approximately $103.9 million in cash, cash equivalents, and investment securities. The Company primarily invests in highly liquid cash equivalents, investments in U.S. Treasury and Agency securities and related money market funds and FDIC-insured bank certificates of deposit, with the balance in commercial bank operating accounts.

 

4.                                      Prepaid Expenses and Other Current Assets

 

Prepaid expenses and other current assets consist of the following at June 30, 2019 and December 31, 2018:

 

 

 

June 30,

 

December 31,

 

 

 

2019

 

2018

 

Prepaid third party vendor costs

 

$

1,714,355

 

$

1,851,553

 

Deposits

 

492,794

 

189,000

 

Prepaid insurance

 

612,768

 

69,021

 

Other receivable

 

776,519

 

843,422

 

Total

 

$

3,596,436

 

$

2,952,996

 

 

5.                                      Property and Equipment, Net

 

Property and equipment, net, consist of the following at June 30, 2019 and December 31, 2018:

 

 

 

June 30,

 

December 31,

 

 

 

2019

 

2018

 

Office furniture and fixtures

 

$

519,675

 

$

519,675

 

Manufacturing equipment

 

181,753

 

107,258

 

Leasehold improvements

 

82,694

 

82,694

 

Capital lease equipment

 

29,529

 

29,529

 

Computer equipment

 

18,612

 

18,612

 

Property and equipment

 

832,263

 

757,768

 

Less accumulated depreciation and amortization

 

(593,534

)

(535,355

)

Property and equipment, net

 

$

238,729

 

$

222,413

 

 

Depreciation expense was $58,179 and $24,064 for the six-month periods ended June 30, 2019 and 2018, respectively.

 

6.                                      Fair Value Measurements

 

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.

 

14


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liability measured at fair value on a recurring basis as of June 30, 2019 and December 31, 2018:

 

 

 

June 30, 2019

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

Active

 

Significant

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

Balance

 

 

 

Identical

 

Observable

 

Unobservable

 

at

 

 

 

Assets

 

Inputs

 

Inputs

 

June 30,

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2019

 

Assets:

 

 

 

 

 

 

 

 

 

Fixed-income treasury portfolio

 

$

86,918,164

 

$

 

$

 

$

86,918,164

 

Certificate of Deposits

 

 

 

 

 

Cash and cash equivalents

 

16,965,619

 

 

 

16,965,619

 

Total assets at fair value

 

$

103,883,783

 

$

 

$

 

$

103,883,783

 

 

 

 

 

December 31, 2018

 

 

 

Quoted

 

 

 

 

 

 

 

 

 

Prices in

 

 

 

 

 

 

 

 

 

Active

 

Significant

 

 

 

 

 

 

 

Markets for

 

Other

 

Significant

 

Balance

 

 

 

Identical

 

Observable

 

Unobservable

 

at

 

 

 

Assets

 

Inputs

 

Inputs

 

December 31,

 

 

 

(Level 1)

 

(Level 2)

 

(Level 3)

 

2018

 

Assets:

 

 

 

 

 

 

 

 

 

Fixed-income treasury portfolio

 

$

30,637,998

 

$

 

$

 

$

30,637,998

 

Certificate of Deposits

 

 

20,024,191

 

 

20,024,191

 

Cash and cash equivalents

 

9,443,667

 

 

 

9,443,667

 

Total assets at fair value

 

$

40,081,665

 

$

20,024,191

 

$

 

$

60,105,856

 

 

The following is a summary of cash equivalents and available-for-sale investments held by the Company at June 30, 2019 and December 31, 2018:

 

 

 

June 30, 2019

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains*

 

Losses*

 

Value

 

Cash:

 

 

 

 

 

 

 

 

 

Cash from operating accounts

 

$

10,882,887

 

$

 

$

 

$

10,882,887

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

6,082,732

 

 

 

6,082,732

 

 

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

16,965,619

 

$

 

$

 

$

16,965,619

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

Fixed-income treasury portfolio:

 

 

 

 

 

 

 

 

 

Fannie Mae

 

3,995,281

 

3,849

 

 

3,999,130

 

Federal farm credit bank

 

2,424,843

 

5,686

 

 

2,430,529

 

Freddie Mac

 

2,254,081

 

820

 

(1,420

)

2,253,481

 

U.S. Treasury Securities

 

78,137,187

 

100,276

 

(2,439

)

78,235,024

 

 

Total short-term investments

 

86,811,392

 

110,631

 

(3,859

)

86,918,164

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

103,777,011

 

$

110,631

 

$

(3,859

)

$

103,883,783

 

 

15


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

 

 

December 31, 2018

 

 

 

 

 

Gross

 

Gross

 

Estimated

 

 

 

Amortized

 

Unrealized

 

Unrealized

 

Fair

 

 

 

Cost

 

Gains*

 

Losses*

 

Value

 

Cash:

 

 

 

 

 

 

 

 

 

Cash from operating accounts

 

$

2,482,621

 

$

 

$

 

$

2,482,621

 

Cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

6,961,046

 

 

 

6,961,046

 

 

 

 

 

 

 

 

 

 

 

Total cash and cash equivalents

 

$

9,443,667

 

$

 

$

 

$

9,443,667

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

Fixed-income treasury portfolio:

 

 

 

 

 

 

 

 

 

Fannie Mae

 

2,013,336

 

 

(1,146

)

2,012,190

 

Federal home loan bank

 

6,020,492

 

 

(10,646

)

6,009,846

 

Freddie Mac

 

2,512,252

 

 

(8,530

)

2,503,722

 

U.S. Treasury Securities

 

20,123,026

 

767

 

(11,553

)

20,112,240

 

 

 

 

 

 

 

 

 

 

 

Certificate of Deposits

 

20,024,346

 

 

(155

)

20,024,191

 

 

 

 

 

 

 

 

 

 

 

Total short-term investments

 

50,693,452

 

767

 

(32,030

)

50,662,189

 

 

 

 

 

 

 

 

 

 

 

Total

 

$

60,137,119

 

$

767

 

$

(32,030

)

$

60,105,856

 

 


*The gross unrealized gains and losses captured in this footnote is before tax.

 

At June 30, 2019 and December 31, 2018, the remaining contractual maturities of available-for-sale investments classified as current on the balance sheet were less than 12 months.

 

There were no available-for-sale securities in a continuous unrealized loss position for greater than twelve months at June 30, 2019 and December 31, 2018. The Company has the ability to hold such securities with an unrealized loss until its forecasted recovery. The Company determined that there was no material change in the credit risk of the above investments. As a result, the Company determined it did not hold any investments with an other-than-temporary impairment as of June 30, 2019.

 

Fair Value of Financial Instruments

 

The Company’s financial instruments consist principally of cash and cash equivalents, investments, other current assets, accounts payable and accrued expenses. Cash and cash equivalents, and investments are carried at fair value (see above). Financial instruments including other current assets, accounts payable and accrued expenses are carried at cost, which approximate fair value given their short-term nature.

 

7.                                      Inventory

 

Inventory consists of the following:

 

 

 

June 30,

 

 

 

2019

 

Raw materials

 

$

39,820

 

Work-in-process

 

3,297,314

 

Finished goods

 

317,883

 

Total Inventory

 

$

3,655,017

 

 

Inventory is related to our approved product, ELZONRIS. There were no write downs for excess and obsolete inventory during the six months ended June 30, 2019.

 

16


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STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

8.                                      Leases

 

The Company has leases for office facilities as well as for certain equipment. The operating lease portfolio is related to two office spaces and the financing lease relate to office equipment that was acquired in prior year. As of June 30, 2019, the Company has not entered into any new lease arrangements classified as a finance lease. Operating leases are included in operating lease right-of-use assets, current operating lease liabilities and operating lease liabilities on the Company’s balance sheet. The Company has elected the package of practical expedients which applies to leases that commenced before the adoption date. By electing the package of practical expedients, the Company did not need to reassess the following; whether any existing contracts are or contain leases, the lease classification for any existing leases and initial direct costs for any existing leases.

 

Right-of-use asset and operating lease liabilities are recognized based on the present value of future minimum lease payments over the lease term at commencement date. When the implicit rate of the lease is not provided or cannot be determined, the Company used the incremental borrowing rate based on the information available at the commencement date to determine the present value of future payments. Lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise those options. Lease expense for minimum lease payments is recognized on a straight-line basis over the lease term. Operating lease right-of-use asset is presented within right-of-use asset, net. The current portion of operating lease liabilities are presented within right-of-use liability - current portion and the non-current portion of operating lease liabilities are presented within right-of-use liability on the Balance Sheet. Finance lease assets are included in Property, plant and equipment - net, and the finance lease obligations are included in Other current liabilities debt, and in Other liabilities on the Balance Sheet. Components of lease expense and other information as follows:

 

 

 

Six Months
Ended June 30,

 

 

 

2019

 

Lease Expense

 

 

 

Operating Lease Cost

 

$

529,385

 

Financing Lease Cost:

 

 

 

Amortization of right-of-use assets

 

4,920

 

Interest on lease liability

 

554

 

Total financing lease cost

 

5,474

 

Total Lease Cost

 

$

534,859

 

 

 

 

June 30,

 

Balance sheet information related to leases was as follows:

 

2019

 

Operating Leases

 

 

 

Operating right-of-use asset, net

 

$

1,469,714

 

Operating right-of-use liability - current portion

 

1,042,526

 

Operating right-of-use liability

 

550,496

 

Total operating lease liabilities

 

$

1,593,022

 

Financing Leases

 

 

 

Property, plant and equipment

 

$

29,529

 

Accumulated depreciation

 

(10,663

)

Property, plant and equipment - net

 

$

18,866

 

Other current liabilities

 

9,876

 

Other liabilities

 

9,496

 

Total Financing lease liabilities

 

$

19,372

 

Weighted Average Remaining Lease Term — Operating Leases

 

1.5 years

 

Weighted Average Remaining Lease Term — Financing Leases

 

1.92 years

 

Weighted Average Discount Rate — Operating Leases

 

7.32

%

Weighted Average Discount Rate — Financing Leases

 

5

%

 

17


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

Future minimum lease payments under non-cancellable leases as of June 30, 2019 were as follows:

 

 

 

Operating
Leases

 

Financing
Leases

 

2019

 

$

558,900

 

$

5,310

 

2020

 

1,117,800

 

10,620

 

2021

 

 

4,425

 

Total future minimum lease payments

 

1,676,700

 

20,355

 

Less imputed interest

 

(83,678

)

(983

)

Total

 

$

1,593,022

 

$

19,372

 

 

Supplemental cash flow information related to leases was as follows:

 

 

 

June 30,

 

Cash paid for amounts included in the measurement of lease liabilities:

 

2019

 

 

 

 

 

Operating cash flows from operating leases

 

$

558,900

 

Operating cash flows from finance leases

 

554

 

Financing cash flows from finance leases

 

4,756

 

 

9.                                      Accounts Payable and Accrued Expenses

 

Accounts payable and accrued expenses consist of the following at June 30, 2019 and December 31, 2018:

 

 

 

June 30,

 

December 31,

 

 

 

2019

 

2018

 

Accrued research and development costs

 

$

12,137,333

 

$

8,790,920

 

Accrued compensation

 

4,037,792

 

5,515,002

 

Accrued legal

 

1,382,760

 

687,042

 

Accrued commercial costs

 

5,401,483

 

4,614,507

 

Accrued general and administrative costs

 

1,408,942

 

1,545,591

 

Accrued sales deduction and allowance

 

1,109,480

 

 

Accrued royalty

 

271,168

 

 

Total accounts payable and accrued expenses

 

$

25,748,958

 

$

21,153,062

 

 

10.                               Common Stock

 

On January 18, 2019, the Company completed a follow-on public offering, selling 8,888,889 shares at an offering price of $9 per share. Additionally, the underwriters exercised in full their over-allotment option to purchase an additional 1,333,333 shares at an offering price of $9 per share. Aggregate gross proceeds from the follow-on public offering, including the exercise of the over-allotment option, were $92 million, and net proceeds received after underwriting fees and offering expenses were approximately $86.2 million.

 

The Company was authorized to issue 83,750,000 shares of common stock at June 30, 2019 and 53,750,000 shares of common stock at December 31, 2018.

 

Dividends on common stock will be paid when, and if, declared by the board of directors. Each holder of common stock is entitled to vote on all matters and is entitled to one vote for each share held. The Company will, at all times, reserve and keep available, out of its authorized but unissued shares of common stock, sufficient shares to affect the conversion of shares from the exercise of stock options.

 

18


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

11.                               Accumulated Other Comprehensive Income (Loss)

 

The changes in accumulated balances for each component of other comprehensive loss are as follows:

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

 

 

 

 

 

 

 

 

 

 

Balance at beginning of period

 

$

(27,161

)

$

(150,377

)

$

(56,559

)

$

(145,958

)

Other comprehensive income before reclassification

 

79,649

 

27,404

 

104,723

 

19,088

 

Amounts reclassified from accumulated other comprehensive loss*

 

 

 

4,324

 

3,897

 

Total other comprehensive income

 

79,649

 

27,404

 

109,047

 

22,985

 

 

 

 

 

 

 

 

 

 

 

Balance at end of period

 

$

52,488

 

$

(122,973

)

$

52,488

 

$

(122,973

)

 


*Amounts reclassified affect other income in the Statements of Operations.

 

12.                               Product revenue reserves and allowances

 

As of June 30, 2019, the Company’s sole source of product revenue has been from sales of ELZONRIS in the United States. The following table summarizes activity in each of the product revenue allowance and reserve categories for the three and six months ended June 30, 2019:

 

 

 

 

 

Three Months Ended June 30, 2019

 

 

 

Government
Rebates

 

Product
Returns

 

Commercial
Co-payment
Assistance
Programs

 

Distribution
Fees

 

Total

 

Beginning balance at March 31, 2019

 

$

172,688

 

$

202,769

 

$

52,181

 

$

142,672

 

$

570,310

 

Provision related to sales in the current quarter

 

725,102

 

465,281

 

944

 

337,815

 

1,529,142

 

Adjustments related to prior period sale

 

 

 

 

 

 

Credits and payments made

 

(416,394

)

(537,460

)

 

(61,011

)

(1,014,865

)

Ending balance at June 30, 2019

 

$

481,396

 

$

130,590

 

$

53,125

 

$

419,476

 

$

1,084,587

 

 

 

 

 

 

Six Months Ended June 30, 2019

 

 

 

Government
Rebates

 

Product
Returns

 

Commercial
Co-payment
Assistance
Programs

 

Distribution
Fees

 

Total

 

Beginning balance at December 31, 2018

 

$

 

$

 

$

 

$

 

$

 

Provision related to sales in the current year

 

897,790

 

668,050

 

53,125

 

480,487

 

2,099,452

 

Adjustments related to prior period sale

 

 

 

 

 

 

Credits and payments made

 

(416,394

)

(537,460

)

 

(61,011

)

(1,014,865

)

Ending balance at June 30, 2019

 

$

481,396

 

$

130,590

 

$

53,125

 

$

419,476

 

$

1,084,587

 

 

Government rebates, product returns, commercial co-payment assistance programs, and distribution fees are recorded as a component of accrued expenses on the balance sheet.

 

13.                               Net Loss Per Common Share

 

The Company accounts for and discloses net loss per share using the treasury stock method. Net loss per common share, or basic loss per share, is computed by dividing net loss by the weighted-average number of common shares outstanding. Since the Company is in a net loss for all periods presented, diluted net loss per share is not presented since the common stock equivalents would have an anti-dilutive effect on the per share calculation.

 

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

 

 

 

Three Months Ended June 30,

 

Six Months Ended June 30,

 

 

 

2019

 

2018

 

2019

 

2018

 

Basic and diluted net loss per common share calculation:

 

 

 

 

 

 

 

 

 

Net loss

 

$

(16,841,422

)

$

(18,928,703

)

$

(44,248,688

)

$

(37,345,456

)

Basic and diluted weighted-average common shares

 

40,108,267

 

28,567,982

 

38,836,664

 

27,851,707

 

Basic and diluted net loss per share

 

$

(0.42

)

$

(0.66

)

$

(1.14

)

$

(1.34

)

 

19


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

The difference between basic and diluted weighted-average common shares generally results from the assumption that dilutive stock options outstanding were exercised and dilutive restricted stock has vested. For the six-month periods ended June 30, 2019 and 2018, the Company reported a loss from operations and therefore, all potentially dilutive stock options and restricted stock as of such date were excluded from the computation of diluted net loss per share as their effect would have been anti-dilutive. The total shares of stock options and restricted stock that could potentially dilute earnings per share in the future, but which were not included in the calculation of diluted net loss per share because their affect would have been anti-dilutive were as follows:

 

 

 

Six Months Ended
June 30,

 

 

 

2019

 

2018

 

Restricted stock

 

3,427,168

 

1,926,706

 

Options outstanding

 

3,446,591

 

3,144,768

 

Total

 

6,873,759

 

5,071,474

 

 

14.          Grant Income

 

In October 2013, the Company entered into a contract with the LLS. LLS is a national voluntary health organization that, among other activities, encourages and sponsors research relating to blood cancers to develop therapies to cure or mitigate these diseases. To further its mission, LLS provides research funding to entities that can demonstrate after LLS’s review process that their proposed research projects have scientific promise to advance LLS’s effort to find treatments and cures for blood cancers and their complications. LLS agreed to provide funding to the Company not to exceed $3.5 million to fund the Company’s development program related to the Company’s preclinical and clinical product development activities. Through June 30, 2019, the Company has received $3.5 million based on milestones achieved. The agreement terminates when there are no longer any payment obligations for either LLS or Stemline.

 

15.                               Income Taxes

 

The Company recorded $22,194 income tax benefit related to intraperiod tax allocations for the six-month period ended June 30, 2019 and no income tax provisions or benefits were recorded for the six-month period ended June 30, 2018, due to the fact that the Company cannot benefit from its net operating losses or other deferred tax assets. The Company does not currently have the ability to carry back losses to previous years to recover taxes paid and future utilization of these losses is uncertain.

 

The Company files income tax returns in the United States and in the State of New York. The Company currently has no ongoing audits.

 

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and their basis for income tax purposes and the tax effects of net operating loss and tax credit carryforwards.

 

Valuation allowances reduce deferred tax assets to the amounts that are more likely than not to be realized. As of June 30, 2019, the Company has recorded additional deferred tax assets which are fully offset by a valuation allowance. Realization of the deferred tax assets is dependent on generating sufficient taxable income in the future. At present, the likelihood of the Company being able to fully utilize its deferred income tax benefits against future income is uncertain.

 

16.                               Stock-Based Compensation

 

The Company’s 2016 Stock Equity Incentive Plan (the “2016 Plan”) was adopted by the board of directors and approved by the stockholders in May 2016. The 2016 Plan authorizes the Company to grant up to 1,812,932 shares of common stock to eligible employees, directors, and non-employee consultants and advisors to the Company. Under the provisions of the 2016 Plan, no option will have a term in excess of 10 years.The Company’s stockholders approved an increase of 1,200,000 shares, an increase of 2,900,000 shares, and an increase of 2,500,000 shares authorized under the 2016 Plan during 2017, 2018, and 2019, respectively.

 

20


Table of Contents

 

STEMLINE THERAPEUTICS, INC.
Notes to Unaudited Financial Statements
June 30, 2019

 

As of June 30, 2019, there were 2,624,469 shares of common stock available for future grants under the 2016 Plan.

 

Total compensation cost that has been charged against operations related to the above plans was approximately $15.5 million and $5.6 million for the six-month periods ended June 30, 2019 and 2018, respectively.

 

The following table summarizes stock-based compensation related to the above plans by expense category for the three and six month periods ended June 30, 2019 and 2018, respectively:

 

 

 

Three Months Ended
June 30,

 

Six Months Ended
June 30,