The following discussion should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this Quarterly Report on Form 10-Q. This Quarterly Report on Form 10-Q, including the following sections, contains forward-looking statements. These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward-looking statements. For a detailed discussion of these risks and uncertainties, see Item 1A "Risk Factors" in our 2021 Annual Report and this Quarterly Report. See also "Special Note Regarding Forward-Looking Statements." We caution the reader not to place undue reliance on these forward-looking statements, which reflect management's analysis only as of the date of this Quarterly Report. We undertake no obligation to update forward-looking statements, which reflect events or circumstances occurring after the date of this Quarterly Report. Our
U.S.GAAP accounting policies are referred to in Note 2 of the Condensed Consolidated Financial Statements as well as the Consolidated Financial Statements included in our 2021 Annual Report. All amounts are in United Statesdollars, unless otherwise indicated. References to "CAD$" are to Canadian dollars.
We are a clinical stage biopharmaceutical company developing novel products to treat brain health disorders. Our mission is to be the global leader in the development and delivery of treatments that unlock new opportunities to improve patient outcomes. We are developing a pipeline of innovative product candidates, with and without acute perceptual effects, targeting the serotonin, dopamine and acetylcholine systems. This specifically includes pharmaceutically optimized drug products derived from the psychedelic and empathogen drug classes including LSD, R(-)-MDMA and zolunicant, or 18-MC, a congener of ibogaine. We were incorporated under the laws of the Province of
British Columbia. Our wholly owned subsidiary, Mind Medicine, Inc.("MindMed US") was incorporated in Delaware. Prior to February 27, 2020, our operations were conducted through MindMed US. On February 26, 2021the Company acquired 100% of the issued and outstanding shares of HealthMode Inc.("HealthMode"), a developer of technologies using Artificial Intelligence (AI)-enabled digital measurement to increase the precision and speed of clinical research and patient monitoring. The Company plans to utilize these technologies in its clinical trials to enhance the quality of the data that is collected during the Company's clinical trials. Since inception, we have incurred losses while advancing the research and development of our products and processes. Our net losses were $16.5 millionand $17.2 millionfor the three months ended September 30, 2022and 2021, respectively, and $51.9 millionand $76.2 million, for the nine months ended September 30, 2022and 2021, respectively. As of September 30, 2022, we had an accumulated deficit of $189.6 millionand cash and cash equivalents of $154.5 million. During the nine months ended September 30, 2022, we continued to enhance the resources required to build our pipeline of opportunities. This included adding personnel and contract resources and ramping up the nonclinical aspects of our activities. In addition, considerable effort was directed towards employing a successful financing strategy.
Research and Development Updates
Our MM-120 (LSD D-tartrate) Phase 2 studies in GAD and ADHD are ongoing with topline results expected in late 2023. Over the near-term, we intend to prioritize the clinical research program of MM-120 in psychiatric disorders, and at the appropriate time in the future intend to continue to explore indications in other disease areas such as chronic pain. For our MM-402 or R(-)-MDMA program, we plan to initiate a Phase 1 clinical trial in 2023; we also started an investigator-initiated trial of R(-)-MDMA in the third quarter of 2022. For MM-110 (zolunicant HCl), we completed a Phase 1 study in late 2021, however, in the third quarter of 2022, we determined that any further clinical development of our MM-110 program will be subject to the pursuit of non-dilutive sources of capital and collaborations with third parties. Our external collaborations and early research and development activities have continued to progress, including the conclusion of the initial collaboration between MindMed and Nextage Therapeutics.
Impact of the COVID-19 pandemic
We continue to monitor the ongoing COVID-19 global pandemic, which has resulted in travel and other restrictions to reduce the spread of the disease. To date, we have not experienced any significant disruptions from the ongoing COVID-19 pandemic. All clinical and chemistry, manufacturing and control activities are currently active.
The safety, health and well-being of all patients, medical staff and our internal and external teams is paramount and is our main objective. As the pandemic and resulting restrictions evolve in jurisdictions across the country, we recognize that the potential
exists for other disruptions to our projected timelines. We are in close communication with our clinical teams and key suppliers and are prepared to take action should the pandemic worsen and impact our business in the future.
As previously disclosed on
May 27, 2022, we received a letter from Nasdaq's Listing Qualifications Departmentnotifying us that we were not in compliance with Nasdaq Listing Rule 5550(a)(2), as the minimum bid price for our listed securities was less than $1for the previous 30 consecutive business days. We had a period of 180 calendar days, or until November 23, 2022, to regain compliance with the rule referred to in this paragraph. The Company's Board approved a reverse share split of the Company's Common Shares on a 15-for-1 basis, which was effected on August 26, 2022and which brought the bid price of the Company's Common Shares above the minimum bid price requirement under the Nasdaq Listing Rules. No fractional Common Shares were issued as a result of the August Share Split. Each fractional Common Share remaining upon the August Share Split that was less than 1/2 of a Common Share was cancelled and each fractional Common Share that was at least 1/2 of a Common Share was changed to one whole Common Share. The August Share Split affected all Common Shares outstanding immediately prior to the effective time of the August Share Split, as well as the number of Common Shares available under the Company's stock option plan and equity incentive plan. In addition, the August Share Split effected a reduction in the number of Common Shares issuable upon exercise of stock options, vesting of Restricted Share Units and exercise of warrants outstanding immediately prior to the effectiveness of the August Share Split. All references to Common Shares, options to purchase Common Shares, share data, per share data, and related information contained in this report have been retrospectively adjusted to reflect the effect of the August Share Split for all periods presented. On September 13, 2022, following the completion of the August Share Split, the Company received a notice from the Nasdaq Listing Qualifications Office indicating that the Company had regained compliance with the minimum bid price requirement under Nasdaq Listing Rule 5550(a)(2).
Components of operating results
Research and development
To date, our resources have focused primarily on the development of our MM-120, MM-110 and MM-420 programs and the commencement of related clinical activities. We have commenced clinical studies and have funded data and study acquisitions and acquired the materials required to supply our studies.
Research and development costs represent a significant portion of our operating expenses. Research and development expenses primarily consist of direct and indirect costs incurred in the development of our product candidates, as follows:
payroll, consulting and benefits expenses;
manufacturing costs to produce clinical trial materials;
clinical research costs associated with discovery, preclinical and clinical testing of our product candidates;
cost of data acquisition and studies;
allocated operating expenses, which include direct or allocated expenses for information technology and human resources; and
We may also incur in-process research and development expense as we acquire or in-license assets from other parties. Technology acquisitions are expensed or capitalized based upon the asset achieving technological feasibility in accordance with management's assessment regarding the ultimate recoverability of the amounts paid and the potential for alternative future use. Acquired in-process research and development costs that have no alternative future use are immediately expensed. 19 --------------------------------------------------------------------------------
General and administrative
General and administrative expenses consist primarily of compensation costs, including stock-based compensation, for executive management and administrative employees, including finance and accounting, legal, human resources and other offices supporting administrative functions, professional services fees, insurance expenses and allocated expenses. We expect our general and administrative expenses to increase substantially for the foreseeable future as we continue to support our research and development activities, grow our business and, if any of our product candidates receive marketing approval, commercialization activities. We also expect to increase the size of our administrative function and facility costs to support the growth of our business. 20 --------------------------------------------------------------------------------
Comparison of the three and nine month periods ended
The following tables summarize our results of operations for the periods presented (in thousands): Three Months Nine Months Ended September 30, Ended September 30, $ % $ % 2022 2021 Change Change 2022 2021 Change Change Operating expenses: Research and development
$ 7,772 $ 9,019 $ (1,247 )(14 )% $ 27,339 $ 23,906 $ 3,43314 % General and administrative 9,211 8,208 1,003
12% 25,092 52,390 (27,298 ) (52 )% Total operating expenses 16,983 17,227 (244 ) (1 )% 52,431 76,296 (23,865 ) (31 )% Operating loss
(16,983 ) (17,227 ) 244 (1 )% (52,431 ) (76,296 ) 23,865 (31 )% Other income/(expense): Interest income/(expense), net 360 (64 ) 424 * 443 (220 ) 663 * Foreign exchange gain/(loss), net 138 (40 ) 178 * 94 94 - 0 % Other income - 135 (135 ) (100 )% 1 215 (214 ) (100 )% Total other income 498 31 467 * 538 89 449 * Loss before income taxes (16,485 ) (17,196 ) 711 (4 )% (51,893 ) (76,207 ) 24,314 (32 )% Income taxes - - - 100 % - - - 100 % Net loss (16,485 )
$ (17,196 ) $ 711(4 )% (51,893 ) $ (76,207 ) $ 24,314(32 )% Other comprehensive gain/(loss): (Loss)/gain on foreign currency translation (107 ) (383 ) 276
(72 )% (303 ) 380 (683 ) (180 )% Overall loss
* Represents a change greater than 300%
Research and development (in thousands):
Three Months Nine Months Ended September 30, Ended September 30, $ % $ % 2022 2021 Change Change 2022 2021 Change Change External Costs MM-120 research program
$ 1,175 $ 1,513(338 ) (22 )% $ 5,249 $ 2,3052,944 128 % MM-110 research program 208 1,599 (1,391 ) (87 )% 1,393 5,104 (3,711 ) (73 )% External R&D collaborations 328 575 (247 ) (43 )% 1,607 2,292 (685 ) (30 )% Preclinical and other programs 1,269 2,086 (817 ) (39 )% 4,639 5,376 (737 ) (14 )% Total external costs 2,980 5,773 (2,793 ) (48 )% 12,888 15,077 (2,189 ) (15 )% Internal Costs 4,792 3,246 1,546 48 % 14,451 8,829 5,622 64 % Total research and development expenses $ 7,772 $ 9,019 $ (1,247 )(14 )% $ 27,339 $ 23,906 $ 3,43314 % Research and development expenses were $7.8 millionfor the three months ended September 30, 2022, compared to $9.0 millionfor the three months ended September 30, 2021, a decrease of $1.2 million. The decrease was primarily due to a decrease of $1.4 millionof external costs related to the MM-110 research program and a $0.8 milliondecrease in preclinical activities. This decrease was partially offset by an increase of internal personnel costs of $1.5 millionas we continue to expand our in-house research and development capabilities. For the nine months ended September 30, 2022, research and development expenses were $27.3 million, compared to $23.9 millionfor the nine months ended September 30, 2021, an increase of $3.4 million. The increase was primarily driven by an increase of $5.6 millionof internal personnel costs related to additional research and development headcount and an increase of $2.9 millionin external costs related to the MM-120 research program. These increases were partially offset by a decrease of external costs related to the MM-110 research program of $3.7 million. General and Administrative General and administrative expenses were $9.2 millionfor the three months ended September 30, 2022, compared to $8.2 millionfor the three months ended September 30, 2021, an increase of $1.0 million. The increase was primarily related to issuance costs related to the Company's 2022 USD Financing Warrants that were issued as part of the Company's public equity offering which closed during the quarter. For the nine months ended September 30, 2022, general and administrative expenses were $25.1 million, compared to $52.4 millionfor the nine months ended September 30, 2021, a decrease of $27.3 million. The decrease was primarily due to a decrease of $26.4 millionin non-cash stock-based compensation expenses relating to the modification of stock option awards and RSUs recorded during the nine months ended September 30, 2021.
Interest income/(expense), net
Interest income (expense), net increased by approximately
$0.4 millionand $0.7 millionfor the three and nine months ended September 30, 2022compared to the three and nine months ended September 30, 2021, respectively. This was primarily due to our investment in cash equivalents during 2022.
Foreign exchange gain, net
Foreign exchange increased by a nominal amount for the three and nine months ended
September 30, 2022compared to the three and nine months ended September 30, 2021. Other Income/(Expense) Other income decreased by a nominal amount for the three and nine months ended September 30, 2022compared to the three and nine months ended September 30, 2021, respectively, primarily due to a cessation of sales of branded merchandise.
Cash and capital resources
Sources of liquidity
Since our creation, we have financed our operations mainly by issuing shares. Our primary capital requirements are funds to support our scientific research and development activities, including staffing, manufacturing, preclinical studies, clinical trials, administrative costs and working capital.
23 -------------------------------------------------------------------------------- We have experienced operating losses and cash outflows from operations since inception and will require ongoing financing to continue our research and development activities and we have not earned any revenue or reached successful commercialization of our products. Our future operations are dependent upon our ability to finance our cash requirements which will allow us to continue our research and development activities and the commercialization of our products. There can be no assurance that we will be successful in continuing to finance our operations. On
January 7, 2021, we completed a bought deal financing resulting in the issuance of 1,395,333 units of the Company at a price per unit of CAD$66.00( $52.05) for gross proceeds of $72.6 million. Each unit comprised one Common Share of the Company and one-half of one Common Share financing warrant (each whole warrant, a "January Warrant"). Each January Warrant entitles the holder thereof to purchase one Common Share at an exercise price of CAD$86.25( $67.95) until January 7, 2024. Also, in connection with this transaction, the Company issued 83,720 compensation warrants to its underwriter. On March 9, 2021, we completed a private placement bought deal financing resulting in the issuance of 400,000 units of the Company at a price per unit of CAD$48.75( $38.55) for gross proceeds of $15.4 million. Each unit was comprised of one Common Share of the Company and one-half of one Common Share financing warrant (each whole warrant, a "March Warrant"). Each March Warrant entitles the holder thereof to purchase one Common Share at an exercise price of CAD$66.00( $52.20) until March 9, 2024. Also, in connection with this transaction, the Company issued 24,000 compensation warrants to its underwriter.
Our cash and cash equivalents and working capital at
Shelf registration and installation in the market
May 4, 2022, we filed the Registration Statement. Pursuant to the Registration Statement, we may offer and sell securities having an aggregate public offering price of up to $200.0 million. In connection with the filing of the Registration Statement, we also entered into a sales agreement Sales Agents, pursuant to which we may issue and sell Common Shares for an aggregate offering price of up to $100.0 millionunder the ATM. Pursuant to the ATM, we will pay the Sales Agents a commission rate equal to 3.0% of the gross proceeds from the sale of any Common Shares. We are not obligated to make any sales of Common Shares under the ATM. As of September 30, 2022we sold 1,955,548 Common Shares for net proceeds of $30.2 millionunder the ATM.
Public Offering of Common Shares and Warrants
September 30, 2022, we closed an underwritten public offering of 7,058,823 Common Shares and 2022 USD Financing Warrants to purchase 7,058,823 Common Shares at a combined offering price of $4.25, for gross proceeds of $30.0 millionand net proceeds of $27.5 millionafter deducting underwriting discounts and commissions and offering costs. Each 2022 USD Financing Warrant is immediately exercisable for one Common Share at an initial exercise price of $4.25per Common Share, subject to certain adjustments and will expire on September 30, 2027.
Future funding needs
To date, we have not generated any revenue. We do not expect to generate any meaningful revenue unless and until we obtain regulatory approval of and commercialize any of our product candidates, and we do not know when, or if at all, that will occur. We will continue to require substantial additional capital to develop our product candidates and fund operations for the foreseeable future. Moreover, we expect our expenses to increase in connection with our ongoing activities, particularly as we continue the development of and seek regulatory approvals for our product candidates. Further, we are subject to all the risks incident in the development of new pharmaceutical products, and we may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may harm our business. Our expenses will increase if, and as, we:
advancing our product candidates through preclinical and clinical development;
seek regulatory approvals for any product candidates that successfully complete clinical trials;
seek to discover and develop additional product candidates;
establish a sales, marketing, medical affairs and distribution infrastructure to commercialize any product candidates for which we may obtain marketing approval and intend to commercialize on our own or jointly; and
expand our operational, financial and management systems and increase personnel, including personnel to support our development, manufacturing and marketing efforts and our operations as a public company.
24 -------------------------------------------------------------------------------- We expect our current cash and cash equivalents will be sufficient to fund our current 2022 and 2023 operating plan and will extend our cash runway into first half of 2025. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. In order to complete the development of our product candidates and to build the sales, marketing and distribution infrastructure that we believe will be necessary to commercialize our product candidates, if approved, we will require substantial additional funding. Until we can generate a sufficient amount of revenue from the commercialization of our product candidates, we may seek to raise any necessary additional capital through the sale of equity, debt financings or other capital sources, which could include income from collaborations, strategic partnerships or marketing, distribution or licensing arrangements with third parties or from grants. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our shareholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our shareholders. Debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, including restricting our operations and limiting our ability to incur liens, issue additional debt, pay dividends, repurchase our Common Shares, make certain investments or engage in merger, consolidation, licensing or asset sale transactions. If we raise funds through collaborations, strategic partnerships and other similar arrangements with third parties, we may be required to grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. We may be unable to raise additional funds or to enter into such agreements or arrangements on favorable terms, or at all. If we are unable to raise additional funds when needed, we may be required to delay, reduce or eliminate our product development or future commercialization efforts. We have based our projections of operating capital requirements on our current operating plan, which is based on several assumptions that may prove to be incorrect and we may use all of our available capital resources sooner than we expect. Because of the numerous risks and uncertainties associated with research, development and commercialization of product candidates, we are unable to estimate the exact amount and timing of our working capital requirements. Our future funding requirements will depend on many factors, including:
the scope, progress, results and costs of researching and developing our product candidates and conducting preclinical studies and clinical trials;
the costs, timing and results of regulatory review of our product candidates;
costs of future activities, including product sales, medical affairs, marketing, manufacturing and distribution, for any of our product candidates for which we receive marketing authorization;
the costs of manufacturing commercial-grade products and sufficient inventory to support commercial launch;
revenue, if any, from the commercial sale of our products, if any of our product candidates receive marketing approval;
the cost and timing of hiring new employees to support our continued growth;
the costs of preparing, filing and prosecuting patent applications, maintaining and enforcing our intellectual property rights and defending intellectual property claims;
the ability to establish and maintain collaborations on favorable terms, if at all;
the extent to which we acquire or license other product candidates and technologies; and
the timing, receipt, and amount of sales or milestone payments related to or royalties on our current or future product candidates, if any.
Cash Flows Nine Months Ended September 30, 2022 2021 Net cash used in operating activities
$ (37,290 ) $ (37,991 )Net cash used in investing activities - (410 ) Net cash provided by financing activities 58,635 98,697 Foreign exchange impact on cash and cash equivalents (365 ) 5,529 Net increase in cash and cash equivalents $ 20,980 $ 65,825
Cash flow from operating activities
Cash used in operating activities for the nine months ended
September 30, 2022was $37.3 million, which consisted of a net loss of $51.9 million, partially offset by $16.3 millionin non-cash charges and a net change of $1.6 millionin our net operating assets and 25 -------------------------------------------------------------------------------- liabilities. The non-cash charges consisted of share-based payments of $12.3 million, amortization of intangible assets of $2.4 million, and issuance costs on liability classified warrants of $1.5 million. Cash used in operating activities for the nine months ended September 30, 2021was $38.0 million, which consisted of a net loss of $76.2 million, partially offset by $40.2 millionin non-cash charges and a net change of $2.0 millionin our net operating assets and liabilities. The non-cash charges primarily consisted of share-based payments.
Cash flow from investing activities
Cash flows used in investing activities for the nine months ended
Cash flow from financing activities
Cash provided by financing activities for the nine months ended
September 30, 2022was $58.6 million, which consisted of the net proceeds of $41.6 millionfrom the issuance of common shares, net of issuance costs, proceeds of $17.7 millionfrom the issuance of warrants, the proceeds of $0.7 millionfrom exercise of warrants, and proceeds of $0.2 millionfrom exercise of options, partially offset by $1.2 millionpayment of warrant issuance costs and $0.4 millionof withholding taxes paid on vested RSUs. Cash provided by financing activities for the nine months ended September 30, 2021was $98.7 million, which consisted of the net proceeds of $81.9 millionfrom the issuance of common shares and warrants, net of issuance costs, the proceeds of $11.2 millionfrom exercise of warrants, and proceeds of $5.6 millionfrom exercise of options.
Significant Accounting Policies and Estimates
Our management's discussion and analysis of our financial condition and results of operations is based on our unaudited interim condensed consolidated financial statements as at
September 30, 2022, which have been prepared in accordance with United Statesgenerally accepted accounting principles, or U.S.GAAP and on a basis consistent with those accounting principles followed by us and disclosed in Note 2 to our most recent annual audited consolidated financial statements. The preparation of these unaudited interim condensed consolidated financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Significant estimates and judgments include, but are not limited to, research and development tax credits recoverable, research and development expenses, and share-based compensation. Accordingly, actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management's judgments and estimates. We anticipate that the COVID-19 pandemic will have an impact on the development timelines of our clinical programs. Estimates and assumptions about future events and their effects cannot be determined with certainty and therefore require the exercise of judgment. As of the date of issuance of these financial statements, we are not aware of any specific event or circumstance that would require the update of our estimates, assumptions and judgments. These estimates may change as new events occur and additional information is obtained and are recognized in the condensed consolidated financial statements as soon as they become known. Actual results could differ from those estimates and any such differences may be material to our financial statements. Other than as described under Note 2 of our unaudited interim condensed consolidated financial statements, there have been no material changes to our critical accounting policies from those described in "Management's Discussion and Analysis of Financial Condition and Results of Operations," included in our most recent annual consolidated financial statements.
Recent accounting pronouncements
See Note 2 to our unaudited financial statements located in "Part I - Financial Information, Item 1. Financial Statements" in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements applicable to our financial statements.
Emerging Growth Company Status
26 -------------------------------------------------------------------------------- We are an "emerging growth company," as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period to enable us to comply with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.
Fully diluted share capital
The number of common shares issued and outstanding on a fully converted basis at
Number of Common Share Equivalents Common Shares 37,541,115 Stock Options 2,364,013 Restricted Share Units 1,082,669 Compensation Warrants 125,890 Financing Warrants 1,286,282 2022 USD Financing Warrants 7,058,823 Total -
September 30, 202249,458,792 27
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