Benitec Biopharma Inc. - Quarter Report: 2021 September (Form 10-Q)

 

 

 

 

 

 

 

 

 

 

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 Yes

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a 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 of the Exchange Act.

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule of the Exchange Act).    Yes  ☐ or    No  ☒

We had 8,171,690 shares of our common stock outstanding as of the close of business on November 15, 2021.

 

 

 

BENITEC BIOPHARMA INC.

INDEX TO FORM

 

This Report contains forward-looking statements that are subject to a number of risks and uncertainties, many of which are beyond our control. Our forward-looking statements relate to future events or our future performance and include, but are not limited to, statements concerning our business strategy, future commercial revenues, market growth, capital requirements, new product introductions, expansion plans and the adequacy of our funding. All statements, other than statements of historical fact included in this Report, are forward-looking statements. When used in this Report, the words “could,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “may,” “continue,” “predict,” “potential,” “project,” or the negative of these terms, and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words. These statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, levels of activity, performance or achievements to be materially different from the information expressed or implied by these forward-looking statements.

Some of the risks and uncertainties that may cause our actual results, performance or achievements to differ materially from those expressed or implied by forward-looking statements include the following:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

as well as other risks detailed under the caption “Risk Factors” in this Report and in other reports filed with the SEC. Although we believe that we have a reasonable basis for each forward-looking statement contained in this Report, we caution you that these statements are based on a combination of facts and important factors currently known by us and our expectations of the future, about which we cannot be certain.

 

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We have based the forward-looking statements included in this Report on information available to us on the date of this Report or on the date thereof. Except as required by law we undertake no obligation to revise or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised to consult any additional disclosures that we may make directly to you or through reports that we, in the future, may file with the SEC, including annual reports on reports current reports

All forward-looking statements included herein or in documents incorporated herein by reference are expressly qualified in their entirety by the cautionary statements contained or referred to elsewhere in this Report.

 

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Benitec Biopharma Inc. (the “Company”) is a corporation formed under the laws of Delaware, United States of America, on November 22, 2019 and listed on the Nasdaq Capital Market (“Nasdaq”) under the symbol “BNTC”. Benitec Biopharma Inc. is the parent entity of a number of subsidiaries including the previous parent entity Benitec Biopharma Limited (“BBL”). BBL was incorporated under the laws of Australia in 1995 and was listed on the Australian Securities Exchange, or ASX, from 1997 until April 15, 2020. On August 14, 2020, BBL reorganized as a Proprietary Limited company and changed its name to Benitec Biopharma Proprietary Limited. The Company’s business focuses on the development of novel genetic medicines. Our proprietary platform, called RNA interference, or ddRNAi, combines RNA interference, or RNAi, withgene therapy to create medicines that facilitate sustained silencing of disease-causing genes.

During the year ended June 30, 2021, the Company completed an organization resructuring as part of the commercial desire to provide a more efficient structure for the future as the Company continues to transition its operations to the US.

The Company’s fiscal year end is June 30. References to a particular “fiscal year” are to our fiscal year end June 30 of that calendar year.

The consolidated financial statements of Benitec Biopharma Inc. are presented in United States dollars and consist of Benitec Biopharma Inc. and its wholly owned subsidiaries:

 

 

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Reference is frequently made herein to the Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”). This is the source of authoritative US GAAP recognized by the FASB to be applied to entities.

The consolidated financial statements include the Company’s accounts and the accounts of its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

The preparation of the Company’s consolidated financial statements requires management to make estimates and assumptions that impact the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in the Company’s consolidated financial statements and accompanying notes. The most significant estimates and assumptions in the Company’s consolidated financial statements include the estimates of useful lives of property and equipment, valuation of the operating lease liability and related asset, allowance for uncollectable receivables, valuation of equity based instruments issued for other than cash, the valuation allowance on deferred tax assets and foreign currency translation due to certain average exchange rates applied in lieu of spot rates on transaction dates. These estimates and assumptions are based on current facts, historical experience and various other factors believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the recording of expenses that are not readily apparent from other sources. Actual results may differ materially and adversely from these estimates. To the extent there are material differences between the estimates and actual results, the Company’s future results of operations will be affected.

 

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The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, reliance on single-source vendors and collaborators, availability of raw materials, patentability of the Company’s products and processes and clinical efficacy and safety of the Company’s products under development, compliance withgovernment regulations and the need to obtain additional financing to fund operations.

There can be no assurance that the Company’s research and development will be successfully completed, that adequate protection for the Company’s intellectual property will be obtained or maintained, that any products developed will obtain necessary government regulatory approval or that any approved products will be commercially viable. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will generate revenue from product sales. The Company operates in an environment of rapid technological change and substantial competition from other pharmaceutical and biotechnology companies. In addition, the Company is dependent upon the services of its employees, consultants and other third parties.

Moreover, is impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented or inhibited from conducting business activities for an indefinite period of time which may of the Company’s clinical trials, and negatively impact manufacturing and testing activities performed by third parties. Any significant delays may impact the use and sufficiency of the Company’s existing cash reserves, and the Company may be required to raise additional capital earlier than it had previously planned. The Company may be unable to raise additional capital if and when needed, which may result in delays or suspension of its development plans. The extent to which the pandemic will impact the Company’s business will depend on future developments that are highly uncertain and cannot be predicted at this time.

Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment.

The Company’s functional currency and reporting currency is the United States dollar. BBL’s functional currency is the Australian dollar (AUD). Assets and liabilities are translated at the exchange rate in effect at the balance sheet date. Revenues and expenses are translated at the average rate of exchange prevailing during the reporting period. Equity transactions are translated at each historical transaction date spot rate. Translation adjustments arising from the use of different exchange rates from period to period are included as a component of stockholders’ equity as “Accumulated other comprehensive loss.” Gains and losses resulting from foreign currency translation are included in the consolidated statements of operations and comprehensive loss as other comprehensive income (loss).

Other comprehensive income for all periods presented includes only foreign currency translation gains.

 

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The Company measures its financial assets and liabilities in accordance with US GAAP using ASC 820, For certain financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, the carrying amounts approximate fair value due to their short maturities.

The Company follows accounting guidance for financial assets and liabilities. ASC 820 defines fair value, provides guidance for measuring fair value and requires certain disclosures. The guidance utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:

 

Level 1:		Observable inputs such as quoted prices (unadjusted) in active markets for identical assets or liabilities.
Level 2:		Inputs, other than quoted prices that are observable, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets and quoted prices for identical or similar assets or liabilities in markets that are not active.
Level 3:		Unobservable inputs in which little or no market data exists, therefore developed using estimates and assumptions developed by us, which reflect those that a market participant would use.

As of September 30, 2021, and June 30, 2021, the Company had no financial assets or liabilities measured at fair value on a recurring basis.

Cash and cash equivalents include cash on hand and at banks, short-term deposits with an original maturity of three months or less with financial institutions, and bank overdrafts. Bank overdrafts are reflected as a current liability on the consolidated balance sheets.

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents. The Company maintains deposits at federally insured financial institutions in excess of federally insured limits. The Company has not experienced any losses in such accounts, and management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held.

As amounts become uncollectible, they will be charged to an allowance and operations in the period when a determination of collectability is made. Any estimates of potentially uncollectible customer accounts receivable will be made based on an analysis of individual customer and historical experience. The Company’s analysis includes the age of the receivable account, creditworthiness of the customer and general economic conditions.

 

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Software		3-4 years
Lab equipment		3-7 years
Computer hardware		3-5 years
Leasehold improvements		shorter of the lease term or estimated useful lives

Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated undiscounted future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the assets. Fair value is generally determined using the asset’s expected future discounted cash flows or market value, if readily determinable.

These amounts represent liabilities for goods and services provided to the Company prior to the end of the period and which are unpaid. Due to their short-term nature, they are measured at amortized cost and are not discounted. The amounts are unsecured and are usually paid within 30 days of recognition.

At lease commencement, the Company records a lease liability based on the present value of lease payments over the expected lease term. The Company calculates the present value of lease payments using the discount rate implicit in the lease, unless that rate cannot be readily determined. In that case, the Company uses its incremental borrowing rate, which is the rate of interest that the Company would have to pay to borrow on a collateralized basis an amount equal to the lease payments over the expected lease term. The Company records a corresponding lease asset based on the lease liability, adjusted for any lease incentives received and any initial direct costs paid to the lessor prior to the lease commencement date.

After lease commencement, the Company measures its leases as follows: (i) the lease liability based on the present value of the remaining lease payments using the discount rate determined at lease commencement; and (ii) the lease asset based on the remeasured lease liability, adjusted for any unamortized lease incentives received, any unamortized initial direct costs and the cumulative difference between rent expense and amounts paid under the lease agreement. Any lease incentives received and any initial direct costs are amortized on a straight-line basis over the expected lease term. Rent expense is recorded on a straight-line basis over the expected lease term.

 

 

Basic net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is calculated by dividing net loss by the weighted-average number of common shares outstanding plus potential common shares. Stock options, warrants and convertible instruments are considered potential common shares and are included in the calculation of diluted net loss per share using the treasury stock method when their effect is dilutive. Potential common shares are excluded from the calculation of diluted net income (loss) per share when their effect is anti-dilutive. As of September 30, 2021, and June 30, 2021, there were 809,159 potential common shares, respectively, that were excluded from the calculation of diluted net loss per share because their effect was anti-dilutive.

The Company recognizes revenue in accordance with that core principle by applying the following steps:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The Company applies judgement in determining whether contracts entered into fall within the scope of ASC 606 – (“ASC 606”). In doing so, management considers the commercial substance of the transaction and how risks and benefits of the contract accrue to the various parties to the contract.

Management has also made the judgement that the grant of the license and transfer of associated and materials are accounted for as one performance obligation as they are not considered to be distinct; they are highly interrelated and could not provide benefits to the customer independently from each other. Judgements were made in relation to the transfer of the license and and whether this should be recognized over time or a point in time. The point in time has been determined with regard to the point at which the transfer of has substantially been completed and the customer has control of the asset and the ability to direct the use of and receive substantially all of the remaining benefits.

Revenue from licensees of the Company’s intellectual property reflects the transfer of a right to use the intellectual property as it exists at the point in time in which the license is transferred to the customer. Consideration can be variable and is estimated using the most likely amount method. Subsequently, the estimate is constrained until it is highly probable that a significant revenue reversal will not occur when the uncertainty is resolved. Revenue is recognized as or when the performance obligations are satisfied.

 

 

The Company recognizes contract liabilities for consideration received in respect of unsatisfied performance obligations and reports these amounts as other liabilities in the consolidated balance sheet. Similarly, if the Company satisfies a performance obligation before it receives the consideration, the Company recognizes either a contract asset or a receivable in its consolidated balance sheet, depending on whether something other than the passage of time is required before the consideration is due.

Revenue from licensees of the Company’s intellectualproperty reflect a right to use the intellectual property as it exists at the point in time in which the license is granted. Where consideration is based on sales of product by the licensee, revenue is recognized when the customer’s subsequent sales of products occur.

Revenue is earned (constrained by variable considerations) from the provision of research and development services to customers. Services revenue is recognized when performance obligations are either satisfied over time or at a point in time. Generally, the provision of research and development services under a contract with a customer will represent satisfaction of a performance obligation over time where the Company retains the right to payment for services performed but not yet completed.

 

 

The Company records share-based compensation in accordance with ASC 718, . ASC 718 requires the fair value of all share-based compensation awarded to employees and to be recorded as an expense over the shorter of the service period or the vesting period. The Company values employee and share-based compensation at fair value using the Black-Scholes Option Pricing Model.

The Company is subject to Australia and United States income tax laws. The Company follows ASC 740 , when accounting for income taxes, which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for temporary differences between the financial statements and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount more likely than not to be realized.

For uncertain tax positions that meet a “more likely than not” threshold, the Company recognizes the benefit of uncertain tax positions in the consolidated financial statements. The Company’s practice is to recognize interest and penalties, if any, related to uncertain tax positions in income tax expense in the consolidated statements of operations.

In June 2016, the FASB issued ASU (Topic 326). This ASU represents a significant change in the accounting for credit losses model by requiring immediate recognition of management’s estimates of current expected credit losses (CECL). Under the prior model, losses were recognized only as they were incurred. The Company has determined that it has met the criteria of a smaller reporting company (“SRC”) as of November 15, 2019. As such, ASU amended the effective date for the Company to be for reporting periods beginning after December 15, 2022. The Company will adopt this ASU effective July 1, 2023.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. For the three months ended September 30, 2021, and 2020, the Company incurred a net loss of $5.0 million and $2.7 million and used net cash of $4.3 million and $2.4 million in operations, respectively. The Company expects to continue to incur additional operating losses in the foreseeable future.

As of September 30, 2021, the Company had $15.7 million in cash and cash equivalents. The Company has performed a review of the cash flow forecasts and believes that the current funding will be sufficient for a period of at least twelve months from the date of this Report.

 

 

The Company’s ability to continue as a going concern is dependent upon its ability to generate revenue and obtain adequate financing. While the Company believes in its ability to generate revenue and raise additional funds, there can be no assurances to that effect. The financial statements do not include any adjustments to reflect the possible future effects on the recoverability and classification of assets or the amounts and classification of liabilities that might be necessary if the Company is unable to continue as agoing concern due to unsuccessful product development or commercialization, or the inability to obtain adequate financing in the future.

 

 

 

 

 

Depreciation expense was $0.1 million for the three months ended September 30, 2021, and $45 thousand, respectively, for the period in 2020.

 

The Company has entered into an operating lease for office space under an agreement that expires in 2022. The lease requires the Company to pay utilities, insurance, taxes and other operating expenses. The Company’s lease does not contain any residual value guarantees or material restrictive covenants. During August 2021, the Company extended the lease thrugh June 2025.

The tables below show the changes during the three months ended September 30, 2021:

 

 

 

As of September 30, 2021, the Company’s operating lease has aremaining lease term of 3.71 years and a discount rate of 4.67%. The maturities of the operating lease liabilities are as follows:  

The Company recorded lease liabilities and lease assets for the lease based on the present value of lease payments over the expected lease term, discounted using the Company’s incremental borrowing rate. Rent expense was $0.1 million for the three months ended September 30, 2021 and 2020, respectively, of which $7 thousand was recorded in the general and administrative expense and $45 thousand was record in research and development expenses.

		Common Stock from Warrants				Weighted- average Exercise Price (per share)
Outstanding at July 1, 2021			107,095			$	10.50
Outstanding and exercisable at September 30, 2021			107,095			$	10.50

 

Upon the the Company assumed BBL’s obligations with respect to the settlement of options that were issued by BBL prior to the pursuant to the Benitec Officers’ and Employees’ Share Option Plan (the “Share Option Plan”). This includes the Company’s assumption of the Share Option Plan and all award agreements pursuant to which each of the options were granted. Each option when exercised entitles the option holder to one share in the Company. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights and are not transferable except on death of the option holder or in certain other limited circumstances. Employee options vest one third on each anniversary of the applicable grant date for three years. If an employee dies, retires or otherwise leaves the Company and certain exercise conditions have been satisfied, generally, the employee has 12 months toexercise their options or the options are cancelled. After the no new options have been or will be issued under the Share Option Plan.

On December 9, 2020, the Company’s stockholders approved the Company’s 2020 Equity and Incentive Compensation Plan (the “2020 Plan”). The 2020 Plan provides for the grant of various equity awards. Currently, only stock options are outstanding under the 2020 Plan. Each option when exercised entitles the option holder to one share of the Company’s common stock. Options are exercisable on or before an expiry date, do not carry any voting or dividend rights, and are not transferable except on death of the option holder or in certain other limited circumstances. Employee stock options vest in increments of on each anniversary of the applicable grant date for three years. director options vest in increments of on the day prior to each of the Company’s next three annual stockholder meetings following the grant date. If an option holder dies or terminates employment or service due to Disability (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 12 months to exercise their options or the options are cancelled. If an option holder otherwise leaves the Company, other than for a termination by the Company for Cause (as defined in the 2020 Plan) and certain exercise conditions have been satisfied, generally, the option holder has 90 days to exercise their options or the options are cancelled. Any future equity grants will be made under the 2020 Plan.

 

 

The classification of share-based compensation expense is summarized as follows:

As of September 30, 2021, there was $1 million of unrecognized share-based compensation expense related to stock options issued under the Share Option Plan and the 2020 Plan.

For the three months ended September 30, 2021, and 2020, the Company did not recognize a provision or benefit for income taxes as it has incurred net losses. In addition, the net deferred tax assets generated from net operating losses are fully offset by a valuation allowance as the Company believes it is more likely than not that the benefit will not be realized.

The Company enters into contracts in the normal course of business with third-party contract research organizations, contract development and manufacturing organizations and other service providers and vendors. These contracts generally provide for termination on notice and, therefore, are cancellable contracts and not considered contractual obligations and commitments.

From time to time, the Company may become subject to claims and litigation arising in the ordinary course of business. The Company is not a party to any material legal proceedings, nor is it aware of any material pending or threatened litigation.

During the three months ended September 30, 2021, the Company had entered into a related party transaction with Francis Abourizk Lightowlers for legal fees totaling $1 thousand. Peter Francis, a director of the Company is a partner at Francis Abourizk Lightowlers. As of September 30, 2021 and June 30, 2021 there were amounts due to this related party of $1 thousand and $2 thousand, respectively, included in trade and other payables on the accompanying consolidated balance sheet.

The Company has evaluated subsequent events through the filing of this Quarterly Report on and determined that there have been no events that have occurred that would require adjustments or disclosures in the consolidated financial statements.

 

We endeavor to become the leader in discovery, development, and commercialization of therapeutic agents capable of addressing significant unmet medical need via the application of the silence and replace approach to the treatment of genetic disorders.

Benitec Biopharma Inc. (“Benitec” or the “Company” or in the third person, “we” or “our”) is a development-stage biotechnology company focused on the advancement of novel genetic medicines with headquarters in Hayward, California. The proprietary platform, called RNA interference, or ddRNAi, combines RNA interference, or RNAi, with gene therapy to create medicines that facilitate sustained silencing of disease-causing genes following a single administration. The Company is developing ddRNAi-based therapeutics for chronic and life-threatening clinical indications including Oculopharyngeal Muscular Dystrophy (OPMD), and Chronic Hepatitis B.

is the most advanced ddRNAi-based genetic medicine currently under development by Benitec. is an gene therapy designed to both silence the expression of mutated, disease-causing genes (to slow, or halt, the underlying mechanism of disease progression) and simultaneously replace the mutant genes with normal, “wild type” genes (to drive restoration of function in diseased cells). This fundamental therapeutic approach to disease management is called “silence and replace” and this biological mechanism offers the potential to restore the underlying physiology of the treated tissues and, in the process, improve treatment outcomes for patients suffering from the chronic and, potentially, fatal effects of Oculopharyngeal Muscular Dystrophy (OPMD). has been granted Orphan Drug Designation in the United States and the European Union.

Through the combination of the targeted gene silencing effects of RNAi and the durable transgene expression achievable via the use of modified viral vectors, the silence and replace approach has the potential to produce long-term silencing of disease-causing genes along with simultaneous replacement of wild type gene function following a single administration of the proprietary genetic medicine. We believe this novel attribute of the investigational agents under development by Benitec may facilitate the achievement of robust clinical activity while greatly reducing the dosing frequencies traditionally expected for medicines employed for the management of chronic diseases. Additionally, the achievement of long-term gene silencing and gene replacement may significantly reduce the risk of patient during the course of medical management of potentially fatal clinical disorders.

On April 15, 2020, (the “Implementation Date”), Benitec Biopharma Limited (the a public company incorporated under the laws of the State of Western Australia, or BBL, was completed in accordance with the Scheme Implementation Agreement, as amended and restated as of January 30, 2020, between BBL and us. As a result of jurisdiction of incorporation was changed from Australia to Delaware, and BBL became our wholly owned subsidiary.

effected pursuant to a statutory scheme of arrangement under Australian law, or the Scheme, whereby on the Implementation Date, all of the issued and outstanding ordinary shares of BBL were exchanged for newly issued shares of our common stock, on the basis of one share of our common stock, par value $0.0001 per share, for every 300 ordinary shares of BBL issued and outstanding. Holders of BBL’s American Depository Shares, or ADSs (each of which represented 200 ordinary shares), received two shares of our common stock for every three ADSs held.

 

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been declared a pandemic by the World Health Organization and has spread to nearly every country, including Australia and the United States. The impact of this pandemic has been and will likely continue to be extensive in many aspects of society, which has resulted in and will likely continue to result in significant disruptions to businesses and capital markets around the world. The extent to which the coronavirus impacts us will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the coronavirus and its variants, and the actions to contain the coronavirus or treat its impact, including the effectiveness and adoption of vaccines for the virus, among others.

Certain of our research and development efforts are conducted globally, including the ongoing development of our silence and replace therapeutic for the treatment of Oculopharyngeal Muscular Dystrophy (OPMD), and will be dependent upon our ability to initiate preclinical and clinical studies despite the

As we continue to actively advance our preclinical programs, including our ongoing Toxicology and Biodistribution study are in close contact with our principal investigators and preclinical trial sites, which are primarily located in France, and are assessing the impact our studies and the expected development timelines and costs, on an ongoing basis. In light of developments relating to pandemic since the beginning of the outbreak, the focus of healthcare providers and hospitals on fighting the virus, and consistent with the FDA’s industry guidance for conducting clinical trials, we have experienced delays to the original timeline regarding the initiation and anticipated completion of the Clinical Trial Application (CTA)-enabling and Investigational New Drug Application (IND)-enabling development work. The initiation of Dosing Study in Beagle dogs, which represents a key component of the was delayed by several months, however, the study has been completed without incident. The acquisition of chemical reagents, biological reagents and laboratory supplies which are essential for the conduct of basic laboratory research, nonclinical studies and GMP manufacturing of has also become challenging due to the disruption of global supply chains inherent to the production of these materials. We will continue to evaluate the impact of on our business and expect to reevaluate the timing of our anticipated preclinical and clinical milestones as we learn more and the impact our industry becomes clearer.

We have also implemented a rotation system whereby staff work from home and attend the laboratory on designated days which may result in a reduction of laboratory work and a halt travel. As we transition our employees back to our premises, there is a risk occur at our offices or laboratory facilities and significantly affect our operations. Additionally, if any of our critical vendors are impacted, our business could be affected if we become unable to timely procure essential equipment, supplies or services in adequate quantities and at acceptable prices.

 

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The following table sets forth our current product candidates and their development status:

 

is under development for the treatment of Oculopharyngeal Muscular Dystrophy and is currently undergoing evaluation in and studies. is the lead pipeline program for Benitec, and the key attributes of are outlined in in Figure 3.

 

 

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is a genetic medicine employing the “silence and replace” approach for the treatment of OPMD. OPMD is an insidious, autosomal-dominant, late-onset, degenerative muscle disorder that typically presents in patients at years of age. The disease is characterized by progressive swallowing difficulties (dysphagia) and eyelid drooping (ptosis). OPMD is caused by a specific mutation in the poly(A)-binding protein nuclear 1 gene (PABPN1). OPMD is a rare disease, however, patients have been diagnosed with OPMD in at least 33 countries. Patient populations suffering from OPMD are well-identified, and significant geographical clustering has been noted for patients with this disorder, which could simplify clinical development and global commercialization efforts.

PABPN1 is a ubiquitous factor that promotes the interaction between the poly(A) polymerase and CPSF (cleavage and polyadenylation specificity factor) and, thus, controls the length of mRNA poly(A) tails, mRNA export from the nucleus, and alternative poly(A) site usage. The characteristic genetic mutation underlying OPMD results in trinucleotide repeat expansion(s) within exon 1 of PABPN1 and results in an expanded poly-alanine tract at the end of PABPN1. The mutation generates a protein with an expanded poly-alanine tract of up to 18 contiguous alanine residues, and the mutant protein is prone to the formation of aggregates called intranuclear inclusions (INIs). The INIs that sequester wildtype PABPN1 could also contribute to loss of the function phenotype associated with OPMD.

Currently, no therapeutic agents are approved for the treatment of OPMD. Additionally, no surgical interventions capable of altering the long-term natural history of OPMD are available. has received Orphan Drug Designation in the United States and the European Union which provides commercial exclusivity independent of intellectual property protection. While OPMD is a rare disorder, we believe the commercial opportunity for a safe and efficacious therapeutic agent in this clinical indication exceeds $1 billion over the course of the commercial life of the product.

Benitec has previously outlined the core and studies required by global regulatory agencies to support the initiation of clinical trials in OPMD patients, and these studies include a Pilot Dosing Study (the “Pilot Dosing Study”) in large animals and a classical GLP Toxicology and Biodistribution Study. is directly injected into the pharyngeal muscles known to underlie the morbidity and mortality characterizing the natural history of OPMD.

The Pilot Dosing Study is the first of two planned and studies that were designed to be conducted in large animals. These studies continue to be carried out under the guidance of the scientific team at Benitec, with key elements of the study design and execution conducted in close collaboration with a team of leading experts in both medicine and surgery that have been deeply engaged in the treatment of OPMD patients for several decades. The Pilot Dosing Study, along with the subsequent GLP Toxicology and Biodistribution Study, will be conducted in canine subjects and will support the validation and optimization of the newly designed method of administration, confirm the efficiency of vector transduction and transgene expression in the key tissue compartments underlying the natural history of OPMD, confirm the optimal drug doses in advance of initiation of human clinical studies, and facilitate observation of key toxicological data-points.

The Pilot Dosing Study was designed as an study in Beagle dogs to confirm the transduction efficiency of upon administration via direct intramuscular injection into specific anatomical regions of the pharynx through the use of an open surgical procedure. This new route of administration was developed in collaboration with key surgical experts in the field of Otolaryngology, and this novel method of dosing will significantly enhance the ability of a treating physician to accurately administer the investigational agent to the muscles that underlie the characteristic deficits associated with the progression of OPMD. It is important to note that prior studies of have reproducibly validated the robust biological activity achieved following direct intramuscular injection. As an example, direct injection of into the tibialis anterior muscles of A17 mice facilitated robust transduction of the targeted skeletal muscle cells and supported complete remission of the OPMD disease phenotype in this animal model.

 

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Benitec conducted the Pilot Dosing Study in Beagle dog subjects to demonstrate that direct intramuscular injection of via the use of a proprietary dosing device in an open surgical procedure could safely achieve the following goals:

 

 

 

The Pilot Dosing Study evaluated the safety and biological activity of two concentrations of (1.0+E13 vg/mL and 3.0+E13 vg/mL) across three distinct doses (1.0+E13 vg/mL and 3.0+E13 vg/mL with a low injection volume, and 3.0+E13 vg/mL with a high injection volume) following direct intramuscular injection into the Hypopharyngeus (HP) muscles and the Thyropharyngeus (TP) muscles of Beagle dogs via the use of a proprietary delivery device employed in an open surgical procedure. The HP muscle in Beagle dogs corresponds to the Middle Pharyngeal Constrictor muscle in human subjects, and the TP muscle in Beagle dogs corresponds to the Inferior Pharyngeal Constrictor muscle in human subjects. was injected only on Day 1 of the Pilot Dosing Study, and the corresponding canine pharyngeal muscles were harvested for analysis after 8 weeks of observation post-dosing. dosing was carried out by both a veterinary surgeon and a practicing Otolaryngologist who has extensive experience with the provision of palliative surgical care for OPMD patients.

Further data analyses are ongoing for the canine subjects treated in the Pilot Dosing Study, and the interim data-points highlighted here are derived from completed analyses of pharyngeal muscle tissues isolated from 16 Beagle dog subjects (of the study population). The derived from the Pilot Dosing Study and the formal conclusions will be updated as additional study subjects are analyzed.

The key preliminary results are summarized here:

 

 

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Finally, it is critical to highlight the key methodological distinctions between the current Pilot Dosing Study conducted by Benitec as compared to the prior Beagle dog dosing study carried out independently by the previous licensee. The dosing study conducted by the prior licensee employed routes and methods of administration to the target pharyngeal muscle tissues and employed similarly limited analytical methods at the completion of the dosing phase of the study. The Benitec team worked to optimize the route and method of administration of and to refine the core analytical methods employed following the completion of dosing.

 

 

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Following the disclosure of the positive Pilot Dosing Study data, Benitec completed a Scientific Advice meeting with The National Agency for the Safety of Medicines and Health Products in France (L’Agence nationale de sécurité du médicament et des produits de santé or “ANSM”) in the first half of 2021.

 

 

 

 

The Pilot Dosing Study was viewed as an appropriate dose range finding study. The preliminary data derived from the Pilot Dosing Study regarding pharyngeal muscle tissue transduction, transgene expression, and the resulting knock-down of wild type PABPN1 supported the adequacy of the data derived from this study to inform the choice of doses for use in the GLP Toxicology and Biodistribution Study. The design of the GLP Toxicology and Biodistribution study was viewed as appropriate to support testing of Pending the final results of the ongoing GLP Toxicology and Biodistribution study, the Pilot Dosing Study data and the murine study data are sufficient to inform the choice of the drug doses employed in the upcoming Phase 1b/2a study. As drug product has been reproducibly manufactured at large-scale in the past, the manufacturing plan for clinical grade drug product can be conducted under GMP conditions with a production process analogous to that that employed in prior large-scale production runs. Finally, the design of the Phase 1b/2a clinical trial can support the evaluation of safety and clinical efficacy in key populations of OPMD patients.

Regarding our regulatory interactions with the FDA, Benitec has been granted a Type C meeting in the fourth quarter of 2021.

Regarding our regulatory interactions with Health Canada, Benitec has been granted a meeting in the fourth quarter of 2021.

Benitec continues to plan for the initiation of the clinical study of in OPMD patients in 2022.

 

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Revenues from customers

Operating Expenses

Liquidity and Capital Resources

Operating activities

Investing activities

Contractual Obligations and Commercial Commitments

Off-Balance Sheet

Critical Accounting Policies and Significant Accounting Estimates

 Stock Compensation

Recent Accounting Pronouncements

ASU

Financial Instruments—Credit Losses

Financial Instruments-Credit Losses, Derivatives and Hedging, and Leases: Effective Dates”

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Item 4. Controls and Procedures

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

Item 1A. Risk Factors

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

Item 3. Defaults Upon Senior Securities

Item 4. Mine Safety Disclosures

Item 5. Other Information

Item 6. Exhibits.

SIGNATURES