Form 10-Q

Large accelerated filer

Accelerated filer

Non-accelerated
filer

Smaller reporting company

Emerging growth company

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM

10-Q

(Mark One)

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

For the quarterly period ended September 30, 2022

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

For the transition period from

Commission file number

001-36577

ContraFect Corporation

(Exact name of registrant as specified in its charter)


Delaware		39-2072586
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

28 Wells Avenue, 3rd Floor, Yonkers, NY		10701
(Address of principal executive offices)		(Zip Code)

(914)

207-2300

(Registrant’s telephone number, including area code)

N/A

(Former name, former address, and former fiscal year, if changed since last report)

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, $0.0001 par value per share	CFRX	Nasdaq Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation

S-T

(§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a

non-accelerated

filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule

12b-2

of the Exchange Act.

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

Indicate by check mark whether the registrant is a shell company (as defined in Rule

12b-2

of the Exchange Act). Yes ☐ No ☒

The number of shares of the registrant’s Common Stock outstanding as of November

, 2022 was 39,332,721.

CONTRAFECT CORPORATION

INDEX


		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements		1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		18
Item 3.	Quantitative and Qualitative Disclosures about Market Risk		26
Item 4.	Controls and Procedures		26

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings		27
Item 1A.	Risk Factors		27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		58
Item 3.	Defaults Upon Senior Securities		58
Item 4.	Mine Safety Disclosures		58
Item 5.	Other Information		58
Item 6.	Exhibits		59

SIGNATURES			60

FORWARD LOOKING STATEMENTS

The information in this Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, which are subject to the “safe harbor” created by those sections. These forward-looking statements include, but are not limited to, statements concerning our strategy, future operations, future financial position, future revenues, our ability to continue as a going concern, projected costs, prospects and plans and objectives of management. The words “anticipates”, “believes”, “estimates”, “expects”, “intends”, “targets”, “may”, “plans”, “projects”, “potential”, “will”, “would”, “could” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. All such forward-looking statements involve significant risks and uncertainties, including, but not limited to, statements regarding:

•

the success, cost, timing and potential indications of our product development activities and clinical trials;

•

our ability to advance into and through clinical development and ultimately obtain U.S. Food and Drug Administration (“FDA”) approval for our product candidates;

•

our research and development plans and ability to bring forward additional product candidates into preclinical and clinical development;

•

our expectations regarding the impact of COVID-19 on our business, operations and financial performance and position;

•

our contract with the Biomedical Advanced Research and Development Authority (“BARDA”) (the “BARDA Contract”) and any exercise of BARDA’s options to extend the BARDA Contract;

•

our grant award from the Military Infectious Diseases Research Program, United States Army Medical Research and Development Command (“USAMRDC”);

•

the rate and degree of market acceptance of our product candidates and our expectations regarding the size of the commercial markets for our product candidates;

•

our future marketing and sales programs;

•

the effect of competition and proprietary rights of third parties;

•

our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern;

•

anticipated reductions in operating expenses;

•

the availability of and our ability to obtain additional financing;

•

the effects of existing and future federal, state and foreign regulations;

•

the seeking of joint development, licensing or distribution and collaboration and marketing arrangements with third parties; and

•

the period of time for which our existing cash and cash equivalents will enable us to fund our operations.

As more fully described under the heading “Risk Factors” contained elsewhere in this Quarterly Report on Form 10-Q, many important factors affect our ability to achieve our stated objectives and to develop and commercialize any product candidates. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks and uncertainties set forth in our filings with the SEC. You should read this Quarterly Report on Form 10-Q with the understanding that our actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements that we make. The forward-looking statements are applicable only as of the date on which they are made, and we do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

RISK FACTOR SUMMARY

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include, but are not limited to, the following:

•

We have incurred significant losses since our inception. We expect to incur losses for at least the next several years and may never achieve or maintain profitability.

•

Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

•

We currently have no source of product revenue and have not yet generated any revenues from product sales.

•

We have a need for substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts.

•

If BARDA were to eliminate, reduce, or delay funding for our BARDA Contract, we would experience a negative impact on our programs associated with such funding.

•

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

•

The timing of the milestone and royalty payments we are required to make to The Rockefeller University (“Rockefeller”) under certain agreements is uncertain and could adversely affect our cash flows and results of operations.

•

Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

•

The COVID-19 pandemic or another pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.

•

We are heavily dependent on the success of our leading product candidates. If we are ultimately unable to obtain regulatory approval for any of our product candidates, our business will be substantially harmed.

•

If clinical trials of any of our product candidates that we develop fail to demonstrate safety and efficacy, or the manufacturing for the commercial supply of drug substance or drug product fails to demonstrate robustness, stability, purity and potency to the satisfaction of the FDA or similar international regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of our product candidates.

•

We may be required to suspend or discontinue clinical trials due to adverse side effects or other safety risks that could preclude approval of any of our product candidates.

•

Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize, delay or prevent our ability to obtain regulatory approval and commence product sales as currently contemplated.

•

We are significantly dependent on our license agreements with Rockefeller that relate to exebacase.

•

We rely on Contract Research Organizations (“CROs”) to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidates.

•

We rely on contract manufacturing organizations (“CMOs”) to manufacture clinical and commercial supplies of our product candidates. In addition to the risks associated with the manufacture of our product candidates, which could include cost overruns, new impurities, difficulties in process or formulation development, scaling up or reproducing manufacturing processes and lack of timely availability of raw materials, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidates.

•

Even if the FDA approves any of our product candidates, adverse effects discovered after approval could adversely affect our markets.

•

Any Breakthrough Therapy designation that we may receive from the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

•

Developments by competitors may render our products or technologies obsolete or non-competitive.

•

The level of commercial success of any of our product candidates that we develop will depend upon significant market acceptance of these products among physicians and payors.

•

Coverage and reimbursement may not be available for any of our product candidates that we develop, including as a result of healthcare reform measures.

•

We may not successfully execute or achieve the expected benefits of our restructuring program and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations.

•

If we are unable to establish our own marketing and sales capabilities, or enter into agreements with third parties, to market and sell our products after they are approved, we may not be able to generate revenues.

•

Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

•

Risks related to regulatory approval of our product candidates and other legal and compliance matters.

•

Risks related to employee matters and our operations.

•

Risks related to our intellectual property.

•

Risks related to our securities and organizational documents.

•

We currently do not meet certain of Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules. If we are unable to regain compliance, we are likely to be delisted. Delisting could negatively affect the price of our common stock and could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.

•

Security breaches, cybersecurity attacks, failure of our data and personal information protections and other disruptions could compromise our information and technology systems and expose us to liability, which would cause our business and reputation to suffer.

•

Our collection, control, processing, sharing, disclosure and otherwise use of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, and evolving laws concerning data privacy in the European Union (“EU”) and European Economic Area (“E.E.A.”).

CONTRAFECT CORPORATION

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

CONTRAFECT CORPORATION

Consolidated Balance Sheets

(in thousands, except share data)


	September 30, 2022			December 31, 2021
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	4,664		$	16,654
Marketable securities		12,984			37,631
Prepaid expenses		1,815			4,439
Other current assets		586			4,140

Total current assets		20,049			62,864
Property and equipment, net		628			741
Operating lease right-of-use assets		2,249			2,544
Other assets		108			613

Total assets	$	23,034		$	66,762

Liabilities and stockholders’ (deficit) equity
Current liabilities:
Accounts payable	$	15,348		$	2,389
Accrued and other current liabilities		7,768			9,128
Current portion of lease liabilities		667			657

Total current liabilities		23,783			12,174
Warrant liabilities		3			2,530
Long-term portion of lease liabilities		2,313			2,609
Other liabilities		38			73

Total liabilities		26,137			17,386
Commitments and contingencies		—			—
Stockholders’ (deficit) equity:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none outstanding at September 30, 2022 and December 31, 2021		—			—
Common stock, $0.0001 par value, 125,000,000 shares authorized, 39,332,721 shares issued and outstanding at September 30, 2022 and December 31, 2021		4			4
Additional paid-in capital		312,898			310,008
Accumulated other comprehensive loss		(140	)		(84	)
Accumulated deficit		(315,865	)		(260,552	)

Total stockholders’ (deficit) equity		(3,103	)		49,376

Total liabilities and stockholders’ (deficit) equity	$	23,034		$	66,762

See accompanying notes.

Table of Contents

CONTRAFECT CORPORATION

Consolidated Statements of Operations

(unaudited)

(in thousands, except share and per share data)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Operating expenses
Research and development	$	10,814		$	8,664		$	40,299		$	24,462
General and administrative		3,366			3,022			9,886			8,722
Restructuring		7,719			—			7,719			—

Total operating expenses		21,899			11,686			57,904			33,184

Loss from operations		(21,899	)		(11,686	)		(57,904	)		(33,184	)
Other income:
Interest income , net		9			36			64			91
Change in fair value of warrant liabilities		4,823			6,358			2,527			17,210

Total other income, net		4,832			6,394			2,591			17,301

Net loss	$	(17,067	)	$	(5,292	)	$	(55,313	)	$	(15,883	)

Per share information:
Basic and diluted net loss per share	$	(0.43	)	$	(0.13	)	$	(1.41	)	$	(0.44	)

Shares used in computing net loss per share		39,332,721			39,332,721			39,332,721			35,914,327

See accompanying notes.

Table of Contents

CONTRAFECT CORPORATION

Consolidated Statements of Comprehensive Loss

(unaudited)

(in thousands)


	Three Months Ended September 30,						Nine Months Ended September 30,
	2022			2021			2022			2021
Net loss	$	(17,067	)	$	(5,292	)	$	(55,313	)	$	(15,883	)
Other comprehensive loss:
Unrealized gain (loss) on available-for-sale securities		73			(1	)		(56	)		(22	)

Comprehensive loss	$	(16,994	)	$	(5,293	)	$	(55,369	)	$	(15,905	)

SEC Form 10-Q filed by ContraFect Corporation