10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2021

☐ Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to

Commission File Number: 001-36329

Recro Pharma, Inc.

(Exact name of registrant as specified in its charter)


Pennsylvania	26-1523233
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

1 E. Uwchlan Ave, Suite 112, Exton, Pennsylvania	19341
(Address of principal executive offices)	(Zip Code)

(770) 534-8239

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol	Name of exchange on which registered
Common Stock, par value $0.01	REPH	The NASDAQ Stock Market LLC

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

None

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.


Large accelerated filer ☐	Accelerated filer ☐
Non-accelerated filer ☒	Smaller reporting company ☒
	Emerging growth company ☐

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

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

As of April 29, 2021, there were 31,026,147 shares of common stock, par value $0.01 per share, outstanding.

TABLE OF CONTENTS


		Page
PART I. FINANCIAL INFORMATION		1
Item 1. Financial statements		1
Item 2. Management's discussion and analysis of financial condition and results of operations		16
Item 3. Quantitative and qualitative disclosures about market risk		22
Item 4. Controls and procedures		22
PART II. OTHER INFORMATION		23
Item 1. Legal proceedings		23
Item 1A. Risk factors		23
Item 2. Unregistered sales of equity securities and use of proceeds		23
Item 3. Defaults upon senior securities		23
Item 4. Mine safety disclosures		23
Item 5. Other information		23
Item 6. Exhibits		23
SIGNATURES		25

PART I. FINANCIAL INFORMATION

Item 1. Financial statements

RECRO PHARMA, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(Unaudited)


(amounts in thousands, except share and per share data)	March 31, 2021			December 31, 2020
Assets
Current assets:
Cash and cash equivalents	$	11,558		$	23,760
Accounts receivable		12,428			9,033
Contract asset		6,994			7,330
Inventory		8,636			11,612
Prepaid expenses and other current assets		2,325			2,334
Total current assets		41,941			54,069
Property, plant and equipment, net		42,770			43,841
Intangible assets, net		54			700
Goodwill		4,319			4,319
Other assets		470			486
Total assets	$	89,554		$	103,415
Liabilities and shareholders’ deficit
Current liabilities:
Accounts payable	$	1,538		$	1,804
Current portion of debt		2,579			1,474
Accrued expenses and other current liabilities		3,989			4,525
Total current liabilities		8,106			7,803
Debt, net		88,899			108,097
Other liabilities		1,273			1,615
Total liabilities		98,278			117,515
Commitments and contingencies (note 8)
Shareholders’ deficit:
Preferred stock, $0.01 par value. 10,000,000 shares authorized, none issued or outstanding		—			—
Common stock, $0.01 par value. 50,000,000 shares authorized, 31,013,319 and 28,601,358 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively		310			286
Additional paid-in capital		232,111			219,998
Accumulated deficit		(241,145	)		(234,384	)
Total shareholders’ deficit		(8,724	)		(14,100	)
Total liabilities and shareholders’ deficit	$	89,554		$	103,415

See accompanying notes to consolidated financial statements.

RECRO PHARMA, INC. AND SUBSIDIARIES

Consolidated Statements of Operations

(Unaudited)


	Three months ended March 31,
(amounts in thousands, except share and per share data)	2021			2020
Revenue	$	16,803		$	21,777
Operating expenses:
Cost of sales (excluding amortization of intangible assets)		14,337			18,254
Selling, general and administrative		4,683			5,446
Amortization of intangible assets		646			646
Total operating expenses		19,666			24,346
Operating loss		(2,863	)		(2,569	)
Interest expense		(3,898	)		(5,123	)
Net loss	$	(6,761	)	$	(7,692	)

Loss per share, basic and diluted	$	(0.23	)	$	(0.33	)
Weighted average shares outstanding		29,737,864			23,394,767

See accompanying notes to consolidated financial statements.

RECRO PHARMA, INC. AND SUBSIDIARIES

Consolidated Statements of Shareholders’ Deficit

(Unaudited)


	Common stock				Additional			Accumulated
(amounts in thousands, except share data)	Shares		Amount		paid-in capital			deficit			Total
Balance, December 31, 2020		28,601,358	$	286	$	219,998		$	(234,384	)	$	(14,100	)
Issuance of common stock, net of costs		2,202,420		22		9,318			—			9,340
Stock-based compensation expense		—		—		3,133			—			3,133
Vesting of restricted stock units, net		209,541		2		(338	)		—			(336	)
Net loss		—		—		—			(6,761	)		(6,761	)
Balance, March 31, 2021		31,013,319	$	310	$	232,111		$	(241,145	)	$	(8,724	)

Balance, December 31, 2019		23,312,928	$	233	$	199,938		$	(206,883	)	$	(6,712	)
Stock-based compensation expense		—		—		3,231			—			3,231
Exercise of stock options, net		37,063		—		(105	)		—			(105	)
Vesting of restricted stock units, net		105,242		1		(917	)		—			(916	)
Net loss		—		—		—			(7,692	)		(7,692	)
Balance, March 31, 2020		23,455,233	$	234	$	202,147		$	(214,575	)	$	(12,194	)

See accompanying notes to consolidated financial statements.

RECRO PHARMA, INC. AND SUBSIDIARIES

Consolidated Statements of Cash Flows

(Unaudited)


	Three months ended March 31,
(amounts in thousands)	2021			2020
Cash flows from operating activities, continuing operations:
Net loss	$	(6,761	)	$	(7,692	)
Adjustments to reconcile net loss to net cash provided by operating activities, continuing operations:
Stock-based compensation expense		3,133			3,231
Non-cash interest expense		1,462			1,460
Depreciation expense		1,436			1,500
Amortization of intangible assets		646			646
Changes in operating assets and liabilities:
Accounts receivable		(3,395	)		(97	)
Contract asset		336			(901	)
Inventory		2,976			3,028
Prepaid expenses and other assets		110			1,078
Accounts payable, accrued expenses and other liabilities		(32	)		1,285
Net cash (used in) provided by operating activities, continuing operations		(89	)		3,538
Cash flows from investing activities
Purchases of property and equipment		(1,477	)		(620	)
Net cash used in investing activities		(1,477	)		(620	)
Cash flows from financing activities:
Cash portion of $16,160 reduction to debt principal and accrued exit fee		(10,100	)		—
Payment of deferred financing costs		(200	)		—
Net payments related to vesting of restricted stock units		(336	)		(1,151	)
Net proceeds related to exercise of stock options		—			130
Net cash used in financing activities		(10,636	)		(1,021	)
Net (decrease) increase in cash and cash equivalents from continuing operations		(12,202	)		1,897
Cash flows used in discontinued operating activities		—			(1,172	)
Cash and cash equivalents, beginning of period		23,760			19,148
Cash and cash equivalents, end of period	$	11,558		$	19,873
Supplemental disclosures of cash flow information:
Cash paid for interest	$	2,495		$	3,693
Issuance of common stock to reduce debt principal and accrued exit fees		6,060			—
Issuance of common stock to settle interest obligations		3,211			—
Purchases of property, plant and equipment included in accrued expenses and accounts payable		132			702

See accompanying notes to consolidated financial statements.

RECRO PHARMA, INC. AND SUBSIDIARIES

Notes to consolidated financial statements

(amounts in thousands, except share and per share data)

(Unaudited)

(1) Background

Recro Pharma, Inc. (the “Company”) was incorporated in Pennsylvania on November 15, 2007. The Company is a dedicated contract development and manufacturing organization (“CDMO”) solving complex formulation and manufacturing challenges for companies developing oral solid dose drug products. It leverages its formulation and development expertise to develop and manufacture pharmaceutical products using proprietary delivery technologies and know-how for commercial partners who commercialize or plan to commercialize these products. The Company operates in

SEC Form 10-Q filed by Recro Pharma, Inc.