Tobira Therapeutics
Tobira Therapeutics, Inc. (Form: 10-Q, Received: 08/11/2015 16:12:26)

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

x

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

For the quarterly period ended June 30, 2015

OR

o

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

For the transition period from        to       

Commission File Number: 001-35953

 

TOBIRA THERAPEUTICS, INC.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

03-0422069

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

 

 

701 Gateway Blvd., Suite 300

South San Francisco, CA

94080

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (650) 741-6625

 

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

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).    Yes   x     No   o

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

 

Large accelerated filer

 

¨

  

Accelerated filer

 

¨

 

 

 

 

Non-accelerated filer

 

x   (Do not check if a small reporting company)

  

Small reporting company

 

¨

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

As of August 7, 2015, there were 17,439,502 shares of the Registrant’s common stock outstanding.

 

 

 


 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements that are based on our beliefs and assumptions and on information currently available to us. Forward-looking statements include information concerning our expectations for the timing of clinical study results, including the CENTAUR and ORION studies, and the timing and success of future development of CVC, our possible or assumed future results of operations and expenses, business strategies and plans, trends, market sizing, competitive position, industry environment and potential growth opportunities, among other things. Forward-looking statements include all statements that are not historical facts and, in some cases, can be identified by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “seeks,” “should,” “will,” “would” or similar expressions and the negatives of those terms.

Forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including those described in “Risk Factors” and elsewhere in this report. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Any forward-looking statement made by us in this report speaks only as of the date on which it is made. Except as required by law, we disclaim any obligation to update these forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in these forward-looking statements, even if new information becomes available in the future.

 

As used in this report, the term “Private Tobira” refers to Tobira Development, Inc. (formerly known as Tobira Therapeutics, Inc.) prior to the consummation of the Merger described in this report and references to the terms the "combined company”, “Tobira”, the "Company”, “we”, “our” and “us” refer to Private Tobira, prior to the consummation of the Merger described in this report and Tobira Therapeutics, Inc. (formerly known as Regado Biosciences, Inc.) and its subsidiaries upon the consummation of the Merger described in this report. The term "Regado" refers to the Regado Biosciences, Inc. and its subsidiaries prior to the Merger described in this report.

 

 

 

2


 

TOBIRA THERAPEUTICS, INC.

FORM 10-Q

FOR THE QUARTER ENDED JUNE 30, 2015

Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

4

 

Condensed Balance Sheets as of June 30, 2015 and December 31, 2014

4

 

Condensed Statements of Operations and Comprehensive Loss for the Three and Six Months Ended June 30, 2015 and 2014

5

 

Condensed Statements of Cash Flows for the Six Months Ended June 30, 2015 and 2014

6

 

Notes to Condensed Financial Statements

7

Item 2.

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

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

27

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

28

Item 1A.

Risk Factors

29

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3.

Defaults Upon Senior Securities

54

Item 4.

Mine Safety Disclosures

54

Item 5.

Other Information

54

Item 6.

Exhibits

54

Signatures

55

Exhibit Index

56

 

 

 

3


 

PART I. FINANCI AL INFORMATION

Item 1. Financial Statements (Unaudited).

TOBIRA THERAPEUTICS, INC.

CONDENSED BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

June 30,

2015

 

 

December 31,

2014

 

 

 

(Unaudited)

 

 

(Note 2)

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

63,393

 

 

$

6,178

 

Prepaid expenses and other current assets

 

 

1,718

 

 

 

1,013

 

Total current assets

 

 

65,111

 

 

 

7,191

 

Property and equipment, net

 

 

446

 

 

 

474

 

Restricted cash

 

 

334

 

 

 

334

 

Other assets

 

 

1,632

 

 

 

347

 

In-process research and development

 

 

12,205

 

 

 

 

Goodwill

 

 

5,110

 

 

 

 

Total assets

 

$

84,838

 

 

$

8,346

 

Liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

3,205

 

 

$

1,887

 

Accrued expenses and other liabilities

 

 

3,888

 

 

 

6,503

 

Capital lease obligation

 

 

23

 

 

 

21

 

Deferred rent

 

 

56

 

 

 

57

 

Term loan

 

 

2,481

 

 

 

 

Convertible notes, related party

 

 

 

 

 

29,770

 

Total current liabilities

 

 

9,653

 

 

 

38,238

 

Capital lease obligations

 

 

28

 

 

 

40

 

Deferred rent

 

 

203

 

 

 

219

 

Term loan

 

 

12,462

 

 

 

14,789

 

Preferred stock warrant liabilities

 

 

 

 

 

2,460

 

Deferred tax liability, net

 

 

4,357

 

 

 

 

Total liabilities

 

 

26,703

 

 

 

55,746

 

Commitments and contingencies (Note 10)

 

 

 

 

 

 

 

 

Convertible preferred stock (Note 7)

 

 

 

 

 

61,982

 

Stockholders’ equity (deficit):

 

 

 

 

 

 

 

 

Preferred stock, par value $0.001; 1,000,000 and no shares authorized at June 30, 2015 and

   December 31, 2014, respectively; no shares issued and outstanding at June 30, 2015 and

   December 31, 2014

 

 

 

 

 

 

Common stock, par value $0.001; 500,000,000 shares authorized and 17,635,149 shares

   issued and outstanding at June 30, 2015; common stock, par value $0.0001; 8,456,867

   shares authorized and 403,539 shares issued and outstanding at December 31, 2014

 

 

18

 

 

 

 

Additional paid-in capital

 

 

189,896

 

 

 

4,378

 

Accumulated other comprehensive income (loss)

 

 

 

 

 

 

Accumulated deficit

 

 

(131,779

)

 

 

(113,760

)

Total stockholders’ equity (deficit)

 

 

58,135

 

 

 

(109,382

)

Total liabilities, convertible preferred stock and stockholders’ equity (deficit)

 

$

84,838

 

 

$

8,346

 

 

See accompanying notes to unaudited condensed financial statements.

 

 

4


 

TOBIRA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS

(Unaudited)

(In thousands, except share and per share data)

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Research and development

 

$

6,616

 

 

$

3,094

 

 

$

12,287

 

 

$

4,763

 

General and administrative

 

 

3,119

 

 

 

1,873

 

 

 

5,271

 

 

 

2,742

 

Total operating expenses

 

 

9,735

 

 

 

4,967

 

 

 

17,558

 

 

 

7,505

 

Loss from operations

 

 

(9,735

)

 

 

(4,967

)

 

 

(17,558

)

 

 

(7,505

)

Other income (expense), net

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(1,190

)

 

 

(1,266

)

 

 

(2,435

)

 

 

(2,281

)

Change in fair value of preferred stock warrant

   liabilities

 

 

(97

)

 

 

(1,412

)

 

 

1,939

 

 

 

(689

)

Loss before income tax expense

 

 

(11,022

)

 

 

(7,645

)

 

 

(18,054

)

 

 

(10,475

)

Income tax benefit (expense)

 

 

35

 

 

 

(271

)

 

 

35

 

 

 

(271

)

Net loss and comprehensive loss

 

$

(10,987

)

 

$

(7,916

)

 

$

(18,019

)

 

$

(10,746

)

Net loss per share, basic and diluted

 

$

(0.99

)

 

$

(19.62

)

 

$

(3.14

)

 

$

(26.63

)

Weighted-average common shares outstanding,

   basic and diluted

 

 

11,124,751

 

 

 

403,539

 

 

 

5,733,406

 

 

 

403,539

 

 

See accompanying notes to unaudited condensed financial statements.

 

 

5


 

TOBIRA THERAPEUTICS, INC.

CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

(In thousands)

 

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

Operating activities

 

 

 

 

 

 

 

 

Net loss

 

$

(18,019

)

 

$

(10,746

)

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

 

 

 

 

 

 

 

 

Depreciation and amortization

 

 

58

 

 

 

9

 

Stock-based compensation

 

 

614

 

 

 

1,209

 

Amortization of debt discount

 

 

353

 

 

 

488

 

Change in fair value of preferred stock warrant liabilities

 

 

(1,939

)

 

 

689

 

Noncash interest expense on convertible notes

 

 

1,068

 

 

 

1,105

 

Amortization of beneficial conversion feature

 

 

429

 

 

 

632

 

Amortization of debt issuance costs

 

 

60

 

 

 

 

Change in assets and liabilities:

 

 

 

 

 

 

 

 

Prepaid expenses and other assets

 

 

(598

)

 

 

(83

)

Accounts payable and accrued expenses

 

 

2,239

 

 

 

1,861

 

Deferred rent

 

 

(21

)

 

 

 

Net cash used in operating activities

 

 

(15,756

)

 

 

(4,836

)

Investing activities

 

 

 

 

 

 

 

 

Cash received from merger transaction

 

 

33,232

 

 

 

 

Purchase of property and equipment

 

 

(31

)

 

 

(63

)

Net cash provided by (used in) investing activities

 

 

33,201

 

 

 

(63

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock, net

 

 

26,826

 

 

 

 

Proceeds from borrowings — term loans, net

 

 

 

 

 

14,888

 

Proceeds from convertible notes, net

 

 

12,954

 

 

 

8,000

 

Payments on term loan

 

 

 

 

 

(1,833

)

Payments on capital lease obligations

 

 

(10

)

 

 

 

Costs paid in connection with preparations for initial public offering

 

 

 

 

 

(1,481

)

Net cash provided by financing activities

 

 

39,770

 

 

 

19,574

 

Net increase in cash and cash equivalents

 

 

57,215

 

 

 

14,675

 

Cash and cash equivalents at beginning of period

 

 

6,178

 

 

 

4,088

 

Cash and cash equivalents at end of period

 

$

63,393

 

 

$

18,763

 

Supplemental disclosure of cash flow information

 

 

 

 

 

 

 

 

Cash paid for interest

 

$

524

 

 

$

49

 

Noncash activities:

 

 

 

 

 

 

 

 

Conversion of promissory notes and interest to common stock

 

$

48,221

 

 

$

 

Beneficial conversion feature related to promissory notes

 

$

396

 

 

$

 

Reclassification of preferred stock warrant liability to additional paid-in capital

 

$

521

 

 

$

 

Conversion of Series A and B preferred stock to common stock

 

$

61,982

 

 

$

 

Conversion of Series F preferred stock to common stock

 

$

24,832

 

 

$

 

Issuance of common stock to financial advisors — Merger transaction

 

$

852

 

 

$

 

Issuance of warrants — term loan and convertible notes, related party

 

$

 

 

$

868

 

Reclassification of stock award liability from equity upon modification

 

$

 

 

$

399

 

Accrued deferred initial public offering costs

 

$

 

 

$

1,445

 

Landlord paid leasehold improvements

 

$

 

 

$

259

 

Equipment purchased under capital lease

 

$

 

 

$

70

 

Accrued debt issuance costs

 

$

 

 

$

47

 

Fair value of assets acquired and liabilities assumed in the Merger:

 

 

 

 

 

 

 

 

Fair value of assets acquired

 

$

18,723

 

 

$

 

Fair value of liabilities assumed

 

 

(5,832

)

 

 

 

Fair value of net assets acquired in the Merger

 

$

12,891

 

 

$

 

 

See accompanying notes to unaudited condensed financial statements.

 

 

6


 

TOBIRA THERAPEUTICS, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

(Unaudited)

 

 

1.

DESCRIPTION OF BUSINESS

Tobira Therapeutics, Inc., or Tobira or the Company, is a clinical-stage biopharmaceutical company focused on the development and commercialization of therapeutics to treat NASH, or nonalcoholic steatohepatitis, which is a form of liver disease affecting 3-5% of the U.S. population and is becoming the leading cause of liver transplant. The Company’s lead product candidate, cenicriviroc, or CVC, is a proprietary immunomodulator that can potentially be used to treat a number of disease states with high unmet medical need such as NASH, fibrosis, inflammation and human immunodeficiency virus, or HIV. CVC is a once-daily pill with well-established safety and tolerability in over 600 subjects dosed in completed Phase 1 and Phase 2 trials, including a pharmacokinetics, or PK, and safety study in subjects with liver cirrhosis and 115 HIV infected subjects on treatment for up to 48 weeks.

Tobira is developing CVC for NASH, for which the Company recently completed enrollment of a Phase 2b clinical trial of CVC in 289 subjects with confirmed NASH and liver fibrosis entitled CENTAUR. The Company expects to announce CENTAUR primary endpoint results in the third quarter of 2016 and the study design incorporates surrogate endpoints that may form the basis for demonstrating efficacy required for accelerated approval. The U.S. Food and Drug Administration, or the FDA, Accelerated Approval Program allows for earlier approval of drugs that treat serious conditions and fill an unmet medical need based on a surrogate endpoint. CVC has been granted Fast Track designation by the FDA for the treatment of NASH in patients with liver fibrosis. Tobira is developing CVC both as a standalone, as well as a cornerstone for combination therapies for NASH and fibrosis, and expects to present initial clinical and preclinical combination data in 2015.

Reverse Merger

On May 4, 2015, Regado Biosciences, Inc., or Regado, completed its business combination with Private Tobira in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of January 14, 2015, as amended on January 23, 2015, or the Merger Agreement. Pursuant to the Merger Agreement, a newly formed wholly-owned subsidiary was established that merged with and into Private Tobira, with Private Tobira surviving the merger and becoming a wholly-owned subsidiary of Regado, or the Merger. In connection with the Merger, the name of Private Tobira was changed to Tobira Development, Inc., or Tobira Development. In connection with, and immediately prior to, the completion of the Merger, Regado filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a one for nine reverse stock split of Regado’s common stock. In connection with and immediately following the consummation of the Merger, Regado filed an amendment to the amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to change its name to Tobira Therapeutics, Inc. On June 29, 2015, a Certificate of Ownership and Merger was filed with the Secretary of State of the State of Delaware to effect the merger of Tobira Development with and into Tobira Therapeutics, Inc. As a result, Tobira Therapeutics, Inc. is the sole entity as of June 30, 2015. See Note 3 for additional information regarding the Merger.

The Company, or Tobira, as used in the accompanying notes to the condensed financial statements, refers to Private Tobira prior to the completion of the Merger and Public Tobira subsequent to the completion of the Merger.

Private Placement

On May 4, 2015, Tobira entered into a Purchase Agreement and a Registration Rights Agreement, or the 2015 Purchase Agreement, which provided for the sale and issuance, promptly after the consummation of the Merger, of 2,542,365 shares of Tobira common stock to certain stockholders of Private Tobira and certain other institutional investors, or the Private Placement, at a purchase price of $10.62 per share for aggregate gross proceeds of $27.0 million. The purchase price of $10.62 is equal to the closing price of Regado’s common stock on April 30, 2015, as adjusted by the one for nine reverse split effected on May 4, 2015.

 

 

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or GAAP, for interim financial information and instructions to Form 10-Q and Article 10 of Regulation S-X set forth by the Securities and Exchange Commission, or the SEC, for interim reporting.  As permitted under these rules, certain footnotes or other financial information normally required by GAAP may be condensed or omitted. These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all adjustments including normal and recurring adjustments which the Company considers necessary for the fair presentation of financial information. The results of operations and comprehensive loss for the three and six months ended June 30, 2015 are not necessarily indicative of

7


 

expected results for the full fiscal year or any other period. The condense d balance sheet as of December 31, 2014 has been derived from audited financial statements but does not include all information required by U.S. GAAP for complete financial statements.

The accompanying unaudited condensed financial statements and notes should be read in conjunction with the audited financial statements and accompanying notes for the year ended December 31, 2014 included in the Current Report, as amended, on Form 8-K/A filed on June 2, 2015. There have been no significant and material changes in our critical accounting policies and significant judgments and estimates during the three and six months ended June 30, 2015, except as described below.

Reverse Stock Splits

On May 4, 2015, Regado effected a one for nine reverse stock split of its outstanding common stock and options for common stock. The par value was not adjusted as a result of the reverse stock split.

On July 28, 2014, Private Tobira effected a one for 26.4065866 reverse stock split of Private Tobira’s common stock, convertible preferred stock, preferred stock warrants and options for common stock, or the Private Tobira Reverse Split. The par value was not adjusted as a result of the Private Tobira Reverse Split. On February 23, 2015, in connection with the Private Tobira Reverse Split, Private Tobira filed a correction to its amended articles of incorporation to effect a one for 26.4065866 reverse stock split of its authorized shares of common stock, Series A preferred stock and Series B preferred stock.

The accompanying condensed financial statements and notes to the condensed financial statements give retroactive effect to the Private Tobira Reverse Split for all periods presented.

Business Combinations

Accounting for acquisitions requires extensive use of estimates and judgment to measure the fair value of the identifiable tangible and intangible assets acquired, including in-process research and development and liabilities assumed. Additionally, the Company must determine whether an acquired entity is considered a business or a set of net assets because the excess of the purchase price over the fair value of net assets acquired can only be recognized as goodwill in a business combination. The Company accounted for the Merger with Regado as a business combination under the acquisition method of accounting. Consideration paid to acquire Regado was measured at fair value and included the exchange of Regado’s common stock, Series F preferred stock and vested stock options. The allocation of the purchase price resulted in recognition of intangible assets related to in-process research and development and goodwill. The key assumptions in determining the fair value of intangible assets were assessing the timing and estimated costs to complete the in-process projects, projecting regulatory approvals, developing an appropriate discount rate and the estimated future cash flows.

As a result of the Merger, historical common stock, stock options and additional paid-in capital, including share and per share amounts, have been retroactively adjusted to reflect the equity structure of the Company including the effect of the Exchange Ratio and the Company’s common stock par value of $0.001 per share (See Note 3).

In-Process Research and Development

In-process research and development, or IPR&D, represents the fair value assigned to research and development assets that were not fully developed as of the completion of the Merger. IPR&D acquired in a business combination is capitalized on the Company’s balance sheet at its acquisition-date fair value. Until the project is completed, the asset is accounted for as an indefinite-lived intangible asset subject to impairment testing. Upon completion of a project, the carrying value of the related IPR&D is reclassified to intangible assets and is amortized over the estimated useful life of the asset. The Company evaluates the potential impairment of its intangible assets if events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable.

Goodwill

Goodwill represents the difference between the consideration transferred and the fair value of the net assets acquired under the acquisition method of accounting. Goodwill is not amortized but is evaluated for impairment during the last fiscal quarter of the year or if indicators of impairment exist that would, more likely than not, reduce the fair value from its carrying amount.

Stock-Based Compensation Expense

For stock options granted to employees, the Company recognizes compensation expense for all stock-based awards based on the grant date estimated fair value. The value of the portion of the award that is ultimately expected to vest is recognized as expense ratably over the requisite service period. The fair value of stock options is determined using the Black-Scholes option pricing model net of

8


 

estimated forfeitures. The determination of fair value for stock-based awards on the date of grant using an option pricing model requires management to make certain as sumptions regarding a number of complex and subjective variables.

Stock-based compensation expense related to stock options granted to non-employees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model, as the options are vested. The awards generally vest over the time period the Company expects to receive services from non-employees. Stock options granted to non-employees are subject to periodic revaluation over their vesting terms.

 

Net Loss Per Share

Basic net loss per common share is calculated by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period, without consideration for potentially dilutive securities. Diluted net loss per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares and potentially dilutive securities outstanding for the period determined using the treasury-stock and if-converted methods. The calculation of diluted loss per share also requires that, to the extent the average market price of the underlying shares for the reporting period exceeds the exercise price of the warrants and the presumed exercise of such securities are dilutive to earnings (loss) per share for the period, adjustments to net income or net loss used in the calculation are required to remove the change in fair value of the warrants for the period. Likewise, adjustments to the denominator are required to reflect the related dilutive shares. For purposes of the diluted net loss per share calculation, convertible preferred stock, convertible notes and accrued interest, stock options and preferred stock warrants are considered to be potentially dilutive securities and are excluded from the calculation of diluted net loss per share because their effect would be anti-dilutive. Therefore, basic and diluted net loss per share was the same for the periods presented due to the Company’s net loss position.

The following table sets forth the outstanding potentially dilutive securities, as adjusted retroactively reflecting the exchange for Regado shares, that have been excluded in the calculation of diluted net loss per share because including such would be anti-dilutive (in common stock equivalent shares):

 

 

 

Three and Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

Convertible preferred stock

 

 

 

 

 

5,544,476

 

Warrants to purchase preferred stock

 

 

64,557

 

 

 

901,986

 

Common stock options

 

 

2,100,765

 

 

 

1,381,574

 

Convertible notes

 

 

 

 

 

3,240,904

 

Total

 

 

2,165,322

 

 

 

11,068,940

 

 

Recent Accounting Pronouncements

In April 2015, the Financial Accounting Standards Board, or the FASB, issued Accounting Standard Update, or ASU, 2015-03, Interest — Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs , which amends the presentation of debt issuance costs as a direct deduction from the face amount of a liability rather than an asset. Amortization of debt issuance costs is to be reported as interest expense. Additionally, amortization of a discount or premium is to be reported as interest expense in the case of liabilities or interest income in the case of assets. For public business entities, the guidance is effective for fiscal years beginning after December 15, 2015 and interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2015 and interim periods with fiscal years beginning after December 15, 2016. Earlier adoption of the amendments is permitted for financial statements that have not been previously issued, and the new guidance shall be applied retrospectively to comparative balance sheets presented. The Company expects to adopt this guidance for its 2016 fiscal year commencing on January 1, 2016 and does not expect adoption to have a material impact on its financial statements.

In August 2014, the FASB issued ASU No. 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern , which requires management to evaluate, in connection with preparing financial statements for each annual and interim reporting period, whether there are conditions or events, considered in the aggregate, that raise substantial doubt about an entity’s ability to continue as a going concern within one year after the date that the financial statements are issued and provide related disclosures. This guidance is effective for annual periods ending after December 15, 2016, and, as such, will be applicable to the Company in 2017. Early adoption is permitted. The Company does not expect this standard to have a material impact on its financial statements.

 

 

9


 

3 .

REVERSE MERGER

We completed the Merger with Regado as discussed in Note 1. Based on the terms of the Merger, Private Tobira was deemed the acquiring company for accounting purposes, and the transaction has been accounted for as a reverse acquisition under the acquisition method of accounting for business combinations in accordance with U.S. GAAP. Accordingly, the assets and liabilities of Regado have been recorded as of the Merger closing date at estimated fair value.

Immediately prior to the effective date of the Merger, the principal and accrued interest of outstanding convertible notes of Private Tobira converted into shares of Series B preferred stock of Private Tobira. Further, all outstanding shares of preferred stock of Private Tobira converted into shares of common stock of Private Tobira. Each Private Tobira warrant issued to Square 1 Bank in connection with a Loan and Security Agreement between Square 1 Bank and Private Tobira dated as of November 9, 2011 and Oxford Finance LLC in connection with a Loan and Security Agreement between Oxford Finance LLC and Tobira dated as of June 30, 2014 that were outstanding and unexercised as of and immediately prior to the effective date of the Merger were exchanged for warrants to purchase Regado common stock. All other Private Tobira warrants were terminated and cancelled in full. At the effective date of the Merger, each outstanding share of common stock of Private Tobira was converted into the right to receive 1.4302 shares of Regado common stock as adjusted for the one for nine reverse stock split, or the Exchange Ratio, as determined pursuant to the terms of the Merger Agreement, and all outstanding options, warrants, or other rights to purchase shares of capital stock of Private Tobira were exchanged for rights to acquire Regado common stock, as renamed Tobira. No fractional shares of Regado common stock were issued in connection with the Merger, and holders of Private Tobira capital stock were entitled to receive cash for any fractional share ownership in lieu of stock thereof.

After consummation of the Merger, Private Tobira stockholders owned a majority of the fully diluted common stock of Tobira.

Purchase Consideration

The purchase price for Regado on May 4, 2015, the closing date of the Merger, was as follows (in thousands):

 

Fair value of Regado common stock outstanding (1)

 

$

40,667

 

Fair value of Regado Series F convertible preferred stock

   outstanding (2)

 

 

2,420

 

Fair value of Regado vested stock options (3)

 

 

3,036

 

Total purchase price

 

$

46,123

 

 

(1)

Comprised of 3,734,536 shares of common stock outstanding at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015;

(2)

Comprised of 222,222 shares of common stock equivalents, as converted, at the date of the Merger based on the closing price of $10.89 per share as adjusted for the one for nine reverse stock split on May 4, 2015; and

(3)

Consideration transferred includes 551,363 Regado vested equity awards assumed and deemed attributable to pre-combination services to Regado.

Allocation of Purchase Consideration

Under the acquisition method of accounting, the total purchase price was allocated to tangible and identifiable intangible assets acquired and liabilities assumed of Regado on the basis of their estimated fair values as of the transaction closing date on May 4, 2015. The Company engaged a third party valuation firm to assist management in its analysis of the fair value of Regado. All estimates, key assumptions, and forecasts were either provided by or reviewed by management. While the Company chose to utilize a third party valuation firm, the fair value analysis and related valuations represent the conclusions of management and not the conclusions or statements of any third party. The excess of the total purchase price over the fair value of assets acquired and liabilities assumed was allocated to goodwill.

10


 

The following table summarizes the allocation of the purchas e consideration to the assets acquired and liabilities assumed based on their fair values as of May 4, 2015 (in thousands):

 

Cash, cash equivalents and restricted cash

 

$

33,232

 

Prepaid expenses and other assets acquired

 

 

1,408

 

In-process research and development

 

 

12,205

 

Goodwill

 

 

5,110

 

Deferred tax liability

 

 

(4,393

)

Other liabilities

 

 

(1,439

)

Total

 

$

46,123

 

 

The Company believes that the historical values of Regado’s current assets and current liabilities approximate fair value based on the short-term nature of such items.

IPR&D consists of intellectual property related to Regado’s Aptamer platform and the estimated net present value of future cash flows expected to be generated from commercialization. The valuation of the Aptamer platform technology was valued using the income approach which values the asset by estimating the present value of future economic benefits that the asset is expected to produce. The Company will not amortize IPR&D until research and development is complete and the asset is reclassified to a definite-lived amortizable asset.

Goodwill is calculated as the difference between the fair value of the consideration expected to be transferred and the values assigned to the identifiable tangible and intangible assets acquired and liabilities assumed. Goodwill is not expected to be deductible for tax purposes.

The deferred tax liability of $4.4 million relates to the temporary difference associated with the $12.2 million value of IPR&D. The deferred tax liability was recorded based on an effective tax rate of 35.99%.

Other liabilities include $0.9 million liability for the settlement of common stock for Merger related fees to financial advisors that were settled by the issuance of 78,213 shares of common stock. The fair value of the liability was determined based upon the fair value of Regado common stock using the closing price of $10.89 per share, as adjusted for the one for nine reverse stock split on May 4, 2015.

The Company’s operating results include operating expenses of $0.3 million attributable to the former Regado business activities for the period of May 5, 2015 to June 30, 2015 and are included in the Company’s condensed financial statements for the three and six months ended June 30, 2015.

The unaudited financial information in the following table summarizes the combined results of operations of the Company and Regado, on a pro forma basis, as if the Merger had occurred at the beginning of the periods presented (in thousands):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Net loss

 

$

(10,449

)

 

$

(26,655

)

 

$

(23,853

)

 

$

(45,109

)

Deemed dividend

 

 

 

 

 

 

 

 

 

 

 

(14,890

)

Net loss attributable to stockholders

 

$

(10,449

)

 

$

(26,655

)

 

$

(23,853

)

 

$

(59,999

)

Net loss attributable to preferred stockholders

 

$

 

 

$

(454

)

 

$

 

 

$

(1,041

)

Net loss attributable to common stockholders,

   basic and diluted

 

$

(10,449

)

 

$

(26,201

)

 

$

(23,853

)

 

$

(58,958

)

Net loss per share, basic and diluted

 

$

(0.70

)

 

$

(2.02

)

 

$

(1.60

)

 

$

(4.65

)

 

11


 

The above unaudited pro forma information was determined based on historical GAAP results of the Company and Regado. The unaudited pro forma combined results are not necessarily indicative of what the Company’s combined result s of operations would have been if the acquisition was completed on January 1, 2014. The unaudited pro forma combined net loss includes pro forma adjustments primarily relating to the following non-recurring items directly attributable to the business comb ination:

 

·

Elimination of transaction costs of $2.5 million and $5.2 million for the three and six months ended June 30, 2015, respectively;

·

Elimination of stock-based compensation expense of $1.8 million related to the acceleration of vesting and modification of post-termination exercise periods of Regado stock option awards in connection with the Merger for the three and six months ended June 30, 2015;

·

Elimination of $1.4 million expense related to severance agreements and transaction bonuses directly attributable to the Merger for the three and six months ended June 30, 2015;

·

Elimination of interest expense of $0.8 million and $1.7 million for the three and six months ended June 30, 2015, respectively, and $1.2 million and $2.2 million for the three and six months ended June 30, 2014, respectively, related to the conversion of Private Tobira’s convertible notes in connection with the Merger; and

·

Elimination of the change in fair value of preferred stock warrant liabilities of $0.1 million of expense and $1.9 million of income for the three and six months ended June 30, 2015, respectively, and $1.5 million of expense and $0.7 million of expense for the three and six months ended June 30, 2014, respectively to reflect 1) the net exercise and cancellation of warrants issued in connection with the convertible notes payable and 2) the conversion of the Oxford Finance LLC, Square 1, and Comerica warrants from warrants on preferred stock to warrants on common stock eliminating the terms that caused the preferred stock warrants to be classified as a liability.

 

The combined transaction costs of the Company were $6.8 million which were expensed as incurred.

 

 

4 .

FAIR VALUE MEASUREMENTS

The following tables and disclosure present information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2015 and December 31, 2014 and indicate the fair value hierarchy of the valuation techniques utilized by the Company to determine such fair value (in thousands):

 

 

 

As of June 30, 2015

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

60,242

 

 

$

 

 

$

 

 

$

60,242

 

Total

 

$

60,242

 

 

$

 

 

$

 

 

$

60,242

 

 

 

 

As of December 31, 2014

 

 

 

Level 1

 

 

Level 2

 

 

Level 3

 

 

Total

 

Assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash equivalents

 

$

4,800

 

 

$

 

 

$

 

 

$

4,800

 

Total

 

$

4,800

 

 

$

 

 

$

 

 

$

4,800

 

Liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Preferred stock warrant liabilities

 

$

 

 

$

 

 

$

2,460

 

 

$

2,460

 

Total

 

$

 

 

$

 

 

$

2,460

 

 

$

2,460

 

 

The carrying amounts of the Company’s financial instruments, including cash, restricted cash, deposits, accounts payable, and accrued expenses and other liabilities, approximate fair value due to their short maturities. The Company’s lease obligation, term loan and convertible notes have fair values that approximate their carrying value based on prevailing borrowing rates available to the Company for loans with similar terms. Financial assets and liabilities, which are measured or disclosed at fair value on a recurring basis and are classified within the Level 3 designation, consist of preferred stock warrant liabilities. On May 4, 2015, the preferred stock warrants outstanding were converted to warrants to purchase common stock eliminating the terms that caused the preferred stock warrants to be accounted for as a liability.

None of the Company’s non-financial assets or liabilities is recorded at fair value on a non-recurring basis for the periods presented. There were no transfers between levels within the fair value hierarchy during the periods presented.

12


 

The following table provides a reconciliation of liabilities measured at fair value using Level 3 significant unobservable inputs (in thousands) for the six months ended June 30, 2015 and the year ended December 31, 2014:

 

 

 

Six   Months Ended

June 30,

2015

 

 

Year Ended

December 31,

2014

 

Balance, beginning of period

 

$

2,460

 

 

$

2,773

 

Issuance of preferred stock warrants

 

 

 

 

 

868

 

Reclassification of stock award liability from equity upon

   modification

 

 

 

 

 

399

 

Reclassification of stock award liability to equity upon

   expiration

 

 

 

 

 

(292

)

Change in fair value of stock award liability

 

 

 

 

 

(107

)

Reclassification of preferred stock warrant liability to equity

   upon conversion to common stock

 

 

(521

)

 

 

 

Change in fair value of preferred stock warrant liabilities (1)

 

 

(1,939

)

 

 

(1,181

)

Balance, end of period

 

$

 

 

$

2,460

 

 

(1)

Changes in fair value of the preferred stock warrant liabilities are recorded in other income (expense), net on the accompanying Statements of Operations and Comprehensive Loss.

As of June 30, 2015, there were no liabilities measured at fair value outstanding. As of December 31, 2014, the significant unobservable inputs used to determine the fair value of preferred stock warrant liabilities using an option-pricing model and the weighted average assumptions used in determining the fair value of the outstanding preferred stock warrant liabilities were as follows: risk-free interest rate of 0.13%, no expected dividend yield, expected price volatility of 107%, and expected term (in years) of 0.8.

 

The details of the preferred stock warrants outstanding as of June 30, 2015 and December 31, 2014 are provided in Note 6.

 

 

5 .

ACCRUED EXPENSES AND OTHER LIABILITIES

Accrued expenses and other liabilities consist of the following (in thousands):

 

 

 

As   of June 30,

2015

 

 

As of December 31,

2014

 

Clinical trial expenses

 

$

2,105

 

 

$

478

 

Research and development

 

 

449

 

 

 

235

 

Compensation expense

 

 

685

 

 

 

928

 

Professional services

 

 

649

 

 

 

709

 

Loan interest

 

 

 

 

 

4,153

 

Total accrued expenses and other liabilities

 

$

3,888

 

 

$

6,503

 

 

 

13


 

6 .

DEBT AND WARRANTS

Convertible Notes and Warrants

On May 4, 2015, Private Tobira’s convertible notes of $43.0 million and accrued interest of $5.2 million were converted into 3,532,756 shares of Series B preferred stock of Private Tobira immediately followed by conversion on a one for one basis into shares of Private Tobira common stock. The following table presents convertible notes, including principal and accrued interest, that were converted to shares of common stock (in thousands):

 

Convertible Notes

 

Principal

 

 

Accrued   Interest

 

July 2012

 

$

10,000

 

 

$

2,368

 

January 2013

 

 

7,000

 

 

 

1,342

 

October 2013

 

 

5,000

 

 

 

617

 

March 2014

 

 

8,000

 

 

 

726

 

March 2015

 

 

13,000

 

 

 

168

 

Total

 

$

43,000

 

 

$

5,221

 

 

In connection with the conversion of the March 2015 notes, the Company recorded a contingent beneficial conversion feature of $0.4 million equal to the difference between the conversion price of $11.81 and the fair value of the underlying Series B preferred stock on the date of issuance. The contingent beneficial conversion feature was immediately expensed to interest expense and recorded in other income (expense), net, on the accompanying statement of operations and comprehensive loss. 

On May 4, 2015, warrants issued to holders of the July 2012 notes, January 2013 notes, October 2013 notes and March 2014 notes expired unexercised. No warrants were issued in connection with the March 2015 notes.

Oxford Finance Term Loan

On June 30, 2014, and as amended on May 5, 2015, the Company entered into an aggregate $15.0 million, four year term loan with Oxford Finance LLC, or the Oxford Loan. The Oxford Loan bears interest at a fixed rate of 6.954% per annum with interest only payments through December 31, 2015 followed by 30 equal payments of principal and interest until maturity at June 1, 2018. At the time of final payment, the Company is required to pay an exit fee of 4.0% of the original principal balance of the Oxford Loan, which the Company recorded as a liability and debt discount at the origination of the term loan. In addition, the Company incurred loan origination fees of $0.1 million which were recorded as a loan discount and debt issuance costs of $0.1 million which were recorded as a deferred asset.

In connection with the Oxford Loan, the Company granted a security interest in all of its assets, except intellectual property, provided that a judicial authority could require the Company’s intellectual property to be part of the collateral package to the extent necessary to satisfy repayment if the company’s other secured assets are insufficient. The Oxford Loan prevents the Company from issuing dividends and contains customary affirmative and negative covenants. At June 30, 2015, the Company was in compliance with all loan covenants.

The Company is permitted to make voluntary prepayments of the Oxford Loan with a prepayment fee equal to (i) 3.0% of the loan prepaid during the first 12 months, (ii) 2.0% of the loan prepaid in months 13-24 and (iii) 1.0% of the loan thereafter. The Company is required to make mandatory prepayments of the outstanding loan upon the acceleration by the lenders following the occurrence of an event of default, along with a payment of the final payment, the prepayment fee and any other obligations that are due and payable at the time of prepayment.

The Company evaluated the Oxford Loan in accordance with accounting guidance for derivatives and determined there was de minimis value to the identified derivative features at issuance and at subsequent reporting periods through June 30, 2015.

The Company accounts for the debt discount and deferred issuance costs utilizing the effective interest method. The Company recorded interest expense and amortization of the debt discount of $0.3 million and $0.7 million for the three and six months ended June 30, 2015, respectively.

14


 

Long-term debt and unamortized discount balances are as follows (in thousands):

 

 

 

As of June   30,

2015

 

 

As   of December 31,

2014

 

Face value of term loan

 

$

15,000

 

 

$

15,000

 

Exit fee

 

 

600

 

 

 

600

 

Unamortized debt discount associated with issuance of

   preferred stock warrants, exit fee, and loan origination fees

 

 

(657

)

 

 

(811

)

Term loan, net

 

$

14,943

 

 

$

14,789

 

 

Future minimum payments under the Oxford Loan are as follows (in thousands):

 

Year ending December 31,

 

 

 

 

2015 (remaining six months)

 

$

521

 

2016

 

 

6,554

 

2017

 

 

6,554

 

2018

 

 

3,877

 

Total future minimum payments

 

 

17,506

 

Less: unamortized interest

 

 

(1,906

)

Less: exit fee

 

 

(600

)

Present value of loan payments

 

$

15,000

 

 

Warrants

In connection with the Oxford Loan, the Company issued warrants to the lenders to purchase an aggregate of 51,783 of Series B preferred stock at a purchase price of $10.14 per share after giving effect for the Exchange Ratio.

In November 2011, the Company entered into a loan and security agreement with Square 1 Bank for a $4.0 million three-year loan, or the Square 1 Loan. The Square 1 Loan was paid in full and terminated in June 2014. In connection with the Square 1 Loan, the Company issued to Square 1 Bank a warrant to purchase 11,835 shares of Series B preferred stock with an exercise price of $10.14 per share after giving effect for the Exchange Ratio.

Prior to the Merger, Regado secured a venture debt loan with Comerica Bank for $4.5 million, or the Comerica Loan. The Comerica Loan was paid in full and was terminated in March 2015. In connection with the Comerica Loan, Regado issued to Comerica Bank a warrant to purchase 1,039 shares of common stock with an exercise price of $108.18 per share after giving effect to the one for nine reverse stock split.

Prior to May 4, 2015, the Company accounted for these warrants as a liability which were revalued to fair value at each reporting period. On May 4, 2015, in connection with the Merger, the warrants to purchase shares of Series B preferred stock converted to warrants to purchase common stock, and the associated preferred stock warrant liability was revalued to fair value and reclassified to additional paid-in capital.

The Company had the following shares of common stock warrants outstanding as of June 30, 2015 after giving effect for the Exchange Ratio:

 

 

 

 

 

 

 

 

 

Shares

 

 

 

 

 

 

 

 

 

Outstanding as of

 

 

 

 

 

Per Share Exercise

 

 

June 30,

 

Issuance Date

 

Expiration Date

 

Price

 

 

2015

 

November 2011

 

November 2018

 

$

10.14

 

 

 

11,835

 

May 2013

 

May 2023

 

$

108.18

 

 

 

1,039

 

June 2014

 

June 2021

 

$

10.14

 

 

 

51,783

 

 

 

 

 

 

 

 

 

 

64,657

 

 

 

15


 

7.

CONVERTIBLE PREFERRED STOCK

Prior to May 4, 2015, Private Tobira’s convertible preferred stock was classified as temporary equity on the accompanying condensed balance sheets. The preferred stock was not redeemable; however, upon certain change in control events that were outside of the Company’s control, including liquidation, sale or transfer of control of the Company, holders of the convertible preferred stock had the right to receive its liquidation preference under the terms of the Company’s certificate of incorporation.

Immediately prior to the Merger, Private Tobira’s convertible notes and accrued interest were converted to 3,532,756 shares of Series B preferred stock. Immediately thereafter, Private Tobira’s Series A and B preferred stock was converted to 3,916,772 shares of Private Tobira common stock at a conversion rate of 1.7742 for Series A preferred stock and a one for one basis for Series B preferred stock. Upon the close of the Merger, all resultant Private Tobira common stock was exchanged for 10,654,460 shares of Regado common stock, as renamed Tobira, at the Exchange Ratio.

The following table summarizes the Company’s convertible preferred stock balances as of June 30, 2015 and December 31, 2014 (in thousands, except share and per share amounts):

 

 

 

June 30,

2015

 

 

December 31,

2014

 

Series A, noncumulative convertible preferred stock, par value $0.0001;

   1,043,011 shares authorized at June 30, 2015 and December 31, 2014;

   994,866 issued and outstanding at June 30, 2015 and December 31, 2014;

   liquidation value of $0 and $31,000 at June 30, 2015 and December 31, 2014,

   respectively

 

 

 

 

 

30,908

 

Series B, noncumulative convertible preferred stock, par value $0.0001;

   5,133,477 shares authorized at June 30, 2015 and December 31, 2014;

   2,151,722 issued and outstanding at June 30, 2015 and December 31, 2014;

   liquidation value of $0 and $54,600 at June 30, 2015 and December 31, 2014,

   respectively

 

 

 

 

 

31,074

 

 

Following the completion of the Merger, on May 15, 2015, the holders of Series F convertible preferred stock elected to convert all 10,000 shares of outstanding preferred stock into 222,222 shares of common stock. No remaining convertible preferred stock balances were outstanding as of June 30, 2015.

 

 

8.

STOCKHOLDERS’ EQUITY (DEFICIT)

Common Stock

Immediately prior to the effective date of the Merger, the principal and accrued interest under Private Tobira’s outstanding convertible notes converted into shares of Series B Preferred Stock of Private Tobira. Immediately thereafter, all outstanding preferred stock of Private Tobira converted into common stock of Private Tobira.

At the effective date of the Merger, each outstanding share of Private Tobira’s common stock was converted into the right to receive 1.4302 shares of Regado common stock, as renamed Tobira, with cash paid in lieu of any fractional shares.

On May 4, 2015, Tobira entered into the 2015 Purchase Agreement with certain Private Tobira stockholders and other institutional investors which provided for the sale and issuance, promptly after the consummation of the Merger, of 2,542,365 shares of Tobira in the Private Placement at a purchase price of $10.62 per share (which price is equal to the closing price of Tobira’s common stock on April 30, 2015, as adjusted by the one for nine reverse split effected on May 4, 2015) for aggregate gross proceeds of $27.0 million. Issuance costs of $0.2 million were recorded as a reduction to proceeds received in additional paid-in capital.

16


 

The Company issued common stock during the six months ended June 30, 2015 as follows:

 

 

 

Common Stock Issued and Outstanding

(in shares)

 

Balance at December 31, 2014

 

 

403,539

 

Conversion of convertible notes and accrued interest

 

 

3,532,756

 

Conversion of Series A and B preferred stock

 

 

3,916,772

 

Issuance of shares in connection with the Merger

 

 

6,939,282

 

Issuance of shares for banker fees

 

 

78,213

 

Issuance of shares in connection with the Private Placement

 

 

2,542,365

 

Conversion of Series F preferred stock

 

 

222,222

 

Balance at June 30, 2015

 

 

17,635,149

 

 

 

9 .

STOCK-BASED COMPENSATION EXPENSE

The Company adopted two stock compensation plans prior to the Merger, the 2007 Stock Option Plan, or the 2007 Plan, adopted in August 2007, and the 2010 Stock Option Plan, or the 2010 Plan, adopted in March 2010. The Company ceased granting awards under the 2007 Plan when it adopted the 2010 Plan. Options remain outstanding under both the 2007 Plan and the 2010 Plan. In connection with the Merger, all such options converted into options to purchase shares of Regado common stock, as renamed Tobira, and the applicable exercise prices were adjusted to reflect the Exchange Ratio. The Company assumed the 2010 Plan under the terms of the Merger and may grant awards under this plan to certain employees. No additional grants can be made from the 2007 Plan, and shares subject to awards granted under this plan that cancel or expire unexercised do not revert to or become available for re-grant under any other Company stock compensation plan.

Prior to the Merger, Regado adopted two stock compensation plans, the 2004 Plan and 2013 Plan. Options remain outstanding under both the 2004 and the 2013 Plan. The number of shares subject to and the exercise prices applicable to these outstanding options were adjusted in connection with the one for nine reverse stock split. No additional grants may be made from the 2004 Plan. However, shares subject to awards granted under this plan that cancel or expire unexercised do revert to and become available for re-grant under the 2013 Plan pool.  The Company obtained stockholder approval of an increase to the share pool for the 2013 Plan in July 2015 and intends that this plan will be its primary stock compensation plan in the future.  

Because the Company is considered to be the acquirer for accounting purposes, the pre-Merger vested stock options granted by Regado under the 2004 Plan and the 2013 Plan are deemed to have been exchanged for equity awards of the Company and as such the portion of the acquisition date fair value of these equity awards attributable to pre-Merger service to Regado were accounted for as a component of the consideration transferred.

The exchange of Private Tobira stock options to purchase Regado common stock, as renamed Tobira, was accounted for as a modification of the awards because the legal exchange of the awards is considered a modification of Private Tobira stock options. The modification of the stock options did not result in any incremental compensation expense as the modification did not increase the fair value of the stock options.

The following table summarizes stock option activity under the Company’s stock-based compensation plan during the six months ended June 30, 2015:

 

 

 

Number of

Options

 

 

Weighted-

Average

Exercise

Price Per Share

 

 

Weighted-

Average

Remaining

Contractual

Life

(in Years)

 

 

Weighted-

Average

Grant

Date Fair

Value

 

Outstanding at December 31, 2014

 

 

1,110,744

 

 

$

4.59

 

 

 

8.72

 

 

 

 

 

Granted

 

 

445,232

 

 

$

14.07

 

 

 

 

 

 

$

10.46

 

Options assumed in the Merger

 

 

551,363

 

 

$

30.11

 

 

 

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Canceled

 

 

(6,574

)

 

$

3.51

 

 

 

 

 

 

 

 

 

Outstanding at June 30, 2015

 

 

2,100,765

 

 

$

13.23

 

 

 

8.53

 

 

 

 

 

Vested and expected to vest at June 30, 2015

 

 

2,034,854

 

 

$

13.39

 

 

 

 

 

 

 

 

 

Vested and exercisable at June 30, 2015

 

 

1,031,595

 

 

$

17.92

 

 

 

 

 

 

 

 

 

17


 

 

As of June 30, 2015 and December 31, 2014, the total intrinsic value of vested and exercisable options was $8.6 million and $1.3 million, respectively. Under our stock-based compensation plan, option awards generally vest over a four-year period contingent upon continuous service and expire ten years from the date of grant (or earlier upon termination of continuous service). The fair value-based measurement of each option is estimated on the date of grant using the Black-Scholes option valuation model.

Stock-based compensation expense related to options granted was recorded as follows (in thousands):

 

 

 

Three Months Ended

June 30,

 

 

Six Months Ended

June 30,

 

 

 

2015

 

 

2014

 

 

2015

 

 

2014

 

Research and development

 

$

102

 

 

$

31

 

 

$

135

 

 

$

90

 

General and administrative

 

 

282

 

 

 

1,034

 

 

 

479

 

 

 

1,119

 

Total

 

$

384

 

 

$

1,065

 

 

$

614

 

 

$

1,209

 

 

 

10.

COMMITMENTS AND CONTINGENCIES

Legal Proceedings

On February 2, 2015, a purported stockholder of Regado filed a putative class-action lawsuit (captioned Maiman v. Regado Biosciences, Inc. , C.A. No. 10606-CB) in the Court of Chancery for the State of Delaware, or the Court, challenging the proposed stock-for-stock Merger of Regado with Tobira, or the Proposed Merger. On February 25, 2015, a second, related putative class action (captioned Gilboa v. Regado Biosciences, Inc. , C.A. No. 10720-CB) was filed in the Court challenging the Proposed Merger. On May 4, 2014, the Proposed Merger was consummated and Tobira became a wholly-owned subsidiary of Regado and changed its name to Tobira Development Inc. The complaints name as defendants: (i) each member of Regado’s Board of Directors, (ii) Regado, (iii) Private Tobira, and (iv) Landmark Merger Sub Inc. Plaintiffs allege that Regado’s directors breached their fiduciary duties to Regado’s stockholders by, among other things, (a) agreeing to merge Regado with Private Tobira for inadequate consideration, (b) implementing a process that was distorted by conflicts of interest, and (c) agreeing to certain provisions of the Merger Agreement that are alleged to favor Private Tobira and deter alternative bids. Plaintiffs also generally allege that the entity defendants aided and abetted the purported breaches of fiduciary duty by the directors. On March 25, 2015, the Court consolidated the two actions and assigned lead counsel for plaintiffs (captioned In re Regado Biosciences, Inc. Stockholder Litigation , Consolidated C.A. No. 10606-CB). On March 27, 2015, plaintiffs filed a consolidated amended complaint, a motion for expedited proceedings and a motion for preliminary injunction. On April 20, 2015, the parties agreed in principle to resolve the litigation (subject to approval by the Court) and signed a memorandum of understanding setting forth the terms of a proposed settlement to provide additional disclosures related to the Merger Agreement and cover Court awarded fees. On April 23, 2015, as part of the proposed settlement, Regado provided additional disclosures to its stockholders. The parties are currently engaged in confirmatory discovery, after which they will submit the proposed settlement to the Court for approval. As of June 30, 2015, the Company is unable to reasonably estimate an amount and/or a range of loss until the Company is made aware of the Court fees awarded by the Court to the plaintiffs under the proposed settlement, if any, as administered under settlement law. The Company maintains D&O insurance and tail coverage with deductibles of $2.0 million and $1.5 million respectively.

 

 

11 .

SUBSEQUENT EVENTS

On July 9, 2015, the Company’s stockholders approved amendments to and material terms of the Company’s 2013 Equity Compensation Plan, including an increase in the number of shares reserved for issuance by 1.2 million.

On August 10, 2015, the Company amended the terms of the Oxford Loan, including extending the interest only period through December 31, 2016 and the maturity date to June 1, 2019. The exit fee was increased from 4.0% to 5.0% of the original principal balance. The Oxford Loan continues to bear interest at a fixed rate of 6.954% per annum.

 

 

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations .

The interim financial statements and this Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read together with our audited financial statements and accompanying notes for the year ended December 31, 2014 included in Exhibit 99.2 of our Current Report on Form 8-K/A filed on June 2, 2015 and with the financial statements and notes thereto for the year ended December 31, 2014, and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our Annual Report on Form 10-K for the year ended December 31, 2014 . In addition to historical information, this discussion and analysis contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Please see Risk Factors beginning on page 29 for a discussion of certain risk factors applicable to our business, financial condition, and results of operations. Operating results are not necessarily indicative of results that may occur for the full fiscal year or any other future period. The term “Private Tobira” refers to Tobira Development, Inc. (formerly known as Tobira Therapeutics, Inc.) prior to the consummation of the Merger. Unless otherwise indicated, references to the terms the "combined company”, “Tobira”, the "Company”, “we”, “our” and “us” refer to Private Tobira, prior to the consummation of the Merger and Tobira Therapeutics, Inc. (formerly known as Regado Biosciences, Inc.) and its subsidiaries upon the consummation of the Merger described herein. The term "Regado" refers to the Regado Biosciences, Inc. and its subsidiaries prior to the Merger.

ABOUT TOBIRA THERAPEUTICS

We are a clinical-stage biopharmaceutical company focused on the development and commercialization of therapeutics to treat NASH, or nonalcoholic steatohepatitis, which is a form of liver disease affecting 3-5% of the U.S. population and is becoming the leading cause of liver transplant. Our lead product candidate, cenicriviroc, or CVC, is a proprietary immunomodulator that can potentially be used to treat a number of disease states with high unmet medical need such as NASH, fibrosis, inflammation and human immunodeficiency virus, or HIV. CVC is a once-daily pill with well-established safety and tolerability in over 600 subjects dosed in completed Phase 1 and Phase 2 trials, including a pharmacokinetics, or PK, and safety study in subjects with liver cirrhosis and 115 HIV infected subjects on treatment for up to 48 weeks.

We are developing CVC for NASH, for which we recently completed enrollment of a Phase 2b clinical trial of CVC in 289 subjects with confirmed NASH and liver fibrosis entitled CENTAUR. We expect to announce CENTAUR primary endpoint results in the third quarter of 2016 and the study design incorporates surrogate endpoints that may form the basis for demonstrating efficacy required for accelerated approval. The U.S. Food and Drug Administration, or the FDA, Accelerated Approval Program allows for earlier approval of drugs that treat serious conditions and fill an unmet medical need based on a surrogate endpoint. CVC has been granted Fast Track designation by the FDA for the treatment of NASH in patients with liver fibrosis. We are developing CVC both as a standalone, as well as a cornerstone for combination therapies for NASH and fibrosis, and expects to present initial clinical and preclinical combination data in 2015.

RECENT DEVELOPMENTS

The following events occurred through June 30, 2015:

Reverse Merger

On May 4, 2015, Regado Biosciences, Inc. (Regado) completed its business combination with Tobira Therapeutics, Inc., or prior to the completion of the Merger described below, Private Tobira or, after the completion of the Merger described below, Public Tobira, in accordance with the terms of an Agreement and Plan of Merger and Reorganization, dated as of January 14, 2015, as amended on January 23, 2015, or the Merger Agreement. Pursuant to the Merger Agreement, a newly formed wholly-owned subsidiary was established that merged with and into Private Tobira, with Private Tobira surviving the merger and becoming a wholly-owned subsidiary of Regado, or the Merger. In connection with the Merger, the name of Private Tobira was changed to Tobira Development, Inc., or Tobira Development. In connection with, and immediately prior to, the completion of the Merger, Regado filed an amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to effect a one for nine reverse stock split of Regado’s common stock. In connection with and immediately following the consummation of the Merger, Regado filed an amendment to the amended and restated certificate of incorporation with the Secretary of State of the State of Delaware to change its name to Tobira Therapeutics, Inc. On June 29, 2015, a Certificate of Ownership and Merger was filed with the Secretary of State of the State of Delaware to effect the merger of Tobira Development with and into Tobira Therapeutics, Inc. As a result, Tobira Therapeutics, Inc. is the sole entity as of June 30, 2015.

Private Placement

On May 4, 2015, we entered into a Purchase Agreement and a Registration Rights Agreement, or the 2015 Purchase Agreement, which provided for the sale and issuance, promptly after the consummation of the Merger, of 2,542,365 shares of Tobira common

19


 

stock to c ertain stockholders of Private Tobira and certain other institutional investors, or the Private Placement, at a purchase price of $10.62 per share for aggregate gross proceeds of $27.0 million. The purchase price of $10.62 is equal to the closing price of Regado’s common stock on April 30, 2015, as adjusted by the one for nine reverse split effected on May 4, 2015.

Series F Preferred Stock Conversion

On May 15, 2015, the holders of Series F preferred stock elected conversion of all outstanding preferred stock into common stock.

Legal Proceedings

See “Part II, Item 1. Legal Proceedings”.

BASIS OF PRESENTATION

Research and Development Expenses

Research and development expenses primarily consist of costs associated with our research activities, including the preclinical and clinical development of our product candidates. We expense research and development expenses as incurred. We contract with clinical research organizations to manage our clinical trials under agreed upon budgets for each study, with oversight by our clinical program managers. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the service has been performed or when the goods have been received. Manufacturing expense includes costs associated with drug formulation development and clinical drug production. We do not track our employee and facility related research and development costs by project, as we typically use our employee and infrastructure resources across multiple research and development programs. We believe that the allocation of such costs would be arbitrary and would not be meaningful. Our research and development costs are controlled through our internal budget and forecast process.

Our research and development expenses consist primarily of:

·

salaries and related expenses for employee personnel, including benefits, travel and expenses related to stock-based compensation granted to personnel in development functions;

·

external expenses paid to clinical trial sites, contract research organizations and consultants that conduct our clinical trials;

·

expenses related to drug formulation development and the production of nonclinical and clinical trial supplies, including fees paid to contract manufacturers;

·

expenses related to preclinical studies;

·

expenses related to compliance with drug development regulatory requirements; and

·

other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of equipment, and other supplies.

We expect to continue to incur substantial expenses related to our development activities for the foreseeable future as we conduct our Phase 2b CENTAUR study and expand our clinical program beyond CENTAUR. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. Our research and development expenses increased in the three and six month period ended June 30, 2015 as compared to the similar period in 2014, and we expect that our research and development expenses will continue to increase in the future. The process of conducting preclinical studies and clinical trials necessary to obtain regulatory approval is costly and time consuming. The probability of success for each product candidate is affected by numerous factors, including preclinical data, clinical data, competition, manufacturing capability and commercial viability. Accordingly, we may never succeed in achieving marketing approval for any of our product candidates.

Successful development of current and future product candidates is highly uncertain. Completion dates and costs for our clinical development programs as well as our research program can vary significantly for each current and future product candidate and are difficult to predict. As a result, we cannot estimate with any degree of certainty the costs we will incur in connection with development of our product candidates. We anticipate we will make determinations as to which programs and product candidates to pursue and how much funding to direct to each program and product candidate on an ongoing basis in response to the scientific success of early research programs, results of ongoing and future clinical trials, our ability to enter into collaborative agreements with respect to programs or potential product candidates, as well as ongoing assessments as to each current or future product candidate’s commercial potential.

20