bbi-20210630

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 June 30, 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: 000-21088

BRICKELL BIOTECH, INC.

(Exact name of registrant as specified in its charter)

Delaware

93-0948554

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer Identification No.)

5777 Central Avenue,

Boulder,

80301

(Address of principal executive offices)

(Zip Code)

(720) 505-4755

(Registrant’s telephone number, including area code)

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


Title of each class	Trading symbol(s)	Name of each exchange on which registered
Common stock, $0.01 par value per share	BBI	The Nasdaq Stock Market LLC

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 July 30, 2021, there were 85,915,445 shares of the registrant’s common stock outstanding.

BRICKELL BIOTECH, INC.

FORM 10-Q

INDEX


FORWARD-LOOKING STATEMENTS		3
RISK FACTORS SUMMARY		4
PART I. FINANCIAL INFORMATION		6
	ITEM 1. Financial Statements (Unaudited)	6






	ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
	ITEM 3. Quantitative and Qualitative Disclosures About Market Risk	35
	ITEM 4. Controls and Procedures	35
PART II. OTHER INFORMATION
	ITEM 1. Legal Proceedings	37
	ITEM 1A. Risk Factors	37
	ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds	68
	ITEM 3. Defaults Upon Senior Securities	69
	ITEM 4. Mine Safety Disclosures	69
	ITEM 5. Other Information	69
	ITEM 6. Exhibits	69

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements that involve substantial risks and uncertainties for purposes of the safe harbor provided by the Private Securities Litigation Reform Act of 1995. All statements contained in this Quarterly Report other than statements of historical fact, including statements relating to future financial, business, and/or research and clinical performance, conditions, plans, prospects, trends, or strategies and other such matters, including without limitation, our strategy, future operations, future financial position, future liquidity, future revenue, projected expenses, results of operations, the anticipated timing, scope, design, progress, results and/or reporting of data of ongoing and future non-clinical studies and clinical trials, intellectual property rights, including the validity, term, and enforceability of such, the expected timing and/or results of regulatory submissions and approvals, and prospects for commercializing any of Brickell’s product candidates, or research collaborations with, or actions of, its partners, including in Japan, the United States (“U.S.”) or any other country. The words “believe,” “may,” “could,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” “opportunity,” “goals,” “looking forward” or “should,” and similar expressions are intended to identify forward-looking statements. Such statements are based on management’s current expectations and involve risks and uncertainties. Actual results and performance could differ materially from those projected in the forward-looking statements as a result of many factors. Unless otherwise mentioned or unless the context requires otherwise, all references in this Quarterly Report to “Brickell,” “Brickell Subsidiary,” “Company,” “we,” “us,” and “our,” or similar references, refer to Brickell Biotech, Inc. and its consolidated subsidiaries.

We based these forward-looking statements largely on our current expectations and projections about future events and trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors” in this Quarterly Report, in Part I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020, and in Part II, Item 1A. “Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, and under a similar heading in any other periodic or current report we may file with the U.S. Securities and Exchange Commission (the “SEC”) in the future. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge quickly and from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the future events and trends discussed in this Quarterly Report may not occur and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements. We undertake no obligation to revise or publicly release the results of any revision to these forward-looking statements, except as required by law. Given these risks and uncertainties, readers are cautioned not to place undue reliance on such forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement.

You should read carefully the factors described in Part II, Item 1A, “Risk Factors” in this Quarterly Report to better understand the risks and uncertainties inherent in our business and underlying any forward-looking statements. You are advised to consult any further disclosures we make on related subjects in our future public filings and on our website.

RISK FACTORS SUMMARY

Our business, financial condition, and operating results may be affected by a number of factors, whether currently known or unknown. Any one or more of such factors could directly or indirectly cause our actual results of operations and financial condition to vary materially from past or anticipated future results of operations and financial condition. Any of these factors, in whole or in part, let alone combined with any of the others, could materially and adversely affect our business, financial condition, results of operations, and stock price. We have provided a summary of some of these risks below, with a more detailed explanation of those and other risks applicable to the Company in Part II, Item 1A. “Risk Factors” in this Quarterly Report.

•Our business depends on the successful continued financing, clinical development, regulatory approval, and commercialization of sofpironium bromide.

•We previously have not conducted a pivotal Phase 3 clinical trial ourselves and may be unable to successfully do so for sofpironium bromide.

•Clinical drug development for sofpironium bromide is expensive, time-consuming, and uncertain.

•Use of patient-reported outcome (“PRO”) assessments and gravimetric assessments in sofpironium bromide clinical trials may delay or adversely impact the development of sofpironium bromide gel or clinical trial results or increase our development costs.

•Sofpironium bromide may cause undesirable side effects or have other unexpected properties that could delay or prevent its regulatory approval, limit the commercial profile of an approved label, or result in post-approval regulatory action.

•Kaken Pharmaceutical Co., Ltd. (“Kaken”) substantially controls the development and commercialization of sofpironium bromide in Japan and certain other Asian countries and may make decisions regarding product development, regulatory strategy, and commercialization that may not be in our best interests. Kaken may be unable to secure an appropriate local business partner (if desirable) and/or obtain approval of the drug in the ex-Japan Asian markets over which it has rights.

•If we or any partners with which we may collaborate to market and sell sofpironium bromide are unable to achieve and maintain medical insurance coverage and adequate levels of reimbursement for this compound following regulatory approval and usage by patients, our commercial success may be hindered severely.

•Even if sofpironium bromide obtains regulatory approval outside Japan, and despite our partner Kaken launching the drug as ECCLOCK® in Japan in 2020, it may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.

•Sofpironium bromide, where approved, will face significant competition and its failure to compete effectively may prevent it from achieving significant market penetration.

•We may face generic competition for sofpironium bromide, which could expose us to litigation or adversely affect our business, financial condition, operating results, and prospects.

•If clinical research organizations (“CROs”) and other third parties do not meet our requirements or otherwise conduct our sofpironium bromide clinical trials as required or are unable to staff or supply our trials, we may not be able to satisfy our contractual obligations or obtain regulatory approval for, or commercialize, sofpironium bromide at all or in the time frames currently planned for.

•If we are unable to establish sales and marketing capabilities on our own or through third parties, or are delayed in establishing these capabilities, we will be unable to successfully commercialize our product candidates, if approved, or generate meaningful product revenue.

•We will need to raise substantial additional financing in the future to fund our operations, which may not be available to us on favorable terms, or at all.

•If the holders of our company’s stock options and warrants exercise their rights to purchase our common stock, the ownership of our stockholders will be diluted.

•We may never obtain regulatory approval to commercialize any of our product candidates in the U.S., or anywhere else in the world other than Japan, and any products approved for sale will be subject to continued regulatory review and compliance obligations and there could be further restrictions on post-approval activities, including commercialization efforts. In obtaining regulatory approval, we will need to negotiate an appropriate product label (aka package insert) with the regulators, which will determine the extent of our allowed promotional activities, and this label could be restrictive or prohibitory with regard to subject matter we believe is necessary to maximize the commercial success of sofpironium bromide.

•Major public health issues, and specifically the pandemic caused by the spread of COVID-19 and COVID-19 variants, and the impact as certain markets emerge from the pandemic, especially in terms of constraints on supply chains and human resource availability, and different degrees of success various countries experience in rolling out their vaccine campaigns, could have an adverse impact on our financial condition and results of operations and other aspects of our business and that of our suppliers, contractors, and business partners.

•We have sponsored or supported and may in the future sponsor or support clinical trials for our product candidates outside the U.S. and Japan, and the Food and Drug Administration (“FDA”), Japan’s Pharmaceuticals and Medical Devices Agency (“PMDA”), and applicable foreign regulatory authorities may not accept data from such trials; in addition, we may not be allowed alone or with local country business partners to obtain regulatory approval for our product candidates without first conducting clinical trials in each of these other countries.

•We may face product liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.

•We may be subject to risks related to pre-approval promotion or off-label use, or unauthorized direct-to-consumer advertising, of our product candidates.

•Healthcare reform measures, including price controls or restricted access, could hinder or prevent the commercial success of our product candidates in any country.

•We are and may be subject to stricter healthcare laws, regulation, and enforcement, and our failure to comply with those laws could expose us to liability or adversely affect our business, financial condition, operating results, and prospects.

•We rely completely on third-party contractors to supply, manufacture, and distribute clinical drug supplies and to help prepare for a possible launch for our product candidates, including certain sole-source suppliers and manufacturers; we intend to rely on third parties for commercial supply, manufacturing, and distribution, and possibly sales and promotion, if any of our product candidates receive regulatory approval; and we expect to rely on third parties for supply, manufacturing, and distribution of preclinical, clinical, and commercial supplies, and possibly sales and promotion, of any future product candidates.

•Manufacturing and supply of the active pharmaceutical ingredients (“API”) and other substances and materials used in our product candidates and finished drug products is a complex and technically challenging undertaking, and there is potential for failure at many points in the manufacturing, testing, quality control and assurance, and distribution supply chain, as well as the potential for latent defects after products have been manufactured and distributed.

•We may not be able to finance or acquire additional pipeline or marketed assets to grow or sustain our company business.

•We may not be able to obtain, afford, maintain, or enforce global patent rights or other intellectual property rights that cover sofpironium bromide and related technologies (and any other product candidates) that are of sufficient type, breadth, and term.

•We may not be able to protect our intellectual property rights meaningfully throughout the world.

•If we fail to comply with our obligations under our intellectual property license agreements, we could lose license rights that are important to our business. Additionally, these agreements may be subject to disagreement over contract interpretation, which could narrow the scope of our rights to the relevant intellectual property or technology, or other key aspects of product development and/or commercialization, or increase our financial or other obligations to our licensors.

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share data)

(unaudited)




	June 30, 2021		December 31, 2020

Assets
Current assets:
Cash and cash equivalents	$	24,408	$	30,115

Prepaid expenses and other current assets	4,507		3,415
Total current assets	28,915		33,530
Property and equipment, net	72		30
Operating lease right-of-use asset	86		74

Total assets	$	29,073	$	33,634
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable	$	2,514	$	568
Accrued liabilities	4,120		5,420
Lease liability, current portion	50		74



Note payable, current portion	—		291

Total current liabilities	6,684		6,353
Lease liability, net of current portion	36		—




Note payable, net of current portion	—		146
Total liabilities	6,720		6,499

Commitments and contingencies (Note 5)
Stockholders’ equity:
Common stock, $0.01 par value, 300,000,000 and 100,000,000 shares authorized as of June 30, 2021 and December 31, 2020, respectively; 71,945,222 and 53,551,461 shares issued and outstanding as of June 30, 2021 and December 31, 2020, respectively	719		536
Additional paid-in capital	147,681		132,492

Accumulated deficit	(126,047)		(105,893)
Total stockholders’ equity	22,353		27,135
Total liabilities and stockholders’ equity	$	29,073	$	33,634

See accompanying notes to these condensed consolidated financial statements.

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except share and per share data)

(unaudited)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Revenue
Collaboration revenue	$	—	$	607	$	—	$	1,653
Royalty revenue	151		—		168		—
Total revenue	151		607		168		1,653

Operating expenses:
Research and development	8,838		2,712		14,890		5,376
General and administrative	2,891		3,021		5,858		5,502
Total operating expenses	11,729		5,733		20,748		10,878
Loss from operations	(11,578)		(5,126)		(20,580)		(9,225)
Investment and other income, net	459		7		490		3

Interest expense	(30)		—		(64)		—




Net loss	$	(11,149)	$	(5,119)	$	(20,154)	$	(9,222)




Net loss per common share attributable to common stockholders, basic and diluted	$	(0.16)	$	(0.43)	$	(0.31)	$	(0.87)

Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted	68,856,370		11,819,152		64,646,565		10,595,960

See accompanying notes to these condensed consolidated financial statements.

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(unaudited, in thousands)


	Three Months Ended June 30,				Six Months Ended June 30,
	2021		2020		2021		2020
Net loss	$	(11,149)	$	(5,119)	$	(20,154)	$	(9,222)
Other comprehensive income:
Unrealized gain on available-for-sale marketable securities arising during holding period, net of tax benefit of $0	—		—		—		28


Total comprehensive loss	$	(11,149)	$	(5,119)	$	(20,154)	$	(9,194)

See accompanying notes to these condensed consolidated financial statements.

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)


	Common Stock		Additional Paid-In-Capital			Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares			Par Value
Balance, December 31, 2020		53,551,461	$	536		$	132,492	$	—	$	(105,893)	$	27,135

Issuance of common stock upon exercise of warrants		12,444,887	124			8,845		—		—		8,969
Issuance of common stock, net of issuance costs of $50		1,083,548	11			1,617		—		—		1,628
Issuance of common stock upon restricted stock unit settlement, net of shares withheld for taxes		96,350	1			(53)		—		—		(52)
Stock-based compensation		—	—			469		—		—		469

Net loss		—	—			—		—		(9,005)		(9,005)
Balance, March 31, 2021		67,176,246	672			143,370		—		(114,898)		29,144



Common stock issued, net of issuance costs of $259		4,768,976	47			3,890		—		—		3,937
Stock-based compensation		—	—			421		—		—		421

Net loss		—	—			—		—		(11,149)		(11,149)
Balance, June 30, 2021		71,945,222	$	719		$	147,681	$	—	$	(126,047)	$	22,353



	Common Stock		Additional Paid-In-Capital		Accumulated Other Comprehensive Gain (Loss)		Accumulated Deficit		Total Stockholders’ Equity
		Shares									Par Value
Balance, December 31, 2019		8,480,968	$	85	$	92,497	$	(28)	$	(84,980)		$	7,574
Issuance of common stock and common stock purchase warrants, net of offering costs of $10		950,000	10		1,980		—		—			1,990
Issuance of common stock upon exercise of warrants		221,293	2		13		—		—			15
Issuance of common stock upon restricted stock unit settlement, net of shares withheld for taxes		19,643	—		(13)		—		—			(13)

Stock-based compensation		—	—		403		—		—			403
Unrealized gain on available-for-sale marketable securities		—	—		—		28		—			28
Net loss		—	—		—		—		(4,103)			(4,103)
Balance, March 31, 2020		9,671,904	97		94,880		—		(89,083)			5,894
Issuance of common stock upon exercise of warrants		2,202,863	22		(15)		—		—			7
Issuance of common stock upon restricted stock unit settlement, net of shares withheld for taxes		6,673	—		(4)		—		—			(4)
Common stock and warrants issued, net of issuance costs of $1,443		14,790,133	148		18,531		—		—			18,679
Stock-based compensation		—	—		453		—		—			453
Net loss		—	—		—		—		(5,119)			(5,119)
Balance, June 30, 2020		26,671,573	$	267	$	113,845	$	—	$	(94,202)		$	19,910

See accompanying notes to these condensed consolidated financial statements.

BRICKELL BIOTECH, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended June 30,
	2021		2020
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(20,154)	$	(9,222)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	890		856

Gain on loan extinguishment	(437)		—
Depreciation	8		6
Reduction of discount on marketable securities	—		25











Changes in operating assets and liabilities:
Prepaid expenses and other current assets	(1,092)		512

SEC Form 10-Q filed by Brickell Biotech, Inc.