FRACTYL HEALTH INC
For the period ended Sep 30, 2024. Filed Nov 12, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Sep 30, 2024 · Filed Nov 12, 2024
GUTS$0.93+3.8%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-06-30; filed 2024-08-14.
0000950170-24-096968
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-09-30; filed 2024-11-12.
0000950170-24-125293
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 115 previous paragraphs and 121 current paragraphs.
73 unchanged; 36 reworded; 12 added; 5 removed; 1 previous and 0 current paragraphs rearranged.
Tables are not compared: 5 previous and 5 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (12)
Current report
In September 2024, the FDA approved an amendment to the clinical study protocol for the REMAIN-1 study of our Revita device, which aligns the co-primary endpoint with FDA expectations for a weight maintenance indication for Revita and adds a midpoint analysis at 3 months allowing us to analyze and report on approximately 45 randomized subjects. We have completed enrollment of a sufficient number of patients for the midpoint analysis of the REMAIN-1 study. We will continue to enroll this study and anticipate reporting open label data from the REVEAL-1 cohort of REMAIN-1 beginning in the fourth quarter of 2024 and anticipate a mid-point data analysis of the REMAIN-1 cohort in the second quarter of 2025.
Current report
We recently nominated our first smart GIP/GLP-1 pancreatic gene therapy lead candidate, RJVA-002, designed for the treatment of obesity. RJVA-002 is a locally administered AAV9 viral vector that expresses human GLP-1 and GIP hormones from a human insulin promoter. RJVA-002 is designed to activate both GIP and GLP-1 receptors, which play crucial roles in regulating blood sugar and body weight.
Current report
We anticipate completing key in vivo studies to support the submission of a Clinical Trial Application (“CTA”) for RJVA-001, our first nominated GLP-1 pancreatic gene therapy candidate designed for the treatment of T2D, by the end of the year. If the CTA for RJVA-001 is approved, we plan to initiate a first-in-human study in the first half of 2025.
Current report
FBG and HbA1c also improved, with mean decreases of 34 (n=24), 46 (n=18), and 58 (n=12) mg/dL and 1.2 (n=24), 1.3 (n=18), and 1.5% (n=11), at 3, 6, and 12 months, respectively. In addition, at 12 months post-procedure, 83% of patients had stabilized or reduced their GLA usage in addition to losing weight and improving their hyperglycemia. Patient reported outcomes (PROs) revealed that Revita was valued by patients and improved T2D management. At 12 months post-procedure, 100% of participants reported they would undergo the Revita procedure again and 100% would recommend the procedure to a family member or friend (n=12). Revita scored a 9.8 and 9.3 (1-10, 10 highest) for its ability to improve T2D management and quality of life, respectively (n=12). To date, no device or procedure-related serious adverse events have been reported.
Current report
Germany Pilot Commercial Launch of Revita
Current report
We initiated a pilot commercial launch of Revita in Germany in the first quarter of 2023, which has since generated insignificant revenue due to the limited scope of the launch. Revita is approved in Europe under a CE Mark and has received reimbursement authorization through NUB in Germany for the treatment of T2D. By the end of October 2024, multiple hospitals had submitted applications for reimbursement authorization for NUB and we plan a controlled expansion of our presence in Germany in 2025.
Current report
Comparison of nine months ended September 30, 2024 and 2023
Current report
Funding Requirements and Going Concern
Current report
Our future success is dependent on our ability to develop product candidates, generate significant revenue, and ultimately upon our ability to attain profitable operations. We are subject to a number of risks similar to other early-stage life science companies, including, but not limited to, successful discovery and development of our product candidates, raising additional capital with favorable terms, development by our competitors of new technological innovations, protection of proprietary technology and market acceptance of our products. The successful discovery and development of product candidates requires substantial working capital which may not be available to us on favorable terms or not at all.
Current report
To date, we have financed our operations to date primarily through sales of convertible preferred stock, sales of common stock in the IPO and debt financings. We have a history of operating losses and had an accumulated deficit of $390.3 million as of September 30, 2024.
Current report
As of September 30, 2024, we had cash and cash equivalents of $84.7 million and net working capital of $71.9 million, which is not sufficient to fund our current operating plan for at least twelve months from the issuance date of this Quarterly Report on Form 10-Q. We expect to seek additional funds through equity or debt financings or through collaboration or licensing transactions or other sources. We may be unable to obtain equity or debt financings or enter into collaboration or licensing transactions and, if necessary, we will be required to implement cost reduction strategies which could curtail or delay our current operating plans. As a result, substantial doubt exists about our ability to continue as a going concern. The accompanying unaudited interim condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. The unaudited interim condensed consolidated financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.
Current report
Cash provided by financing activities of $28.0 million for the nine months ended September 30, 2023 was primarily driven by the $28.4 million capital raised from the issuance of the 2023 Notes, net of issuance costs, partially offset by additional issuance costs of $0.3 million such as legal fees paid to third party service providers, and a $0.1 million partial repayment of the 2022 Convertible Notes.
Removed paragraphs (5)
Previous report
In July 2024, the U.S. Food and Drug Administration (the "FDA") granted Breakthrough Device Designation for the Company’s Revita System for use in the maintenance of weight loss after discontinuation of GLP-1 drugs. Breakthrough Device Designation will enable priority regulatory review with the FDA upon successful completion of the REMAIN-1 study, as well as the potential for an early or accelerated decision on reimbursement by the Centers for Medicare & Medicaid Services (the "CMS"). The Company is evaluating Revita in the REMAIN-1 study, which was initiated in the third quarter of 2024. The Company anticipates reporting open label data from the REVEAL-1 cohort of REMAIN-1 in the fourth quarter of 2024 and anticipates a mid-point data analysis of the REMAIN-1 cohort in the second quarter of 2025.
Previous report
In June 2024, the Company presented new head-to-head preclinical data comparing Rejuva to semaglutide as part of a President Select Abstract at ADA’s 84th Scientific Sessions in Orlando, FL. These data demonstrated statistically significant improvements in the percentage and durability of weight reductions, as well as a greater relative proportion of fat mass to lean mass loss in mice treated with Rejuva versus semaglutide.
Previous report
Comparison of six months ended June 30, 2024 and 2023
Previous report
Funding Requirements
Previous report
We will require substantial additional capital beyond the proceeds from our IPO to finance our operations. If we are unable to raise such capital when needed, or on acceptable terms, we may be forced to delay, reduce and/or eliminate one or more of our research and development programs or future commercialization efforts.
Reworded paragraphs (36)
Previous wording
Since our formation in 2010, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates and securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. The Revita DMR System, or Revita, is approved in Europe under a Conformitè Europëenne, or CE mark and has received reimbursement authorization through NUB in Germany for the treatment of T2D. In the first half of 2023, we initiated a limited commercial pilot in a single center in Dusseldorf, Germany. We do not have any products approved for sale in the United States. To date, we have financed our operations primarily through the proceeds from sales of our convertible preferred stock, sales of our common stock in our initial public offering ("IPO") and debt financing.
Current wording
Since our formation in 2010, we have devoted substantially all of our efforts and financial resources to organizing and staffing our company, business planning, raising capital, acquiring or discovering product candidates, securing related intellectual property rights and conducting discovery, research and development activities for our product candidates. The Revita DMR System, or Revita, is approved in Europe under a Conformitè Europëenne, or CE mark and has received reimbursement authorization through NUB in Germany for the treatment of T2D. In the first half of 2023, we initiated a limited commercial pilot in a single center in Dusseldorf, Germany. We do not have any products approved for sale in the United States. To date, we have financed our operations primarily through the proceeds from sales of our convertible preferred stock, sales of our common stock in our IPO and debt financings.
Previous wording
In June 2024, the FDA approved an amendment to the clinical study protocol for the Revitalize-1 study of our Revita device, which expands eligibility to patients with T2D who are inadequately controlled on any glucose lowering agent ("GLA"), including GLP-1 agonists and/or insulin, thus expanding the potential U.S. treatment population by nearly six-fold. We are currently enrolling this study and expect to report topline data in mid-2025.
Current wording
We are currently enrolling the REVITALIZE-1 study of our Revita device for patients with T2D who are inadequately controlled on at least one glucose lowering agent and expect to report topline data in mid-2025.
Previous wording
We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our current or future product candidates in the United States. For the three and six months ended June 30, 2024, we incurred net losses of $17.2 million and $20.6 million, respectively. Our net loss was $30.2 million and $42.2 million for the three and six months ended June 30, 2023, respectively. As of June 30, 2024, we had an accumulated deficit of $367.2 million. We expect to continue to incur significant losses for the foreseeable future and we expect these losses to increase substantially if and as we:
Current wording
We have incurred significant operating losses since our inception. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and commercialization of one or more of our current or future product candidates in the United States. For the three and nine months ended September 30, 2024, we incurred net losses of $23.2 million and $43.7 million, respectively. Our net loss was $15.7 million and $57.9 million for the three and nine months ended September 30, 2023, respectively. As of September 30, 2024, we had an accumulated deficit of $390.3 million. As discussed further in Liquidity and Capital Resources—Funding Requirements and Going Concern, substantial doubt exists about our ability to continue as a going concern. The accompanying unaudited interim condensed consolidated financial statements in this Quarterly Report on Form 10-Q have been prepared on a going concern basis, which contemplates the realization of assets and satisfaction of liabilities in the ordinary course of business. We expect to continue to incur significant losses for the foreseeable future and we expect these losses to increase substantially if and as we:
Previous wording
In 2023, we initiated the Germany Real-World Registry, a prospective, post-market, clinical follow-up study to evaluate the Revita DMR Procedure in patients with inadequately controlled T2D. Our target inclusion criteria includes patients ages 18 and over, with a baseline HbA1c between 7.0% and 10.0%, a BMI of less than or equal to 45 and on at least one ADA. The study will assess change in HbA1c, change in number of ADAs, safety and tolerability, quality of life and patient reported outcomes, and healthcare utilization expenditure over five years in patients with T2D after receiving the Revita DMR Procedure in a real-world setting.
Current wording
In 2023, we initiated the Germany Real-World Registry, a prospective, post-market, clinical follow-up study to evaluate the Revita DMR Procedure in patients with inadequately controlled T2D. Our target inclusion criteria includes patients ages 18 and over, with a baseline HbA1c between 7.0% and 10.0%, a BMI of less than or equal to 45 and on at least one GLA. The study will assess change in HbA1c, change in number of GLAs, safety and tolerability, quality of life and patient reported outcomes, and healthcare utilization expenditure over five years in patients with T2D after receiving the Revita DMR Procedure in a real-world setting.
Previous wording
As of August 8, 2024, we have treated 37 patients with DMR and enrolled 31 patients in the registry study with 12-month follow-up data from 11 patients. At baseline, prior to Revita, these patients were a median age of 62 years, with obesity and advanced T2D, a median body weight of 111 kilograms (245 pounds; BMI 32 kg/m2) and median baseline HbA1c of 9.6% despite using up to three GLAs. Approximately two-thirds of these patients were male. At 12 months, these patients’ median weight decreased from 111 kilograms (245 pounds) to 97 kilograms (214 pounds), representing a nearly 13% total body weight loss, and their median HbA1c decreased from 9.6% to 7.2%. In addition, the number of glucose lowering medications remained stable or decreased for 10 out of the 11 patients at 12 months. To date, no device or procedure-related serious adverse events have been reported. It is important to note that weight loss was observed as early as 1-month post-Revita procedure, and weight loss was generally maintained through 1 year of follow-up (see data table), which demonstrates in a real-world setting the potential for a single Revita procedure to be a durable weight maintenance solution.
Current wording
As of October 5, 2024, we have treated 37 patients with DMR and enrolled 31 patients in the registry study with 12-month follow-up data from 12 patients. At baseline, prior to Revita, these patients were a mean age of 61 years, with obesity and advanced T2D, a mean body weight of 102 kilograms (225 pounds; BMI 33 kg/m 2) and mean baseline fasting blood glucose (FBG) and HbA1c of 169 mg/dL and 8.8%, respectively, despite using up to three GLAs. Approximately 60% of these patients were male. At 3 (n=24), 6 (n=18), and 12 (n=12) months post procedure, patient mean weight decreased by 7.7, 7.5, and 9.2 kilograms (17, 17, 20 pounds, respectively) (see the table below for absolute values). Nearly all participants lost weight with 42% losing >10% of their body weight at 12 months post-DMR. Weight loss was observed as early as 1-month post-Revita procedure, and weight loss was generally maintained through 1 year of follow-up, which demonstrates in a real-world setting the potential for a single Revita procedure to be a durable weight maintenance solution.
Previous wording
The following table reflects German Real-World Registry Weight and Blood Sugar Data Post-Revita Procedure:
Current wording
The following table reflects German Real-World Registry Weight and Blood Sugar Data Over Time Post-Revita Procedure:
Previous wording
Median values shown. Fractyl Health data on file, n=11. NCT06256497. HbA1c=glycated hemoglobin.
Current wording
Mean values shown. Fractyl Health data on file, n=31, 24, and 12 for 3, 6, and 12 month post-procedure, except for HbA1c at 12 months, n=11. NCT06256497. HbA1c=glycated hemoglobin.
Previous wording
We plan to continue to enroll more patients in the Germany Real-World Registry across several centers and will continue to report on clinical, health economic, and patient-relevant outcomes from this study on an ongoing basis. We are planning to disclose additional registry data from a larger number of patients at a scientific congress later this year.
Current wording
We plan to continue to enroll more patients in the Germany Real-World Registry across several centers and will continue to report on clinical, health economic, and patient-relevant outcomes from this study on an ongoing basis. We are planning to disclose additional registry data from a larger number of patients in the first quarter of 2025.
Previous wording
Research and development expenses increased by $7.6 million, or 83.4%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to increased clinical, Rejuva, engineering and facilities expenditures, as well as increased personnel-related expenses. Clinical study expenses increased by $2.6 million due to the initiation of Remain-1 and the progress made in Revitalize-1. Rejuva-related research and engineering expenditures increased by $1.0 million due to the continued development of our Rejuva program. Revita-related engineering expenses also increased by $0.3 million due to continued development effort of our Revita system. Allocated facilities expenses increased by $1.1 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $1.6 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $0.9 million primarily due to new options and restricted stock units ("RSUs") issued.
Current wording
Research and development expenses increased by $9.6 million, or 102.6%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to the advancement made in our Revita and Rejuva programs, increased facilities expenditures, as well as personnel-related expenses. Revita related expenses increased by $4.5 million primarily due to a $4.1 million increase in clinical expenses due to progress made in our Remain-1 and Revitalize-1 studies, as well as a $0.3 million increase in device development effort. Rejuva-related expenditures increased by $1.7 million due to continued development in our Rejuva program, primarily due to a $1.5 million increase in gene therapy research expenses and a $0.2 million increase in device development effort. In addition, allocated facilities expenses increased by $0.9 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $1.5 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $1.0 million primarily due to new options and RSUs issued.
Previous wording
Selling, general and administrative expenses increased by $3.5 million, or 126.2%, during the three months ended June 30, 2024 as compared to the three months ended June 30, 2023, primarily due to increased professional services, insurance and facilities expenditures, as well as personnel-related expenses. Professional services expenses increased by $0.5 million primarily due to the increased legal, audit, accounting and other administrative expenses incurred to operate as a public company. Insurance expenses increased by $0.3 million mainly due to higher public company director and officer ("D&O") insurance premium. Allocated facilities expenses increased by $0.2 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $0.6 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $1.8 million primarily due to new options and RSUs issued.
Current wording
Selling, general and administrative expenses increased by $0.3 million, or 6.6%, during the three months ended September 30, 2024 as compared to the three months ended September 30, 2023, primarily due to increased professional services, insurance and facilities expenditures, as well as personnel-related expenses, partially offset by the absence of debt issuance costs in the current period. Professional services expenses increased by $0.7 million primarily due to the increased legal, investor relations and other administrative expenses incurred to operate as a public company. Insurance expenses increased by $0.3 million mainly due to a higher public company director and officer ("D&O") insurance premium. Allocated facilities expenses increased by $0.2 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $0.6 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $0.4 million primarily due to new options and RSUs issued. These increases were partially offset by $1.9 million in debt issuance costs associated with the re-issuance of the 2022 Convertible Notes and issuance of the 2023 Notes that occurred in the third quarter of 2023 while there were no debt issuance costs during the three months ended September 30, 2024.
Previous wording
Other income, net, of $5.8 million during the three months ended June 30, 2024 was primarily attributable to $4.7 million gain from the change in fair value of warrant liabilities and $1.4 million interest income, offset by $0.3 million loss from the change in fair value of notes payable. Other expense, net, of $18.4 million during the three months ended June 30, 2023 was primarily attributable to $18.4 million loss from the change in fair value of notes payable and $0.1 million loss from the change in fair value of warrant liabilities, offset by $0.2 million interest income.
Current wording
Other income, net, of $0.6 million during the three months ended September 30, 2024 was primarily attributable to a $2.3 million gain from the change in fair value of warrant liabilities and $0.9 million in net interest income, offset by a $2.6 million loss from the change in fair value of notes payable. Other expense, net, of $1.9 million during the three months ended September 30, 2023 was primarily attributable to a $1.1 million loss from the change in fair value of notes payable and a $1.0 million loss from the change in fair value of warrant liabilities, offset by $0.2 million in net interest income.
Previous wording
We recognized a gain of $4.7 million from the decrease in fair value of warrant liabilities during the three months ended June 30, 2024, which consisted of $4.1 million gain related to the July 2023 Warrants and $0.6 million gain related to the September 2023 Warrants. The decrease in the fair value of these warrants was mainly due to the decrease in the fair value of the underlying shares of common stock. We recognized a loss of $0.1 million from the change in fair value of warrant liabilities during the three months ended June 30, 2023 related to the 2014 Warrant, which was due to the increase in the fair value of the underlying shares of preferred stock to be purchased under the warrant.
Current wording
We recognized a gain of $2.3 million from the decrease in fair value of warrant liabilities during the three months ended September 30, 2024, which consisted of a $2.0 million gain related to the July 2023 Warrants and a $0.3 million gain related to the September 2023 Warrants. The decrease in the fair value of these warrants was mainly due to the decrease in the fair value of the underlying shares of common stock. We recognized a loss of $1.0 million from the change in fair value of warrant liabilities during the three months ended September 30, 2023 related to the July 2023 Warrants, which was due to an increase in estimated underlying equity value due to reduced remaining estimated time to assumed conversion events.
Previous wording
We recognized a loss of $0.3 million from the increase in fair value of the 2023 Notes during the three months ended June 30, 2024, which was due to a combination of the fluctuation of market interest rate and the accrual of the PIK interests. No gain or loss was recognized for the 2023 Notes during the three months ended June 30, 2023 because the 2023 Notes were not entered into until September 2023.
Current wording
We recognized a loss of $2.6 million from the increase in fair value of the 2023 Notes during the three months ended September 30, 2024, which was due to a combination of the fluctuation of market interest rate and the accrual of the interests. No gain or loss was recognized for the 2023 Notes during the three months ended September 30, 2023 because the 2023 Notes were not entered into until September 2023.
Previous wording
We recognized a loss of $18.4 million from the increase in fair value of the 2022 Convertible Notes during the three months ended June 30, 2023, which was primarily driven by the consideration of known and knowable terms of the subsequent amendments to the 2022 Convertible Notes along with the concurrent issuance of warrants to purchase common stock to the lenders. No gain or loss was recognized for the 2022 Convertible Notes during the three months ended June 30, 2024 because all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock upon the closing of the IPO on February 6, 2024.
Current wording
We recognized a loss of $1.1 million from the increase in fair value of the 2022 Convertible Notes during the three months ended September 30, 2023, which was primarily due to a combination of changes in estimates and assumptions used in the valuation model such as equity value, volatility, time to conversion event (IPO or non-IPO), scenario weightings and risk-free rate. No gain or loss was recognized for the 2022 Convertible Notes during the three months ended September 30, 2024 because all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock upon the closing of the IPO on February 6, 2024.
Previous wording
In addition, interest income earned from our cash deposits increased by $1.2 million due to higher deposit balances upon the completion of our IPO as well as higher market interest rates.
Current wording
In addition, interest income earned from our cash deposits increased by $1.0 million mainly due to higher deposit balances upon the completion of our IPO.
Previous wording
The following table summarizes our condensed consolidated results of operations for the six months ended June 30, 2024 and 2023.
Current wording
The following table summarizes our condensed consolidated results of operations for the nine months ended September 30, 2024 and 2023.
Previous wording
Revenue and cost of goods sold during the six months ended June 30, 2024 and 2023 was related to our pilot commercial launch in Germany.
Current wording
Revenue and cost of goods sold during the nine months ended September 30, 2024 and 2023 was related to our pilot commercial launch in Germany.
Previous wording
Research and development expenses increased by $12.7 million, or 68.7%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to increased clinical, Rejuva and facilities expenditures, as well as personnel-related expenses. Clinical study expenses increased by $4.9 million due to the initiation of Remain-1 and the progress made in Revitalize-1. Allocated facilities expenses increased by $2.5 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. Rejuva-related expenditures increased by $0.9 million due to continued development in our Rejuva program. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $2.2 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $2.4 million primarily due to new option and RSUs issued. These increases were partially offset by a decrease of $0.2 million in medical affairs expenditures primarily due to the timing of the collaborative medical research projects.
Current wording
Research and development expenses increased by $22.3 million, or 80.1%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to the advancement made in our Revita and Rejuva programs, increased facilities expenditures, as well as personnel-related expenses. Revita related expenses increased by $9.2 million primarily due to a $8.8 million increase in clinical expenses due to progress made in our Remain-1 and Revitalize-1 studies, as well as a $0.3 million increase in device development effort. Rejuva-related expenditures increased by $2.7 million due to continued development in our Rejuva program, primarily due to a $2.2 million increase in gene therapy research expenses and a $0.5 million increase in device development effort. In addition, allocated facilities expenses increased by $3.3 million as our new office and laboratory space lease in Burlington, MA, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $3.7 million as a result of the expansion of our workforce and our effort to bring certain clinical and scientific resources in house. In addition, stock-based compensation increased by $3.4 million primarily due to new option and RSUs issued.
Previous wording
Selling, general and administrative expenses increased by $7.9 million, or 142.3%, during the six months ended June 30, 2024 as compared to the six months ended June 30, 2023, primarily due to increased professional services, insurance and facilities expenditures, as well as personnel-related expenses. Professional services expenses increased by $1.1 million primarily due to the increased legal, audit, accounting and other administrative expenses incurred to operate as a public company. Insurance expenses increased by $0.5 million mainly due to higher public company D&O insurance premium. Allocated facilities expenses increased by $0.4 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $1.0 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $4.7 million primarily due to new options and RSUs issued.
Current wording
Selling, general and administrative expenses increased by $8.2 million, or 81.3%, during the nine months ended September 30, 2024 as compared to the nine months ended September 30, 2023, primarily due to increased professional services, insurance and facilities expenditures, as well as personnel-related expenses, partially offset by the absence of debt issuance costs in the current period. Professional services expenses increased by $1.8 million primarily due to the increased legal, audit, accounting, investor relations and other administrative expenses incurred to operate as a public company. Insurance expenses increased by $0.8 million mainly due to a higher public company D&O insurance premium. Allocated facilities expenses increased by $0.6 million as our new office and laboratory space lease in Burlington, Massachusetts, commenced on November 1, 2023. Personnel-related expenses, including salaries, bonuses and other compensatory benefits, increased by $1.6 million as a result of the expansion of our workforce. In addition, stock-based compensation increased by $5.1 million primarily due to new options and RSUs issued. These increases were partially offset by $1.9 million in debt issuance costs associated with the re-issuance of the 2022 Convertible Notes and issuance of the 2023 Notes that occurred in the third quarter of 2023, while there were no debt issuance costs during the nine months ended September 30, 2024.
Previous wording
Other income, net, of $24.0 million during the six months ended June 30, 2024 was primarily attributable to $15.1 million gain from the change in fair value of warrant liabilities, $6.4 million gain from the change in fair value of notes payable and $2.5 million interest income. Other expense, net, of $18.2 million during the six months ended June 30, 2023 was primarily attributable to $18.6 million loss from the change in fair value of notes payable and $0.1 million loss from the change in fair value of warrant liabilities, offset by $0.6 million interest income.
Current wording
Other income, net, of $24.6 million during the nine months ended September 30, 2024 was primarily attributable to a $17.4 million gain from the change in fair value of warrant liabilities, $3.8 million gain from the change in fair value of notes payable and $3.4 million in net interest income. Other expense, net, of $20.1 million during the nine months ended September 30, 2023 was primarily attributable to a $19.7 million loss from the change in fair value of notes payable and $1.2 million loss from the change in fair value of warrant liabilities, offset by $0.8 million in net interest income.
Previous wording
We recognized a gain of $15.1 million from the decrease in fair value of warrant liabilities during the six months ended June 30, 2024, which consisted of $12.8 million gain related to the July 2023 Warrants, $2.2 million gain related to the September 2023 Warrants and $0.1 million gain related to the 2014 Warrant. The decrease in the fair value of these warrants was mainly due to the decrease in the fair value of the underlying shares of common stock to be purchased under these warrants. We recognized a loss of $0.1 million from the change in fair value of warrant liabilities during the six months ended June 30, 2023 related to the 2014 Warrant, which was due to the increase in the fair value of the underlying shares of preferred stock to be purchased under the warrant.
Current wording
We recognized a gain of $17.4 million from the decrease in fair value of warrant liabilities during the nine months ended September 30, 2024, which consisted of a $14.8 million gain related to the July 2023 Warrants, $2.5 million gain related to the September 2023 Warrants and $0.1 million gain related to the 2014 Warrant. The decrease in the fair value of these warrants was mainly due to the decrease in the fair value of the underlying shares of common stock to be purchased under these warrants. We recognized a loss of $1.2 million from the change in fair value of warrant liabilities during the nine months ended September 30, 2023 related to the July 2023 Warrants, which was due to an increase in estimated underlying equity value due to reduced remaining estimated time to assumed conversion events.
Previous wording
We recognized a gain of $8.0 million from the decrease in fair value of 2022 Convertible Notes during the six months ended June 30, 2024, which was primarily driven by the decline in our common stock value after the IPO. Upon the closing of the IPO on February 6, 2024, all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock. The 2022 Convertible Notes were marked to market to its fair value as of the time of the conversion before being reclassified to equity. The gain from the decrease in fair value of the 2022 Convertible Notes was offset by a loss of $1.6 million from the increase in fair value of the 2023 Notes during the six months ended June 30, 2024 due to a combination of the fluctuation of market interest rate and the accrual of the PIK interests.
Current wording
We recognized a gain of $8.0 million from the decrease in fair value of 2022 Convertible Notes during the nine months ended September 30, 2024, which was primarily driven by the decline in our common stock value after the IPO. Upon the closing of the IPO on February 6, 2024, all of the outstanding principal plus accrued interest under the 2022 Convertible Notes were converted into our common stock. The 2022 Convertible Notes were marked to market to its fair value as of the time of the conversion before being reclassified to equity. The gain from the decrease in fair value of the 2022 Convertible Notes was offset by a loss of $4.2 million from the increase in fair value of the 2023 Notes during the nine months ended September 30, 2024 due to a combination of the fluctuation of market interest rate and the accrual of the interests.
Previous wording
We recognized a loss of $18.6 million from the increase in fair value of the 2022 Convertible Notes during the six months ended June 30, 2023, which was primarily driven by the consideration of known and knowable terms of the subsequent amendments to the convertible notes along with the concurrent issuance of warrants to purchase common stock to the lenders. No gain or loss was recognized for the 2023 Notes during the six months ended June 30, 2023 because the 2023 Notes were not entered into until September 2023.
Current wording
We recognized a loss of $19.4 million from the increase in fair value of the 2022 Convertible Notes during the nine months ended September 30, 2023, which was primarily driven by the consideration of known and knowable terms of the subsequent amendments to the convertible notes along with the concurrent issuance of warrants to purchase common stock to the lenders. In addition, we also recognized a loss of $0.3 million from the increase in fair value of the 2023 Notes during the nine months ended September 30, 2023 related to interests accrued on the 2023 Notes.
Previous wording
In addition, interest income earned from our cash deposits increased by $1.9 million due to higher deposit balances upon the completion of our IPO as well as higher market interest rates.
Current wording
In addition, interest income earned from our cash deposits increased by $2.9 million mainly due to higher deposit balances upon the completion of our IPO.
Previous wording
As of June 30, 2024, we had approximately $102.4 million of cash and cash equivalents. On February 6, 2024, we completed our IPO, in which we issued and sold 7,333,333 shares of our common stock at a price to the public of $15.00 per share, resulting in net proceeds to us of approximately $98.9 million, after deducting the underwriting discounts and other offering expenses. On March 5, 2024, we issued an additional 99,999 shares of our common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares at the IPO public price of $15.00 per share, for additional net proceeds of approximately $1.4 million, after deducting the underwriting discounts and commissions.
Current wording
As of September 30, 2024, we had approximately $84.7 million of cash and cash equivalents. On February 6, 2024, we completed our IPO, in which we issued and sold 7,333,333 shares of our common stock at a price to the public of $15.00 per share, resulting in net proceeds to us of approximately $98.9 million, after deducting the underwriting discounts and other offering expenses. On March 5, 2024, we issued an additional 99,999 shares of our common stock pursuant to the partial exercise of the underwriters’ option to purchase additional shares at the IPO public price of $15.00 per share, for additional net proceeds of approximately $1.4 million, after deducting the underwriting discounts and commissions.
Previous wording
On September 7, 2023, we entered into a credit agreement, as amended from time to time, with Symbiotic Capital Opportunities Holding, L.P. and Catalio Structured Opportunities AIV I LP, or the Lenders, that provides for term loans in an aggregate principal amount of $45.0 million, or the 2023 Notes, payable in two tranches. The first tranche, with a principal amount of $30.0 million, was extended on September 7, 2023, resulting in net proceeds of approximately $28.4 million. The second tranche, with a principal amount of $15.0 million, may be extended upon our achievement of certain operating and funding milestones as defined in the 2023 Notes, by July 31, 2024. The 2023 Notes also provide for a third tranche with an uncommitted principal amount of $20.0 million that may be extended to us, subject to the Lenders’ prior written consent in their sole discretion.
Current wording
On September 7, 2023, we entered into a credit agreement, as amended from time to time, with Symbiotic Capital Opportunities Holding, L.P. and Catalio Structured Opportunities AIV I LP, or the Lenders, that provides for term loans in an aggregate principal amount of $45.0 million, or the 2023 Notes, payable in two tranches. The first tranche, with a principal amount of $30.0 million, was extended on September 7, 2023, resulting in net proceeds of approximately $28.4 million. The second tranche, with a principal amount of $15.0 million, would have been extended upon our achievement of certain operating and funding milestones as defined in the 2023 Notes, by July 31, 2024. The 2023 Notes also provide for a third tranche with an uncommitted principal amount of $20.0 million that may be extended to us, subject to the Lenders’ prior written consent in their sole discretion. Due to a shift in business strategy expansion to include the weight maintenance study, we decided not to pursue the milestones required to access the second tranche. As a result, the second tranche was not extended.
Previous wording
The credit agreement, as amended, contains the following financial covenants: (i) a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions, and (ii) a financing milestone covenant requiring that (a) we have received proceeds from an equity financing or series of financings (including the net proceeds from the IPO) of at least $40.0 million during the period commencing on September 7, 2023 and ending on or prior to February 15, 2024, and (b) we have received equity financing or series of financings of at least $100.0 million (inclusive of such equity financing or series of financings in the preceding clause (a)) during the period commencing as of September 7, 2023 and prior to June 30, 2024. As of June 30, 2024, we were in compliance with the financial covenants and other terms of the arrangement.
Current wording
The credit agreement, as amended, contains financial covenants including a minimum liquidity covenant requiring us to maintain a minimum $10.0 million balance in cash and cash equivalents on deposit in accounts, subject to certain exceptions. As of September 30, 2024, we were in compliance with the financial covenants and other terms of the arrangement.
Previous wording
The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. Under the terms of the credit agreement, the first principal payment date can be extended to September 30, 2027, at our election, if certain financing milestones as defined in the 2023 Notes are achieved on or prior to September 30, 2026. As of June 30, 2024, we achieved the defined milestones and can therefore elect to extend the first principal payment date to September 30, 2027. In addition, upon any principal payment, we are required to make an additional payment to the Lenders of a 6.0% fee, or the Exit Fee, over the principal and accrued PIK interest paid. The aggregate Exit Fee of the 2023 Notes should equal to 6.0% of the total commitment of $45.0 million plus all accrued PIK interest. All remaining outstanding principal balance, accrued interest and Exit Fee on the 2023 Notes shall be due and payable on the maturity date of September 7, 2028.
Current wording
The outstanding balances under the 2023 Notes bear interest at a floating annual rate equal to the greater of 5.5% above the Wall Street Journal prime rate or 13.25%. On and prior to September 30, 2024, 6.0% of the interest is payable in kind and added to the outstanding principal amount of the 2023 Notes. Beginning September 30, 2026, we are required to make principal payments in the amount of 1.5% of the aggregate principal amount outstanding, including accrued PIK interest, each month. Under the terms of the credit agreement, the first principal payment date can be extended to September 30, 2027, at our election, if certain financing milestones as defined in the 2023 Notes are achieved on or prior to September 30, 2026. As of June 30, 2024, we achieved the defined milestones and elected to extend the first principal payment date to September 30, 2027. In addition, upon any principal payment, we are required to make an additional payment to the Lenders of a 6.0% fee, or the Exit Fee, over the principal and accrued PIK interest paid. The aggregate Exit Fee of the 2023 Notes should equal to 6.0% of the total commitment of $45.0 million plus all accrued PIK interest. All remaining outstanding principal balance, accrued interest and Exit Fee on the 2023 Notes shall be due and payable on the maturity date of September 7, 2028.
Previous wording
As of June 30, 2024, the balance of the 2023 Notes was carried at its fair value of $28.4 million.
Current wording
As of September 30, 2024, the balance of the 2023 Notes was carried at its fair value of $30.3 million.
Previous wording
As of June 30, 2024, we had cash and cash equivalents of $102.4 million. Based on our current business plans, we believe that our existing cash and cash equivalents will enable us to fund our operating expenses, debt repayment obligations and capital expenditure requirements into the fourth quarter of 2025. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Current wording
Our estimate as to how long we expect our existing cash and cash equivalents will be able to continue to fund our operating expenses and capital expenditures requirement is based on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect.
Previous wording
Adequate additional funds may not be available to us on acceptable terms, or at all. Market volatility resulting from pandemics, monetary policy changes, or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Additional debt financing and convertible preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interest.
Current wording
Adequate additional funds may not be available to us on acceptable terms, or at all. Market volatility resulting from pandemics, monetary policy changes, or other factors could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, your ownership interest will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect your rights as a common stockholder. Additional debt financings and convertible preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially dilute your ownership interest.
Previous wording
Cash used in operating activities of $30.4 million for the six months ended June 30, 2024 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $20.6 million adjusted for net non-cash income of $12.4 million, primarily consisting of $15.1 million gain from change in fair value of warrant liabilities and $7.6 million gain from change in fair value of notes payable (non-cash portion), offset by $9.0 million stock-based compensation, $1.1 million non-cash operating lease expense and $0.2 million depreciation. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $2.5 million.
Current wording
Cash used in operating activities of $48.5 million for the nine months ended September 30, 2024 was primarily driven by spending on our ongoing clinical studies, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Cash used in operating activities resulted primarily from our net loss of $43.7 million adjusted for net non-cash income of $9.4 million, primarily consisting of a $17.4 million gain from change in fair value of warrant liabilities and $5.7 million gain from change in fair value of notes payable (non-cash portion), offset by $11.5 million in stock-based compensation, a $1.5 million non-cash operating lease expense, a $0.5 million depreciation and a $0.3 million non-cash interest expense. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $4.6 million.
Previous wording
Cash used in operating activities of $21.2 million for the six months ended June 30, 2023 was primarily driven by spending on our ongoing clinical study, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Our net loss of $42.2 million was partially offset by non-cash items totaling $20.8 million, primarily consisting of $18.6 million loss from change in fair value of convertible notes payable, $1.9 million stock-based compensation, $0.2 million of depreciation and $0.1 million loss from change in fair value of warrant liabilities. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of $0.1 million.
Current wording
Cash used in operating activities of $32.2 million for the nine months ended September 30, 2023 was primarily driven by spending on our ongoing clinical study, Rejuva-related research activities, professional services related to our corporate and general administrative activities, as well as personnel-related expenses, including salaries, bonuses, and other compensatory benefits. Our net loss of $57.9 million was partially offset by non-cash items totaling $23.9 million, primarily consisting of a $19.5 million loss from change in fair value of the 2022 Convertible Notes payable, $3.0 million in stock-based compensation, a $1.2 million loss from change in fair value of warrant liabilities and $0.2 million of depreciation. In addition, $1.9 million of the net loss was related to debt issuance costs that were presented in cash used in financing activities. Cash used in operating activities was also impacted by changes in working capital and other assets and liabilities of 0.2 million.
Previous wording
Cash used in investing activities for the six months ended June 30, 2024 and 2023 were related to the purchase of property and equipment. The increase in the six months ended June 30, 2024 compared with the six months ended June 30,
Current wording
Cash used in investing activities for the nine months ended September 30, 2024 and 2023 were related to the purchase of property and equipment. The increase in the nine months ended September 30, 2024 compared with the nine months ended September 30, 2023 was primarily due to our spending on leasehold improvement, office furniture and information technology equipment as we moved into our new office and laboratory space in Burlington, MA.
Previous wording
Cash provided by financing activities of $101.0 million for the six months ended June 30, 2024 was primarily driven by the $103.7 million capital raised from the IPO, net of discounts and commissions, partially offset by $2.9 million payments of public offering costs made to third-party service providers. We also received proceeds of $0.2 million from stock option exercises.
Current wording
Cash provided by financing activities of $101.2 million for the nine months ended September 30, 2024 was primarily driven by the $103.7 million capital raised from the IPO, net of discounts and commissions, partially offset by $2.9 million payments of public offering costs made to third-party service providers. We also received proceeds of $0.4 million from stock option exercises.
Previous wording
As of June 30, 2024, our lease commitments reflect payments due for our operating and finance leases. The operating leases include our corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of June 30, 2024, our future contractual commitments for our leases were $60.9 million. For additional information on our leases and timing of future payments, please see Note 7— "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.
Current wording
As of September 30, 2024, our lease commitments reflect payments due for our operating and finance leases. The operating leases include our corporate office and laboratory space in Burlington, MA that will expire in June 2034. The finance leases represent leases of laboratory equipment used in our Rejuva pre-clinical activities. As of September 30, 2024, our future contractual commitments for our leases were $59.6 million. For additional information on our leases and timing of future payments, please see Note 7— "Commitments and Contingencies" to the unaudited condensed consolidated financial statements included in this Quarterly Report on this Form 10-Q.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
2023 was primarily due to our spending on leasehold improvement, office furniture and information technology equipment as we moved into our new office and laboratory space in Burlington, MA.