Aerovate Therapeutics 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
JBIO$15.07+6.9%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 2024-08-12.
0001798749-24-000049
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.
0001798749-24-000059
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 69 previous paragraphs and 80 current paragraphs.
46 unchanged; 19 reworded; 14 added; 4 removed; 0 previous and 1 current paragraphs rearranged.
Tables are not compared: 29 previous and 30 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 (14)
Current report
On October 30, 2024, we entered into an Agreement and Plan of Merger, or the Merger Agreement, by and among us, Caribbean Merger Sub I, Inc., a Delaware corporation and our wholly owned subsidiary, or Merger Sub I, Caribbean Merger Sub II, LLC, a Delaware limited liability company and our wholly owned subsidiary, or Merger Sub II and together with Merger Sub I, Merger Subs, and Jade Biosciences, Inc., a Delaware corporation, or Jade, pursuant to which, and subject to the satisfaction or waiver of the conditions set forth in the Merger Agreement, among other things, Merger Sub I will merge with and into Jade, with Jade surviving the merger as the surviving corporation, or the First Merger, and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our wholly owned subsidiary and the surviving corporation of the merger, or the Second Merger and together with the First Merger, the Merger. The Merger is intended to qualify for federal income tax purposes as a tax-free reorganization under the provisions of Section 368(a) of the Internal Revenue Code of 1986, as amended.
Current report
In addition, in connection with the closing of the Merger, or the Closing, we expect to declare a cash dividend to our pre-Merger stockholders of approximately $65.0 million in the aggregate, or the Cash Dividend, provided such amount is subject to adjustment as set forth in the Merger Agreement.
Current report
Subject to the terms and conditions of the Merger Agreement, at the effective time of the Merger, or the Effective Time, (a) each then-outstanding share of Jade’s common stock, par value $0.0001 per share, or Jade Common Stock, will be converted into the right to receive a number of shares of our common stock, par value $0.0001 per share, or Aerovate Common Stock, based on a ratio calculated in accordance with the Merger Agreement, or the Exchange Ratio, provided that any unvested restricted shares of Jade Common Stock will be subject to the same terms and conditions (including, without limitation, vesting and repurchase provisions) that are otherwise applicable to such unvested shares as of immediately prior to the Effective Time, (b) each then-outstanding share of Jade’s preferred stock, par value $0.0001 per share, or Jade Preferred Stock, will be converted into the right to receive a number of shares of our newly authorized convertible preferred stock, par value $0.0001 per share, equal to (x) the Exchange Ratio divided by (y) 1,000, (c) each then-outstanding option to purchase Jade Common Stock will be assumed by us, subject to adjustment as set forth in the Merger Agreement and (d) each then-outstanding warrant to purchase shares of Jade Common Stock or Jade Preferred Stock will be assumed by us, subject to adjust as set forth in the Merger Agreement.
Current report
We and Jade have each agreed to customary representations, warranties and covenants in the Merger Agreement, including, among others, covenants relating to (1) obtaining the requisite approval of our respective stockholders, (2) non-solicitation of alternative acquisition proposals and (3) the conduct of our respective businesses during the period between the date of signing the Merger Agreement and the Closing.
Current report
On October 30, 2024, Jade entered into a Securities Purchase Agreement, or the Purchase Agreement, with certain existing Jade stockholders and new investors, or the Investors. Pursuant to the Purchase Agreement, and subject to the terms and conditions thereof, Jade agreed to sell, and the Investors agreed to purchase, immediately prior to the consummation of the Merger, shares of Jade Common Stock and pre-funded warrants for an aggregate purchase price of approximately $300.0 million, or the Concurrent Investment, which reflects the conversion of the previously issued $95 million of convertible notes. The consummation of the Concurrent Investment is conditioned on the satisfaction or waiver of the conditions set forth in the Merger Agreement and in the Purchase Agreement. Shares of Jade Common Stock and pre-funded warrants issued pursuant to this financing transaction will be converted into shares of Aerovate Common Stock and pre-funded warrants to acquire shares of Aerovate Common Stock, in accordance with the Exchange Ratio and the Merger Agreement.
Current report
Consummation of the Merger is subject to certain closing conditions, including, among other things, (1) requisite approval by our stockholders, (2) approval by the requisite Jade stockholders of the adoption and approval of the Merger Agreement and the transactions contemplated thereby, (3) Nasdaq’s approval of the listing of the shares of Aerovate Common Stock to be issued in connection with the Merger, and (4) an executed Purchase Agreement for the Concurrent Investment in full force and effect evidencing cash proceeds of not less than $80.0 million to be received by the combined company immediately prior to or following the Closing.
Current report
The Merger Agreement contains certain termination rights of each of us and Jade. Upon termination of the Merger Agreement under specified circumstances, we may be required to pay Jade a termination fee of $2,340,000, and in certain other circumstances, Jade may be required to pay us a termination fee of $5,250,000.
Current report
At the Effective Time, our board of directors of is expected to consist of six members, all of whom will be designated by Jade.
Current report
Concurrently and in connection with the execution of the Merger Agreement, (i) certain stockholders of Jade (solely in their respective capacities as Jade stockholders) holding approximately 99% of the outstanding shares of Jade capital stock have entered into support agreements with us and Jade to vote all of their shares of Jade capital stock in favor of the adoption and approval of the Merger Agreement and the transactions contemplated thereby and (ii) certain of our stockholders holding approximately 38.1% of the outstanding shares of Aerovate Common Stock have entered into support agreements with us and Jade to vote all of their shares of Aerovate Common Stock in favor of, among other things, the adoption and approval of the Merger Agreement and the transactions contemplated thereby.
Current report
candidates, if approved. This is due to the numerous risks and uncertainties associated with developing product candidates, including the uncertainty of:
Current report
Research and development expenses for the three months ended September 30, 2024 were $10.3 million compared to $16.9 million for the three months ended September 30, 2023. The decrease of $6.6 million was primarily due to a $4.3 million decrease in contract manufacturing costs, a $2.0 million decrease in clinical trial costs, a $2.0 million decrease in base wages and bonus expense, and a $1.4 million decrease in stock based compensation expense, partially offset by a $2.6 million increase in severance expense, a $0.4 million increase in regulatory and other expenses, and a $0.1 million increase in payroll taxes.
Current report
Comparison of the nine months ended September 30, 2024 and 2023 (Unaudited)
Current report
On October 30. 2024, we entered into the Merger Agreement pursuant to which, subject to the satisfaction or waiver of the conditions therein, Merger Sub I will merge with and into Jade, with Jade surviving the first merger as the surviving corporation and as part of the same overall transaction, Jade will merge with and into Merger Sub II, with Merger Sub II continuing as our wholly owned subsidiary and the surviving corporation of the second merger. The closing of the Merger is subject to approval by our stockholders and the stockholders of Jade and other customary closing conditions. Our future operations are highly dependent on the success of the proposed Merger with Jade.
Current report
Comparison of the nine months ended September 30, 2024 and 2023 (Unaudited)
Removed paragraphs (4)
Previous report
Workforce Reduction Plan
Previous report
Comparison of the six months ended June 30, 2024 and 2023 (Unaudited)
Previous report
Research and development expenses for the six months ended June 30, 2024 were $41.3 million compared to $29.5 million for the six months ended June 30, 2023. The increase of $11.8 million was primarily due to our Phase 2b/Phase 3 trial causing increases of $5.0 million contract manufacturing costs, $4.6 million in headcount related costs, $1.3 million in travel and other miscellaneous costs, $0.4 million in clinical trial costs, and $0.5 million in regulatory and preclinical costs.
Previous report
Comparison of the six months ended June 30, 2024 and 2023 (Unaudited)
Reworded paragraphs (19)
Previous wording
In June 2024, following our decision to halt further development of AV-101, we announced our plan to terminate nearly all of our workforce in the coming months, or the Workforce Reduction Plan. As of July 31, 2024, 35 individuals, or 69% of our workforce, have been terminated. The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against our company. In connection with the Workforce Reduction Plan, we estimate that we will incur costs (in consideration of releases) of approximately $5.6 million, which are primarily one-time severance benefits. Approximately $2.6 million of these costs were incurred in the second quarter of 2024, and the remaining are expected to be incurred in the third and fourth quarter of 2024.
Current wording
In June 2024, following our decision to halt further development of AV-101, we announced our plan to terminate nearly all of our workforce in the coming months, or the Workforce Reduction Plan. As of September 30, 2024, 46 individuals, or approximately 90% of our workforce, have been terminated. The affected individuals have been and will be provided severance benefits, including cash severance payments. Each affected individual’s eligibility for severance benefits is contingent upon entering into a separation agreement, which includes a general release of claims against our company. In connection with the Workforce Reduction Plan, we incurred costs (in consideration of releases) of approximately $6.4 million, which are primarily one-time severance benefits.
Previous wording
General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will decrease for the second half of 2024 as we decrease the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on the outcome of our strategic review process, related audit and legal expenses and whether we decide to pursue any future product development efforts.
Current wording
General and administrative expenses consist primarily of personnel-related costs, including salaries, payroll taxes, employee benefits, stock-based compensation and severance charges for those individuals in executive, finance and other administrative functions. Other significant costs include legal fees relating to intellectual property and corporate matters, professional fees for accounting and consulting services, and insurance costs. We anticipate that our general and administrative expenses will decrease for the second half of 2024 as we decrease the size of our organization in connection with the Workforce Reduction Plan. Our future general and administrative expenses will be significantly dependent on our ability to successfully consummate the Merger, related audit and legal expenses and whether we decide to pursue any future product development efforts.
Previous wording
General and administrative expenses for the three months ended June 30, 2024 were $4.9 million compared to $4.3 million for the three months ended June 30, 2023. The increase of $0.6 million was primarily due to a $0.3 million increase in headcount related costs, $0.4 million increase in travel and other miscellaneous costs, partially offset by a decrease of $0.1 million in insurance costs.
Current wording
General and administrative expenses for the three months ended September 30, 2024 were $7.1 million compared to $4.5 million for the three months ended September 30, 2023. The increase of $2.6 million was primarily due to a $1.6 million increase in legal and consulting expenses, $1.1 million in severance expense, $0.1 million in stock based compensation expense, and $0.1 million in insurance and other costs, partially offset by a decrease of $0.4 million in base wages and bonus expense.
Previous wording
Other income for the three months ended June 30, 2024 was $1.4 million compared to $1.3 million for the three months ended June 30, 2023. The increase of $0.1 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended June 30, 2024.
Current wording
Other income for the three months ended September 30, 2024 was $1.2 million compared to $1.8 million for the three months ended September 30, 2023. The decrease of $0.6 million was due to interest earned on our cash and cash equivalents and short-term investments for the three months ended September 30, 2024.
Previous wording
The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023 (in thousands):
Current wording
The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023 (in thousands):
Previous wording
Research and development expenses for the three months ended June 30, 2024 were $21.2 million compared to $16 million for the three months ended June 30, 2023. The increase of $5.2 million was primarily due to a $2.2 million increase in headcount related costs, $1.5 million increase in contract manufacturing costs, $1.1 million increase in travel and other miscellaneous costs, $0.3 million increase in regulatory and preclinical costs, and $0.1 million increase in clinical trial costs.
Current wording
Research and development expenses for the nine months ended September 30, 2024 were $51.7 million compared to $46.4 million for the nine months ended September 30, 2023. The increase of $5.3 million was primarily due to a $5.0 million increase in severance expense, $1.6 million in travel and other miscellaneous expense, $0.7 million in contract manufacturing costs, $0.6 million in regulatory and preclinical costs, $0.2 million in stock based compensation, and $0.2 million in benefits, partially offset by a $1.5 million decrease in base wages and bonus expense, and a $1.6 million decrease in clinical trial costs.
Previous wording
General and administrative expenses for the six months ended June 30, 2024 were $9.5 million compared to $8.5 million for the six months ended June 30, 2023. The increase of $1.0 million was primarily due to a $1.0 million increase in headcount related costs, $0.5 million in travel and other miscellaneous costs, partially offset by decreases of $0.3 million in insurance costs, and $0.2 million in legal and consulting costs.
Current wording
General and administrative expenses for the nine months ended September 30, 2024 were $16.5 million compared to $12.9 million for the nine months ended September 30, 2023. The increase of $3.6 million was primarily due to a $1.3 million increase in severance expense, $1.2 million in stock compensation expense, $1.4 million in legal and consulting expenses, $0.1 million in rent allocation, and $0.2 million in insurance and other costs, partially offset by a decrease of $0.6 million in base wages and bonus expense.
Previous wording
Other income for the six months ended June 30, 2024, was $2.8 million compared to $2.4 million for the six months ended June 30, 2023. The increase of $0.4 million was due to interest earned on our cash and cash equivalents and short-term investments for the six months ended June 30, 2024.
Current wording
Other income for the nine months ended September 30, 2024, was $4.0 million compared to $4.2 million for the nine months ended September 30, 2023. The decrease of $0.2 million was due to interest earned on our cash and cash equivalents and short-term investments for the nine months ended September 30, 2024.
Previous wording
As of June 30, 2024, we had cash and cash equivalents and short-term investments of $104.2 million. We expect our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Current wording
As of September 30, 2024, we had cash and cash equivalents and short-term investments of $88.7 million. We expect our existing cash and cash equivalents and short-term investments will be sufficient to fund our operations for at least twelve months from the date of filing this Quarterly Report on Form 10-Q. However, our forecast of the period of time through which our financial resources will be adequate to support our operations is a forward-looking statement that involves risks and uncertainties, and actual results could vary materially. We have based this estimate on assumptions that may prove to be wrong, and we could deplete our capital resources sooner than we expect. Additionally, the process of conducting clinical trials is costly, and the timing of progress and expenses in these trials is uncertain.
Previous wording
If we resume development activities, we expect to finance our cash needs through equity offerings, debt financings, or other capital sources, potentially including collaborations, licenses and other similar arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and 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. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our drug candidates even if we would otherwise prefer to develop and market such drug candidates ourselves.
Current wording
We expect to finance our cash needs through our existing cash, cash equivalents and short-term investments. However, we may be unable to enter into arrangements when needed on favorable terms or at all. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our stockholders will be or could be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing and 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. If we raise funds through collaborations, or other similar arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or grant licenses on terms that may not be favorable to us and/or may reduce the value of our common stock. Our failure to raise capital or enter into such other arrangements when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market our drug candidates even if we would otherwise prefer to develop and market such drug candidates ourselves.
Previous wording
The following table sets forth a summary of the net cash flow activity for the six months ended June 30, 2024 and 2023 (in thousands):
Current wording
The following table sets forth a summary of the net cash flow activity for the nine months ended September 30, 2024 and 2023 (in thousands):
Previous wording
Net cash used in operating activities for the six months ended June 30, 2024 was $44.1 million, consisting primarily of our net loss incurred during the period of $48.0 million adjusted for non-cash charges of $8.1 million for stock-based compensation expense, $1.5 million of accretion on investments, $0.1 million of depreciation expense, and $2.9 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $4.8 million increase in prepaid expenses, a $2.5 million decrease in other assets, a $0.7 million decrease in accounts payable and accrued and other current liabilities, and a $0.1 million decrease in other long term liabilities.
Current wording
Net cash used in operating activities for the nine months ended September 30, 2024 was $60.1 million, consisting primarily of our net loss incurred during the period of $64.2 million adjusted for non-cash charges of $10.1 million for stock-based compensation expense, $1.9 million of accretion on investments, $0.3 million of depreciation expense, and $4.4 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $0.1 million increase in prepaid expenses, a $0.8 million decrease in other assets, a $5.6 million decrease in accounts payable and accrued and other current liabilities, and a $0.5 million decrease in other liabilities.
Previous wording
Net cash used in operating activities for the six months ended June 30, 2023 was $26.4 million, consisting primarily of our net loss incurred during the period of $35.5 million adjusted for non-cash charges of $5.4 million for stock-based compensation expense, $1.3 million of accretion on investments, and $5.0 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $5.4 million increase in accounts payable and accrued and other current liabilities, a $0.1 million decrease in other assets, a $0.2 million decrease in other liabilities and a $0.1 million decrease in prepaid expenses.
Current wording
Net cash used in operating activities for the nine months ended September 30, 2023 was $42.0 million, consisting primarily of our net loss incurred during the period of $55.1 million adjusted for non-cash charges of $8.7 million for stock-based compensation expense, $2.1 million of accretion on investments, and $6.5 million for net changes in operating assets and liabilities. The net change in operating assets and liabilities primarily related to a $6.8 million increase in accounts payable and accrued and other current liabilities, a $0.1 million decrease in other assets, a $0.1 million decrease in other liabilities and a $0.1 million decrease in prepaid expenses.
Previous wording
Net cash provided by investing activities for the six months ended June 30, 2024 of $26.8 million was comprised of purchases of short-term investments of $14.8 million, offset by maturities of short-term investments of $41.6 million.
Current wording
Net cash provided by investing activities for the nine months ended September 30, 2024 of $42.9 million was comprised of purchases of short-term investments of $19.7 million, offset by maturities of short-term investments of $62.6 million.
Previous wording
Net cash provided by investing activities for the six months ended June 30, 2023 of $19.4 million was comprised of purchases of short-term investments of $48.3 million, $0.1 million for purchases of property and equipment, offset by maturities of short-term investments of $67.8 million.
Current wording
Net cash provided by investing activities for the nine months ended September 30, 2023 of $6.2 million was comprised of purchases of short-term investments of $96.2 million, $0.1 million for purchases of property and equipment, offset by maturities of short-term investments of $102.5 million.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2024 of $24.9 million was comprised of $23.6 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $0.3 million of payments made for offering costs, and $1.5 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2024 of $24.9 million was comprised of $23.6 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $0.3 million of payments made for offering costs, and $1.5 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan.
Previous wording
Net cash provided by financing activities for the six months ended June 30, 2023 of $45.5 million was comprised of $44.9 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $0.2 million of payments made for offering costs, and $0.8 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan.
Current wording
Net cash provided by financing activities for the nine months ended September 30, 2023 of $45.5 million was comprised of $44.9 million in net proceeds received from sales of common stock under the Sales Agreement, after deducting Agent commissions, $0.2 million of payments made for offering costs, and $0.8 million of proceeds from stock option exercises and issuances of common stock under our employee stock purchase plan.
Previous wording
There have been no significant changes in our critical accounting policies and estimates during the six months ended June 30, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.
Current wording
There have been no significant changes in our critical accounting policies and estimates during the nine months ended September 30, 2024, as compared to the critical accounting policies and estimates disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in our Annual Report on Form 10-K.
Previous wording
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. The decision to opt out of the extended transition period under the JOBS Act is irrevocable.
Current wording
As an emerging growth company under the Jumpstart Our Business Startups Act of 2012, or the JOBS Act, we can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to “opt out” of such extended transition period, which means that when a
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
standard is issued or revised and it has different application dates for public or private companies, we will adopt the new or revised standard at the time public companies adopt the new or revised standard. The decision to opt out of the extended transition period under the JOBS Act is irrevocable.