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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 September 30, 2020
Or
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)
Delaware93-0948554
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
5777 Central Avenue, Boulder,CO80301
(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 classTrading symbol(s)Name of each exchange on which registered
Common stock, $0.01 par value per shareBBIThe 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 filerAccelerated 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 November 5, 2020, there were 53,515,476 shares of the registrant’s common stock outstanding.



BRICKELL BIOTECH, INC.
FORM 10-Q
INDEX

FORWARD-LOOKING STATEMENTS
RISK FACTORS SUMMARY
PART I. FINANCIAL INFORMATION
ITEM 1. Financial Statements (Unaudited)
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
ITEM 4. Controls and Procedures
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 1A. Risk Factors
ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds
ITEM 3. Defaults Upon Senior Securities
ITEM 4. Mine Safety Disclosures
ITEM 5. Other Information
ITEM 6. Exhibits
2


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 regarding our strategy, future operations, future financial position, liquidity, future revenue, projected expenses, results of operations, expectations concerning the timing and our ability to commence and subsequently report data from planned non-clinical studies and clinical trials, prospects, plans and objectives of management are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “plan,” “expect,” “predict,” “potential,” “opportunity,” “goals,” 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 our 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 I, Item 1A. “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, and in Part II, Item 1A. “Risk Factors” in our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020 and June 30, 2020, and in this Quarterly Report, and under a similar heading in any other annual, 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.



3


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, 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 the risks applicable to the Company in Part II, Item 1A. “Risk Factors” in this Quarterly Report.
Our business depends on the successful financing, clinical development, regulatory approval, and commercialization of sofpironium bromide.
We have never 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 very expensive, time-consuming, and uncertain.
Use of patient-reported outcome 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.
Our development partner in Asia, Kaken Pharmaceutical Co., Ltd., substantially controls the development 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.
If we or any partners with which we may collaborate to market and sell sofpironium bromide are unable to achieve and maintain 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, it may fail to achieve the broad degree of physician and patient adoption and use necessary for commercial success.
Sofpironium bromide, if 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 third-party Clinical Research Organizations and other third parties do not meet our requirements or otherwise conduct our sofpironium bromide clinical trials as required or are unable to staff our trials, we may not be able to satisfy our contractual obligations or obtain regulatory approval for, or commercialize, sofpironium bromide.
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 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.
4


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.
Our failure to maintain compliance with Nasdaq’s continued listing requirements could result in the delisting of our common stock.
We may never obtain regulatory approval to commercialize any of our product candidates in the U.S., 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.
Major public health issues, and specifically the pandemic caused by the spread of COVID-19, could have an adverse impact on our financial condition and results of operations and other aspects of our business.
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 FDA, PMDA, and applicable foreign regulatory authorities may not accept data from such trials.
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 could hinder or prevent the commercial success of our product candidates.
We also 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 for our product candidates, including certain sole-source suppliers and manufacturers, and we expect to rely on third parties for supply, manufacturing and distribution of preclinical, clinical and commercial supplies of our product candidates.
Manufacturing and supply of the APIs and other substances and materials used in our product candidates 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 obtain, maintain or enforce global patent rights or other intellectual property rights that cover sofpironium bromide and related technologies that are of sufficient breadth.
We may not be able to protect our intellectual property rights 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 increase our financial or other obligations to our licensors.
5


PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
(unaudited)
September 30,
2020
December 31,
2019
Assets
Current assets:
Cash and cash equivalents$20,174 $7,232 
Marketable securities, available-for-sale 4,497 
Prepaid expenses and other current assets6,129 6,240 
Total current assets26,303 17,969 
Property and equipment, net7 16 
Operating lease right-of-use asset94 159 
Total assets$26,404 $18,144 

Liabilities and stockholders equity
Current liabilities:
Accounts payable$1,126 $2,245 
Accrued liabilities6,042 6,379 
Lease liability, current portion80 78 
Deferred revenue 1,795 
Note payable, current portion267  
Total current liabilities7,515 10,497 
Lease liability, net of current portion7 73 
Note payable, net of current portion170  
Total liabilities7,692 10,570 
Commitments and contingencies (Note 6)
Stockholders’ equity:
Common stock, $0.01 par value, 100,000,000 and 50,000,000 shares authorized at September 30, 2020 and December 31, 2019, respectively; 31,241,636 and 8,480,968 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
312 85 
Additional paid-in capital116,928 92,497 
Accumulated other comprehensive loss (28)
Accumulated deficit(98,528)(84,980)
Total stockholders’ equity18,712 7,574 
Total liabilities and stockholders’ equity$26,404 $18,144 




See accompanying notes to these condensed consolidated financial statements.
6


BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except share and per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Collaboration revenue$142 $1,183 $1,795 $7,248 
Operating expenses:
Research and development1,281 3,337 6,657 13,585 
General and administrative3,211 3,901 8,713 7,290 
Total operating expenses4,492 7,238 15,370 20,875 
Loss from operations(4,350)(6,055)(13,575)(13,627)
Investment and other income, net24 54 27 64 
Gain on extinguishment 2,318  2,318 
Interest expense (1,098) (1,982)
Change in fair value of warrant and derivative liability   212 
Net loss(4,326)(4,781)(13,548)(13,015)
Reduction (accretion) of redeemable convertible preferred stock to redemption value (82) 10,274 
Net loss attributable to common stockholders$(4,326)$(4,863)$(13,548)$(2,741)
Net loss per common share attributable to common stockholders, basic and diluted$(0.15)$(1.65)$(0.82)$(1.98)
Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted28,107,785 2,943,896 16,475,843 1,382,592 























See accompanying notes to these condensed consolidated financial statements.
7


BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(unaudited, in thousands)

Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Net loss$(4,326)$(4,781)$(13,548)$(13,015)
Other comprehensive income (loss):
Unrealized gain (loss) on available-for-sale marketable securities arising during holding period, net of tax benefit of $0
 (11)28 (11)
Total comprehensive loss$(4,326)$(4,792)$(13,520)$(13,026)








































See accompanying notes to these condensed consolidated financial statements.
8


BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ EQUITY (DEFICIT)
(in thousands, except share data)
(unaudited)
Series A, B, C & C-1 Redeemable
Convertible Preferred Stock
Common StockAdditional
Paid-In-Capital
Accumulated Other Comprehensive Gain (Loss)Accumulated
Deficit
Total
Stockholders’
Equity
SharesCarrying ValueSharesPar 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 issuance 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 warrants2,202,86322(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 
Issuance of common stock upon exercise of warrants— — 1,113,424 11 (10)— — 1 
Issuance of common stock upon restricted stock unit settlement, net of shares withheld for taxes— — 56,221 — (22)— — (22)
Common stock issued, net of issuance costs of $261
— — 3,400,418 34 2,562 — — 2,596 
Stock-based compensation— — — — 553 — — 553 
Net loss— — — — — — (4,326)(4,326)
Balance, September 30, 2020 $ 31,241,636 $312 $116,928 $ $(98,528)$18,712 
9



Series A, B, C & C-1 Redeemable
Convertible Preferred Stock
Common StockAdditional
Paid-In-Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’ Equity (Deficit)
SharesCarrying ValueSharesPar Value
Balance, December 31, 20181,256,466 $58,290 589,001 $6 $ $ $(71,624)$(71,618)
Reduction of redeemable convertible preferred stock to redemption value(10,519)— — — 10,519 10,519 
Stock-based compensation— — 384 — — 384 
Net loss— — — — (4,580)(4,580)
Balance, March 31, 20191,256,466 47,771 589,001 6 384  (65,685)(65,295)
Stock based compensation— — 299 — — 299 
Accretion of redeemable convertible preferred stock to redemption value163 — (163)— — (163)
Net loss— — — — (3,654)(3,654)
Balance, June 30, 20191,256,466 47,934 589,001 6 520  (69,339)(68,813)
Accretion of redeemable convertible preferred stock to redemption value— 82 — — (82)— — (82)
Conversion of redeemable convertible preferred stock and preferred stock dividends to common stock(1,256,466)(48,016)2,783,951 28 47,988 — — 48,016 
Common stock issued in recapitalization— — 3,367,988 34 36,059 — — 36,093 
Conversion of convertible notes payable and accrued interest to common stock— — 1,069,740 10 5,082 — — 5,092 
Reclassification of warrant liability to equity— — — 1,511 — — 1,511 
Common stock warrants issued in connection with the research and development funding liability— — — — 876 — — 876 
Stock based compensation— — — 324 — — 324 
Unrealized loss on available-for-sale marketable securities— — — — — (11)— (11)
Net loss— — — — — (4,781)(4,781)
Balance, September 30, 2019 $ 7,810,680 $78 $92,278 $(11)$(74,120)$18,225 



See accompanying notes to these condensed consolidated financial statements.
10


BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
Nine Months Ended
September 30,
20202019
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(13,548)$(13,015)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation9 25 
Reduction (accretion) of discount on marketable securities25 (25)
Non-cash interest expense 666 
Change in fair value of warrant and derivative liability (212)
Gain on extinguishment (2,318)
Amortization of discounts and financing costs 1,043 
Stock-based compensation1,409 1,007 
Changes in operating assets and liabilities:
Prepaid expenses and other current assets112 (2,480)
Accounts payable(1,119)(2,776)
Accrued liabilities(376)(2,207)
Promissory note 5,600 
Deferred revenue(1,795)(7,248)
Net cash used in operating activities(15,283)(21,940)
CASH FLOWS FROM INVESTING ACTIVITIES:
Maturities of marketable securities4,500 5,500 
Cash and cash equivalents acquired in recapitalization 13,017 
Capital expenditures (8)
Net cash provided by investing activities4,500 18,509 
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the issuance of common stock and warrants, net of issuance costs23,265  
Proceeds from the issuance of note payable437  
Proceeds from the exercise of warrants23  
Proceeds from issuance of convertible promissory notes 7,397 
Payments of principal of note payable (4,808)
Net cash provided by financing activities23,725 2,589 
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS12,942 (842)
CASH AND CASH EQUIVALENTS—BEGINNING7,232 8,067 
CASH AND CASH EQUIVALENTS—ENDING$20,174 $7,225 
11


BRICKELL BIOTECH, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(unaudited, in thousands)

Nine Months Ended
September 30,
20202019
Supplement Disclosure of Cash Flow Information:
Interest paid$ $319 
Supplement Disclosure of Non-Cash Investing and Financing Activities:
Conversion of redeemable convertible preferred stock and preferred stock dividends to common stock$ $48,016 
Shares issued in recapitalization$ $23,076 
Reduction of redeemable convertible preferred stock to redemption value$ $(10,376)
Warrants to purchase common stock issued with convertible promissory notes$ $1,492 
Derivative liability issued with convertible promissory notes$ $1,442 
Warrants to purchase common stock issued with funding agreement$ $876 
Accretion of redeemable convertible preferred stock issuance costs$ $103 

































See accompanying notes to these condensed consolidated financial statements.
12


BRICKELL BIOTECH, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)

NOTE 1. ORGANIZATION AND NATURE OF OPERATIONS
Brickell Biotech, Inc. (the “Company” or “Brickell”) is a clinical-stage pharmaceutical company focused on the development of innovative and differentiated prescription therapeutics for the treatment of debilitating skin diseases. The Company’s pipeline consists of potential novel therapeutics for hyperhidrosis and other prevalent dermatological conditions. The Company’s pivotal Phase 3 clinical-stage product candidate, sofpironium bromide, is a proprietary new chemical entity that belongs to a class of medications called anticholinergics. The Company intends to develop sofpironium bromide as a potential best-in-class, self-administered, once daily, topical therapy for the treatment of primary axillary hyperhidrosis. The Company’s operations to date have been limited to business planning, raising capital, developing its pipeline assets (in particular sofpironium bromide), identifying product candidates, and other research and development.
On August 31, 2019, the Company, then known as Vical Incorporated (“Vical”), and Brickell Biotech, Inc., a then privately-held Delaware corporation that began activities in September 2009 (“Private Brickell”), completed a recapitalization in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated June 2, 2019, as further amended on August 20, 2019 and on August 30, 2019 (the “Merger Agreement”), by and among Vical, Victory Subsidiary, Inc., a wholly-owned subsidiary of Vical (“Merger Sub”), and Private Brickell. Pursuant to the Merger Agreement, Merger Sub merged with and into Private Brickell, with Private Brickell surviving as a wholly-owned subsidiary of Vical (the “Merger”). Additionally, on August 31, 2019, immediately after the completion of the Merger, the Company changed its name from “Vical Incorporated” to “Brickell Biotech, Inc.” and Private Brickell changed its name from “Brickell Biotech, Inc.” to “Brickell Subsidiary, Inc.”
The accompanying condensed consolidated financial statements and related notes reflect the historical results of Private Brickell prior to the Merger and of the combined company following the Merger, and do not include the historical results of Vical prior to the completion of the Merger. These financial statements and related notes should be read in conjunction with the audited financial statements for the year ended December 31, 2019, included in the Company’s Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 18, 2020.
Liquidity and Capital Resources
The accompanying condensed consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company has incurred significant operating losses and has an accumulated deficit as a result of ongoing efforts to develop product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. For the nine months ended September 30, 2020, the Company had a net loss of $13.5 million and net cash used in operating activities of $15.3 million. As of September 30, 2020, the Company had cash and cash equivalents of $20.2 million and an accumulated deficit of $98.5 million.
The Company believes that its cash and cash equivalents as of September 30, 2020, combined with the proceeds received from the subsequent sales of the Company’s common stock and warrants (see Note 9. “Subsequent Events”), are sufficient to fund its operations for at least the next 12 months from the issuance of these condensed consolidated financial statements. The Company expects to continue to incur additional substantial losses in the foreseeable future as a result of the Company’s research and development activities. Additional funding will be required in the future to continue with the Company’s planned development and commercial related activities.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiary, Brickell Subsidiary, Inc., and are presented in United States (“U.S.”) dollars and have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”) and applicable rules and regulations of the SEC for interim reporting. As permitted under those rules and regulations, certain footnotes or other financial information normally included in financial statements prepared in accordance with US GAAP have been
13


condensed or omitted. These condensed consolidated financial statements have been prepared on the same basis as the annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for a fair presentation of the Company’s financial information. The results of operations for the three and nine months ended September 30, 2020 are not necessarily indicative of the results to be expected for the full year ending December 31, 2020, for any other interim period, or for any other future period. The condensed consolidated balance sheet as of December 31, 2019 has been derived from audited financial statements at that date but does not include all of the information required by US GAAP for complete financial statements. All intercompany balances and transactions have been eliminated in consolidation. The Company operates in one operating segment and, accordingly, no segment disclosures have been presented herein. The Company’s management performed an evaluation of its activities through the date of filing of these financial statements and concluded that there are no subsequent events requiring disclosure, other than as disclosed.

Use of Estimates

The Company’s condensed consolidated financial statements are prepared in accordance with US GAAP, which requires it to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Although these estimates are based on the Company’s knowledge of current events and actions it may take in the future, actual results may ultimately differ from these estimates and assumptions.

Risks and Uncertainties

The Company’s business is subject to significant risks common to early-stage companies in the pharmaceutical industry including, but not limited to, the ability to develop appropriate formulations, scale up and produce the compounds; dependence on collaborative parties; uncertainties associated with obtaining and enforcing patents and other intellectual property rights; clinical implementation and success; the lengthy and expensive regulatory approval process; compliance with regulatory and other legal requirements; competition from other products; uncertainty of broad adoption of its approved products, if any, by physicians and patients; significant competition; ability to manage third-party manufacturers, suppliers, contract research organizations, business partners and other alliance management; and obtaining additional financing to fund the Company’s efforts.

The product candidates developed by the Company require approvals from the U.S. Food and Drug Administration (“FDA”) and foreign regulatory agencies prior to commercial sales in the U.S. or foreign jurisdictions, respectively. There can be no assurance that the Company’s current and future product candidates will receive the necessary approvals. If the Company is denied approval or approval is delayed, it may have a material adverse impact on the Company’s business and its financial condition.

The Company expects to incur substantial operating losses for the next several years and will need to obtain additional financing in order to develop and, if successful, commercialize our product candidates. There can be no assurance that such financing will be available or will be at terms acceptable to the Company.

Fair Value Measurements

Fair value is the price that the Company would receive to sell an asset or pay to transfer a liability in a timely transaction with an independent counterparty in the principal market or in the absence of a principal market, the most advantageous market for the asset or liability. A three-tier hierarchy is established to distinguish between (1) inputs that reflect the assumptions market participants would use in pricing an asset or liability developed based on market data obtained from sources independent of the reporting entity (observable inputs) and (2) inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing an asset or liability developed based on the best information available in the circumstances (unobservable inputs), and establishes a classification of fair value measurements for disclosure purposes.

The hierarchy is summarized in the three broad levels listed below:

Level 1—quoted prices in active markets for identical assets and liabilities

Level 2—other significant observable inputs (including quoted prices for similar assets and liabilities, interest rates, credit risk, etc.)
14



Level 3—significant unobservable inputs (including the Company’s own assumptions in determining the fair value of assets and liabilities)

The following table sets forth the fair value of the Company’s financial assets measured at fair value on a recurring basis based on the three-tier fair value hierarchy (in thousands):
Level 1 (1)
September 30,
2020
December 31, 2019
Assets:
Money market funds$19,519 $7,232 
U.S. treasuries 4,497 
Total$19,519 $11,729 
____________
(1)    No assets as of each respective date were identified as Level 2 or 3 based on the three-tier fair value hierarchy. The Company had no financial liabilities measured at fair value on a recurring basis as of each respective date.
Fair Value of Financial Instruments

The following methods and assumptions were used by the Company in estimating the fair values of each class of financial instrument disclosed herein:

Money Market Funds—The carrying amounts reported as cash and cash equivalents in the condensed consolidated balance sheets approximate their fair values due to their short-term nature and/or market rates of interest (Level 1 of the fair value hierarchy).

U.S. Treasuries—The Company designated its investments in U.S. treasury securities as available-for-sale securities and accounted for them at their respective fair values. The securities were classified as short-term or long-term based on the nature of the securities and their availability to meet current operating requirements. Securities that were readily available for use in current operations are classified as short-term available-for-sale marketable securities and are reported as a component of current assets in the condensed consolidated balance sheets (Level 1 of the fair value hierarchy).

Securities classified as available-for-sale are measured at fair value, including accrued interest, with temporary unrealized gains and losses reported as a component of stockholders’ equity until their disposition. The Company reviews available-for-sale securities at the end of each period to determine whether they remain available-for-sale based on its then current intent. The cost of securities sold is based on the specific identification method. The securities are subject to a periodic impairment review. An impairment charge would occur when a decline in the fair value of the investments below the cost basis is judged to be other-than-temporary.

Leases

The Company accounts for leases under the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 842, Leases (“ASC 842”). Under ASC 842, the Company determines if an arrangement is a lease at inception. Leases with a term greater than one year are recognized on the balance sheet as right-of-use assets, lease liabilities and, if applicable, long-term lease liabilities. The Company has elected the practical expedient not to recognize on the balance sheet leases with terms of one year or less and not to separate lease components and non-lease components for long-term real estate leases. Lease liabilities and their corresponding right-of-use assets are recorded based on the present value of lease payments over the expected lease term. The interest rate implicit in lease contracts is typically not readily determinable. As such, the Company estimates the incremental borrowing rate based on industry peers in determining the present value of lease payments. The Company’s facility operating lease has one single component. The lease component results in a right-of-use asset being recorded on the balance sheet, which is amortized as lease expense on a straight-line basis in the Company’s condensed consolidated statements of operations.

15


Revenue Recognition

The Company recognizes revenue upon the transfer of promised goods or services to customers in an amount that reflects the consideration to which the Company expects to be entitled in exchange for those goods or services. To determine revenue recognition for contracts with customers, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies the performance obligations. At contract inception, the Company assesses the goods or services promised within each contract and assesses whether each promised good or service is distinct and determines those that are performance obligations. The Company then recognizes as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.
To date, the Company has not received approval for any drug candidates from the FDA, and the Company has not generated or recognized any revenue from the sale of products. As described further below, in September 2020, the Company’s Japanese development partner received regulatory approval in Japan to manufacture and market sofpironium bromide gel, 5% for the treatment of primary axillary (underarm) hyperhidrosis, and under the agreement with its development partner, the Company is entitled to receive commercial milestone payments, as well as tiered royalties based on a percentage of net sales of sofpironium bromide in Japan.
In March 2015, the Company entered into a license, development, and commercialization agreement (as amended, the “Kaken Agreement”) with Kaken Pharmaceutical Co., Ltd. (“Kaken”). Under the Kaken Agreement, the Company granted to Kaken an exclusive right to develop, manufacture, and commercialize the Company’s sofpironium bromide compound, a topical anticholinergic, in Japan and certain other Asian countries (the “Territory”). In exchange, Kaken paid the Company an upfront, non-refundable payment of $11.0 million (the “upfront fee”). In addition, the Company was entitled to receive aggregate payments of up to $10.0 million upon the achievement of specified development milestones, and $30.0 million upon the achievement of commercial milestones, as well as tiered royalties based on a percentage of net sales of licensed products in the Territory. The Kaken Agreement further provides that Kaken will be responsible for funding all development and commercial costs for the program in the Territory. Kaken was also required to enter into negotiations with the Company, to supply the Company, at cost, with clinical supplies to perform Phase 3 clinical trials in the U.S.
The Company evaluates collaboration arrangements to determine whether units of account within the collaboration arrangement exhibit the characteristics of a vendor and customer relationship. The Company determined that the licenses transferred to Kaken in exchange for the upfront fee were representative of this type of a relationship. If a license to the Company’s intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company recognizes revenues from non-refundable, upfront fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other performance obligations, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. The Company evaluates the measure of progress each reporting period and, if necessary, adjusts the measure of performance and related revenue recognition on a prospective basis.

Under Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers (“Topic 606”), the Company evaluated the terms of the Kaken Agreement, and the transfer of intellectual property and manufacturing rights (the “license”) was identified as the only performance obligation as of the inception of the agreement. The Company concluded that the license for the intellectual property was distinct from its ongoing supply obligations. The Company further determined that the transaction price under the arrangement was comprised of the $11.0 million upfront payment, which was allocated to the license performance obligation. The future potential milestone amounts were not included in the transaction price, as they were all determined to be fully constrained. As part of its evaluation of the development and regulatory milestones constraint, the Company determined that the achievement of such milestones was contingent upon success in future clinical trials and regulatory approvals, each of which was uncertain at that time. The Company will re-evaluate the transaction price each quarter and as uncertain events are resolved or other changes in circumstances occur. Future potential milestone amounts would be recognized as revenue from collaboration arrangements, if unconstrained. The remainder of the arrangement, which largely consisted of both parties incurring costs in their respective territories, provides for the reimbursement of the ongoing supply costs. These costs were representative of a collaboration arrangement outside of the scope of Topic 606 as they do not have the characteristics of a vendor and customer relationship. Reimbursable program costs
16


are recognized proportionately with the delivery of drug substance and are accounted for as reductions to research and development expense and are excluded from the transaction price.

In May 2018, the Company entered into an amendment to the Kaken Agreement, pursuant to which the Company received an upfront non-refundable fee of $15.6 million (the “Kaken R&D Payment”), which was initially recorded as deferred revenue, to provide the Company with research and development funds for the sole purpose of conducting certain clinical trials and other such research and development activities required to support the submission of a new drug application for sofpironium bromide. These clinical trials have a benefit to Kaken and have the characteristics of a vendor and customer relationship. The Company has accounted for the Kaken R&D Payment under the provisions of Topic 606. This Kaken R&D Payment is recognized using an input method in proportion to the cost incurred. Upon receipt of the Kaken R&D Payment, on May 31, 2018, a milestone payment originally due upon the first commercial sale in Japan was removed from the Kaken Agreement and all future royalties to the Company under the Kaken Agreement were reduced 150 basis points.

Consequently, during the three months ended September 30, 2020 and 2019, the Company recognized revenue of $0.1 million and $1.2 million, respectively, related to the Kaken R&D Payment. During the nine months ended September 30, 2020 and 2019, the Company recognized revenue of $1.8 million and $7.2 million, respectively, related to the Kaken R&D Payment. As of December 31, 2019, the Company had a deferred revenue balance related to the Kaken R&D Payment of $1.8 million, which is recorded as deferred revenue on the accompanying condensed consolidated balance sheets. As of September 30, 2020, there was no remaining deferred revenue balance related to the Kaken R&D Payment.
Milestones

At the inception of each arrangement that includes milestone payments (variable consideration), the Company evaluates whether the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within the Company or the Company’s collaboration partner’s control, such as regulatory approvals, are generally not considered probable of being achieved until those approvals are received. The transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, the Company re-evaluates the probability of achievement of such milestones and any related constraint, and if necessary, adjusts the Company’s estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, which would affect license, collaboration or other revenues and earnings in the period of adjustment.

To date, Kaken has paid the Company $10.0 million in milestone payments under the Kaken Agreement.
Royalties

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue from any collaborative arrangement.

Net Income (Loss) per Common Share

Basic and diluted net income (loss) per common share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding. When the effects are not anti-dilutive, diluted earnings per share is computed by dividing the Company’s net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding and the impact of all dilutive potential common shares.

Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period, including stock options, restricted stock units, and warrants, using the treasury stock method, and redeemable convertible preferred stock and convertible promissory notes, using the if-converted method. In computing diluted earnings per share, the average stock price for the period is used in determining the number of shares assumed to be issued from the exercise of stock options, the vesting of restricted stock units, or the exercise of warrants. Potentially dilutive common share equivalents are excluded from the diluted earnings per share computation in net loss periods because their effect would be anti-dilutive.
17



The following table sets forth the potential common shares excluded from the calculation of net loss per common share, because their inclusion would be anti-dilutive:
Three and Nine Months Ended
September 30,
20202019
Outstanding warrants19,556,108 1,632,495 
Outstanding options4,743,537 1,802,895 
Unvested restricted stock units204,233  
Total 24,503,878 3,435,390 

NOTE 3. ACCRUED LIABILITIES

Accrued liabilities consisted of the following (in thousands):
September 30,
2020
December 31,
2019
Accrued contracted research and development services$3,436 $4,532 
Accrued compensation1,128 59 
Accrued license fee1,000  
Accrued professional fees478 1,788 
Total$6,042 $6,379 

NOTE 4. CONVERTIBLE PROMISSORY NOTES

In March 2019, the Company initiated a convertible promissory notes offering pursuant to which the Company issued unsecured convertible promissory notes (the “Prom Notes”), bearing interest at 12.0% with a maturity of one year. Through August 31, 2019, the Company had raised an aggregate principal amount of $7.4 million in Prom Notes, including $1.7 million from certain of the Company’s management and board of directors. On August 31, 2019, immediately prior to the Merger, the Prom Notes and related accrued interest converted into 1,069,740 shares of Private Brickell common stock at a conversion price of $7.54 per share.

The Prom Notes also provided for the issuance of warrants at 50% coverage, to acquire 490,683 shares of common stock. The warrants are exercisable for a term of five years at an exercise price of $10.36. The Company evaluated the various financial instruments under ASC 480, “Distinguishing Liabilities from Equity,” and ASC 815, “Derivatives and Hedging” (“ASC 815”), and determined the warrants required fair value accounting. The fair value of the warrants was recorded as a warrant liability upon issuance. The fair value of the warrants on the dates of issuance of $1.5 million was determined with the assistance of a third-party valuation firm. The fair value of the warrants was recorded as a debt discount upon issuance and was amortized to interest expense over the term of the Prom Notes based on the effective interest method.

At inception of the Prom Notes offering, the Company analyzed the conversion feature of the agreement for derivative accounting consideration under ASC 815 and determined that the embedded conversion features should be classified as a derivative, which was required to be bifurcated and recorded as a derivative liability.

The embedded derivative for the Prom Notes was carried on the Company’s condensed consolidated balance sheets at fair value. The derivative liability was marked-to-market each measurement period and any change in fair value was recorded as a component of the statements of operations. The fair value of the derivative liabilities on the date of issuance of $1.4 million was determined with the assistance of a third-party valuation firm. The fair value of the conversion feature was recorded as a debt discount upon issuance and was amortized to interest expense over the term of the Prom Notes based on the effective interest method.

During the three months ended September 30, 2019, the Company recognized $1.1 million of interest expense, including $0.4 million of accretion of discounts using an effective interest rate of 12.0%. During the nine months ended September 30, 2019, the Company recognized $2.0 million of interest expense, including $0.8 million of accretion of discounts using an
18


effective interest rate of 12.0%. During the three and nine months ended September 30, 2020, no interest expense was recognized.

NOTE 5. NOTE PAYABLE

Loan Agreement with Hercules Capital, Inc.

On February 18, 2016, the Company entered into a loan and security agreement (the “Loan Agreement”) with Hercules Capital, Inc. (the “Lender”) under which the Company borrowed $7.5 million upon the execution of the Loan Agreement on February 18, 2016. The interest rate applicable to each tranche was variable based upon the greater of either (i) 9.2% and (ii) the sum of (a) the Prime Rate as reported in The Wall Street Journal minus 3.5%, plus (b) 9.2%. Payments under the Loan Agreement were interest only until June 1, 2017, followed by equal monthly payments of principal and interest through the maturity date of September 1, 2019. The Company paid the Lender aggregate facility fees of $0.2 million in connection with the Loan Agreement.

In connection with the Loan Agreement, the Company issued warrants to the Lender, which are exercisable for 9,005 shares of common stock at a per share exercise price of $33.31 (the “Hercules Capital Warrants”). The Hercules Capital Warrants will terminate, if not earlier exercised, on February 18, 2026. The fair value of the Hercules Capital Warrants was recorded at inception as a redeemable convertible preferred stock warrant liability upon issuance.
On September 3, 2019, the Company repaid the remaining outstanding loan balance of $2.6 million and an associated accrued interest and aggregate end-of-term payment of $0.6 million, and the Loan Agreement was terminated. At the effective time of the Merger, the warrant liability was reclassified to equity in the condensed consolidated balance sheets. As of September 30, 2020, there were no remaining unaccreted debt discounts and issuance costs.

Paycheck Protection Program
On April 15, 2020, the Company executed an unsecured promissory note to IberiaBank (the “PPP Loan”) pursuant to the U.S. Small Business Administration’s Paycheck Protection Program (the “PPP”) under Division A, Title I of the federal Coronavirus Aid, Relief, and Economic Security (“CARES”) Act, which is reported in the condensed consolidated balance sheet as of September 30, 2020 within the current and long-term note payable line items. A PPP loan is for the purpose of helping businesses keep their workforce employed during the Coronavirus (COVID-19) crisis. The Company used the PPP Loan proceeds to cover payroll costs and certain other permitted costs in accordance with the relevant terms and conditions of the CARES Act.
The PPP Loan is in the principal amount of $0.4 million, bears interest at a fixed rate of 1.00% per annum and matures on April 15, 2022. The PPP Loan requires equal monthly payments of principal and interest commencing on November 15, 2020. The PPP Loan may be prepaid by the Company at any time prior to maturity without penalty. As of September 30, 2020, the Company has evaluated the uses of proceeds under the PPP Loan with respect to the relevant terms and conditions of the CARES Act and believes that the full amount of the loan is subject to forgiveness. The Company intends to apply for full forgiveness of the PPP Loan.

NOTE 6. COMMITMENTS AND CONTINGENCIES
Operating Leases
In August 2016, the Company entered into a five-year lease for office space in Boulder, Colorado that expires on October 31, 2021 (the “Boulder Lease”) subject to the Company’s option to renew the Boulder Lease for two additional terms of three years each. Pursuant to the Boulder Lease, the Company leased 3,038 square feet of space in a multi-suite building. Rent payments under the Boulder Lease included base rent of $4,430 per month during the first year of the Boulder Lease with an annual increase of 3.5%, and additional monthly fees to cover the Company’s share of certain facility expenses, including utilities, property taxes, insurance, and maintenance, which were $2,160 per month during the first year of the Boulder Lease.
The Company recognized a right-of-use asset and corresponding lease liability on January 1, 2019, by calculating the present value of lease payments, discounted at 12.0%, the Company’s estimated incremental borrowing rate, over the 2.8 years expected remaining term. As the Company’s lease does not provide an implicit rate, the Company estimated the incremental
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borrowing rate based on industry peers. Industry peers consist of several public companies in the biotechnology industry with comparable characteristics, including clinical trials progress and therapeutic indications. Amortization of the operating lease right-of-use asset for the Boulder Lease amounted to $19 thousand and $0.1 million for the three and nine months ended September 30, 2020, respectively, which was included in operating expense. As of September 30, 2020, the remaining lease term was 1.1 years.
The terms of the Boulder Lease provide for rental payments on a monthly basis on a graduated scale. Lease expense for the three months ended September 30, 2020 and 2019 was $23 thousand and $22 thousand, respectively. Lease expense for each of the nine months ended September 30, 2020 and 2019 was $0.1 million.
The following is a summary of the contractual obligations related to operating lease commitments as of September 30, 2020 and the effect such obligations are expected to have on the Company’s liquidity and cash flows in future periods (in thousands):
Less than 1 year$85 
1-3 years8 
3-5 years 
More than 5 years 
Imputed interest(6)
Total$87 

Amended and Restated License Agreement with Bodor
In February 2020, the Company, together with Brickell Subsidiary and Bodor Laboratories, Inc. and Dr. Nicholas S. Bodor (collectively, “Bodor”) entered into an amended and restated license agreement (the “Amended and Restated License Agreement”). The Amended and Restated License Agreement supersedes the License Agreement, dated December 15, 2012, entered into between Brickell Subsidiary and Bodor, as amended by Amendment No. 1 to License Agreement, effective as of October 21, 2013, and Amendment No. 2 to License Agreement, effective as of March 31, 2015.
The Amended and Restated License Agreement retains with the Company a worldwide, exclusive license to develop, manufacture, market, sell and sublicense products containing the proprietary compound sofpironium bromide based upon the patents referenced in the Amended and Restated License Agreement for a defined field of use. In exchange for entering into the Amended and Restated License Agreement, settling the previously disclosed dispute, and resolving the associated litigation between the Company and Bodor, the Company made an upfront payment of $1.0 million in cash to Bodor following the execution of the Amended and Restated License Agreement and the settlement agreement by and among the Company, Brickell Subsidiary, Inc., and Bodor, dated February 17, 2020. Additionally, under the original License Agreement and the Amended and Restated License Agreement, the Company is required to pay Bodor (i) a royalty on sales of product outside Kaken’s territory, including a low single-digit royalty on sales of certain product not covered by the patent estate licensed from Bodor; (ii) a specified percentage of all royalties the Company receives from Kaken for sales of product within its territory; (iii) a percentage of non-royalty sublicensing income the Company receives from Kaken or other sublicensees; and (iv) up to an aggregate of $1.8 million (plus an additional $0.1 million for approvals of additional products) in cash payments and $1.5 million of shares of the Company’s common stock upon the achievement of certain development, regulatory and other milestones, including the enrollment of the first patient in the U.S. Phase 3 trials. Based on the foregoing, the Company made a $0.5 million milestone payment to Bodor in June 2020 following the closing of the June 2020 Offering (see Note 7. “Capital Stock”). Additionally, in October 2020, in association with the enrollment of the first patient in its U.S. Phase 3 pivotal program, the Company made a cash payment of $0.5 million and issued $0.5 million, or 480,769 shares, of the Company’s common stock to Bodor. As a result, during the nine months ended September 30, 2020, the Company recorded an aggregate of $1.5 million as research and development expense in the condensed consolidated statements of operations.

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NOTE 7. CAPITAL STOCK

Common Stock
Under the Company’s amended and restated certificate of incorporation, the Company is authorized to issue 100,000,000 shares of common stock with a par value of $0.01 per share. Each share of the Company’s common stock is entitled to one vote, and the holders of the Company’s common stock are entitled to receive dividends when and as declared or paid by its board of directors. The Company has reserved authorized shares of common stock for future issuance at September 30, 2020 as follows:
September 30, 2020(1)
Common stock warrants19,556,109 
Common stock options outstanding 4,743,537 
Shares available for grant under the Omnibus Plan1,997,623
Unvested restricted stock units204,233 
Total26,501,502 
____________
(1)    In connection with the October 2020 Offering, the Company removed the reservation of the 1,997,623 shares available for grant under the Omnibus Plan.
Public Offering of Common Stock and Warrants
In June 2020, the Company entered into an underwriting agreement with Oppenheimer & Co. Inc. (“Oppenheimer”), as representative of several underwriters, relating to the public offering, issuance and sale of 14,790,133 shares of its common stock, and, to certain investors, pre-funded warrants to purchase 2,709,867 shares of its common stock, and accompanying common stock warrants to purchase up to an aggregate of 17,500,000 shares of its common stock (the “June 2020 Offering”). Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of common stock. The public offering price of each share of common stock and accompanying common warrant was $1.15 and $1.149 for each pre-funded warrant and accompanying common warrant, respectively. The pre-funded warrants were immediately exercisable at a price of $0.001 per share of common stock. The common warrants were immediately exercisable at a price of $1.25 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The June 2020 Offering resulted in approximately $18.7 million of net proceeds to the Company after deducting underwriting commissions and discounts and other offering expenses of $1.4 million and excluding the proceeds, if any, from the exercise of the warrants. The Company anticipates using the net proceeds from the June 2020 Offering for research and development, including clinical trials, working capital, and general corporate purposes.
Certain officers of the Company participated in the June 2020 Offering by purchasing an aggregate purchase price of $0.2 million of the Company's common stock and warrants.
At Market Issuance Sales Agreement
On April 14, 2020, the Company entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Oppenheimer as the Company’s sales agent (the “Agent”). Pursuant to the terms of the ATM Agreement, the Company may sell from time to time through the Agent shares of the Company’s common stock having an aggregate offering price of up to $8.0 million (the “Shares”). The Shares are issued pursuant to the Company’s shelf registration statement on Form S-3 (Registration No. 333-236353). Sales of the Shares are made by means of ordinary brokers’ transactions on the Nasdaq Capital Market at market prices or as otherwise agreed by the Company and the Agent. Under the terms of the ATM Agreement, the Company may also sell the Shares from time to time to the Agent as principal for its own account at a price to be agreed upon at the time of sale. Any sale of the Shares to the Agent as principal would be pursuant to the terms of a separate placement notice between the Company and the Agent. The Company will be significantly limited in its ability to sell shares of its common stock under the ATM Agreement unless and until the number of authorized shares of common stock of the Company is increased, which would require stockholder approval. During the three and nine months ended September 30, 2020, the Company sold 3,400,418 Shares under the ATM Agreement at a weighted-average price of $0.84
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per share, for aggregate net proceeds of $2.6 million, after giving effect to a 3% commission to Oppenheimer as Agent plus initial expenses for executing the ATM Agreement.
Private Placement Offerings
On February 17, 2020, the Company and Lincoln Park entered into (i) a securities purchase agreement (the “Securities Purchase Agreement”); (ii) a purchase agreement (the “Purchase Agreement”); and (iii) a registration rights agreement (the “Registration Rights Agreement”). Pursuant to the Securities Purchase Agreement, Lincoln Park purchased, and the Company sold, (i) an aggregate of 950,000 shares of common stock (the “Common Shares”); (ii) a warrant to initially purchase an aggregate of up to 606,420 shares of common stock at an exercise price of $0.01 per share (the “Series A Warrant”); and (iii) a warrant to initially purchase an aggregate of up to 1,556,420 shares of common stock at an exercise price of $1.16 per share (the “Series B Warrant” and together with the Series A Warrant, the “Warrants”). The aggregate gross purchase price for the Common Shares and the Warrants was $2.0 million.
Under the terms and subject to the conditions of the Purchase Agreement, the Company has the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $28.0 million in the aggregate of shares of common stock. Sales of common stock by the Company, if any, will be subject to certain limitations, and may occur from time to time, at the Company’s sole discretion, over the 36-month period commencing on August 14, 2020 (the “Commencement Date”). Further, the Company will be significantly limited in its ability to sell shares of its common stock under the Purchase Agreement unless and until the number of authorized shares of common stock of the Company is increased, which would require stockholder approval.
Following the Commencement Date, under the Purchase Agreement, on any business day selected by the Company, the Company may direct Lincoln Park to purchase up to 100,000 shares of common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to 125,000 shares, provided that the closing sale price of the common stock is not below $3.00 on the purchase date; and (ii) the Regular Purchase may be increased to up to 150,000 shares, provided that the closing sale price of the common stock is not below $5.00 on the purchase date. In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $1,000,000. The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of common stock immediately preceding the time of sale. In addition to Regular Purchases, the Company may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the Purchase Agreement. In all instances, the Company may not sell shares of its common stock to Lincoln Park under the Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of the outstanding shares of common stock. As of September 30, 2020, the Company has not made any sales of its common stock under the Purchase Agreement.
The Company agreed with Lincoln Park that it will not enter into any “variable rate” transactions with any third party, subject to certain exceptions, for a period defined in the Purchase Agreement. The Company has the right to terminate the Purchase Agreement at any time, at no cost or penalty.

The Securities Purchase Agreement, the Purchase Agreement, and the Registration Rights Agreement contain customary representations, warranties, agreements, and conditions to completing future sale transactions, indemnification rights and obligations of the parties.

Preferred Stock
Under the Company’s amended and restated certificate of incorporation, the Company’s board of directors has the authority to issue up to 5,000,000 shares of preferred stock with a par value of $0.01 per share, at its discretion, in one or more classes or series and to fix the powers, preferences and rights, and the qualifications, limitations, or restrictions thereof, including dividend rights, conversion rights, voting rights, terms of redemption, and liquidation preferences, without further vote or action by the Company’s stockholders. As of September 30, 2020, the Company had no shares of preferred stock outstanding and had not designated the rights, preferences, or privileges of any class or series of preferred stock.

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NOTE 8. STOCK-BASED COMPENSATION

Equity Incentive Plans
2020 Omnibus Plan
On April 20, 2020, the Company’s stockholders approved the Omnibus Plan, which replaced, with respect to new award grants, the Company’s 2009 Equity Incentive Plan, as amended and restated (the “2009 Plan”), and the Vical Equity Incentive Plan (the “Vical Plan”) (collectively, the “Prior Plans”) that were previously in effect. Following the approval of the Omnibus Plan on April 20, 2020, no additional grants will be made pursuant to the Prior Plans, but awards outstanding under those plans as of that date remain outstanding in accordance with their terms. On August 31, 2020, the Company’s stockholders approved an increase in the number of shares of common stock authorized for issuance under the Omnibus Plan by 4,500,000. At September 30, 2020, 3,347,065 shares were subject to outstanding awards under the Omnibus Plan, and 1,997,623 shares remained available for grant under the Omnibus Plan.
2009 Equity Incentive Plan
The 2009 Plan was replaced by the Omnibus Plan on April 20, 2020 and, as a result, at September 30, 2020, there were no remaining shares available for new grants under the 2009 Plan. However, as of September 30, 2020, 1,319,452 shares were subject to outstanding awards under the 2009 Plan, which awards remain outstanding in accordance with their terms.
Vical Equity Incentive Plan
In connection with the Merger, the Company adopted the Vical Plan, which was replaced by the Omnibus Plan on April 20, 2020. As a result, at September 30, 2020, there were no remaining shares available for new grants under the Vical Plan. However, as of September 30, 2020, 281,253 shares were subject to outstanding awards under the Vical Plan, which awards remain outstanding in accordance with their terms.
Stock-based Compensation Expense

Total stock-based compensation expense reported in the condensed consolidated statements of operations was allocated as follows (in thousands):
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
Research and development$98 $81 $270 $237 
General and administrative455 243 1,139 770 
Total stock-based compensation expense$553 $324 $1,409 $1,007 

NOTE 9. SUBSEQUENT EVENTS
Public Offering of Common Stock and Warrants
In October 2020, the Company entered into an underwriting agreement with Oppenheimer, as representative of several underwriters, relating to the public offering, issuance and sale of 19,003,510 shares of its common stock, and, to certain investors, pre-funded warrants to purchase 1,829,812 shares of its common stock, and accompanying common stock warrants to purchase up to an aggregate of 20,833,322 shares of its common stock (the “October 2020 Offering”). Each share of common stock and pre-funded warrant to purchase one share of our common stock was sold together with a common warrant to purchase one share of our common stock. The public offering price of each share of the Company’s common stock and accompanying common warrant was $0.72 and $0.719 for each pre-funded warrant and accompanying common warrant, respectively. The pre-funded warrants were immediately exercisable at a price of $0.001 per share of the Company’s common stock. The common warrants were immediately exercisable at a price of $0.72 per share of the Company’s common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The October 2020 Offering resulted in net proceeds of approximately $13.7 million to the Company after deducting underwriting commissions
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and discounts and other offering expenses of $1.3 million and excluding the proceeds, if any, from the exercise of the warrants. The Company anticipates using the net proceeds from the October 2020 Offering for research and development, including clinical trials, working capital, and general corporate purposes.
Sales of Shares under the ATM Agreement
Subsequent to September 30, 2020 and through November 12, 2020, the Company sold 959,749 Shares under the ATM Agreement at a weighted-average price of $0.88 per share, resulting in aggregate net proceeds to the Company of $0.8 million, after giving effect to a 3% commission to Oppenheimer as Agent.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
We are a clinical-stage pharmaceutical company focused on the development of innovative and differentiated prescription therapeutics for the treatment of debilitating skin diseases. Our pipeline consists of potential novel therapeutics for hyperhidrosis and other prevalent dermatological conditions. Our executive management team and board of directors bring extensive experience in product development and global commercialization, having served in leadership roles at large global pharmaceutical companies and biotechs that have developed and/or launched successful products, including several that were first-in-class and/or achieved iconic status, such as Cialis®, Taltz®, Gemzar®, Prozac®, Cymbalta® and Juvederm®.
Our pivotal Phase 3 clinical-stage product candidate, sofpironium bromide, is a proprietary new chemical entity. It belongs to a class of medications called anticholinergics. Anticholinergics block the action of acetylcholine, a chemical that transmits signals within the nervous system that are responsible for a range of bodily functions, including activation of the sweat glands. Sofpironium bromide was retrometabolically designed. Retrometabolic drugs are designed to exert their action topically and are potentially rapidly metabolized once absorbed into the blood. This proposed mechanism of action may allow for highly effective doses to be used while limiting systemic side effects. We intend to develop sofpironium bromide as a potential best-in-class, self-administered, once daily, topical therapy for the treatment of primary axillary hyperhidrosis.
Hyperhidrosis is a life-altering condition of sweating beyond what is physiologically required to maintain normal thermal regulation. It is believed to be caused by an overactive cholinergic response of the sweat glands and affects an estimated 15.3 million, or 4.8%, of the population of the U.S. According to a 2016 update on the prevalence and severity of hyperhidrosis in the U.S. by Doolittle et al., axillary (underarm) hyperhidrosis, which is the targeted first potential indication for sofpironium bromide, is the most common occurrence of hyperhidrosis, affecting approximately 65% of patients in the U.S. or an estimated 10 million individuals.
We and our development partner in Asia, Kaken Pharmaceutical Co., Ltd., (“Kaken”), have conducted multiple clinical trials of sofpironium bromide gel that encompass over 1,300 subjects in the U.S. and Japan. These trials evaluated the potential safety, tolerability, pharmacokinetics (PK), and efficacy of sofpironium bromide gel in adult and pediatric primary axillary hyperhidrosis patients and healthy adult subjects. Under our License, Development and Commercialization Agreement with Kaken, dated March 31, 2015 (as amended, the “Kaken Agreement”), in exchange for paying us an upfront, nonrefundable payment, we granted Kaken the exclusive right to develop, manufacture and commercialize sofpironium bromide in Japan and certain other Asian countries. In March 2019, Kaken completed a Phase 3 trial in patients with primary axillary hyperhidrosis in Japan, achieving statistical significance (p<0.05) on all primary and secondary endpoints, upon which Kaken filed for, and in September 2020 received, regulatory approval to manufacture and market in Japan sofpironium bromide gel, 5% under the brand name ECCLOCK® for the treatment of primary axillary (underarm) hyperhidrosis.
Based on the positive results in the clinical trials for sofpironium bromide globally to date, our planned program for sofpironium bromide includes two pivotal Phase 3 clinical trials in up to 350 subjects per trial with primary axillary hyperhidrosis in the U.S. Assuming the results of the Phase 3 clinical trials are favorable, we plan thereafter to submit a new drug application (“NDA”) to the U.S. Food and Drug Administration (the “FDA”), for the treatment of primary axillary hyperhidrosis by sofpironium bromide.
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Recent Clinical and Regulatory Matters
U.S. Phase 3 Clinical Studies
In October 2020, we initiated our first of two pivotal U.S. Phase 3 clinical studies evaluating sofpironium bromide gel, 15% for the treatment for primary axillary (underarm) hyperhidrosis (the “Cardigan I Study”). The Cardigan I Study is expected to enroll up to 350 subjects aged nine years and older with primary axillary hyperhidrosis and is a multicenter, randomized, double-blinded, vehicle (placebo)-controlled Phase 3 study to evaluate the safety and efficacy of topically applied sofpironium bromide gel, 15%. Subjects will apply sofpironium bromide or vehicle once daily at bedtime to their underarms for six consecutive weeks, with a two-week post-treatment follow-up.
The co-primary efficacy endpoints of the Cardigan I Study include the proportion of subjects achieving at least a 2-point improvement on the Hyperhidrosis Disease Severity Measure-Axillary (HDSM-Ax) scale, a proprietary and validated patient-reported outcome measure, and change in gravimetric sweat production (GSP), each from baseline to end of treatment (EOT). In addition, safety and tolerability assessments will be performed throughout the study.
We plan to initiate the second of the two pivotal U.S. Phase 3 clinical trials (the “Cardigan II Study”) for sofpironium bromide gel, 15% in the fourth quarter of 2020. The Cardigan II Study will evaluate the safety and efficacy of sofpironium bromide gel, 15% versus vehicle in approximately 350 subjects aged nine years and older with primary axillary hyperhidrosis.
We expect to report topline data from both the Cardigan I and II Studies by the end of 2021.
Regulatory Approval by Development Partner in Japan
In September 2020, Kaken received regulatory approval in Japan to manufacture and market sofpironium bromide gel, 5% under the brand name ECCLOCK® for the treatment of primary axillary (underarm) hyperhidrosis. This regulatory approval was based on the results of Kaken’s Japanese pivotal Phase 3 registration study of sofpironium bromide gel, 5% in 281 patients with primary axillary hyperhidrosis, in which all primary and secondary efficacy endpoints demonstrated statistically significant differences between sofpironium bromide gel and vehicle. In addition, sofpironium bromide gel, 5% was observed to be safe and generally well tolerated in this study, as well as in the accompanying 52-week long-term safety extension study with 185 patients in Japan. Under the Kaken Agreement, we are entitled to receive commercial milestone payments, as well as tiered royalties based on a percentage of net sales of sofpironium bromide in Japan.
Together with Kaken, we were granted by the Japanese Patent Office a composition of matter patent with claims directed to the novel polymorphic, or crystalline, forms of sofpironium bromide that is expected to provide additional protection for these newly developed and distinct forms in Japan through 2040.
Phase 3 Open-Label Long-Term Safety Study
In July 2020, we completed our 12-month Phase 3 open-label long-term safety study evaluating sofpironium gel 5% and 15% in 300 subjects nine years and older with primary axillary hyperhidrosis. The study results confirmed that sofpironium bromide gel, at both concentrations, was safe and generally well tolerated, which was consistent with the earlier Phase 2 clinical trial results. No treatment-related serious adverse events were observed. We expect to release additional details at an upcoming scientific forum.
AnGes Collaboration Agreement
In September 2020, we entered into a collaboration agreement with AnGes, Inc. (“AnGes”) relating to the development and potential commercialization of AnGes’ proprietary investigational adjuvanted plasmid DNA vaccine intended to prevent SARS-CoV-2 (COVID-19). Under the terms of the collaboration agreement, AnGes will continue to lead the development of its vaccine candidate in Japan and we will provide information and know-how that could be relevant to such development efforts. If AnGes obtains positive results from its clinical studies in Japan and we are able to satisfy certain conditions, including raising the required development funding, we would have the right to lead the development efforts in the U.S. and certain emerging markets. If ultimately approved for sale in the applicable jurisdictions, AnGes would have commercial rights to the vaccine in Japan and we would have commercial rights in the U.S. and certain emerging markets on terms and conditions to be agreed with AnGes prior to any launch of a vaccine product. AnGes currently is conducting Phase 1/2
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clinical studies with its vaccine candidate in Japan, with data readouts expected through the first quarter of 2021. The results from these studies will guide any further development efforts by AnGes and us of this novel vaccine candidate.
Significant Financing and Licensing Arrangements
Public Offerings of Common Stock and Warrants
In October 2020, we entered into an underwriting agreement with Oppenheimer & Co. Inc. (“Oppenheimer”), as representative of several underwriters, relating to the public offering, issuance and sale of 19,003,510 shares of our common stock, and, to certain investors, pre-funded warrants to purchase 1,829,812 shares of our common stock, and accompanying common stock warrants to purchase up to an aggregate of 20,833,322 shares of our common stock (the “October 2020 Offering”). Each share of common stock and pre-funded warrant to purchase one share of common stock was sold together with a common warrant to purchase one share of our common stock. The public offering price of each share of common stock and accompanying common warrant was $0.72 and $0.719 for each pre-funded warrant and accompanying common warrant, respectively. The pre-funded warrants were immediately exercisable at a price of $0.001 per share of common stock. The common warrants were immediately exercisable at a price of $0.72 per share of common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The October 2020 Offering resulted in net proceeds of approximately $13.7 million to the Company after deducting underwriting commissions and discounts and other offering expenses of $1.3 million and excluding the proceeds, if any, from the exercise of the warrants.
In June 2020, we entered into an underwriting agreement with Oppenheimer, as representative of several underwriters, relating to the public offering, issuance and sale of 14,790,133 shares of our common stock, and, to certain investors, pre-funded warrants to purchase 2,709,867 shares of our common stock, and accompanying common warrants to purchase up to an aggregate of 17,500,000 shares of our common stock (the “June 2020 Offering”) (and together with the October 2020 Offering, the “2020 Offerings”). Each share of common stock and pre-funded warrant to purchase one share of our common stock was sold together with a common warrant to purchase one share of our common stock. The public offering price of each share of common stock and accompanying common warrant was $1.15 and $1.149 for each pre-funded warrant and accompanying common warrant, respectively. The pre-funded warrants were immediately exercisable at a price of $0.001 per share of our common stock. The common warrants were immediately exercisable at a price of $1.25 per share of our common stock and will expire five years from the date of issuance. The shares of common stock and pre-funded warrants, and the accompanying common warrants, were issued separately and were immediately separable upon issuance. The June 2020 Offering resulted in approximately $18.7 million of net proceeds after deducting underwriting commissions and discounts and other offering expenses of $1.4 million and excluding the proceeds, if any, from the exercise of the warrants.
We anticipate using the proceeds from the 2020 Offerings for research and development, including clinical trials, working capital, and general corporate purposes.
At Market Issuance Sales Agreement
In April 2020, we entered into an At Market Issuance Sales Agreement (the “ATM Agreement”) with Oppenheimer as our sales agent (the “Agent”). Pursuant to the terms of the ATM Agreement, we may sell from time to time through the Agent shares of our common stock having an aggregate offering price of up to $8.0 million (the “Shares”). The Shares are issued pursuant to our shelf registration statement on Form S-3 (Registration No. 333-236353). Sales of the Shares are made by means of ordinary brokers’ transactions on The Nasdaq Capital Market at market prices or as otherwise agreed by us and the Agent. Under the terms of the ATM Agreement, we may also sell the Shares from time to time to the Agent as principal for its own account at a price to be agreed upon at the time of sale. Any sale of the Shares to the Agent as principal would be pursuant to the terms of a separate placement notice between us and the Agent. We will be significantly limited in our ability to sell shares of our common stock under the ATM Agreement unless and until the number of authorized shares of our common stock is increased, which would require stockholder approval. Through November 12, 2020, aggregate net proceeds of approximately $3.4 million were received from the sale of 4,360,167 Shares at a weighted-average price of $0.85 per share, after giving effect to a 3% commission to Oppenheimer as Agent plus initial expenses for executing the ATM Agreement.
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Private Placement Offerings
In February 2020, we entered into (i) a securities purchase agreement (the “Securities Purchase Agreement”); (ii) a purchase agreement (the “Purchase Agreement”); and (iii) a registration rights agreement (the “Registration Rights Agreement”), with Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Lincoln Park”). Pursuant to the Securities Purchase Agreement, Lincoln Park purchased, and we sold, (i) an aggregate of 950,000 shares of common stock (the “Common Shares”), (ii) a warrant to initially purchase an aggregate of up to 606,420 shares of common stock at an exercise price of $0.01 per share (the “Series A Warrant”), and (iii) a warrant to initially purchase an aggregate of up to 1,556,420 shares of common stock at an exercise price of $1.16 per share (the “Series B Warrant”, and together with the Series A Warrant, the “Warrants”). The aggregate gross purchase price for the Common Shares and the Warrants was $2.0 million.
Under the terms and subject to the conditions of the Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase, up to $28.0 million in the aggregate of shares of our common stock. Sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing on August 14, 2020 (the “Commencement Date”). Further, we will be significantly limited in our ability to sell shares of our common stock under the Purchase Agreement unless and until the number of authorized shares of our common stock is increased, which would require stockholder approval.
Following the Commencement Date, under the Purchase Agreement, on any business day selected by us, we may direct Lincoln Park to purchase up to 100,000 shares of our common stock on such business day (each, a “Regular Purchase”), provided, however, that (i) the Regular Purchase may be increased to up to 125,000 shares, provided that the closing sale price of the common stock is not below $3.00 on the purchase date; and (ii) the Regular Purchase may be increased to up to 150,000 shares, provided that the closing sale price of the common stock is not below $5.00 on the purchase date. In each case, Lincoln Park’s maximum commitment in any single Regular Purchase may not exceed $1,000,000. The purchase price per share for each such Regular Purchase will be based off of prevailing market prices of common stock immediately preceding the time of sale. In addition to Regular Purchases, we may direct Lincoln Park to purchase other amounts as accelerated purchases or as additional accelerated purchases if the closing sale price of the common stock exceeds certain threshold prices as set forth in the Purchase Agreement. In all instances, we may not sell shares of our common stock to Lincoln Park under the Purchase Agreement if it would result in Lincoln Park beneficially owning more than 9.99% of the outstanding shares of our common stock. As of September 30, 2020, we have not made any sales of our common stock under the Purchase Agreement.
We agreed with Lincoln Park that we will not enter into any “variable rate” transactions with any third party, subject to certain exceptions, for a period defined in the Purchase Agreement. We have the right to terminate the Purchase Agreement at any time, at no cost or penalty.
Amended and Restated License Agreement with Bodor
In February 2020, we, together with Brickell Subsidiary and Bodor Laboratories, Inc. and Dr. Nicholas S. Bodor (collectively, “Bodor”) entered into an amended and restated license agreement (the “Amended and Restated License Agreement”). The Amended and Restated License Agreement supersedes the License Agreement, dated December 15, 2012, entered into between Brickell Subsidiary and Bodor, as amended by Amendment No. 1 to License Agreement, effective as of October 21, 2013, and Amendment No. 2 to License Agreement, effective as of March 31, 2015.
The Amended and Restated License Agreement retains with us a worldwide, exclusive license to develop, manufacture, market, sell and sublicense products containing the proprietary compound sofpironium bromide based upon the patents referenced in the Amended and Restated License Agreement for a defined field of use. In exchange for entering into the Amended and Restated License Agreement, settling the previously disclosed dispute, and resolving the associated litigation between us and Bodor, we made an upfront payment of $1.0 million in cash to Bodor following the execution of the Amended and Restated License Agreement and the settlement agreement by and among the Company, Brickell Subsidiary, Inc., and Bodor, dated February 17, 2020. Additionally, based on the License Agreement and the Amended and Restated License Agreement, we are required to pay Bodor (i) a royalty on sales of product outside Kaken’s territory, including a low single-digit royalty on sales of certain product not covered by the patent estate licensed from Bodor; (ii) a specified percentage of all royalties we receive from Kaken for sales of product within its territory; (iii) a percentage of non-royalty sublicensing income we receive from Kaken or other sublicensees; and (iv) up to an aggregate of $1.8 million (plus an additional $0.1 million for approvals of additional products) in cash payments and $1.5 million of shares of our common stock upon the achievement of certain development, regulatory and other milestones, including the enrollment of the first
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patient in the U.S. Phase 3 trials. Based on the foregoing, we made a $0.5 million milestone payment to Bodor in June 2020 following the closing of the June 2020 Offering. Additionally, in October 2020, in association with the enrollment of the first patient in our U.S. Phase 3 pivotal program, we made a cash payment of $0.5 million and issued $0.5 million, or 480,769 shares, of our common stock to Bodor. As a result, during the nine months ended September 30, 2020, we recorded an aggregate of $1.5 million as research and development expense in the condensed consolidated statements of operations.
Corporate History
On August 31, 2019, the Delaware corporation formerly known as “Vical Incorporated” (“Vical”), completed a reverse merger transaction in accordance with the terms and conditions of the Agreement and Plan of Merger and Reorganization, dated June 2, 2019, as further amended on August 20, 2019 and August 30, 2019, by and among Vical, Brickell Biotech, Inc., a then privately-held Delaware corporation that began activities in September 2009 (“Private Brickell”) and Victory Subsidiary, Inc., a wholly-owned subsidiary of Vical (“Merger Sub”), pursuant to which Merger Sub merged with and into Private Brickell, with Private Brickell surviving the merger as a wholly-owned subsidiary of Vical (the “Merger”). Additionally, on August 31, 2019, immediately after the completion of the Merger, the Company changed its name from “Vical Incorporated” to “Brickell Biotech, Inc.”
Financial Overview
Our operations to date have been limited to business planning, raising capital, developing our pipeline assets (in particular sofpironium bromide), identifying product candidates, and other research and development. To date, we have financed operations primarily through funds received from the sale of convertible preferred stock, debt, convertible notes, common stock, and warrants, funds received from license and collaboration agreements, and cash and investments acquired in connection with the Merger. We do not have any products approved for sale and have not generated any product sales. Since inception and through September 30, 2020, we have raised or generated an aggregate of $149.6 million to fund our operations, of which $39.1 million was through license and collaboration agreements, $37.0 million was from cash and investments acquired in the Merger, $33.6 million was from the sale of convertible preferred stock, $25.0 million was from the sale of common stock and warrants, $7.5 million was from the sale of debt, and $7.4 million was from the sale of convertible notes. As of September 30, 2020, we had cash and cash equivalents of $20.2 million. As described above, subsequent to September 30, 2020, we received approximately $13.7 million in net proceeds from the October 2020 Offering and $0.8 million in net proceeds from sales under the ATM Agreement.
Since inception, we have incurred operating losses. We recorded a net loss of $4.3 million and $4.8 million for the three months ended September 30, 2020 and 2019, respectively, and $13.5 million and $13.0 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $98.5 million. We expect to continue incurring significant expenses and operating losses for at least the next several years as we:
•    execute our two pivotal Phase 3 clinical trials for sofpironium bromide in the U.S.;
•    contract to manufacture product candidates;
•    advance research and development-related activities to develop and expand our product pipeline;
•    maintain, expand, and protect our intellectual property portfolio;
•    hire additional staff, including clinical, scientific, and management personnel; and
•    add operational and finance personnel to support product development efforts and to support operating as a public company.
We do not expect to generate significant revenue unless and until we successfully complete development of, obtain marketing approval for, and commercialize product candidates, either alone or in collaboration with third parties. We expect these activities may take several years and our success in these efforts is subject to significant uncertainty. We expect we will need to raise substantial additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, that we generate substantial product revenues, we expect to finance our operations through public or private equity or debt financings, collaborations or licenses, or other available financing transactions. However, we may be unable to raise additional funds through these or other means when needed.
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Key Components of Operations
Collaboration Revenue
Collaboration revenue generally consists of revenue recognized under our strategic collaboration agreements for the development and commercialization of our product candidates. Our strategic collaboration agreements generally outline overall development plans and include payments we receive at signing, payments for the achievement of certain milestones, and royalties. For these activities and payments, we utilize judgment to assess the nature of the performance obligations to determine whether the performance obligations are satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue. We have not recognized any royalty revenue to date. Other than the revenue we may generate in connection with these agreements, we do not expect to generate any revenue from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into other collaborative agreements with third parties.
Research and Development Expenses
Research and development expenses principally consist of payments to third parties known as Clinical Research Organizations (“CROs”). These CROs help plan, organize, and conduct clinical and nonclinical studies under our direction. Personnel costs, including wages, benefits, and share-based compensation, related to our research and development staff in support of product development activities are also included, as well as costs incurred for supplies, preclinical studies and toxicology tests, consultants, and facility and related overhead costs.
Below is a summary of our research and development expenses related to sofpironium bromide by categories of costs for the periods presented. The other expenses category includes travel, lab and office supplies, clinical trial management software, license fees, and other miscellaneous expenses. We expect our research and development expenses to increase in future periods during the execution of our Phase 3 program for sofpironium bromide.
Three Months Ended
September 30,
Nine Months Ended
September 30,
2020201920202019
(in thousands)
Direct program expenses related to sofpironium bromide$409 $2,452 $4,140 $10,871 
Personnel and other expenses
Salaries, benefits, and stock-based compensation758 863 2,233 2,518 
Regulatory and compliance79 18 137 158 
Other expenses35 147 38 
Total research and development expenses$1,281 $3,337 $6,657 $13,585 

General and Administrative Expenses
General and administrative expenses consist primarily of personnel costs, including wages, benefits, and share-based compensation, related to our executive, sales, marketing, finance, and human resources personnel, as well as professional fees, including legal, accounting, and sublicensing fees.
We expect our overall general and administrative expenses to continue to increase in the near term as we incur expenses associated with operating as a public company compared to prior periods, which may include increased insurance premiums, investor relations expenses, legal and accounting fees associated with the expansion of our business and corporate governance, financial reporting expenses, and expenses related to Sarbanes-Oxley and other regulatory compliance obligations.
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Total Other Income (Expense)
Investment and Other Income, Net
Investment and other income, net consists primarily of realized gains and losses associated with marketable securities and interest earned on cash and cash equivalent and marketable securities balances. Our interest income varies each reporting period depending on our average cash balances during the period and market interest rates. We expect interest income to fluctuate in the future with changes in average cash balances and market interest rates.
Gain on Extinguishment
Gain on extinguishment consists of the gain realized on the conversion of convertible promissory notes to common stock in August 2019, as described further immediately below.
Interest Expense
Interest expense historically consisted primarily of interest and amortization related to the issuance of $7.4 million of convertible promissory note principal during the nine months ended September 30, 2019 and principal borrowings of $7.5 million provided by the loan and security agreement entered into with Hercules Capital, Inc. on February 18, 2016 (the “Loan Agreement”). In August 2019, the convertible promissory notes were converted and the Loan Agreement was repaid, and therefore, there was no interest expense thereafter related to these agreements.
Change in Fair Value of Warrant and Derivative Liability
In connection with the Loan Agreement, we issued warrants to Hercules Capital, Inc., which are exercisable for 9,005 shares of common stock at a per share exercise price of $33.31. In connection with the convertible promissory notes, we issued warrants which are exercisable for 490,683 shares of common stock at a per share exercise price of $10.36.
We accounted for the warrants as liabilities at their estimated fair value. The warrants were subject to remeasurement to fair value at each balance sheet date, and any fair value adjustments were recognized in the condensed consolidated statements of operations within the “Change in fair value of warrant and derivative liability” line item. The liability was adjusted for changes in fair value through August 2019, and at that time the final warrant liability fair value was reclassified to equity in the condensed consolidated balance sheets and no longer remeasured to fair value each period.
Critical Accounting Policies and Estimates
We have prepared the condensed consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these condensed consolidated financial statements requires us to make estimates, assumptions, and judgments that affect the reported amounts of assets, liabilities, expenses, and related disclosures at the date of the condensed consolidated financial statements, and the reported amounts of revenue and expenses during the reporting period. On an ongoing basis, management evaluates its critical estimates, including those related to revenue recognition, accrued research and development expenses, convertible promissory notes, redeemable convertible preferred stock, warrants, and stock-based compensation. We base our estimates on our historical experience and on assumptions that we believe are reasonable; however, actual results may differ materially from these estimates under different assumptions or conditions.
For the nine months ended September 30, 2020, there have been no material changes in our critical accounting policies and estimates as compared to those disclosed in Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 18, 2020.
Recent Accounting Pronouncements
For information on recent accounting pronouncements, whether adopted or to be adopted, that may impact our business, see Note 2 of the notes to the condensed consolidated financial statements included elsewhere in this Quarterly Report. Unless otherwise discussed, we believe that the impact of recently issued guidance to be adopted in the future is not expected to have a material impact on our condensed consolidated financial statements upon adoption.
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Results of Operations
Comparison of the Three Months Ended September 30, 2020 and 2019
Three Months Ended
September 30,
20202019
(in thousands)
Collaboration revenue
$142 $1,183 
Research and development expenses
(1,281)(3,337)
General and administrative expenses
(3,211)(3,901)
Total other income, net24 1,274 
Net loss
$(4,326)$(4,781)

Collaboration Revenue
Collaboration revenue decreased by $1.0 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. Revenue in both periods was driven by research and development activities related to the Kaken Agreement for which Kaken provided research and development funding. The decrease in revenue recognized was attributable to our Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were ongoing in 2019 but were concluded or winding down by the end of the first quarter of 2020. Conducting these studies is the basis for revenue recognition of a $15.6 million research and development payment received from Kaken in the second quarter of 2018.
Research and Development
Research and development expense decreased by $2.1 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019, which was primarily due to reduced clinical and other related regulatory and compliance costs of the Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were concluded or winding down by the end of the first quarter of 2020.
General and Administrative Expenses
General and administrative expenses decreased by $0.7 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. This decrease was primarily due to lower costs of $1.1 million for professional-related fees associated with the Merger that occurred in the third quarter of 2019 and $0.4 million for other miscellaneous fees, partially offset by higher costs of $0.6 million for stock and other compensation expense that was driven by increased headcount and $0.2 million for directors’ and officers’ liability insurance due to becoming a public company.
Total Other Income, Net
Total other income, net decreased by $1.3 million for the three months ended September 30, 2020 compared to the three months ended September 30, 2019. The decrease was primarily due to a gain of $2.3 million related to the conversion of the convertible promissory notes in August 2019 and a decrease of $1.1 million in interest expense related to the issuance of convertible promissory notes in 2019 and principal borrowings provided by the Loan Agreement with a former lender, none of which recurred in the 2020 period.
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Comparison of the Nine Months Ended September 30, 2020 and 2019
Nine Months Ended
September 30,
20202019
(in thousands)
Collaboration revenue
$1,795 $7,248 
Research and development expenses
(6,657)(13,585)
General and administrative expenses
(8,713)(7,290)
Total other income, net27 612 
Net loss
$(13,548)$(13,015)

Collaboration Revenue
Collaboration revenue decreased by $5.5 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. Revenue in both periods was driven by research and development activities related to the Kaken Agreement for which Kaken provided research and development funding. The decrease in revenue recognized was attributable to our Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were ongoing in 2019 but were concluded or winding down by the end of the first quarter of 2020. Conducting these studies is the basis for revenue recognition of a $15.6 million research and development payment received from Kaken in the second quarter of 2018.
Research and Development
Research and development expenses decreased by $6.9 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019, which was primarily due to a decrease in clinical and other related regulatory and compliance costs of the Phase 3 open-label long-term safety study of sofpironium bromide gel and other ancillary clinical studies that were concluded or winding down by the end of the first quarter of 2020. During the nine months ended September 30, 2020, research and development expense of $1.5 million was recorded relating to certain milestone obligations pursuant to the Amended and Restated License Agreement with Bodor.
General and Administrative Expenses
General and administrative expenses increased by $1.4 million for the nine months ended September 30, 2020 compared to the nine months ended September 30, 2019. This increase was primarily due to higher costs of $1.4 million for stock and other compensation expense that was driven by increased headcount and $0.8 million for directors’ and officers’ liability insurance due to becoming a public company, partially offset by lower costs of $0.8 million for other miscellaneous expenses.
Total Other Income, Net
Total other income, net decreased by $0.6 million for the nine months ended September 30, 2020 compared the nine months ended September 30, 2019. The change was primarily due to a gain of $2.3 million related to the conversion of the convertible promissory notes in August 2019 and a gain of $0.2 million gain resulting from fair value adjustments to warrant liabilities during the nine months ended September 30, 2019, both of which did not recur in 2020. These gains were partially offset by a decrease of $2.0 million in interest expense related to the issuance of convertible promissory notes in 2019 and principal borrowings provided by the Loan Agreement with a former lender.
Liquidity and Capital Resources
We have incurred significant operating losses and have an accumulated deficit as a result of ongoing efforts to develop our product candidates, including conducting preclinical and clinical trials and providing general and administrative support for these operations. For the nine months ended September 30, 2020 and 2019, we had a net loss of $13.5 million and $13.0 million, respectively. As of September 30, 2020 and December 31, 2019, we had an accumulated deficit of $98.5 million and $85.0 million, respectively. As of September 30, 2020, we had cash and cash equivalents of $20.2 million. Since inception, we have financed our operations primarily through funds received from the sale of convertible preferred stock, common stock
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and warrants, debt, and convertible notes, payments received under strategic license and collaboration agreements, and cash and investments acquired in the Merger.
We believe that our cash and cash equivalents as of September 30, 2020, combined with the proceeds received from the sale of our common stock and warrants in the October 2020 Offering, are sufficient to fund our operations for at least the next 12 months from the issuance of this Quarterly Report. We expect to continue to incur additional substantial losses in the foreseeable future as a result of our research and development activities. Additional funding will be required in the future to continue with our planned development and commercial related activities.
Cash Flows
Since inception, we have primarily used our available cash to fund expenditures related to product discovery and development activities. The following table sets forth a summary of cash flows for the periods presented:
Nine Months Ended
September 30,
20202019
(in thousands)
Net cash used in operating activities$(15,283)$(21,940)
Net cash provided by investing activities4,500 18,509 
Net cash provided by financing activities23,725 2,589 
Net change in cash and cash equivalents$12,942 $(842)

Operating Activities
Net cash used in operating activities of $15.3 million during the nine months ended September 30, 2020 decreased compared to $21.9 million during the same period in the prior year primarily due to changes in working capital of $6.0 million and an increase of other non-cash net expenses of $1.1 million, partially offset by an increase in net loss of $0.5 million.
Investing Activities
Net cash provided by investing activities of $4.5 million during the nine months ended September 30, 2020 decreased compared to $18.5 million during the same period in the prior year. The $14.0 million decrease was primarily the result of cash received from Vical in the Merger in the 2019 period.
Financing Activities
Net cash provided by financing activities of $23.7 million during the nine months ended September 30, 2020 increased compared to $2.6 million during the same period in the prior year. The increase was primarily related to higher net proceeds received in the 2020 period from the issuance of common stock and warrants of $23.3 million and proceeds from the issuance of a note payable of $0.4 million, compared to net proceeds received in the 2019 period from the issuance of convertible promissory notes of $7.4 million, partially offset by the repayment of principal associated with the Loan Agreement in the 2019 period of $4.8 million.
Off-Balance Sheet Arrangements
As of September 30, 2020 and December 31, 2019, we had not been involved in any material off-balance sheet arrangements, as defined in the rules and regulations of the SEC.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and are not required to provide the information under this item.

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ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosures. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Conclusion Regarding the Effectiveness of Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the design and operation of our disclosure controls and procedures, as such term is defined in Rule 13a-15(e) and 15d-15(e) promulgated under the Exchange Act as of the end of the period covered by this Quarterly Report. Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective and were operating at a reasonable assurance level as of September 30, 2020.
Changes in Internal Control over Financial Reporting
Management has determined that there were no significant changes in our internal control over financial reporting that occurred during the three months ended September 30, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On September 4, 2020, a confidential binding settlement was reached with Patricia S. Walker, our former President and Chief Scientific Officer, with regard to litigation she brought in the United States District Court for the Central District of California against our company, one of our officers, our Board Chairperson and others, alleging wrongful termination for unspecified damages, and claiming discrimination based on age, gender, and association with a person with a disability. On September 25, 2020, Ms. Walker filed a notice with the court dismissing her action with prejudice. On September 29, 2020, Ms. Walker notified the arbitrator who would have decided the case of the settlement, who has now closed the matter. On October 2, 2020, we made an immaterial payment in consideration of the settlement, and the matter is final.
From time to time, we may become involved in legal proceedings arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, if determined adversely to us, would individually or taken together have a material adverse effect on our company.

ITEM 1A. RISK FACTORS
Our business, financial condition, and operating results may be affected by a number of factors, whether currently known or unknown, including but not limited to those described below. 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, could materially and adversely affect our business, financial condition, results of operations, and stock price. The following information should be read in conjunction with Part I, Item 2, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the condensed consolidated financial statements and related notes in Part I, Item 1, “Financial Statements” of this Quarterly Report.
Risk factors below that have been modified from the version of that risk factor as it appeared in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 (other than typographical or definitional modifications), or additional risk factors that did not appear in that Annual Report on Form 10-K, are noted with an “*” preceding such risk factor.
Risks Related to Our Business Operations
Our business depends on the successful financing, clinical development, regulatory approval, and commercialization of sofpironium bromide.
The successful development, regulatory approval, and commercialization of sofpironium bromide requires significant additional financing and depends on a number of factors, including but not limited to the following:
timely and successful completion of Phase 3 clinical trials in the U.S., which may be significantly costlier than we currently anticipate and/or produce results that do not achieve the endpoints of the trials or which are ultimately deemed not to be clinically meaningful;
whether we are required by the FDA or similar foreign regulatory agencies to conduct additional clinical trials beyond those currently planned to support the approval and commercialization of sofpironium bromide;
achieving and maintaining, and, where applicable, ensuring that our third-party contractors achieve and maintain, compliance with our and their contractual obligations and with all regulatory and legal requirements applicable to sofpironium bromide;
ability of third parties with which we contract to manufacture consistently adequate clinical trial and commercial supplies of sofpironium bromide, to remain in good standing with regulatory agencies and to develop, validate and maintain or supervise commercially viable manufacturing processes that are compliant with FDA-regulated Current Good Manufacturing Practices, (“cGMPs”), and the product’s package insert;
a continued acceptable safety profile during clinical development and following approval of sofpironium bromide;
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ability to obtain favorable labeling for sofpironium bromide through regulators that allows for successful commercialization, given the drug may be marketed only to the extent approved by these regulatory authorities (unlike with most other industries);
ability to commercialize sofpironium bromide successfully in the U.S. and internationally, if approved for marketing, sale and distribution in such countries and territories, whether alone or in collaboration with Kaken or others;
acceptance by physicians, insurers and payors, and patients of the quality, benefits, safety, and efficacy of sofpironium bromide, if approved, including relative to alternative and competing treatments and the next best standard of care;
existence of a regulatory and legal environment conducive to the success of sofpironium bromide;
ability to price sofpironium bromide to recover our development costs and generate a satisfactory profit margin; and
our ability and our partners’ ability to establish and enforce intellectual property rights in and to sofpironium bromide, including but not limited to patents and licenses.
If we do not achieve one or more of these factors, many of which are beyond our reasonable control, in a timely manner or at all, and with adequate financing, we could experience significant delays or an inability to obtain regulatory approvals or commercialize sofpironium bromide. Even if regulatory approvals are obtained, we may never be able to successfully commercialize sofpironium bromide. Accordingly, we cannot assure you that we will be able to generate sufficient revenue through the sale of sofpironium bromide, or any current primary asset, to continue our business.
*We have never conducted a pivotal Phase 3 clinical trial ourselves and may be unable to successfully do so for sofpironium bromide.
The conduct of a pivotal Phase 3 clinical trial is a long, expensive, complicated, uncertain, and highly regulated process. Although our employees have conducted successful Phase 2 and Phase 3 clinical trials in the past across many therapeutic areas while employed at other companies, we as a company have not conducted a pivotal Phase 3 clinical trial, and as a result, we may require more time and incur greater costs than we anticipate. We commenced a Phase 3 long-term safety study for sofpironium bromide gel in the third quarter of 2018 and intend to conduct two pivotal Phase 3 clinical trials in subjects with primary axillary hyperhidrosis in the U.S. While we initiated the U.S. Phase 3 pivotal program for sofpironium bromide gel, 15% in the fourth quarter of 2020, we may not be able to complete that program in a reasonable timeframe, or at all. Failure to commence or complete, or delays in, our planned clinical trials would prevent us from, or delay us in, obtaining regulatory approval of and commercializing sofpironium bromide and could prevent us from, or delay us in, receiving development- or regulatory-based milestone payments and commercializing sofpironium bromide gel for the treatment of primary axillary hyperhidrosis, which would adversely impact our financial performance, as well as put us in potential breach of material contracts for the licensing and development of sofpironium bromide, subjecting us to significant contract liabilities, including but not limited to potential loss of rights in and to sofpironium bromide.
Clinical drug development for sofpironium bromide is very expensive, time-consuming, and uncertain.
Clinical development for sofpironium bromide is very expensive, time-consuming, difficult to design and implement, and its outcome is inherently uncertain. Most product candidates that commence clinical trials are never approved by regulatory authorities for commercialization and of those that are approved many do not cover their costs of development or ever generate a profit. In addition, we, any partner with which we currently or may in the future collaborate, the FDA, a local or central institutional review board, or other regulatory authorities, including state and local agencies and counterpart agencies in foreign countries, may suspend, delay, extend, require modifications or add additional requirements to or terminate our clinical trials at any time.
In the case of sofpironium bromide, we are seeking to deliver sufficient concentrations of the active pharmaceutical ingredient (“API”), absorbed from the skin surface through the skin barrier to the targeted dermal tissue to achieve the intended