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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q

 

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

 

For the quarterly period ended September 30, 2022

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: 001-36591

 

Otonomy, Inc.

(Exact name of registrant as specified in its charter)

 

 

Delaware

 

26-2590070

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

 

4796 Executive Drive

San Diego, California 92121

(619) 323-2200

(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)

 

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

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.001 per share

 

OTIC

 

The NASDAQ Global Select Market

 

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

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

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

 

Large accelerated filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

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

The number of shares of the registrant’s common stock, par value $0.001, outstanding as of November 4, 2022 was 57,153,490.

 

 


 

TABLE OF CONTENTS

 

 

Page

 

 

PART I. FINANCIAL INFORMATION

4

 

 

Item 1. Financial Statements

4

 

 

Condensed Balance Sheets

4

 

 

Condensed Statements of Operations

5

 

 

Condensed Statements of Comprehensive Loss

6

 

 

Condensed Statements of Stockholders’ Equity

7

 

 

Condensed Statements of Cash Flows

9

 

 

Notes to Condensed Financial Statements

10

 

 

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

19

 

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

 

 

Item 4. Controls and Procedures

29

 

 

PART II. OTHER INFORMATION

30

 

 

Item 1. Legal Proceedings

30

 

 

Item 1A. Risk Factors

30

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

66

 

 

Item 3. Default Upon Senior Securities

66

 

 

Item 4. Mine Safety Disclosures

66

 

 

Item 5. Other Information

66

 

 

Item 6. Exhibits

67

 

3


 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Otonomy, Inc.

Condensed Balance Sheets

(in thousands, except share and per share data)

 

 

September 30,

 

 

December 31,

 

 

2022

 

 

2021

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

Current assets:

 

 

 

 

 

Cash and cash equivalents

$

40,146

 

 

$

77,412

 

Prepaid and other current assets

 

3,766

 

 

 

3,056

 

Total current assets

 

43,912

 

 

 

80,468

 

Restricted cash

 

703

 

 

 

702

 

Property and equipment, net

 

1,431

 

 

 

1,771

 

Right-of-use assets

 

11,481

 

 

 

12,696

 

Total assets

$

57,527

 

 

$

95,637

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

Current liabilities:

 

 

 

 

 

Accounts payable

$

616

 

 

$

1,090

 

Accrued expenses

 

2,643

 

 

 

4,338

 

Accrued compensation

 

2,330

 

 

 

3,450

 

Debt, current

 

16,130

 

 

 

 

Leases, current

 

3,532

 

 

 

3,455

 

Total current liabilities

 

25,251

 

 

 

12,333

 

Long-term debt, net of current

 

-

 

 

 

15,997

 

Leases, net of current

 

10,879

 

 

 

12,400

 

Total liabilities

 

36,130

 

 

 

40,730

 

Commitments and Contingencies

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

Preferred stock, $0.001 par value; 10,000,000 shares authorized at September 30, 2022
   and December 31, 2021;
no shares issued or outstanding at September 30, 2022 and
   December 31, 2021

 

 

 

 

 

Common stock, $0.001 par value; 200,000,000 shares authorized at September 30, 2022
   and December 31, 2021;
57,062,447 and 56,732,474 shares issued and outstanding
   at September 30, 2022 and December 31, 2021, respectively

 

57

 

 

 

57

 

Additional paid-in capital

 

615,826

 

 

 

610,655

 

Accumulated deficit

 

(594,486

)

 

 

(555,805

)

Total stockholders’ equity

 

21,397

 

 

 

54,907

 

Total liabilities and stockholders’ equity

$

57,527

 

 

$

95,637

 

 

See accompanying notes.

 

4


 

Otonomy, Inc.

Condensed Statements of Operations

(in thousands, except share and per share data)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

Product sales, net

 

$

 

 

$

 

 

$

 

 

$

125

 

Costs and operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Cost of product sales

 

 

 

 

 

 

 

 

 

 

 

370

 

Research and development

 

 

8,410

 

 

 

8,978

 

 

 

27,048

 

 

 

24,995

 

Selling, general and administrative

 

 

3,431

 

 

 

3,501

 

 

 

10,702

 

 

 

11,213

 

Total costs and operating expenses

 

 

11,841

 

 

 

12,479

 

 

 

37,750

 

 

 

36,578

 

Loss from operations

 

 

(11,841

)

 

 

(12,479

)

 

 

(37,750

)

 

 

(36,453

)

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest income

 

 

220

 

 

 

9

 

 

 

320

 

 

 

35

 

Interest expense

 

 

(427

)

 

 

(410

)

 

 

(1,251

)

 

 

(1,184

)

Net loss

 

$

(12,048

)

 

$

(12,880

)

 

$

(38,681

)

 

$

(37,602

)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share, basic and diluted

 

$

(0.18

)

 

$

(0.19

)

 

$

(0.57

)

 

$

(0.61

)

Weighted-average shares used to compute net loss per share, basic and diluted

 

 

68,128,113

 

 

 

67,792,425

 

 

 

68,008,741

 

 

 

61,969,780

 

 

See accompanying notes.

5


 

Otonomy, Inc.

Condensed Statements of Comprehensive Loss

(in thousands)

 

 

 

Three Months Ended September 30,

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

Net loss

 

$

(12,048

)

 

$

(12,880

)

 

$

(38,681

)

 

$

(37,602

)

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on available-for-sale securities

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Comprehensive loss

 

$

(12,048

)

 

$

(12,881

)

 

$

(38,681

)

 

$

(37,603

)

 

See accompanying notes.

6


 

Otonomy, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2022
   (unaudited)

 

 

56,990,363

 

 

$

57

 

 

$

614,458

 

 

$

 

 

$

(582,438

)

 

$

32,077

 

Issuance of common stock upon
   exercise of stock options and vesting of restricted stock units (unaudited)

 

 

72,084

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Issuance of common stock under
   employee stock purchase plan (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

1,368

 

 

 

 

 

 

 

 

 

1,368

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,048

)

 

 

(12,048

)

Balance at September 30, 2022
   (unaudited)

 

 

57,062,447

 

 

$

57

 

 

$

615,826

 

 

$

 

 

$

(594,486

)

 

$

21,397

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at June 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

606,941

 

 

$

1

 

 

$

(529,346

)

 

$

77,653

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

1,766

 

 

 

 

 

 

 

 

 

1,766

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(12,880

)

 

 

(12,880

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at September 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

608,707

 

 

$

 

 

$

(542,226

)

 

$

66,538

 

 

See accompanying notes.

 

 

7


 

Otonomy, Inc.

Condensed Statements of Stockholders’ Equity

(in thousands, except share data)

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2021

 

 

56,732,474

 

 

$

57

 

 

$

610,655

 

 

$

 

 

$

(555,805

)

 

$

54,907

 

Issuance of common stock upon
   exercise of stock options and
   vesting of restricted stock units (unaudited)

 

 

284,680

 

 

 

 

 

 

41

 

 

 

 

 

 

 

 

 

41

 

Issuance of common stock
   under employee stock
   purchase plan (unaudited)

 

 

45,293

 

 

 

 

 

 

74

 

 

 

 

 

 

 

 

 

74

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

5,056

 

 

 

 

 

 

 

 

 

5,056

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(38,681

)

 

 

(38,681

)

Balance at September 30, 2022
   (unaudited)

 

 

57,062,447

 

 

$

57

 

 

$

615,826

 

 

$

 

 

$

(594,486

)

 

$

21,397

 

 

 

 

Common Stock

 

 

Additional
Paid-in

 

 

Accumulated
Other
Comprehensive

 

 

Accumulated

 

 

Total
Stockholders’

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Income

 

 

Deficit

 

 

Equity

 

Balance at December 31, 2020

 

 

48,318,970

 

 

$

48

 

 

$

570,841

 

 

$

1

 

 

$

(504,624

)

 

$

66,266

 

Issuance of common stock and pre-
   funded warrants, net of issuance
   costs (unaudited)

 

 

8,298,890

 

 

 

9

 

 

 

32,198

 

 

 

 

 

 

 

 

 

32,207

 

Issuance of common stock
   upon exercise of stock
   options (unaudited)

 

 

2,836

 

 

 

 

 

 

6

 

 

 

 

 

 

 

 

 

6

 

Issuance of common stock
   under employee stock
   purchase plan (unaudited)

 

 

60,619

 

 

 

 

 

 

122

 

 

 

 

 

 

 

 

 

122

 

Stock-based compensation
   expense (unaudited)

 

 

 

 

 

 

 

 

5,540

 

 

 

 

 

 

 

 

 

5,540

 

Net loss (unaudited)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(37,602

)

 

 

(37,602

)

Unrealized loss on available-
   for-sale securities (unaudited)

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Balance at September 30, 2021
   (unaudited)

 

 

56,681,315

 

 

$

57

 

 

$

608,707

 

 

$

 

 

$

(542,226

)

 

$

66,538

 

 

See accompanying notes.

8


 

Otonomy, Inc.

Condensed Statements of Cash Flows

(in thousands)

 

 

 

Nine Months Ended September 30,

 

 

 

2022

 

 

2021

 

 

 

(unaudited)

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(38,681

)

 

$

(37,602

)

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

 

 

 

 

 

 

Depreciation

 

 

668

 

 

 

648

 

Stock-based compensation

 

 

5,056

 

 

 

5,540

 

Amortization of premiums on short-term investments

 

 

 

 

 

77

 

Amortization of debt discount

 

 

133

 

 

 

130

 

Impairment of property, plant and equipment

 

 

 

 

 

727

 

Loss on disposal of equipment

 

 

7

 

 

 

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

Prepaid and other assets

 

 

(710

)

 

 

(911

)

Accounts payable

 

 

(442

)

 

 

(315

)

Accrued expenses

 

 

(1,684

)

 

 

172

 

Accrued compensation

 

 

(1,120

)

 

 

(990

)

Right-of-use assets and lease liabilities, net

 

 

(229

)

 

 

(126

)

Net cash used in operating activities

 

 

(37,002

)

 

 

(32,650

)

Cash flows from investing activities:

 

 

 

 

 

 

Maturities of short-term investments

 

 

 

 

 

50,245

 

Purchases of property and equipment

 

 

(378

)

 

 

(296

)

Proceeds from disposition of business

 

 

 

 

 

768

 

Net cash (used in) provided by investing activities

 

 

(378

)

 

 

50,717

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock and pre-funded warrants, net of issuance costs

 

 

 

 

 

32,207

 

Proceeds from issuance of long-term debt, net of issuance costs

 

 

 

 

 

674

 

Proceeds from exercise of stock options

 

 

41

 

 

 

6

 

Proceeds from issuance of common stock under employee stock purchase plan

 

 

74

 

 

 

122

 

Net cash provided by financing activities

 

 

115

 

 

 

33,009

 

Net change in cash, cash equivalents and restricted cash

 

 

(37,265

)

 

 

51,076

 

Cash, cash equivalents and restricted cash at beginning of period

 

 

78,114

 

 

 

31,469

 

Cash, cash equivalents and restricted cash at end of period

 

$

40,849

 

 

$

82,545

 

 

 

 

 

 

 

 

Cash and cash equivalents at end of period

 

$

40,146

 

 

$

81,843