10-Q

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the success, cost, timing and potential indications of our product development activities and clinical trials;

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our ability to advance into and through clinical development, make regulatory filings and ultimately obtain U.S. Food and Drug Administration (“FDA”) approval for our product candidates;

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our research and development plans and ability to bring forward additional product candidates into preclinical and clinical development;

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our continued listing on the Nasdaq Capital Market;

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our expectations regarding the impact of COVID-19 on our business, operations and financial performance and position;

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our grant award from the Military Infectious Diseases Research Program, United States Army Medical Research and Development Command (“USAMRDC”);

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the rate and degree of market acceptance of our product candidates and our expectations regarding the size of the commercial markets for our product candidates;

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our future marketing and sales programs;

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the effect of competition and proprietary rights of third parties;

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our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern;

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anticipated reductions in operating expenses;

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the availability of and our ability to obtain additional financing;

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the effects of existing and future federal, state and foreign regulations;

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the seeking of joint development, licensing or distribution and collaboration and marketing arrangements with third parties; and

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the period of time for which our existing cash and cash equivalents will enable us to fund our operations.

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We have incurred significant losses since our inception. We expect to incur losses for at least the next several years and may never achieve or maintain profitability.

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Our recurring losses from operations raise substantial doubt regarding our ability to continue as a going concern.

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We currently have no source of product revenue and have not yet generated any revenues from product sales.

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We have a need for substantial additional funding. If we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product development programs or commercialization efforts, and we may be forced to sell or liquidate our business. Any financial or strategic alternative we pursue may not be successful.

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Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or product candidates.

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The timing of the milestone and royalty payments we are required to make to The Rockefeller University (“Rockefeller”) under certain agreements is uncertain and could adversely affect our cash flows and results of operations.

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Our ability to utilize our net operating loss carryforwards and certain other tax attributes may be limited.

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Any pandemic, epidemic or outbreak of an infectious disease may materially and adversely impact our business, including our preclinical studies and clinical trials.

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We are heavily dependent on the success of our leading product candidates. If we are ultimately unable to obtain regulatory approval for any of our product candidates, our business will be substantially harmed.

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If clinical trials of any of our product candidates that we develop fail to demonstrate safety and efficacy, or the manufacturing for the commercial supply of drug substance or drug product fails to demonstrate robustness, stability, purity and potency to the satisfaction of the FDA or similar international regulatory authorities or do not otherwise produce positive results, we may incur additional costs or experience delays in completing, or ultimately be unable to complete the development and commercialization of our product candidates.

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We may be required to suspend or discontinue clinical trials due to adverse side effects or other safety risks that could preclude approval of any of our product candidates.

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Delays in clinical trials are common and have many causes, and any such delays could result in increased costs to us and jeopardize, delay or prevent our ability to obtain regulatory approval and commence product sales as currently contemplated.

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We are significantly dependent on our license agreements with Rockefeller that relate to exebacase.

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We rely on Contract Research Organizations (“CROs”) to conduct our preclinical studies and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidates.

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We rely on contract manufacturing organizations (“CMOs”) to manufacture clinical and commercial supplies of our product candidates. In addition to the risks associated with the manufacture of our product candidates, which could include cost overruns, new impurities, difficulties in process or formulation development, scaling up or reproducing manufacturing processes and lack of timely availability of raw materials, if these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may be delayed in obtaining, or may ultimately not be able to obtain, regulatory approval for commercialization of any of our product candidates.

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Even if the FDA approves any of our product candidates, adverse effects discovered after approval could adversely affect our markets.

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Any Breakthrough Therapy designation that we may receive from the FDA for our product candidates may not lead to a faster development or regulatory review or approval process, and it does not increase the likelihood that our product candidates will receive marketing approval.

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Developments by competitors may render our products or technologies obsolete or non-competitive.

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The level of commercial success of any of our product candidates that we develop will depend upon significant market acceptance of these products among physicians and payors.

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Coverage and reimbursement may not be available for any of our product candidates that we develop, including as a result of healthcare reform measures.

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We may not successfully execute or achieve the expected benefits of our restructuring program and other cost saving measures we may take in the future, and our efforts may result in further actions and may adversely affect our business, financial condition and results of operations.

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If we are unable to establish our own marketing and sales capabilities, or enter into agreements with third parties, to market and sell our products after they are approved, we may not be able to generate revenues.

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Interim, “topline” and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

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Risks related to regulatory approval of our product candidates and other legal and compliance matters.

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Risks related to employee matters and our operations.

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Risks related to our intellectual property.

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Risks related to our securities and organizational documents.

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We do not expect that we will meet certain of Nasdaq Capital Market’s continued listing requirements and other Nasdaq rules. If we are unable to increase our stockholders' equity, we will be delisted. Delisting could negatively affect the price of our common stock and could make it more difficult for us to sell securities in a future financing or for you to sell our common stock.

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Security breaches, cybersecurity attacks, failure of our data and personal information protections and those of third parties and other disruptions could compromise our information and technology systems and expose us to liability, which would cause our business and reputation to suffer.

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Our collection, control, processing, sharing, disclosure and otherwise use of personal data could give rise to liabilities as a result of governmental regulation, conflicting legal requirements, and evolving laws concerning data privacy in the European Union (“EU”) and European Economic Area (“E.E.A.”).

1. Organization and Description of Business

Organization and Business

ContraFect Corporation (the “Company”) is a clinical-stage biotechnology company focused on the discovery and development of direct lytic agents (“DLAs”), including lysins and amurin peptides, as new medical modalities for the treatment of life-threatening, antibiotic-resistant infections. The Company intends to address antibiotic-resistant infections using product candidates from our lysin and amurin peptide platforms. DLAs are fundamentally different than antibiotics and offer a potential paradigm shift in the treatment of antibiotic-resistant infections. The Company’s most advanced product candidate is exebacase, a lysin which targets S. aureus, including methicillin-resistant strains, which causes serious infections such as bacteremia, pneumonia and osteomyelitis. S. aureus is also a frequent source of biofilm-dependent infections of heart valves (endocarditis), prosthetic joints, indwelling devices and catheters. These infections result in significant morbidity and mortality despite current antibiotic therapy.

Exebacase was being studied in a pivotal Phase 3 superiority study (the “DISRUPT study”) to evaluate the safety, tolerability, efficacy and pharmacokinetics of intravenous (“IV”) exebacase when used in addition to background standard of care antibiotic therapy for the treatment of S. aureus bacteremia, including right-sided endocarditis in adolescent and adult patients. On July 7, 2022, the Data Safety Monitoring Board (“DSMB”) conducted an interim futility analysis and recommended that the DISRUPT study be stopped because the conditional power of the study was below the pre-specified threshold for futility. Based on the DSMB’s recommendation, patient enrollment in the Phase 3 trial was stopped (“Trial Closure”). The Company continued to monitor all already enrolled patients and all patients completed their follow-up visits. The Company expects to complete all clinical study reports as required by the U.S. Food and Drug Administration (“FDA”).

On July 29, 2022, the Company initiated a restructuring plan resulting in a reduction in workforce. The restructuring plan was designed to reduce costs and align resources with the Company’s anticipated product development milestones for exebacase and CF-370 and to help preserve the value of the Company’s drug discovery operations. The restructuring reduced the Company’s workforce from 43 full-time employees as of June 30, 2022 to 27 full-time employees as of August 15, 2022, when the reduction was completed. The Company recognized a restructuring charge of $7.7 million, including $1.6 million related to employee termination costs and other related expenses from the workforce reduction and $6.1 million from the write-off of prepaid manufacturing costs following the suspension of IV exebacase related activities.

The Company has incurred recurring losses since inception as a research and development organization and has an accumulated deficit of $334.6 million as of June 30, 2023. For the six months ended June 30, 2023, the Company used $16.9 million of cash in operations. The Company has relied on its ability to fund its operations through public and private debt and equity financings, and, to a lesser extent, grant funding and government contracts. The Company expects operating losses and negative cash flows to continue at significant levels in the future as it continues to advance its programs. As of June 30, 2023, the Company had $14.4 million in cash, cash equivalents and marketable securities, which, without additional funding, the Company believes will not be sufficient to meet its obligations within the next twelve months from the date of issuance of these consolidated financial statements. The Company plans to continue to fund its operations through public or private debt and equity financings, but there can be no assurances that such financing will continue to be available to the Company on satisfactory terms, or at all, particularly in light of the Trial Closure. As such, management has not considered the potential for future capital raises in its assessment of the Company’s ability to meet its obligations for the next twelve months, and substantial doubt exists about the Company’s ability to continue as a going concern for twelve months from the date the financial statements were issued. If the Company is unable to obtain funding, the Company would be forced to delay, further reduce its workforce or reduce or eliminate its research and development programs, which could adversely affect its business prospects, or the Company may be unable to continue operations or continue as a going concern and may be forced to sell or liquidate the business.

The consolidated financial statements have been prepared assuming that the Company will continue as a going concern, which contemplates continuity of operations, the realization of assets and the satisfaction of liabilities and commitments in the normal course of business.

On March 22, 2021, the Company completed an underwritten public offering under the Company’s registration statement on Form S-3 (Reg. No. 333-246359) (the “Form-S-3”). The Form S-3 was declared effective by the SEC on August 31, 2020 and allows the Company to offer and sell from time-to-time up to $150.0 million of common stock, preferred stock, debt securities, warrants or units comprised of any combination of these securities. The Company issued 143,750 shares of its common stock, including shares sold pursuant to the fully exercised overallotment option granted to the underwriters in connection with the offering, at a public

offering price of $400.00 per share, resulting in net proceeds to the Company of $53.8 million after underwriting discounts and commissions and offering expenses payable by the Company.

On December 15, 2022, the Company completed (i) a registered direct offering under the Form S-3 of 54,375 shares of its common stock and a pre-funded warrant to purchase 623,919 shares of common stock (the “2022 pre-funded warrant”) and (ii) a concurrent private placement in which the Company issued a Class A warrant to purchase up to an aggregate of 1,356,589 shares of common stock (the “Class A Warrant”) and a Class B warrant to purchase up to an aggregate of 678,294 shares of common stock (the “Class B Warrant”) (collectively, the “2022 Offering”). All shares of common stock, the 2022 pre-funded warrant, the Class A Warrant and the Class B Warrant were issued together to a single accredited investor purchaser for consideration equating to $10.32 per share of common stock (or 2022 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a Class A Warrant to purchase two shares of common stock and a Class B warrant to purchase one share of common stock, in the case of each of the Class A Warrant and Class B Warrant, for no additional consideration but each with an exercise price per share of $10.32, for aggregate net proceeds to the Company of $6.1 million after placement agent fees and offering expenses payable by the Company.

On March 2, 2023, the Company completed (i) a registered direct offering under the Form S-3 of 128,000 shares of its common stock and a pre-funded warrant to purchase 2,372,000 shares of common stock (the “2023 pre-funded warrant”) and (ii) a concurrent private placement in which the Company issued a warrant to purchase up to an aggregate of 5,000,000 shares of common stock (the “2023 Warrant”) (collectively, the “2023 Offering”). All securities in the 2023 Offering were issued to the same single accredited investor purchaser as in the 2022 Offering for consideration equating to $4.00 per share of common stock (or 2023 pre-funded warrant to purchase one share of common stock, less a nominal exercise price), together with a 2023 Warrant to purchase two shares of common stock for no additional consideration but with an exercise price per share of $4.00


28 Wells Avenue, 3rd Floor, Yonkers, NY		10701
(Address of principal executive offices)		(Zip Code)


Large accelerated filer	☐	Accelerated filer	☐

Non-accelerated filer	☒	Smaller reporting company	☒

		Emerging growth company	☐


		Page No.
PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	1
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	20
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	30
Item 4.	Controls and Procedures	30

PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities	62
Item 3.	Defaults Upon Senior Securities	62
Item 4.	Mine Safety Disclosures	62
Item 5.	Other Information	62
Item 6.	Exhibits	63
SIGNATURES		64


	June 30, 2023			December 31, 2022
	(unaudited)			(audited)
Assets
Current assets:
Cash and cash equivalents	$	14,422		$	8,907
Marketable securities		—			4,775
Prepaid expenses		1,521			1,382
Other current assets		571			2,642
Total current assets		16,514			17,706
Property and equipment, net		556			627
Operating lease right-of-use assets		2,077			2,241
Other assets		105			105
Total assets	$	19,252		$	20,679
Liabilities and stockholders’ deficit
Current liabilities:
Accounts payable	$	11,557		$	13,671
Accrued and other current liabilities		4,239			6,498
Current portion of lease liabilities		677			671
Total current liabilities		16,473			20,840
Warrant liabilities		1,861			9,299
Long-term portion of lease liabilities		1,988			2,210
Other liabilities		38			182
Total liabilities		20,360			32,531
Commitments and contingencies		—			—
Stockholders’ deficit:
Preferred stock, $0.0001 par value, 25,000,000 shares authorized and none issued and outstanding at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value, 125,000,000 shares authorized, 10,704,803 and 594,983 shares issued and outstanding at June 30, 2023 and December 31, 2022		1			1
Additional paid-in capital		333,535			313,884
Accumulated other comprehensive loss		—			(32	)
Accumulated deficit		(334,644	)		(325,705	)
Total stockholders’ deficit		(1,108	)		(11,852	)
Total liabilities and stockholders’ deficit	$	19,252		$	20,679


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Operating expenses:
Research and development	$	4,870		$	16,760		$	10,165		$	29,485
General and administrative		3,105			3,266			6,668			6,520
Total operating expenses		7,975			20,026			16,833			36,005
Loss from operations		(7,975	)		(20,026	)		(16,833	)		(36,005	)
Other income (expense):
Interest income, net		114			21			201			55
Other expense		(96	)		—			(96	)		—
Change in fair value of warrant liabilities		389			1,916			7,789			(2,296	)
Total other income (expense)		407			1,937			7,894			(2,241	)
Net loss	$	(7,568	)	$	(18,089	)	$	(8,939	)	$	(38,246	)
Per share information:
Net loss per share of common stock, basic and diluted	$	(1.94	)	$	(36.79	)	$	(3.04	)	$	(77.79	)
Basic and diluted weighted average shares outstanding		3,901,839			491,626			2,943,979			491,626


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


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


	Common Stock				Additional Paid-In Capital			Accumulated Other Comprehensive Loss			Accumulated Deficit			Stockholders’ Deficit
	Shares		Amount
Balance, December 31, 2022		594,983	$	1	$	313,884		$	(32	)	$	(325,705	)	$	(11,852	)
Issuance of securities in registered offering		128,000		—		10,000			—			—			10,000
Financing cost of sale of securities		—		—		(883	)		—			—			(883	)
Issuance of common stock for exercise of pre-funded warrants		842,937		—		5			—			—			5
Stock-based compensation		—		—		932			—			—			932
Unrealized gain on marketable securities		—		—		—			32			—			32
Net loss		—		—		—			—			(1,371	)		(1,371	)
Balance, March 31, 2023		1,565,920	$	1	$	323,938		$	—		$	(327,076	)	$	(3,137	)
Issuance of common stock for exercise of pre-funded warrants		2,104,000		—		—			—			—			—
Issuance of common stock for exercise of warrants		7,034,883		—		7,774			—			—			7,774
Financing cost of warrant inducement and exercise		—		—		(414	)		—			—			(414	)
Reversal of warrant liability due to exercise of warrants		—		—		1,442			—			—			1,442
Share-based compensation		—		—		795			—			—			795
Net loss		—		—		—			—			(7,568	)		(7,568	)
Balance, June 30, 2023		10,704,803	$	1	$	333,535		$	—		$	(334,644	)	$	(1,108	)