Quarterly report pursuant to Section 13 or 15(d)

Organization and Description of Business

v3.23.3
Organization and Description of Business
9 Months Ended
Sep. 30, 2023
Accounting Policies [Abstract]  
Organization and Description of Business

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 $340.0 million as of September 30, 2023. For the nine months ended September 30, 2023, the Company used $25.6 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 to the extent it continues to advance its programs. As of September 30, 2023, the Company had $5.4 million in cash, cash equivalents and marketable securities, which, without additional funding, the Company believes will not be sufficient to meet its obligations soon after the date of issuance of these consolidated financial statements. The Company's future viability is dependent on its ability 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 suspension from trading of the Company's common stock on the Nasdaq Capital Market. 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 in the near-term, 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.

The Company has sought a strategic partnership or collaboration with one or more parties and has also sought other financial and strategic alternatives. To date, the Company has continued research and development activities while managing its cash position. However, the Company requires additional resources in order to continue as a going concern. The Company can provide no assurance that it will be successful in obtaining additional resources to improve its financial condition. If the Company is unable to obtain additional resources soon, the Company’s Board of Directors is likely to determine to place the Company into bankruptcy or other dissolution proceedings.

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, for aggregate net proceeds to the Company of $9.1 million after placement agent fees and offering expenses payable by the Company.

On June 26, 2023, the Company entered into an inducement offer to exercise common stock purchase warrants (the “Inducement Agreement”) with an institutional investor (the “Holder”) to purchase up to an aggregate of 7,034,883 shares of the Company’s common stock. The Inducement Agreement provided the Holder with the opportunity to exercise all of (i) the Class A Warrant, (ii) Class B Warrant and (iii) the 2023 Warrant (collectively, the “Existing Warrants”) held by the Holder, each at a reduced exercise price from $4.00 to $1.36 per underlying share, which was equal to the most recent closing price of the Company’s common stock on The Nasdaq Capital Market prior to the execution of the Inducement Agreement. In consideration for exercising the Existing Warrants (the “Warrant Exercise”), at an exercise price equal to $1.36 per underlying share, the Company issued to the Holder or (i) a new unregistered Class C Common Stock Purchase Warrant (the “Class C Warrant”) to purchase up to 1,406,977 shares of common stock, at an exercise price equal to $1.36 per underlying share and (ii) a new unregistered Class D Common Stock Purchase Warrant (the “Class D Warrant” and together with the Class C Warrant, the “New Warrants”) to purchase up to 5,627,906 shares of common stock, at an exercise price equal to $1.36 per underlying share (such shares of common stock issuable upon exercise of the New Warrants, the “New Warrant Shares”). The proceeds to the Company from the Warrant Exercise were $9.6 million, prior to deducting fees to the financial advisor and estimated expenses.

The significant changes in common stock outstanding have impacted and are expected to continue to impact the year-over-year comparability of the Company’s net loss per share calculations. All share and per share amounts have been adjusted for all periods presented to reflect a one-for-eighty reverse stock split effected on February 14, 2023.