FREQUENTLY ASKED QUESTIONS
Last updated November 2023
What operational and financial adjustments did the Company make in fiscal year 2023?
During FY23, the Company made significant reductions to its workforce, cash burn rate, and operating expenses, to preserve its resources and use them where they are most needed. This transformation consisted of reducing our force of full-time employees by approximately 70%, adding five part-time employees, and leveraging experienced consultants and advisors on a part-time basis. This, along with other expense reduction measures, led to significant improvements in the Company’s cash burn, G&A expense, and R&D expense run rates. Compared to the prior fiscal year, in FY23 we saw decreases in the Company’s cash used in operating activities of 68%, decreases in G&A expense of 61%, and decreases in R&D expense of 90%.
By restructuring our workforce and electing to retain specialized consultants where possible, we believe we have significantly enhanced our regulatory, clinical, and medical capabilities, and further assembled a team that places the Company in the best position to be successful. We are optimistic that the latest clinical hold submission to the FDA will result in the lifting of the clinical hold. If successful, our current team stands ready to implement the best strategies to maximize shareholder value in the near- and long-term.
What is the status of the clinical hold?
The Company recently provided additional information to the FDA that we believe answers the FDA’s remaining questions. We hope this submission will lead to the removal of the clinical hold. The Company is on standby to address any other issues that may be noted by the FDA, and is optimistic that the time, effort and significant cost investment over the past year will result in the removal of the hold.
What is the short-term development plan for leronlimab following the resolution of the clinical hold?
The Company has continually evaluated the various indications for leronlimab, and worked to strategically determine how to best focus and advance each indication – whether in-house and/or through strategic partnerships. This work did not cease during the clinical hold process.
Following the resolution of the clinical hold, we will continue to focus on a multiple therapeutic development approach to leronlimab. We have already been working toward eventual decisions as to the most opportunistic, least capital-intensive manner to develop and create value through various means for leronlimab, identifying strategies that are time- and cost-effective and create the opportunity for non-dilutive financing opportunities such as license agreements, co-development, partnerships, etc. For example, KOLs consulting with the Company identified a clinical trial in the HIV space they feel strongly about that will help patients and can be conducted in a time- and cost-effective manner. Further, we will continue to evaluate pre-clinical combination therapy trials in MASH and oncology. Positive developments in the foregoing initiatives could also result in more substantive interest from third parties by way of licensing and collaboration agreements, joint development initiatives, and other partnership opportunities.
What is the current status of the longer-acting therapeutic project?
Early in 2023, the Company entered into a partnership directed toward developing a long-acting therapeutic to bolster our existing IP portfolio and patent protection with the goals of attracting partnership opportunities, preserving and increasing the value of our patent portfolio, and creating additional shareholder value.
The partner company is an experienced drug development company and uses generative artificial intelligence (AI), among other technologies, in its development activities. If successful, such a modified therapeutic would require less frequent injections for patients on drug, furthering the convenience and overall marketability of the product. Working with a company with established AI-capabilities allows for an expedited and robust development path for this modified, longer-acting therapeutic for the Company.
What is the current status of the CEO search?
As previously announced, the Board has been searching for a new Chief Executive Officer, with a focus on identifying a candidate possessing the requisite experience and expertise to enhance the Company’s overall business strategies and efforts to achieve regulatory approval and commercialization of leronlimab. Currently, the search has been narrowed to several highly qualified candidates, and we anticipate having a new CEO in place by the end of the year.
How does the Company make decisions as it relates to executive compensation?
Each year, the Company’s Board of Directors reviews and appoints at least three independent members of the Board to serve on a compensation committee (the “Compensation Committee”). Among other duties, the Compensation Committee oversees incentive, equity-based and other compensatory plans for executive officers of the Company.
On an annual basis, the Compensation Committee evaluates the Company’s overall compensation philosophy and determines base salaries and other forms of compensation to be paid to executive officers, including cash incentive compensation and grants of stock options and other stock-based awards, which are all disclosed in the Company’s annual proxy statements. The Compensation Committee’s decisions are based on (annual) recommendations received from an independent executive compensation advisory firm retained by the Compensation Committee. The independent compensation consultant analyzes peer companies and other benchmarking and comparison data, and then makes recommendations as to the competitiveness of the Company’s executive compensation program, and a proposed mix of compensation elements. The above process ensures that the Company and Compensation Committee’s practices are in-line with industry standards, and companies of similar size and financial condition. This process also helps ensure that the Company is able to attract and retain talented key employees.
At the 2019 Annual Meeting of the Company, our stockholders approved the Board’s recommendation that an advisory vote on executive compensation be conducted annually. Accordingly, each fiscal year, the shareholders are asked to place an advisory vote as to the compensation of our executive officers.
Additional information as it relates to responsibilities and processes of the Compensation Committee is set forth in its charter and director and executive officer compensation policy, which are posted on our website under Governance Documents. Additional, more-detailed information in relation to the compensation paid to executive officers can be found in the Company’s required SEC filings, including the Company’s Definitive Proxy Statement filed on September 25, 2023.
What is the current status of the Amarex litigation effort?
In July 2023, the Company took the next step towards holding Amarex, its former clinical research organization (CRO), accountable for its numerous failures in relation to clinical trial management and regulatory services it was supposed to have provided to CytoDyn. The Company is seeking damages in excess of $100 million from Amarex in this action. We have fully funded the Company’s counsel, Sidley Austin LLP, for this litigation effort in advance, which allows them to take all steps necessary to maximize the Company’s recovery from Amarex. The final arbitration hearing is set to commence August 12, 2024. We would then expect the arbitrator to issue their final order sometime in the weeks following the conclusion of the final hearing, perhaps in late September 2024. We are confident in our case and have one of the preeminent litigation firms in the world representing the Company in this proceeding. We will continue to vigorously pursue this matter.
What is the status of the new communication strategy?
The Company is in the process of making a marked shift in its communications with stakeholders. These renewed engagement efforts will be clear, concise, measured, and compliant with pertinent regulatory requirements. We will continue to update shareholders as required with material information and developments via our SEC filings, but we also anticipate communicating more frequently with investors via direct communications. We will also communicate more frequently with the market at large, and we actively review and respond to investor inquiries.
You already may have noticed a change in our responsiveness with investors via the Company’s IR email account (firstname.lastname@example.org) over the past several months. Additionally, we actively review all investor communications for recurring themes which helps better inform the Company on what is most important to current and potential investors. We are also in the process of setting up a FAQ section on the Company’s website where we intend to post and respond to the most important questions. This FAQ page will be updated on a regular basis.
Note Regarding Forward-Looking Statements
This Frequently Asked Questions supplement contains forward-looking statements relating to, among other things, future operating and financial performance, product development, market position and business strategy. The reader is cautioned not to rely on these statements, which are based on current expectations of future events. For important information about these statements and/or our Company, including the risks, uncertainties and other factors that could cause actual results to vary materially from the assumptions, expectations and projections expressed in any forward-looking statements, the reader should review the Annual Report on Form 10-K for the fiscal year ended May 31, 2023, including in the sections captioned “Forward Looking Statements” and “Item 1A. Risk Factors”, as later supplemented by our Form 10-Q for the quarter ended August 31, 2023, in the section captioned “Item 1A. Risk Factors”. CytoDyn Inc. does not undertake to update any forward-looking statement as a result of new information or future events or developments.