Sienna Biopharmaceuticals, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
September 30, 2018
Organization and Description of Business
In these notes to the unaudited condensed consolidated financial statements, the
Company, Sienna, we, us, and our refers to Sienna Biopharmaceuticals, Inc. (formerly Sienna Labs, Inc.) and its subsidiaries on a consolidated basis.
Sienna Biopharmaceuticals, Inc. was incorporated on July 27, 2010, under the laws of the State of Delaware and is headquartered in
Westlake Village, California. The Company is a clinical-stage biopharmaceutical company focused on bringing innovations in biotechnology to the discovery, development and commercialization of first-in-class, targeted, topical products in medical dermatology and aesthetics.
July 20, 2017, the Company amended and restated its certificate of incorporation, giving effect to a 1-for-5.87 reverse stock split of the Companys capital
stock. All share and per share information included in the accompanying unaudited condensed consolidated financial statements has been adjusted to reflect this reverse stock split.
On August 1, 2017, the Company completed its initial public offering, or IPO, of 4,983,333 shares of common stock, which included
the exercise in full by the underwriters of their option to purchase up to 650,000 additional shares of common stock, at an offering price to the public of $15.00 per share. The Company received net proceeds of approximately $66.4 million after
deducting underwriting discounts, commissions and offering related transaction costs. In connection with the IPO, the Companys outstanding shares of convertible preferred stock were automatically converted into 12.8 million shares of
common stock. As of September 30, 2018, the Company had 21.1 million shares of common stock outstanding. See Note 13, Stockholders Equity.
In connection with the completion of its IPO, on August 1, 2017, the Companys certificate of incorporation was amended and restated
to provide for 300.0 million authorized shares of common stock with a par value of $0.0001 per share and 10.0 million authorized shares of preferred stock with a par value of $0.0001 per share.
On June 29, 2018, the Company entered into a new loan and security agreement (the SVB Loan Agreement) with Silicon Valley
Bank (SVB), pursuant to which SVB agreed to make available to the Company term loans with an aggregate principal amount of up to $40.0 million, $30.0 million of which was funded on June 29, 2018 and $10.0 million of
which remains available for borrowing, subject to the satisfaction of certain conditions set forth in the SVB Loan Agreement. See Note 10, Long-Term Debt.
On August 3, 2018 the Company entered into a sales agreement (the Sales Agreement) with Cowen and Company, LLC
(Cowen), pursuant to which the Company may sell from time to time, at its option, up to $75.0 million of the Companys common stock through an
at-the-market equity offering program under which Cowen will act as sales agent (the ATM Offering Program).
On August 3, 2018, the Company also filed a Registration Statement on Form S-3 (the Shelf
Registration Statement), covering the offering of up to $250.0 million of common stock, preferred stock, debt securities, warrants, purchase contracts and units. The Shelf Registration Statement included a prospectus covering the
offering, issuance and sale of up to $75.0 million of the Companys common stock from time to time through the ATM Offering Program. The Registration Statement became effective on August 14, 2018. The shares to be sold under
the Sales Agreement, may be issued and sold pursuant to the Shelf Registration Statement. During the three months ended September 30, 2018, the Company issued 340,307 shares of its common stock through the ATM Offering Program and
received net proceeds of approximately $5.0 million, after deducting commissions of $0.2 million and other offering expenses of $0.4 million.
2. Liquidity Risks
The Company has
incurred 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. The
Company had an accumulated deficit of $140.0 million and $85.9 million as of September 30, 2018 and December 31, 2017, respectively. The Company had net losses of $16.8 million and $54.1 million for the three and nine
months ended September 30, 2018 and $16.4 million and $39.4 million for the three and nine months ended September 30, 2017, respectively, and net cash used in operating activities of $46.1 million and $26.9 million for
the nine months ended September 30, 2018 and 2017, respectively.
The Company has historically financed its operations primarily
through private and public equity issuances and debt offerings, and more recently through term loans under the SVB Loan Agreement and proceeds from the Companys ATM Offering Program. Pursuant to the SVB Loan Agreement, if the Company fails to
receive positive Phase 2b data for SNA-120 by March 31, 2019, the