Washington, D.C. 20549
APTOSE BIOSCIENCES INC.
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. Yesý ☒ Noo ☐
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). Yesý ☒ Noo ☐
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.
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.ý ☒
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yeso ☐ No ý☒
See accompanying notes to condensed consolidated interim financial statements (unaudited).
APTOSE BIOSCIENCES INC.
APTOSE BIOSCIENCES INC.
See accompanying notes to condensed consolidated interim financial statements (unaudited)
APTOSE BIOSCIENCES INC.
The Company uses historical data to estimate the expected dividend yield and expected volatility of its common shares in determining the fair value of stock options. The expected life of the options represents the estimated length of time the options are expected to remain outstanding.
The Company has a stock incentive plan (SIP) pursuant to which the Board may grant stock-based awards comprised of restricted stock units or dividend equivalents to employees, officers, consultants, independent contractors, advisors and non-employee directors of the Company. Each restricted unit is automatically redeemed for one common share of the Company upon vesting. The following table presents the activity under the SIP plan for the six months ended June 30, 20192020 and 20182019 the units outstanding.
On June 3, 2019, the Company granted 80,000 restricted share units (RSUs), 40,000 of which have a vesting term of three months and the balance havinghave a vesting term of one year. On May 5, 2020, the vesting term on the balance was extended from one year to one year and one month.
The Company recorded share-based payment expense related to stock options and RSUs as follows:
| 11. | Related party transactions: |
The Company uses Moores Cancer Center at the University of California San Diego (UCSD) to provide pharmacology lab services to the Company. Dr. Stephen Howell is thea member of our Scientific Advisory Board and former Acting Chief Medical Officer of Aptose up to January 1, 2020, and is also a Professor of Medicine at UCSD and oversees the laboratory work. The work is completed under the terms of research services agreements executed in March 2015 and has been extended annually. In March 2019, the Board approved an extension of this agreement for twelve months for services up to $300,000. These transactions are in the normal course of business and are measured at the amount of consideration established and agreed to by the related parties.
During the six monthscomparative period ended June 30, 2019, while Dr. Howell was Acting Chief Medical Officer, the Company recorded $135 thousand (2018 – $143 thousand) in research and development expenses related to the agreement.
| APTOSE BIOSCIENCES INC. |
| Notes to Condensed Consolidated Interim Financial Statements (unaudited) |
| Three and six months ended June 30, 2020 and 2019 |
| (Tabular amounts in thousands of United States dollars, except as otherwise noted) |
(a) On July 20, 2020, the Company completed a confidentially marketed public offering through the issuance of 10,500,000 common shares at a price of $5.25 per share for gross proceeds of $55.12 million.
ITEMItem 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS– Management’s Discussion and Analysis of Financial Condition and Results of Operations
This discussionQuarterly Report on Form 10-Q contains certain forward-looking statements that involve riskswithin the meaning of Section 27A of the Securities Act of 1933, as amended, and uncertainties.Section 21E of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. For more information, see “Cautionary Note Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and uncertainties described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, as updated and supplemented in Part II, Item 1A in this Quarterly Report on Form 10-Q. These risks and uncertainties could cause actual results to differ materially from those projected or implied by our forward-looking statements contained in this report. These forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and do not assume any obligation, to update these forward-looking statements, except as required by law.
The following discussion should be read in conjunction with our unaudited condensed consolidated interim financial statements and accompanying notes contained in this Quarterly Report on Form 10-Q and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2018.2019.
All amounts are expressed in United States dollars unless otherwise stated.
OVERVIEW
Aptose Biosciences Inc. (“we”, “our”, “us”, “Aptose” or the “Company”) is a science-driven biotechnology company advancing first-in-class targeted agents to treat life-threatening cancers, such as acute myeloid leukemia (“AML”), high-risk myelodysplastic syndromes (“MDS”), chronic lymphocytic leukemia (“CLL”) and other hematologic malignancies. Based on insights into the genetic and epigenetic profiles of certain cancers and patient populations, Aptose is building a pipeline of novel oncology therapies directed at dysregulated processes and signaling pathways. Aptose is developing targeted medicines for precision treatment of these diseases based on the specific gene expression signature of a patient’s malignancy. In the treatment of cancer, this strategy is intended to optimize efficacy and quality of life by minimizing the cytotoxic side effects associated with conventional therapies. We currently have in development two molecules: CG026806 (“CG-806”) and APTO-253, both being evaluated for safety, tolerance,tolerability, pharmacokinetics and signals of efficacy in Phase 1 clinical trials. Each molecule is described below:below.
CG-806 is an orally administered, highly potent first-in-class pan-FLT3/pan-BTKFMS-like tyrosine kinase (“FLT3”)/Bruton’s tyrosine kinase (“BTK”) inhibitor andthat selectively targets defined clusters of kinases that are operative in hematologic malignancies. This mutationally agnostic small molecule anticancer agent is currently being evaluated in a Phase 11a/b study for the treatment of patients having B-cell malignancies including classic CLL, small lymphocytic lymphoma (“SLL”) and certain non-Hodgkin’s lymphomas (“NHL”) that are resistant/refractory/intolerant to other therapies. In addition, Aptose also is planning forrecently received IND allowance to initiate a Phase 11a/b study for the development ofto develop CG-806 for the treatment of patients with relapsed/refractory Acute Myeloid Leukemiaacute myeloid leukemia (“R/R AML”), including the emerging populations resistant to FMS-like tyrosine kinase 3 (“FLT3”)FLT3 inhibitors. CG-806 is a highly potent, reversible, non-covalent inhibitor of the wild type and mutant forms of the Bruton’s tyrosine kinase (“BTK”) enzyme. Overexpression of BTK drives certain B cell malignancies, and treatment of such B cell malignancies with covalent BTK inhibitors that target the cysteine residue in the active site of BTK have heralded dramatic responses in many patients, but also can lead to drug resistance via mutation of the cysteine amino acid residue to a serine residue (“BTK-C481S mutant”) thus rendering such covalent inhibitors less effective. CG-806 targets the ATP-binding pocket of BTK through a reversible, non-covalent mechanism, thereby allowing CG-806 to retain low nanomolar potency against the BTK-C481S mutant enzyme. Simultaneously, CG-806 inhibits aberrant intracellular BTK signaling and a handful of other oncogenic signaling pathways, thereby allowing CG-806 to exert potent and direct killing of the cancer cells without targeting pathways often associated with toxicities. Thus, CG-806 may serve as a novel therapeutic agent to treat B cell malignancy patients that are refractory, resistant or intolerant to covalent BTK inhibitors and other non-covalent BTK inhibitors currently in development. In addition to potent inhibition of wild type and mutant forms of the BTK enzyme, CG-806 exhibits high potency (picomolar to low nanomolar IC50 values) for inhibition of the FLT3 cell surface receptor with the Internal Tandem Duplication (“FLT3-ITD”) and significant potency against all other mutant forms of FLT3. Because of the potency of CG-806 against the FLT3 receptor, it may become an effective therapy for AML patients, including the subset of patients having the FLT3-ITD, which occurs in approximately 30%this trial of patients with R/R AML, and is associated with poor prognosis. As noted above,the CG-806 also suppressesstarting dose of 450 mg BID was selected because the initiation and intracellular transmission of other oncogenic signaling pathways which are operativeplasma from B-cell cancer patients at that dose completely inhibited phospho-FLT3, suggesting responses may emerge early in AML, thereby potentially allowing the agent to become a broadly active and important therapeutic option for the difficult-to-treat AML patient populationpopulation. It is important to note that CG-806 now is undergoing formal development for both lymphoid and hopefully slowing the pace of drug resistance in patients.myeloid hematologic malignancies.
APTO-253 is our Phase 1-stagea first-in-class small molecule therapeutic agent that clinically inhibits expression of the MYC oncogene without causing, to date, general myelosuppression of the bone marrow. The MYC oncogene is overexpressed inacross many hematologic cancers, including AML and certain B cell malignancies.malignancies, as well as certain solid tumor indications. MYC isacts as a transcription factor that regulates cell growth, proliferation, differentiation and apoptosis, and overexpression of MYC amplifies new sets of genes to promote survival of cancer cells. APTO-253 down regulatessuppresses expression of the MYC oncogene in AML cells and depletes those cells of the MYC oncoprotein, leading to apoptotic cell deathdeath. APTO-253 is currently being evaluated in AML cells. Indeed,a Phase 1b study for the first AML patient administered the lowest dose level (20 mg/m2)treatment of APTO-253 experienced a significant reduction in the expression of MYC in blood cells (“PBMCs”) during the 28-day cycle of therapy, and no drug-related adverse events were noted. Likewise, the second patient administered APTO-253, this time an MDS patient administered the second dose level (40 mg/m2), also showed a significant reduction in the expression of MYC in PBMCs during the 28-day cycle of therapy, and no drug-related adverse events were noted. Currently, Aptose is dosing patients with the third dose level (66mg/m2). Thus,R/R AML and high-risk MDS. APTO-253 may serve as a safe and effective MYC inhibitor for AML/MDS patients that combines well with other agents and does not significantly impact the normal bone marrow.
EXPANSION OF THE MANAGEMENT TEAM AND FINANCING
On June 3, 2019, we announced the appointment of Jotin Marango, M.D., Ph.D., to the position of Senior Vice President, Chief Business Officer. In his role as a member of the executive leadership team, Dr. Marango is responsible for Aptose’s corporate and business development initiatives, including licensing and alliance management, business and product strategy, as well as market and competitive intelligence.
On June 3, 2019, we announced the closing of an underwritten public offering (the “Offering”) of 11,500,000 common shares (the “Common Shares”) at a price to the public of $1.85 per Common Share, which includes the exercise in full by the underwriters for the Offering (the “Underwriters”) of an option to purchase 1,500,000 additional Common Shares. The gross proceeds from the Offering, before deducing the underwriting discounts and commissions, were approximately $21.3 million. We intend to use the net proceeds of the Offering to accelerate and expand our clinical trial programs, and for working capital and general corporate purposes.
On May 24, 2019, we entered into an at-the-market equity facility (the “2019 ATM Facility”) with Piper Jaffray & Co. (“Piper Jaffray”) and Canaccord Genuity LLC (“Canaccord Genuity”), acting as co-agents. Under the terms of this facility, we may, from time to time, issue and sell through the co-agents, up to $40 million Common Shares through at-the-market distributions on the NASDA Capital Market. The 2019 ATM Facility replaces the previous at-the-market facility that we entered into with Cantor Fitzgerald & Co. (“Cantor Fitzgerald”) in 2018 (the “2018 ATM Facility”).
On May 7, 2019, we announced the commencement of a $20 million common share purchase agreement (the “2019 Purchase Agreement”) with Aspire Capital Fund, LLC (“Aspire Capital”). Pursuant to the 2019 Purchase Agreement, Aspire Capital has committed to purchase up to $20 million of Common Shares, at Aptose’s request from time to time, for up to 30 months. The 2019 Purchase Agreement replaces the previous common share purchase agreement that we entered into with Aspire Capital in May 2018 (the “2018 Purchase Agreement”).
PROGRAM UPDATES
CG-806
Indication and Clinical Trials:
CG-806 is being developed with the intent to deliver the agent as an oral therapeutic and to develop it for relapsed and refractory (R/R) AML/ MDSR/R AML and for appropriatea spectrum of B cell malignancies (including but not limited to CLL, SLL and NHL). In collaboration with
On March 25, 2019, we announced that the FDA, we wereU.S Food and Drug Administration (“FDA”) granted INDAptose Investigational New Drug (“IND”) allowance to evaluateinitiate its Phase Ia/b clinical trial for CG-806. The clinical trial is a multicenter, open label, dose-escalation study with additional optional expansion cohorts to assess the safety, tolerability, pharmacokinetics and pharmacodynamic effects, and preliminary efficacy of CG-806 as part of a Phase 1 program in patients with B cell malignancies, andCLL, SLL or NHL. In this trialstudy, CG-806 is now started.administered in gelatin capsules twice daily (“BID”) during a 28-day cycle.
We are finalizing our strategy to performAs of the date of this report, we have initiated twenty-four clinical studiessites for the Phase 1a/b trial in patients with AML/MDS.CLL/SLL or NHL which include specialty regional cancer care centers as well as large hospitals and key academic institutions. As of the date of this report, we have completed the first, second, third and fourth dose levels (150 mg, 300 mg, 450 mg and 600 mg BID, respectively). Aptose now has opened for patient enrollment for the fifth dose level (750 mg BID) of CG-806. Under an FDA-approved accelerated titration protocol, only one patient was required at each of the first two dose levels, followed by three patients at each dose level thereafter. Intra-patient dose escalation is allowed if the higher dose is safe in three or more patients, and additional patients may be enrolled at dose levels previously declared safe. To date, among enrolled patients with an array of B-cell malignancies, three classic CLL patients have received CG-806 and all three demonstrated inhibition of phospho-BTK and lymphocytosis, indicating target engagement and pharmacologic activity of CG-806. As CG-806 moves from low/intermediate dose levels and into the higher dose levels, it is hoped that an optimal dose can be selected that demonstrates formal clinical responses without excessive toxicity.
Aptose also plans to advance CG-806 into myeloid malignancies, with an initial focus on AML, in a separate Phase 1 trial. On June 29, 2020, the Company announced that it had received allowance from the FDA to proceed into a study in R/R AML with a starting dose of 450 mg BID. The clinical trial is a multicenter, open label, dose-escalation study with additional optional expansion cohorts to assess the safety, tolerability, pharmacokinetics and pharmacodynamic effects, and preliminary efficacy of CG-806 in patients with R/R AML. In this study, CG-806 is administered in BID during a 28-day cycle. Our strategy was to identify a starting dose of CG-806 that we believe could be therapeutically active in critically ill patients with R/R AML. In our ongoing Phase 1a/b study in patients with CLL and other B-cell malignancies, 450 mg BID CG-806 delivered plasma levels that completely inhibited phospho-FLT3, suggesting that the 450 mg BID dose may be therapeutically active in patients with AML. Aptose plans to dose escalate beyond the 450 mg BID dose level, provided the 450 mg BID dose level is safe and well tolerated in R/R AML patients. Based on strong preclinical evidence of CG-806’s activity against AML – including demonstration of mutation-agnostic and genotype-agnostic potency, particularly compared against other FLT3 inhibitors, and its ability to safely cure AML in murine leukemia models – we believe CG-806 may offer hope to the fragile and difficult-to-treat AML patient population. We intend to initiate the Phase 1a/b study during the second half of 2020 in AML patients who are relapsed, resistant, or refractory to current treatments.
The FDA has granted orphan drug designation to CG-806 for the treatment of patients with AML. Orphan drug designation is granted by the FDA to encourage companies to develop therapies for the treatment of diseases that affect fewer than 200,000 individuals in the United States. Orphan drug status provides research and development tax credits, an opportunity to obtain grant funding, exemption from FDA application fees and other benefits. If CG-806 is approved to treat AML, theThe orphan drug designation also provides us with seven additional years of marketing exclusivity.exclusivity in this indication.
On March 25, 2019, we announced that the U.S Food and Drug Administration (“FDA”) granted Aptose Investigational New Drug (“IND”) allowance to initiate its Phase 1 clinical trial for CG-806. The Phase 1 clinical trial is a multicenter, open label, dose-escalation study with expansions to assess the safety, tolerability, PK, and preliminary efficacy of CG-806 in patients with CLL, SLL or NHL. The initial goal of the trial is to evaluate safety, tolerability and pharmacokinetics of CG-806 in these patient populations and to observe for signals of efficacy. CG-806 in gelatin capsules will be dosed every 12 hours during a 28-day cycle, and the starting dose will be 150mg. Pending the collection of predictive pharmacokinetic data in humans, Aptose plans to seek allowance from the FDA to move CG-806 into the AML/MDS patient population in a separate Phase I trial.
As of the date of this report, we have initiated 8 sites for the Phase 1a/b trial in patients with CLL/SLL or NHL and enrolled the first patient at the dose level of 150mg [taken two times daily (“BID”)] (only one patient is required at this dose level). Provided the patient tolerates the therapy for the full 28-day cycle and following review of relevant data by our drug safety monitoring board (DSMB), Aptose plans to enroll one patient at the second dose level (300mg BID).
Manufacturing:
We
During fiscal years 2017 and 2018, we created a scalable chemical synthetic route for the manufacture of CG-806 drug substance and have scaled the manufacture of API (active pharmaceutical ingredient, or drug substance) to kg levels. We manufactured and delivered a batch of API which was used for Dose Range Finding Studies that were performed and completed in early January 2018. We completed in March 2018 the manufacture of a multi-kg batch of Good Laboratory Practice (“GLP”) grade API and then formulated that API into a drug product for use in IND-enabling GLP toxicology studies. We alsolevels, we completed the manufacture of a multi-kg batch of API under Good Manufacturing Product (“GMP”) conditions as our API supply for our first-in-human clinical trials, and we manufactured under GMP conditions two dosage strengths of capsules to serve as our clinical supply in those human studies. In June 2018,During fiscal 2019, we completed a secondsuccessful manufacture of multiple batches of API and drug product, and planned numerous GMP batch of drug productproduction campaigns to supply the trial. Althoughongoing trial and planned trials into the future. To date we have been able to manufacture API and capsules to support clinical supplies under GMP conditions,conditions. We are continuing our manufacturing campaigns in the current 2020 fiscal period and have commenced scale-up and tech transfer activities to support additional manufacturing capacity for the ongoing and planned clinical trials of CG-806. Additional research and development funds are being utilized to support further exploratory formulation studies in an ongoing effort to craft a superior formulation for later stage development of CG-806. During
Data presentations:
On April 27, 2020, we presented the year ended December 31, 2018, we completedearly clinical data on CG-806 at the in-life dosing phaseAACR Virtual Annual Meeting I (April 27-28) in lieu of the IND-enabling GLP toxicology studieslive oral presentation originally planned. A video summary of Abstract # 9967 - Early clinical findings from a Phase 1a/b dose escalation trial to evaluate the safety and received audited reports for such studies earlytolerability of CG-806 in fiscal 2019.patients with relapsed or refractory CLL/SLL or non-Hodgkin’s lymphomas described the first-in-human tests of CG-806 are being carried out in a Phase 1a/b clinical study in patients with significant unmet needs including patients with relapsed or refractory CLL, SLL or NHL who had been failed by or been intolerant to two lines of established therapy. We noted that the second patient, treated at the 300 mg BID dose level, represented a classic CLL patient that developed a brisk lymphocytosis (evidence of BTK target engagement and evidence of pharmacologic activity), and that enrollment was continuing.
Intellectual Property:
In May 2018,On June 12, 2020, we paid $2.0 millionpresented new clinical data on CG-806 in cash and obtaineda poster presentation at the rights to CG-806, for all fields of use, in all territories outside25th Congress of the RepublicEHA. The poster, Early Clinical Findings from a Phase 1 a/b Dose Escalation Trial to Evaluate the Safety and Tolerability of Korea and China, by exercising an option we obtained through a June 2016 option-license agreement with South Korean company CrystalGenomics, Inc. (“CG”), granting us an exclusive option to research, develop and commercialize (collectively the “Rights”) CG-806.
In June 2018, we entered into a separate license agreement with CG for Aptose to gain a license for Rights to CG-806 in Patients with Relapsed or Refractory CLL/SLL or Non-Hodgkin’s Lymphomas (EHA2020 Abstract# EP711), reviewed CG-806 data for eight patients (as of the People’s Republic of China, Hong Kong and Macau (the “China Rights”). Underdata cut-off date on May 5, 2020) with relapsed or refractory CLL,SLL or NHL in the license agreement, Aptose made an upfront payment to CG of $3.0 million for the China Rights. CG is eligible for payments upon the achievement of developmental, regulatory and commercial-based milestones, as well as single-digit royalties on product sales in China. Aptose now owns worldwide Rights to CG-806, including an issued patent in China but excluding any Rights in Korea.
We have continued to augment our patent protection on CG-806. On September 12, 2017, we announced that we received a noticefirst in-human Phase 1a/b, open-label, single arm, multicenter dose-escalation clinical study. Data from the United States Patentongoing trial demonstrated CG-806 was well-tolerated in patients treated at 150 mg, 300 mg, 450 mg BID over multiple cycles, with no dose-limiting toxicities or serious adverse events observed, supporting continued dose escalation. CG-806 treatment achieved human steady state PK levels known to be effective in murine tumor models and Trademark Office (“USPTO”) statingled to complete inhibition of phospho-BTK and multiple CLL survival pathways. CG-806 treatment also led to lymphocytosis in both classic CLL patients entering study with elevated lymphocyte counts and led to complete inhibition of phospho-FLT3, suggesting that our U.S. Patent Application had been issueddose levels evaluated in this study may be therapeutic in patients with AML.
On June 22, 2020, we presented new preclinical data on CG-806 in a poster presentation at the AACR Virtual Annual II 2020. The poster, CG-806, a First-in-Class FLT3/BTK Inhibitor, and Venetoclax Synergize to Inhibit Cell Proliferation and to Induce Apoptosis and Aggressive B-cell Lymphomas, illustrated how CG-806 simultaneously inhibits the driver BCR pathway and PI3K/AKT, NFᴋB and MAPK-mediated rescue pathways to kill aggressive double-hit and double-expressor B-cell lymphoma cells. Overall, the presented work provided additional mechanistic evidence to support the clinical development of CG-806 as a patent. The patent claims numerous compounds, including the CG-806 compound, pharmaceutical compositions comprising the CG-806 compound,single agent or in combination with venetoclax in patients with aggressive B-cell lymphomas harboring unfavorable BCL2/MYC/BCL6 translocations and methods of treating various diseases caused by abnormal/ or uncontrolled activation of protein kinases. On July 9, 2018, we received a notice from the Japan Patent Office stating that our Japan Patent Application has been issued as a patent. The patent claims the CG-806 compound, pharmaceutical compositions comprising the CG-806 compound, and uses for treating various diseases caused by abnormal or uncontrolled activation of protein kinases. On September 27, 2018, we announced that the European Patent Office had issued a patent. The granted patent claims the CG-806 compound, pharmaceutical compositions comprising the CG-806 compound, and uses for treating diseases caused by abnormal or uncontrolled activation of protein kinases, such as cancer. This European patent will be nationalized in, and cover, approximately forty European countries including the United Kingdom, France, Germany, Italy, the Netherlands and Spain. The patent is expected to provide protection until the end of 2033. Finally, on March 4, 2019, we announced that the Australian Patent Office had issued a patent that claims various compounds, including the CG-806 compound, pharmaceutical compositions comprising the CG-806 compound, and uses for the treatment of various diseases, such as lymphoma or leukemia. The patent is expected to provide protection until December 2033.overexpression.
We have completed several studies that demonstrate the highly differentiated profile of CG-806. Key studies that have been presented at scientific forums are as follows:
| · | On April 15, 2018, at the 2018 Annual Meeting of the American Association for Cancer Research (“AACR”), we presented with the OHSU Knight Cancer Institute preclinical data demonstrating that CG-806, a pan-FLT3/pan-BTK inhibitor, demonstrates broader activity and superior potency to other FLT3 and BTK inhibitors against primary bone marrow samples from patients with hematologic malignancies. We also presented preclinical data demonstrating CG-806 targets multiple pathways to kill diverse subtypes of AML and B-cell malignancies in vitro. |
| · | On June 15, 2018, at the 23rd Congress of the European Hematology Association (“EHA”), we presented, during a poster presentation, preclinical data demonstrating CG-806 unique binding to wild type and C481S mutant BTK. Further, we presented that CG-806 suppresses the BCR, AKT/PI3K, ERK and NFkB signaling pathways and exerts broader and far greater potency of direct cancer cell killing that Ibrutinib against malignant bone marrow cells from patients with CLL, ALL and a host of other hematologic malignancies. |
| · | On December 3, 2018, we announced two separate poster presentations at the American Society of Hematology (ASH) Annual Meeting being held on December 1-4, 2018. The OHSU Knight Cancer Institute and Aptose presented data in one poster and the team at The University of Texas MD Anderson Cancer Center (“MDACC”) presented data in a separate poster. These presentations highlighted several key findings. First, in collaboration with the MDACC, orally administered CG-806 demonstrated efficacy in a patient derived xenograft (“PDX”) study in which the bone marrow cells from a patient with AML having dual ITD and D835 mutations in FLT3 were implanted into a mouse. The dual FLT3 mutant form of AML represents a very difficult to treat population that has shown resistance to other FLT3 inhibitors, and data from the PDX model suggest that CG-806 may be useful in treating such patients. Secondly, Aptose presented high level data from preclinical GLP toxicology studies that demonstrate orally administered CG806 is a well-tolerated targeted molecule. Finally, in collaboration with the OHSU Knight Cancer Center, studies of CG-806 on 124 samples of freshly isolated bone marrow from CLL patients demonstrated both broader and greater cell killing potency for CG-806 than Ibrutinib. |
| · | On April 1, 2019, at the 2019 Annual Meeting of the AACR, Aptose, along with our collaborators at OHSU Knight Cancer Institute, presented data highlighting CG-806 was more potent than other FLT3 inhibitors including midostaurin, sorafenib, sunitinib, dovitinib, quizartinib, crenolanib and gilteritinib. CG-806 was equally potent against cells from patients in the adverse, intermediate and favorable risk groups (2017 ELN risk stratification), and cells from patients with relapsed or transformed AML (World Health Organization classification) were as sensitive as those from patients with de novo AML. The data demonstrated potency in primary AML patient samples across all AML subgroups including relapsed/refractory/transformed AML and those with genetic abnormalities related to poor prognosis. While patient samples with FLT3-ITD mutations were expected to have greater sensitivity to CG-806, the most surprising correlation was the sensitivity of patient samples with IDH1 R132 mutations. The enhanced sensitivity of IDH-1 mutant AML to CG-806 warrants investigation in the clinical setting. Moreover, in studies of CG-806 on AML patient bone marrow samples, we demonstrated that mutations in p53, ASXL1 and NPM1 do not hinder the potency of CG-806. |
| · | On June 14, 2019, we presented new preclinical data for CG-806 in a poster presentation at the 24th Congress of the European Hematology Association (EHA) in Amsterdam, the Netherlands. The poster,CG-806, preclinical in vivo efficacy and safety profile as a pan-FLT3 / pan-BTK inhibitor, highlights the in vivo anti-leukemic efficacy of CG-806 and its GLP toxicology and toxicokinetic profile. In a preclinical MV4-11 FLT3-ITD AML xenograft mouse model, CG-806 suppressed leukemia growth at all doses tested throughout the 28-day period of dosing. In the mice treated with 100 mg/kg, 5 of 11 (45%) were cured through day 120, and in the 300 mg/kg group, 10 of 11 (91%) of the mice were cured. Retreating the “uncured’ mice in these two dose groups for an additional 28 days beginning on day 88 led to rapid and robust antitumor response in all retreated mice through day 120. In the “re-treated” mice, no drug resistance and no toxicities were observed. GLP 28-day toxicology and TK studies mice and dogs showed no adverse CG-806-related effects on body weight, ophthalmic, respiratory or neurological examinations, clinical pathology (coagulation, clinical chemistry, or urinalysis), organ weight or macroscopic evaluations. No CG-806-related cardiovascular effects were noted in the 28-day GLP toxicology study or in a separate preclinical cardiovascular safety study. |
APTO-253
APTO-253
Phase IB1b Trial
APTO-253, a small molecule inhibitor of MYC gene expression, is being evaluated by Aptose in a Phase Ib1b clinical trial in patients with relapsed / refractory (“R/R”)R hematologic malignancies, particularly R/R-AMLR AML and high-risk MDS. The Phase Ib,1b, multicenter, open-label, dose-escalation clinical trial of APTO-253 is designed to assess the safety, tolerability, pharmacokinetics and pharmacodynamic responses and efficacy of APTO-253 as a single agent and determine the recommended Phase II2 dose. APTO-253 will beis being administered once weekly, over a 28-day cycle. The dose escalation stage of the study could potentially enroll up to 20 patients with R/R-AMLR AML or high-risk MDS. The study is designed to then transition, as appropriate, to single-agent expansion cohorts in R/R-AMLR AML and/or high-risk MDS.
As of the date of this report, we have sevenmultiple active sites recruiting patients in the dose escalation stage of the trial. TheAs of the date of this report, we have completed enrollment and treatment of patients on the first, patient, having AML, was dosed with 20mg/m2second, third and successfully completed the 28-day cycle. Asfourth dose levels (20, 40, 66, and 100 mg/m2, respectively). Under an FDA-approved accelerated titration protocol, only one patient was required at each of the first two dose levels, followed by three patients at each dose level we then placed an MDSthereafter. Aptose has now opened for patient onenrollment the fifth dose level (150 mg/m2) of APTO-253. During the second quarter of 2020, the FDA allowed an amendment for Aptose to initiate more aggressive dose levelescalations with APTO-253, provided the tolerability profile remains favorable. The first four dosing cohorts have enrolled a mix of 40mg/m2,patients with AML and that patient successfully completed the 28-day cycle. We now are dosing patients in the third cohort and hope to continue dose escalation following completion of the third cohort. WeMDS. To date, we have observed meaningful reductions in MYC expression in the PBMCperipheral blood mononuclear cells (PBMCs) from the firsttreated patients with AML and second patients dosed with the new formulationMDS, demonstrating MYC target engagement and mechanistic proof of APTO-253, and we plan to analyze samples from patientsconcept in the third dose cohort as soon as those samples become available.different indications.
Manufacturing:
We are continuing to manufacture additional drug substance and drug product for use in the ongoing trial. We have completed a second 2kg GMP batch of drug substance and plan shortly to manufacture an additional batch of GMP drug product.
We are exploring additional drug delivery methods for APTO-253 and plan to initiate additional non-clinical studies for solid tumor and hematologic cancer development. As preparing, submitting, and advancing applications for regulatory approval, developing drugs and drug product and clinical trials are sometimes complex, costly, and time-consuming processes, an estimate of the future costs is not reasonable at this time.
As reported previously, APTO-253 was placed
Impact of COVID 19 on our Research Programs:
We are advancing first-in-class targeted agents to treat life-threatening cancers that, in most cases, are not elective for patients and require immediate treatment. However, COVID-19 has caused global economic and social disruptions that could adversely affect our ongoing or planned research and development and clinical hold bytrial activities including enrollment of patients in our ongoing clinical trials, collection and analysis of patient data and eventually, the FDA in November 2015reporting of top-line results from our trials.
Our team proactively addressed these new challenges swiftly and appropriately, implementing safeguards and procedures to ensure both the safety of our employees and stakeholders, and accommodate the potential challenges due to deficienciesCOVID-19. Aptose was early in directing its employees to work-from-home and provided the tools to minimize productivity disruptions. Our Clinical Operations team reached out to active and future clinical sites to determine their needs and challenges and assist where possible, including virtual monitoring of patients, which reduces patients’ visits. We also have contacted our drug product that was manufactured priormanufacturers to 2013. Those shortcomingsidentify any potential supply chain disruptions and are adjusting accordingly. During the early part of the drug product were address and the clinical hold was lifted. More specifically, the Phase Ib trial of APTO-253 was placed on clinical hold as a consequence of an event that occurred at a clinical site with the infusion procedure. Ultimately, a root cause investigation determined that the event resulted from chemistry and manufacturing based issues, all of which were incorporated into a Chemistry, Manufacturing and Control amendment to the IND application. Effective June 29, 2018, the clinical hold was lifted and the APTO-253 clinical trial was re-initiated.
The Phase Ib trial was placed on clinical hold in order to solve a chemistry-based formulation issue, and the chemistry of the API and the formulation had undergone minor modifications to deliver a stable and soluble drug product for return to the clinical setting. In December 2016, we had successfully manufactured multiple non-GMP batches of a new drug product formulation for APTO-253; however, a batch that was the intended clinical supply encountered an unanticipated mishap during the filling process that compromised the stability of that batch of drug product. We conducted formal root cause analyses studies, identified the reason for the drug product stability failure, and established a corrective and prevention action plan for the manufacture of future batches of drug product. During the first quarter of 2018,2020, we manufacturedbegan to carefully monitor the potential impact of COVID-19, and on a new GMPregular basis, we communicated with investigators at our clinical supplysites to gain an evolving understanding of drug productcompeting COVID-19 related activities and performed studies required to demonstrateclinical trial related activities.
In the fitnessbeginning of the drug product forApril, we learned that some of our larger clinical usage. The release specifications for the new clinical supply were met, and we presented the findings to the FDAsites that are impacted by COVID-19 may either postpone or face delays in the second quarterenrollment of 2018. On June 28, 2018, the FDA notified us that it had lifted thepatients on all on-going clinical hold on APTO-253.
We then completed all tasks required to return APTO-253 to the Phase Ib clinical trial.
Preclinical data presented at scientific forums are as follows:
| · | On April 17, 2018, at the 2018 Annual Meeting of the AACR, we presented preclinical data demonstrating that APTO-253 is a new addition to the repertoire of drugs that can exploit DNA BRCA1/2 deficiency, broadening the potential applicability of APTO-253 towards solid cancer indications. |
| · | On June 4, 2018, we announced that preclinical data elucidating the mechanism of action of APTO-253 were published in two separate articles in the June 2018 issue (Volume 17, Number 6) of Molecular Cancer Therapeutics, a peer-reviewed journal of the American Associate for Cancer Research. The most important finding disclosed in the published articles is the ability of the APTO-253 small molecule to bind to and stabilize a G-quadruplex DNA motif found in the promoter regulatory region of the MYC oncogene and to inhibit expression of the MYC gene, thereby depleting the cells of the MYC oncoprotein and leading to cancer cell death. These findings make APTO-253 the only clinical stage molecule that can directly target the MYC gene and inhibit its expression. |
| · | On April 1, 2019, at the 2019 Annual Meeting of the AACR, Aptose, we presented in vitro studies that further define the mechanism of action of APTO-253. Researchers found that APTO-253 targets a G-quadruplex motif in the P1/P2 promoter region of the MYC gene and inhibits MYC gene expression to induce apoptosis, resulting in its ability to potently kill hematologic malignant cell lines and primary samples from AML and CLL patients. In this study, researchers performed long-term in vitro studies to determine if and how cells might develop resistance to APTO-253. MYC driven Raji cells required three years in increasing concentrations of APTO-253 in order to adopt multiple modifications and develop high level resistance to APTO-253. These modifications include up-regulation of the ABCG2 transporter, acquisition of a more stable MYC protein lacking the conserved core sequence of MYC Box III generated by deletion of an internal region of the MYC gene exon 2, and utilization of alternate P3 promoter not inhibited by G4 binding and stabilization. |
Multi-Targeting Epigenetic Program
In November 2015, we announced an exclusive drug discovery partnership with Laxai Avanti Life Sciences (“LALS”) for the development of next generation epigenetic-based therapies. Under the agreement, LALS was responsible for optimizing candidates derived from our collaboration with the Moffitt Cancer Center, which was terminated in January 2017, for the development of dual-targeting single agent inhibitors for the treatment of hematologic and solid tumor cancers and we would own global rights to all newly discovered candidates characterized and optimized under the collaboration, including all generated intellectual property. As of November 2016, LALS and we had generated novel compounds that inhibit both the bromodomain proteins and oncogenic kinases, while improving pharmaceutical properties that could serve as a basis for further optimization towards a lead preclinical candidate. However,trials due to a prioritizationnumber of developmentfactors, including the re-allocation of resources and to avoid clinical trial patients being exposed to COVID-19. Such measures taken at the clinical sites could lead to a slowdown in the enrollment of patients on our trials at these sites. To minimize the impact of COVID-19, we focused efforts LALSon our other larger clinical sites and we suspended workregional cancer care sites that are not/less impacted by COVID-19 to recruit patients into the fourth cohort. While it is difficult to estimate the duration and impact of COVID-19 on the program in January 2017,larger sites, as of the date of this report, we have not experienced and do not foresee material delays to the collaboration with LALS was terminated. However, the program delivered novel intellectual property and compelling hit molecules for further optimization.
On March 7, 2018, we entered into an exclusive global license agreement with Ohm Oncology (“OHM”), an affiliateenrollment of LALS that was formed in 2016 to advance the clinical development of compelling molecules derived from the LALS initiative,patients or timelines for the development, manufactureCG-806 Phase 1a/b trial due to the variety of clinical sites that we have actively recruited for this trial. APTO-253 is administered intravenously, which requires the need for hospital / clinical site resources to assist and commercialization of APL-581, as well as related molecules from our dual bromodomainmonitor patients during each infusion and extra-terminal domain motif protein and kinase inhibitor program. Under the agreement, we will retain reacquisition rights to certain molecules, while OHM/LALS will have the rights to develop and sublicense all other molecules. We have received two separate upfront cash payments and are eligible to receive up to $125 million of additional payments based on the achievementcurrent conditions caused by COVID-19, future enrollment of certain development, regulatorypatients on this trial is likely to be negatively impacted.
Based on the current and sales milestones, as well as significant royalties on future sales generated fromforeseeable environment due to COVID-19 and the program, if any.additional caution applied to the review and activation of new clinical trials by clinical sites, we may experience delays with initiating the Phase 1 clinical study in AML, including but not limited to the conduct of site initiation visits remotely.
As of the date of this report, we have not experienced material delays in the manufacturing of CG-806 or APTO-253 related to COVID-19. Should our manufacturers be required to shut down their facilities due to COVID-19 for an extended period of time, our trials may be negatively impacted.
LIQUIDITY AND CAPITAL RESOURCES
Since our inception, we have financed our operations and technology acquisitions primarily from equity financing, proceeds from the exercise of warrants and stock options, and interest income on funds held for future investment.
We are an early stage development company and we currently do not earn any revenues from our drug candidates. The continuation of our research and development activities and the commercialization of the targeted therapeutic products are dependent upon our ability to successfully finance and complete our research and development programs through a combination of equity financing and payments from strategic partners. We have no current sources of significant payments from strategic partners.
Sources of liquidity:
The following table presents our cash and cash equivalents, investments and working capital as at June 30, 2019,2020 and December 31, 2018.2019.
| (in thousands) | | Balances at June 30, 2019 | | Balances at December 31, 2018 |
| Cash and cash equivalents | | $ | 26,898 | | | $ | 15,299 | |
| Investments | | | 8,477 | | | | 440 | |
| Total | | $ | 35,375 | | | $ | 15,739 | |
| | | | | | | | | |
| Working capital | | $ | 33,046 | | | $ | 13,697 | |
| (in thousands) | | Balances at
June 30,
2020 | | Balances at
December 31,
2019 |
| Cash and cash equivalents | | $ | 54,112 | | | $ | 79,842 | |
| Investments | | | 28,610 | | | | 17,758 | |
| Total | | $ | 82,722 | | | $ | 97,600 | |
| | | | | | | | | |
| Working capital | | $ | 78,539 | | | $ | 93,227 | |
Working capital reflectsrepresents primarily cash, cash equivalents, investments and prepaid expenses and other current assets less current liabilities. Current liabilities of approximately $3.22 million as at June 30, 2019 include approximately $493 thousand related to the current portion of the Company’s lease liability. There is no comparable amount in current liabilities of approximately $2.79 million as at December 31, 2018. See “Critical Accounting Policies” below.
In addition to the cash and cash equivalent and investments on hand as at June 30, 2019, we have access to additional funds through two financing arrangements established in May of 2019.
On May 24, 2019, we entered into a $40 million ATM facility with Piper Jaffrey and Canaccord Genuity, acting as co-agents. As of the date of this report, we have not issued any Common Shares under this facility.
On May 7, 2019, we entered into the 2019 Purchase Agreement with Aspire Capital where Aspire Capital has committed to purchase up to $20 million of Common Shares of Aptose, at our from time to time, for up to 30 months. Additional terms of the financing are described below in the section “Common Share Purchase Agreements”. As at June 30, 2019, the Company had not issued any shares under the 2019 Aspire Purchase Agreement, other than the Commitment Shares.
In managing our liquidity risk, we have considered our available cash and cash equivalents and investments as at June 30, 2019. We have also considered our ability to continue to raise funds in 2019 and 2020 through the 2019 ATM Facility with Piper Jaffray and Canaccord Genuity and through the 2019 Purchase Agreement with Aspire Capital, each of which is described further below, in assessing whether we will have sufficient resources to fund research and development operations and general and administrative costs through to at least the twelve-month period ending from the date of this report.
We believe that our cash, and cash equivalents and investment holdings, and use of full proceeds frominvestments on hand at June 30, 2020 will be sufficient to finance our ATM facility with Piper Jaffray andoperations for at least 12 months from the 2019 Purchase Agreement with Aspire Capital,issuance date of these financial statements. Our cash needs for the next twelve months include estimates of the number of patients and rate of enrollment of our clinical trials, the amount of drug product that we will be enoughrequire to fundsupport our plannedclinical trials, and our general corporate overhead costs to support our operations, into 2021.and our reliance on our manufacturers. We have based these estimates on assumptions and plans which may change and which could impact the magnitude and/or timing of operating expenses and our cash runway. These estimates include
Since our inception, we have financed our operations and technology acquisitions primarily from equity financing, proceeds from the rateexercise of enrolmentwarrants and timingstock options, and releaseinterest income on funds held for future investment.
On July 20, 2020, the Company completed a confidentially marketed public offering (“CMPO”), with Piper Sandler & Co. as the representative of the resultsunderwriters, through the issuance of 10,500,000 common shares for gross proceeds of $55.12 million.
On May 5, 2020, the Company entered into an “At-The-Market” Facility equity distribution agreement with Piper Sandler & Co. and Canaccord Genuity LLC acting as co-agents (the “2020 ATM”). Under the terms of this facility, the Company may, from time to time, sell common shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the six months period ended June 30, 2020, the Company did not issue any shares under this 2020 ATM.
During the year ended December 31, 2019, the Company completed two CMPOs, with RBC Capital Markets, LLC and Canaccord Genuity LLC, as representatives of the underwriters, and Piper Jaffray & Co., as the representative of the underwriters, respectively, through the issuance of, in the aggregate, 30,043,750 common shares for aggregate gross proceeds of $95.45 million (approximately $88.18 million net of share issue costs). The Company also raised capital pursuant to two separate share purchase agreements with Aspire Capital Fund, LLC (“Aspire Capital”) through the issuance of an aggregate of 7,302,433 common shares for aggregate gross proceeds of $14.4 million We do not expect that COVID-19 will have a significant impact on our liquidity and capital resources and we are not incurring significant additional costs to support our ongoing operations during this time. We have not entered into long term manufacturing contracts and should there be a delay in our trials we have flexibility to reduce future planned manufacturing campaigns.
We expect that we will need to raise additional capital or incur indebtedness to continue to fund our operations in the future. In December 2019, we filed a short form base shelf prospectus (the “Base Shelf”) that allows us to distribute, upon the filing of prospectus supplements, up to $200,000,000 of common shares, warrants, or units comprising any combination of common shares and warrants. The Base Shelf was declared effective by the SEC on January 9, 2020 and expires on January 9, 2023.
Our ability to raise additional funds could be affected by adverse market conditions, the status of our clinical trials,product pipeline, possible delays in enrollment in our trial related to COVID-19, and various other factors and we may be unable to raise capital when needed, or on terms favorable to us. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our reliance on our manufacturers. We are also reliant ondevelopment programs, potentially delaying the ability of Aspire Capitaltime to purchase shares under the Share Purchase Agreement and also the availability of a liquid market for Aptose Shares for useany of the ATM facility.our product candidates.
We will need additional cash in order to execute our research and development plans for our CG-806 and APTO-253 programs and associated general and administrative overhead costs. The Company will use the most efficient source of capital available to it which may include funds available from the 2019 ATM Facility.
Cash flows:
The following table presents a summary of our cash flows for the three and six-month periods ended June 30, 2020 and 2019:
| | | Three months ended, | | Six months ended, |
| (in thousands) | | June 30, 2020 | | June 30, 2019 | | June 30, 2020 | | June 30, 2019 |
| | | | | | | | | |
| Net cash provided by (used in): | | | | | | | | | | | | | | | | |
| Operating activities | | $ | (7,164 | ) | | $ | (5,269 | ) | | $ | (15,254 | ) | | $ | (10,143 | ) |
| Investing activities | | | 1,479 | | | | (8,026 | ) | | | (10,948 | ) | | | (8,050 | ) |
| Financing activities | | | 46 | | | | 23,613 | | | | 482 | | | | 29,791 | |
| Effect of exchange rates changes on cash and cash equivalents | | | (3 | ) | | | (1 | ) | | | (10 | ) | | | 1 | |
| Net (decrease)/increase in cash and cash equivalents | | $ | (5,642 | ) | | $ | 10,317 | | | $ | (25,730 | ) | | $ | 11,599 | |
Cash used in operating activities:
Our cash used in operating activities for the three months ended June 30, 2020 and 2019 was approximately $7.2 million and $5.3 million, respectively. Our cash used in operating activities for the six months ended June 30, 2020 and 2019 was approximately $15.3 million and 2018:$10.1 million, respectively. Net cash used in operating activities was higher in the three and six-month periods ended June 30, 2020 as compared with the three and six-month periods ending June 30, 2019 resulting mostly from higher net loss in the current periods. See “Results of Operations”. Our uses of cash for operating activities for both periods primarily consisted of salaries and wages for our employees, facility and facility-related costs for our offices and laboratories, fees paid in connection with preclinical and clinical studies, drug manufacturing costs, laboratory supplies and materials, and professional fees.
| | | Three months ended, | | Six months ended, |
| (in thousands) | | June 30, 2019 | | June 30, 2018 | | June 30, 2019 | | June 30, 2018 |
| | | | | | | | | |
| Net cash provided by (used in): | | | | | | | | | | | | | | | | |
| Operating activities | | $ | (5,269 | ) | | $ | (9,183 | ) | | $ | (10,143 | ) | | $ | (13,237 | ) |
| Investing activities | | | (8,026 | ) | | | 150 | | | | (8,050 | ) | | | 126 | |
| Financing activities | | | 23,613 | | | | 11,569 | | | | 29,791 | | | | 20,424 | |
| Effect of exchange rates changes on cash and cash equivalents | | | (1 | ) | | | - | | | | 1 | | | | - | |
| Net increase in cash and cash equivalents | | $ | 10,317 | | | $ | 2,536 | | | $ | 11,599 | | | $ | 7,313 | |
We do not expect to generate positive cash flow from operations for the foreseeable future due early stage of our clinical trials. These trials may incurto additional research and development costs, including costs related to drug discovery, preclinical testing, clinical trials, and manufacturing, as well as operating expenses associated with supporting these activities.activities, and potential milestone payments to our collaborators. It is expected that negative cash flow will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products under development and/or royalty or milestone revenue from any such products exceeds expenses.
Net
Cash flow from investing activities:
Our cash used in operatinginvesting activities for the three months ended June 30, 2020 was lower$1.5 million, and consisted of net maturity of investments of $1.5 million and purchases of property and equipment of $37 thousand. Our cash used in investing activities in the three and six-month periodsthree-month period ended June 30, 2019 as compared with the threewas $8.0 million, and six month periods ending June 30, 2018 resulting mostly from lowerconsisted of net loss in the current periods. See “Resultspurchases of Operations’.investments of $8 million and property and equipment of $26 thousand.
Net
Our cash used in investing activities in the six month period ended June 30, 2020 was $10.9 million, and consisted of approximately $8net purchases of investments of $10.9 million reflects the purchaseand purchases of securities with an original termproperty and equipment of greater than 90 days.
Net$53 thousand. Our cash provided by financingused in investing activities in the six month period ended June 30, 2019 reflect mostlywas $8.05 million, and consisted net purchases of investments of $8 million and property and equipment of $50 thousand.
The composition and mix of cash, cash equivalents and investments is based on our evaluation of conditions in financial markets and our near-term liquidity needs. We have exposure to credit risk, liquidity risk and market risk related to our investments. The Company manages credit risk associated with its cash and cash equivalents and investments by maintaining minimum standards of R1-low or A-low investments. The Company invests only in highly rated financial instruments which are capable of prompt liquidation. The Company manages its liquidity risk by continuously monitoring forecasts and actual cash flows. The Company is subject to interest rate risk on its cash and cash equivalents and investments. The Company does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in market interest rates relative to interest rates on the investments, owing to the relative short-term nature of the investments.
Cash flow from financing activities:
Our cash flow from financing activities for the three months ended June 30, 2020 was $46 thousand, and consisted of proceeds from the exercise of stock options. Our cash flow from financing activities in the three month period ended June 30, 2019 was $23.6 million, and consisted of 11,500,000 shares issued to pursuant to the public offeringCMPO of common stockshares in June 2019 for net proceeds of approximately $19.6 million, 5,502,4332,242,478 shares issued to Aspire Capital pursuant to thea share purchase agreement entered into on May 30, 2018 Share(the “Aspire Purchase AgreementAgreement”) for net proceeds of approximately $10 million, 77,349 shares issued pursuant to the 2018 ATM with Cantor Fitzgerald for net proceeds or approximately $178 thousand. Net cash provided by financing activities in the six month period ended June 30, 2018 reflect 5,231,953 shares issued pursuant to the 2017 Share Purchase Agreement with Aspire Capital for net proceeds of approximately $15$4 million and 1,429,847 shares issued pursuant to the 2018 ATM with Cantor Fitzgerald for net$19 thousand of proceeds of approximately $5.2 million and $183 thousand related tofrom the exercise of stock options.
Common Shares Purchase Agreements
In October 2017, we entered into a Common Shares Purchase Agreement (the “2017 Purchase Agreement”) with Aspire Capital to sell up to $15.5 millionOur cash flow from financing activities for the six months ended June 30, 2020 was approximately $482 thousand, consisted of Common Shares to Aspire Capital.proceeds of exercise of stock options of $482 thousand. During the year ended December 31, 2018, we issued 5,231,953 Common Shares under the 2017 Purchase Agreement at an average price of $2.87 for gross proceeds of approximately $15 million. On a cumulative basis, we raised a total of $15.5 million under the 2017 Purchase Agreement, the total amount that was available under the 2017 Purchase Agreement.
In May 2018, we entered into the 2018 Purchase Agreement with Aspire Capital to sell up to $20 million of Common Shares to Aspire Capital. Under the terms of the 2018 Purchase Agreement, Aspire Capital committed to purchase up to an aggregate of $20 million of our Common Shares, at our request from time to time during a 30-month period beginning on June 8, 2018. Under the terms of the 2018 Purchase Agreement, we issued 170,261 Common Shares at a value of $3.524 per Common Share to Aspire Capital as consideration for Aspire Capital entering into the 2018 Purchase Agreement,three and during the year ended December 31, 2018, we issued 907,547 Common Shares at an average price of $2.12 for gross proceeds of approximately $1.9 million. In the threesix months ended June 30, 2019 we issued 2,242,478raised net proceeds of approximately $29.8 million from the issuance of common shares as detailed below.
Public Offering of Common Shares
On June 3, 2019, the Company completed a CMPO through the issuance of 11,500,000 common shares at an averagea price of $1.78$1.85 per Common Shareshare for gross proceeds of $4 million. In$21.275 million (approximately $19.594 million net of share issue costs). Costs associated with the proceeds consisted of a 7% cash commissions and share issue costs, which consisted of agent commission, legal and professional fees and listing fees.
At-The-Market Facilities
On May 5, 2020, the Company entered into an ATM equity distribution agreement with Piper Sandler & Co. and Canaccord Genuity LLC acting as co-agents. Under the terms of this facility, the Company may, from time to time, sell common shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the six months ended June 30, 2019,2020, the Company issued 5,502,433 Common Shares under the 2018 Aspire Purchase Agreement at an average price of $1.82 per Common Share for gross and net proceeds of $10 million. On a cumulative basis to June 30, 2019, the Company has raised a total of approximately $11.9 million gross and net proceeds under the 2018 Aspire Purchase Agreement. As of June 30, 2019, the Company has issued the maximum number of Common Shares issuable under this facility without shareholder approval and on May 7, 2019 the agreement was terminated.
On May 7, 2019, we entered into the 2019 Purchase Agreement with Aspire Capital where Aspire Capital has committed to purchase up to $20 million of Common Shares of Aptose, at Aptose’s request from time to time, for up to 30 months. The 2019 Purchase Agreement limits the amount of Common Shares that Aspire can own at one time to 9.99% of the issued and outstanding Common shares, and limits the maximum number of Common Shares that can be issued under the 2019 Purchase Agreement to 19.99% of the outstanding Common Shares on the date of the 2019 Purchase Agreement unless shareholder approval is obtained or the Common Shares issued to date once the 19.99% threshold is reached have an average purchase price equal to or exceeding $2.10. As consideration for Aspire Capital’s obligation under the Agreement we issued 171,428 Common Shares to Aspire Capital as a commitment fee. The Company recorded $360 thousand in general and administrative expenses related to the issuance of the Commitment Shares. As at June 30, 2019, the Company haddid not issuedissue any shares under the 2019 Aspire Purchase Agreement, other than the Commitment Shares.this ATM equity facility.
At-The-Market Facilities
On March 27, 2018, wethe Company entered into the 2018 ATM Facility with Cantor Fitzgerald, acting as sole agent.ATM. Under the terms of this facility, we could,the Company was allowed, from time to time, to sell our Common Sharescommon shares having an aggregate offering value of up to $30 million through Cantor Fitzgerald.
DuringFitzgerald on the year ended December 31, 2018, we issued 4,085,615 Common Shares under the 2018 ATM Facility at an average price of $2.71 for gross proceeds of approximately $11.1 million ($10.7 million net of share issue costs).Nasdaq Capital Market. During the six months ended June 30, 2019, the Company issued 77,349 additional Common Sharesshares under thethis 2018 ATM Facility at an average price of $2.37 for gross proceeds of $183 thousand ($178 thousand net of share issue costs). On a cumulative basis to June 30, 2019, the Company hashad raised a total of $11.2 million gross proceeds ($10.9 million net of share issue costs) under the 2018 ATM Facility.ATM. The Company terminated this agreement on May 24, 2019.
Common Share Purchase Agreements
On May 24, 2019, we30, 2018, the Company entered into the 2019 ATM Facility with Piper Jaffrey and Canaccord Genuity, acting as co-agents. UnderAspire Purchase Agreement to sell up to $20.0 million of common shares to Aspire Capital over approximately 30 months. Pursuant to the terms of this facility, we may, from timeagreement, on June 8, 2018, the Company issued 170,261 common shares to time, sell our Common Shares having an aggregate offering valueAspire Capital in consideration for entering into the 2018 Aspire Purchase Agreement for a total cost of up to $40 million through Piper Jaffrey and Canaccord Genuity. We determine, at our sole discretion, the timing and number of Common Shares to be sold under the 2019 ATM Facility. As of the date of this report, we have not issued any Common Shares under this facility.
Public Offering of Common Stock
On June 3, 2019, we completed the Offering through the issuance of 11,500,000 Common Shares at a price to the public of $1.85 per Common Share, which includes the exercise in full by the Underwriters of their option to purchase 1,500,000 additional Common Shares. The gross proceeds from the offering were approximately $21.3 million. ($19.6 million net of underwriting discounts and commissions and share-issue costs).
RBC Capital Markets LLC and Canaccord Genuity acted as joint book-runners for the Offering. H.C. Wainwright & Co. and Jones Trading Institutional Services LLC acted as co-managers.
Contractual Obligations
$600 thousand. During the six-month periodsix months ended June 30, 2019, we entered intothe Company issued 5,502,433 common shares pursuant to the Aspire Purchase Agreement at an operating lease agreementaverage price of $1.82 per share for gross and net proceeds of $10 million. On a cumulative basis up to renew our existing laboratory space forMay 24, 2019, the Company raised a three-year period. Minimum lease payments are as follows: $41 thousand fortotal of approximately $11.9 million gross and net proceeds and has raised 6,409,980under the remaining six months of 2019, $84 thousand for the year ended December 31, 2020; $86 thousand for the year ended December 31, 2021 and $14 thousand for the year ended December 31, 2022. These lease payments, along with our lease payments for our other operating leases, have been recorded as a right-of-use asset and lease liability on the statement of financial position. See “Critical Accounting Policies” below.Aspire Purchase Agreement.
Other than the above, there
Contractual Obligations
There were no material changes to our contractual obligations and commitments described under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018,2019, which can be found on EDGAR atwww.sec.gov/edgar.shtml and on SEDAR atwww.sedar.com. www.sedar.com.
RESULTS OF OPERATIONS
A summary of the results of operations for the three-month and six-month periods ended June 30, 20192020 and 20182019 is presented below:
| | | Three months ended
June 30, | | Six months ended
June 30, |
| (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 |
| | | | | | | | | |
| Revenues | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Research and development expenses | | | 3,491 | | | | 7,818 | | | | 6,831 | | | | 10,958 | |
| General and administrative expenses | | | 2,855 | | | | 2,511 | | | | 5,115 | | | | 6,213 | |
| Net finance income | | | 128 | | | | 67 | | | | 222 | | | | 95 | |
| Net loss | | | (6,218 | ) | | | (10,262 | ) | | | (11,724 | ) | | | (17,076 | ) |
| Other comprehensive gain/( loss) | | | 9 | | | | (4 | ) | | | 18 | | | | (6 | ) |
| Total comprehensive loss | | $ | (6,209 | ) | | $ | (10,266 | ) | | $ | (11,706 | ) | | $ | (17,082 | ) |
| Basic and diluted loss per common share | | $ | (0.13 | ) | | $ | (0.30 | ) | | $ | (0.27 | ) | | $ | (0.56 | ) |
| | | | | | | | | | | | | | | | | |
| | | Three months ended
June 30, | | Six months ended
June 30, |
| (in thousands) | | | 2020 | | | | 2019 | | | | 2020 | | | | 2019 | |
| | | | | | | | | | | | | | | | | |
| Revenues | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
| Research and development expenses | | | 6,866 | | | | 3,491 | | | | 12,800 | | | | 6,831 | |
| General and administrative expenses | | | 9,015 | | | | 2,855 | | | | 14,915 | | | | 5,115 | |
| Net finance income | | | 131 | | | | 128 | | | | 439 | | | | 222 | |
| Net loss | | | (15,750 | ) | | | (6,218 | ) | | | (27,276 | ) | | | (11,724 | ) |
| Other comprehensive gain/(loss) | | | (15 | ) | | | 9 | | | | (15 | ) | | | 18 | |
| Total comprehensive loss | | $ | (15,765 | ) | | $ | (6,209 | ) | | $ | (27,291 | ) | | $ | (11,706 | ) |
| Basic and diluted loss per common share | | $ | (0.21 | ) | | $ | (0.13 | ) | | $ | (0.36 | ) | | $ | (0.27 | ) |
The net loss for the three-month period ended June 30, 2019 decreased2020 increased by approximately $4.1$9.5 million to $6.2$15.8 million as compared with $10.3$6.2 million for the comparable period. The decrease isperiod in 2019, primarily as a result $5of an increase of $7.1 million in license fees for CG-806 paidstock-based compensation in the comparablecurrent period, lower professional feesa combined increase in program costs and related to regulatory filings in the comparable period in supportlabor costs of financing activitiesapproximately $2.6 million on our CG-806 and APTO-253 development programs, and offset by higher operational costs (such as rent, salarieslower general and travel) associated with having two molecules in clinical development.administrative expenses, after adjusting for stock option compensation, of $185 thousand.
The net loss for the six-month period ended June 30, 2019, decreased2020 increased by $5.4$15.6 million to $11.7$27.3 million as compared with $17.1$11.7 million for the comparable period. Year-to-date resultsperiod, primarily as a result of an increase of $10.9 million in stock-based compensation in the current period, a combined increase in program costs and related labor costs of approximately $4.5 million on our CG-806 and APTO-253 development programs, and higher cash-based general and administrative expenses of $384 thousand. These expenses were impactedpartially offset by similar factorsan increase in net finance income of $217 thousand in the current period compared to those noted above.the comparative period, mostly as a result of higher interest earned on larger balances of cash equivalents and investments held during the six-month period ended June 30, 2020.
Research and Development
The research and development expenses for the three-month and six-month periods ended June 30, 2020 and 2019 and 2018 arewere as follows:
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| (in thousands) | | 2019 | | 2018 | | 2019 | | 2018 | | | 2020 | | | | 2019 | | | | 2020 | | | | 2019 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| License fees – CG-806 | | $ | - | | | $ | 5,000 | | | $ | - | | | $ | 5,000 | | |
| Program costs – CG-806 | | | 1,678 | | | | 1,103 | | | | 3,064 | | | | 2,457 | | | $ | 3,755 | | | $ | 1,678 | | | $ | 6,700 | | | $ | 3,064 | |
| Program costs – APTO-253 | | | 722 | | | | 1,098 | | | | 1,850 | | | | 2,019 | | | | 856 | | | | 722 | | | | 1,735 | | | | 1,850 | |
| Personnel related expenses | | | 925 | | | | 457 | | | | 1,624 | | | | 946 | | | | 1,317 | | | | 925 | | | | 2,620 | | | | 1,624 | |
| Stock-based compensation | | | 157 | | | | 152 | | | | 275 | | | | 519 | | | | 933 | | | | 157 | | | | 1,733 | | | | 275 | |
| Depreciation of equipment | | | 9 | | | | 8 | | | | 18 | | | | 17 | | | | 5 | | | | 9 | | | | 12 | | | | 18 | |
| | | $ | 3,491 | | | $ | 7,818 | | | $ | 6,831 | | | $ | 10,958 | | | $ | 6,866 | | | $ | 3,491 | | | $ | 12,800 | | | $ | 6,831 | |
Research and development expenses decreasedincreased by $4.3$3.4 million to $3.5$6.9 million for the three-month period ended June 30, 20192020 as compared with $7.8 million for the comparative period. Research and development expenses decreased by $4.2 million to $6.8 million for the six-month period ended June 30, 2019 as compared with $11.0$3.5 million for the comparative period. Changes to the components of our research and development expenses presented in the table above are primarily as a result of the following events:
| · | We paidProgram costs for CG-806 increased by approximately $2.1 million, mostly as a totalresult of $5 million in license feeshigher manufacturing costs, including costs to CG inscale up manufacturing and research costs associated with optimizing the three-month period ended June 30, 2018 which is comprised of $2 millionformulation, higher costs associated with the CG-806 Phase 1a/b trial and the costs associated with planning for the Rights and $3 million for the China Rights. CG is eligible for development, regulatory and commercial-based milestones as well as royalties on future product sales.CG-806 AML trial. |
| · | An increase in research and development activitiesPersonnel-related expenses increased by $392 thousand, mostly related to our CG-806 development program. Innew positions hired since the three-month period ended March 31,second quarter of 2019 program costs consisted mostly of costs to completesupport the preclinical studiesCC-806 Phase 1a/b and to prepare regulatory filings in support of an IND filing, and the manufacturing of drug product for theAPTO-253 Phase 1 clinical trials and the planning of the CG-806 AML Phase 1 clinical trial. In |
| · | Stock-based compensation increased by approximately $776 thousand in the three month periodmonths ended June 30, 2020, compared with the three months ended June 30, 2019, program costs consisted mostly related to an increase in the number of contractors in support ofoptions granted during the B cell Malignancy clinical trial, which was approved by the FDA in March 2019, and in ongoing manufacturing costs of CG-806 to supply the trial. In the period ended March 31, 2018, program costs reflected the completion of two dose range finding studies and the manufacturing of a batch of the drug substance to be used in toxicity studies. In the three-month periodsix months ended June 30, 2018, we manufactured2020 and a GLP batch of CG-806 to be used in toxicity studies, we initiated the manufacturing of a GMP batch of the drug substance for future clinical trials, and we initiated a toxicity study in rodents. |
| · | In the three month period ended June 30, 2019, program costs for APTO-253 consisted mostly of costs associated with the clinical trial which was actively enrolling patients during this period. In the three month period ended March 31, 2019, program costs for our APTO-253 program consisted mostly of costs related to the Phase 1b clinical trial, and manufacturing costs for a second GMP batch of APTO-253. In the three-month period ended March 31, 2018 the Company completed production of a GMP batch of drug product, and initiated necessary studies to present to the FDA in support of removing the clinical hold. In the three-month period ended June 30, 2018, we completed the required studies for the FDA, we initiated the manufacturing of an additional clinical batch of APTO-253 and we increased clinical activities in preparation to return APTO-253 to the clinic. |
| · | An increase in personnel expenses mostly related to additional clinical research staff to support two Phase 1 clinical trials. |
| · | For the six-month period ended June 30, 2019, there was a decrease in stock option compensation of approximately $243 thousand as compared with the six-month period ended June 30, 2018, related mostly to stock options granted in the three-month period ended March 31, 2018, of which 100,000 with ahigher grant date fair value of $2.03 vested immediately, contributing to higher expenses in that period.options as compared with the six months ended June 30, 2019. |
Research and development expenses increased by $6.0 million to $12.8 million for the six-month period ended June 30, 2020 as compared with $6.8 million for the comparative period for the same reasons as described above for the three-month period ended June 30, 2020.
General and Administrative
The general and administrative expenses for the threethree-month and six-month periods ending June 30, 2020 and 2019 and 2018 arewere as follows:
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| (in thousands) | | | 2019 | | | | 2018 | | | | 2019 | | | | 2018 | |
| | | | | | | | | | | | | | | | | |
| General and administrative, excluding non-cash items | | $ | 2,039 | | | $ | 1,536 | | | $ | 3,735 | | | $ | 3,370 | |
| Common Shares issued Aspire share purchase agreement | | | 360 | | | | 600 | | | | 360 | | | | 600 | |
| Stock-based compensation | | | 411 | | | | 364 | | | | 955 | | | | 2,225 | |
| Depreciation of equipment | | | 45 | | | | 11 | | | | 65 | | | | 18 | |
| | | $ | 2,855 | | | $ | 2,511 | | | $ | 5,115 | | | $ | 6,213 | |
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| (in thousands) | | | 2020 | | | | 2019 | | | | 2020 | | | | 2019 | |
| | | | | | | | | | | | | | | | | |
| General and administrative, excluding items below | | $ | 2,214 | | | $ | 2,399 | | | $ | 4,479 | | | $ | 4,095 | |
| Stock-based compensation | | | 6,768 | | | | 411 | | | | 10,369 | | | | 955 | |
| Depreciation of equipment | | | 33 | | | | 45 | | | | 67 | | | | 65 | |
| | | $ | 9,015 | | | $ | 2,855 | | | $ | 14,915 | | | $ | 5,115 | |
General and administrative expenses increased in the three-month period ended June 30, 2019 as compared with the three-month period ended June 30, 2018, mostly as a result of higher personnel related expenses, increased travel, higher legal and regulatory fees and rent and office costs and offset by lower share based payment expenses associated with financing activities.
General and administrative expenses decreased in the six month period ended June 30, 2019 as compared with the six month period ended June 30, 2019, mostly as a result of lower stock option compensation recorded in the current period and offset by higher expenses related to personnel, travel, rent and office costs, legal and regulatory expenses.
General and administrative expenses (excluding non-cash items) increased in the three and six months ended June 30, 2019, compared with the three and six months ended June 30, 2018, primarily as a result of increased headcount, higher consulting fees and professional fees, rent and office and travel expenses in support of financing activities and in support of increased company-wide operations.
In the three-month period ended June 30, 2019, we issued 171,428 Commitment Shares to Aspire Capital as a commitment fee for entering into the 2019 Purchase Agreement. We recorded $360 thousand in general and administrative expenses related to the issuance of these shares. In the three-month period ended June 30, 2018, we issued 170,261 Common Shares to Aspire Capital as a commitment fee for entering into the 2018 Purchase Agreement. We recorded $600 thousand in general and administrative expenses related to the issuance of these Common Shares.
Stock option compensation for the three-month period ended June 30, 20192020 were $9.0 million as compared with $2.9 million for the comparative period, an increase of approximately $6.2 million. The increase was comparable withprimarily as a result of the stock option compensation recorded in the three month period ended June 30, 2018. Forfollowing:
| · | General and administrative expenses, other than stock-based compensation and depreciation of equipment, decreased by approximately $185 thousand in the three months ended June 30, 2020, primarily as a result of lower financing costs in the current period, offset by higher personnel related costs mostly related to two additional hires, including a Chief Business Officer, in the second quarter of 2019, higher insurance and professional and regulatory costs, and higher office administrative costs. |
| · | Stock-based compensation increased by approximately $6.4 million in the three months ended June 30, 2020, compared with the three months ended June 30, 2019 mostly related to an increase in the number of restricted share units (RSUs) and options granted during the six-month period ended June 30, 2020, and a higher grant date fair value of options as compared with June 30, 2019. |
General and administrative expenses for the six-month period ended June 30, 2019, stock-based compensation decreased by approximately $1.32020 were $14.9 million as compared with $5.1 million for the six-monthcomparative period, an increase of approximately $9.8 million. The increase was primarily as a result of the following:
| · | General and administrative expenses, other than stock-based compensation and depreciation of equipment, increased by approximately $384 thousand in the six months ended June 30, 2020 primarily as a result of higher personnel related costs mostly related to two additional hires, including a Chief Business Officer, in the second quarter of 2019, higher insurance and professional and regulatory costs, and higher office administrative costs. |
| · | Stock-based compensation increased by approximately $9.4 million in the six months ended June 30, 2020, compared with the six months ended June 30, 2019 for the same reasons as described above for the three-month period ended June 30, 2020. |
COVID-19 did not have a significant impact on our results of operations for the quarter ended June 30, 2018 mostly2020. We have not experienced and do not foresee material delays to the enrollment of patients or timelines for the CG-806 Phase 1a/b trial due to the variety of clinical sites that we have actively recruited for this trial. APTO-253 is administered intravenously, which requires the need for hospital / clinical site resources to assist and monitor patients during each infusion and based on the current conditions caused by COVID-19, future enrollment of patients on this trial is likely to be negatively impacted. As of the date of this report, we have not experienced material delays in the manufacturing of CG-806 or APTO-253 related to 750,000 stock options with a grant date fair valueCOVID-19. Should our manufacturers be required to shut down their facilities due to COVID-19 for an extended period of $2.03 vested immediately that were granted to directors and executive in the three-month period ended March 31, 2018. We granted a total of 1,105,000 stock options to directors and general and administrative employees in the six month period ended June 30, 2019 with an average grant date fair value of $1.29 as compared with a total of 1,722,500 stock options with an average grant date fair value of $2.13 in the six month period ended June 30, 2018. In addition, we granted 80,000 restricted share units (“RSUs”) in the current six month period as compared with nil in the comparative six month period.time, our trials may be negatively impacted.
OFF-BALANCE SHEET ARRANGEMENTS
As at June 30, 2019,2020, we arewere not party to any off-balance sheet arrangements.
CRITICAL ACCOUNTING POLICIES
Critical Accounting Policies and Estimates
We periodically review our financial reporting and disclosure practices and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies and financial disclosures. Management has discussed the development and selection of the critical accounting policies with the Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure relating to critical accounting policies in this Management’s Discussion and Analysis.
Significant accounting judgments and estimates
A “critical accounting policy” is one which is both important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For additional information, please see the discussion of our significant accounting policies in Note 2 to the Financial Statements included in our Annual Report for the fiscal year ended December 31, 20182019 on Form 10-K filed with the United States Securities Exchange Commission (the “SEC”) on March 12, 2019. With the exception of the change to our accounting policy noted below as a result of the adoption of Accounting Standards Update, or ASU, No. 2016-02, Leases (Topic 842) there10, 2020. There were no material changes to our critical accounting policies and estimates during the six months ended June 30, 2019.2020 other than that we have determined that due to an increase in the amount and values of our research contracts, we now consider our estimates related to prepaid and accrued research and development (R&D) activities as significant estimates. Research and development (R&D) costs are expensed as incurred. R&D costs consist primarily of salaries and benefits, stock-based compensation, manufacturing, contract services, clinical trials, intangibles, and research related overhead. Non-refundable advance payments for goods and services that will be used in future research are recorded in prepaid and other assets and are expensed when the services are performed.
Effective January 1, 2019, the Company adopted Financial Accounting Standards Board,We record expenses for research and development activities based on our estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development on our behalf. The financial terms vary from contract to contract and may result in uneven payment flows as compared with services performed or FASB, standard ASU No. 2016-02, “Leases (Topic 842)”. The Company’s operating leases of tangible property with terms greater than twelve months are recognized as right-of-use assets, which represents the lessee’s right to use, or control the use of, a specified asset for the lease term, and a corresponding lease liability, which represents the lessee’s obligation to make lease payments under a lease, measured on a discounted basis. The Company adopted the new standard using the alternative transition method, which permits a company to use its effective date as the date of initial application without restating comparative period financial statements. Landlord inducements in the form of free rent periods are netted against lease payments to the landlord in measuring right-of-use assets.
products delivered. As a result, we are required to estimate research and development expenses incurred during the period, which impacts the amount of adopting Topic 842, we recordedaccrued expenses and prepaid balances related to such costs as of January 1, 2019, a right-of-use asseteach balance sheet date. We estimate the amount of approximately $1.570 million,work completed through discussions with internal personnel and a lease liabilityexternal service providers as to the progress or stage of approximately $1.647 million. Upon adoption, landlord inducements of approximately $78 thousand were de-recognized and a corresponding adjustment was made to right-of-use assets. The impactcompletion of the adopting Topic 842 onservices and the Statementagreed-upon fee to be paid for such services. We make significant judgments and estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates.
Although we do not expect our estimates to be materially different from amounts actually incurred, if our estimates of Lossthe status and Comprehensive Loss was nominal.timing of services performed differ from the actual status and timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
Other important accounting policies and estimates made by management are the valuation of contingent liabilities, the valuation of tax accounts, and the assumptions used in determining the valuation of share-based compensation.
Management’s assessment of our ability to continue as a going concern involves making a judgment, at a particular point in time, about inherently uncertain future outcomes and events or conditions. Please see the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q for a discussion of the factors considered by management in arriving at its assessment.
Other important accounting policies and estimates made by management are the valuation of contingent liabilities, the valuation of tax accounts, and the assumptions used in determining the valuation of share-based compensation.
Updated share information
As at August 6, 2019,4, 2020, we had 55,446,564 Common Shares87,483,719 common shares issued and outstanding. In addition, there were 6,145,800 Common Shares11,950,557 common shares issuable upon the exercise of outstanding stock options and upon the vesting of restricted share units.
Cautionary Note Regarding Forward-Looking Statements
This Report contains forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable Canadian securities law, which we collectively refer to as “forward-looking statements”. Such forward-looking statements reflect our current beliefs and are based on information currently available to us. In some cases, forward-looking statements can be identified by terminology such as “may”, “would”, “could”, “will”, “should”, “expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”, “predict”, “potential”, “continue” or the negative of these terms or other similar expressions concerning matters that are not historical facts.
Many factors could cause our actual results, performance or achievements to be materially different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements, including, among others:
| · | events outside of our control, such as natural disasters, wars or health crises such as the COVID-19 pandemic, which result in uncertainty and adverse effects on our business; |
| | |
| · | our lack of product revenues and net losses and a history of operating losses; |
| · | our early stage of development, particularly the inherent risks and uncertainties associated with (i) developing new drug candidates generally, (ii) demonstrating the safety and efficacy of these drug candidates in clinical studies in humans, and (iii) obtaining regulatory approval to commercialize these drug candidates; |
| · | our need to raise substantial additional capital in the future and our potential inability to raise such funds when needed and on acceptable terms, particularly in light of restrictions and increasing costs of capital related to the COVID-19 pandemic; |
| · | delays to clinical studies and regulatory approvals of our drug candidates, including delays resulting from the COVID-19 pandemic, which may increase our costs and could substantially harm our business; difficulties in enrolling patients for clinical trials which may lead to delays or cancellations of our clinical trials; |
| · | the marketplace’s refusal to accept our products or product candidates due to intense competition and technological change in our industries, and our inability to compete successfully against other companies in our industries and achieve profitability; |
| · | our inability to protect our intellectual property rights and to not infringe on the intellectual property rights of third parties; limits on commercialization of our products because of intellectual property rights owned or controlled by third parties; |
| · | potential exposure to litigation, including product liability and other claims, and the potential need to take action against other parties; and |
| | |
| · | extensive government regulation of our industry and our inability to comply with applicable regulations and standards; |
More detailed information about risk factors and their underlying assumptions are included in our Annual Report on Form 10-K for the year ended December 31, 2019, under Item 1A – Risk Factors, as they are updated and supplemented in this Report. Except as required under applicable securities legislation, we undertake no obligation to publicly update or revise forward-looking statements, whether as a result of new information, future events or otherwise.
ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISKItem 3 – Qualitative and Quantitative Disclosures about Market Risk
Under SEC rules and regulations, as a smaller reporting company, we are not required to provide this information.
ITEM 4. CONTROLS AND PROCEDURESItem 4 – Controls and Procedures
As of the end of our fiscal quarter ended June 30, 2019,2020, an evaluation of the effectiveness of our “disclosure controls and procedures” (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the United States Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was carried out by our management, with the participation of our principal executive officer and principal financial officer. Based upon that evaluation, our principal executive officer and principal financial officer have concluded that as of the end of our fiscal quarter ended June 30, 2019,2020, our disclosure controls and procedures are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms and (ii) accumulated and communicated to our management, including our principal executive officer and principal financial officers,officer, to allow timely decisions regarding required disclosure.
It should be noted that while our principal executive officer and principal financial officer believe that our disclosure controls and procedures provide a reasonable level of assurance that they are effective, they do not expect that our disclosure controls and procedures or internal control over financial reporting will prevent all errors or fraud. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING
There were no changes in our internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) during our fiscal quarter ended June 30, 20192020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II—OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGSItem 1 – Legal Proceedings
We are not currently party toinvolved in any material active legal proceedings.actions. However, from time to time, we may be subject to various pending or threatened legal actions and proceedings, including those that arise in the ordinary course of our business. Such matters are subject to many uncertainties and to outcomes that are not predictable with assurance and that may not be known for extended periods of time.
ITEM 1A. RISK FACTORSItem 1A – Risk Factors
Under SEC rules
The following risk factors update and supplement the risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2019, and they should be read in conjunction with those risk factors. Any of the risks and uncertainties described below could significantly and negatively affect our business, prospects, financial condition, operating results, or credit ratings, which could cause the trading price of our common shares to decline. Additional risks and uncertainties not presently known to us, or risks that we currently consider immaterial, could also impair our business operations or financial condition. The following discussion of risk factors contains “forward-looking” statements, as discussed above.
Risks Related to our Business
We need to raise additional capital.
We have an ongoing need to raise additional capital. To obtain the necessary capital, we must rely on some or all of the following: additional share issues, debt issuances (including promissory notes), collaboration agreements or corporate partnerships and grants and tax credits to provide full or partial funding for our activities. Additional funding may not be available on terms that are acceptable to us or in amounts that will enable us to carry out our business plan. Although, as of the date of this report, we do not expect that COVID-19 will have a significant impact on our liquidity and capital resources, the extent to which COVID-19 impacts our business will depend on future developments, which are highly uncertain and cannot be predicted. As such, our ability to raise additional funds could be affected by adverse market conditions resulting from the COVID-19 outbreak and delays in enrolment in our trial related to COVID-19.
Our need for capital may require us to:
| · | engage in equity financings that could result in significant dilution to existing investors; |
| · | delay or reduce the scope of or eliminate one or more of our development programs; |
| · | obtain funds through arrangements with collaborators or others that may require us to relinquish rights to technologies, product candidates or products that we would otherwise seek to develop or commercialize ourselves; |
| · | license rights to technologies, product candidates or products on terms that are less favorable to us than might otherwise be available; |
| · | considerably reduce operations; or |
In addition, sales of a substantial number of our shares of common shares in the public markets, or the perception that such sales could occur, could depress the market price of our shares of common shares and impair our ability to raise capital through the sale of additional equity securities.
Our operations could be adversely affected by events outside of our control, such as natural disasters, wars or health crises such as the COVID-19 pandemic.
We may be impacted by business interruptions resulting from pandemics and public health emergencies, including those related to COVID-19, geopolitical actions, including war and terrorism or natural disasters including earthquakes, typhoons, floods and fires. An outbreak of infectious disease, a pandemic or a similar public health threat, such as the COVID 19 pandemic, or a fear of any of the foregoing, could adversely impact us by causing operating, manufacturing supply chain, clinical trial and project development delays and disruptions, labour shortages, travel and shipping disruption and shutdowns (including as a result of government regulation and prevention measures). The extent to which COVID-19 will impact our business and our financial results will depend on future developments, which are highly uncertain and cannot be predicted, including the scope, severity and duration of the pandemic, the actions taken to contain the pandemic or mitigate its impact, and the direct and indirect economic effects of the pandemic and containment measures, among other future developments. We may incur expenses or delays relating to such events outside of our control, which could have a material adverse impact on our business, operating results and financial condition.
Risks Related to Development, Clinical Testing and Regulatory Approval of Our Product Candidates
Clinical trials are long, expensive and uncertain processes and the FDA or Health Canada may ultimately not approve any of our product candidates. We may never develop any commercial drugs or other products that generate revenues.
In the past five years, none of our product candidates has received regulatory approval for commercial use and sale in North America. We cannot market a pharmaceutical product in any jurisdiction until it has completed thorough preclinical testing and clinical trials in addition to that jurisdiction’s extensive regulatory approval process. Approval in one country does not assure approval in another country. In general, significant research and development and clinical studies are required to demonstrate the safety and effectiveness of our product candidates before we can submit any applications for regulatory approval.
Clinical trials are long, expensive and uncertain processes. Clinical trials may not start or be on schedule and the FDA or Health Canada or any other regulatory body may not ultimately approve our product candidates for commercial sale in the relevant territory. Based on the current environment due to COVID-19 and the additional caution applied to the granting of new clinical trial initiations, there is no assurance that the FDA will grant allowance to initiate the planned CG-806 AML study while COVID -19 related restrictions are in place at the FDA. The clinical trials of any of our drug candidates could be unsuccessful, which would prevent us from advancing, commercializing or partnering the drug.
Even if the results of our preclinical studies or clinical trials are initially positive, it is possible that we will obtain different results in the later stages of drug development or that results seen in clinical trials will not continue with longer term treatment. Positive results in Phase 1 clinical trials may not necessarily repeat in larger Phase 2 or Phase 3 clinical trials.
Our preclinical studies and clinical trials may not generate positive results that will allow us to move towards the commercial use and sale of our product candidates. Furthermore, negative preclinical or clinical trial results may cause our business, financial condition, or results of operations to be materially adversely affected. For example, our Phase 1b clinical trial of APTO-253 in patients with R/R AML and high risk MDS was placed on clinical hold by the FDA in November 2015. Those shortcomings of the drug product were addressed and the clinical hold was lifted. However, there can be no assurance that the Company will have the resources, or that we will decide, to continue the development of APTO-253 after the current clinical trial. There is a long development path ahead that will take many years to complete the development and is prone to the risks of failure or delays inherent in drug development. Likewise, our CG-806 product candidate is currently being evaluated in a Phase 1a/b study for patients having B-cell malignancies, and it is expected to undergo many years of testing and regulatory examinations prior to any potential regulatory approvals.
Preparing, submitting and advancing applications for regulatory approval of products is complex, expensive and time intensive and entails significant uncertainty. A commitment of substantial resources to conduct time-consuming research, preclinical studies and clinical trials is required if we are to complete development of our products.
Clinical trials of our products require that we identify and enroll a large number of patients with the illness under investigation. We may not be able to enroll a sufficient number of appropriate patients to complete our clinical trials in a timely manner, particularly in smaller indications and indications where there is significant competition for patients. If we experience difficulty in enrolling a sufficient number of patients to conduct our clinical trials, we may need to delay or terminate ongoing clinical trials and will not accomplish objectives material to our success. Delays in planned patient enrollment or lower than anticipated event rates in our current clinical trials or future clinical trials also may result in increased costs, program delays, or both.
In addition, unacceptable toxicities or adverse side effects may occur at any time in the course of preclinical studies or human clinical trials or, if any product candidates are successfully developed and approved for marketing, during commercial use of any approved products. The appearance of any unacceptable toxicities or adverse side effects could interrupt, limit, delay or abort the development of any of our product candidates or, if previously approved, necessitate their withdrawal from the market. Furthermore, disease resistance or other unforeseen factors may limit the effectiveness of our potential products.
Our failure to develop safe and commercially viable drugs would substantially impair our ability to generate revenues and sustain our operations and would materially harm our business and adversely affect our share price.
We may not achieve our projected development goals in the time frames we announce and expect.
We set goals for, and make public statements regarding, the expected timing of the accomplishment of objectives material to our success, such as the commencement and completion of clinical trials, the submission of a drug-regulatory application, and the expected costs to develop our product candidates. The actual timing and costs of these events can vary dramatically due to factors within and beyond our control, such as delays or failures in our IND submissions or clinical trials, issues related to the manufacturing of drug supply, uncertainties inherent in the regulatory approval process, market conditions and interest by partners in our product candidates among other things. Our clinical trials may not be completed, we may not make regulatory submissions or receive regulatory approvals as planned; or we may not secure partnerships for any of our product candidates. Any failure to achieve one or more of these milestones as planned would have a material adverse effect on our business, financial condition and results of operations.
Although, as of the date of this report, we do not foresee material delays to the enrollment of patients or timelines for our trials due to COVID-19, the extent to which COVID-19 will impact the projected development goals will depend on future developments, which are highly uncertain and cannot be predicted. In the beginning of April we learned that certain of our larger sites will not be able to enroll new patients on the fourth dose level of CG-806 due to the current environment caused by COVID-19 and we therefore expect a slowdown in enrollment at these sites. We are continuing to work with our smaller regional cancer care centers that are not impacted by COVID-19 to recruit patients into the fourth cohort. Furthermore, should the FDA approve a phase 1 study for CG-806 in AML, we may have delays in starting a clinical trial due to the challenges of organizing site initiation visits remotely. We are continuing to plan for the CG-806 AML study and meeting with potential sites so we can test CG-806 in AML patients after FDA approval. Future enrollment of patients on the APTO-253 trial is likely to be negatively impacted as a result of the current environment, as it is administered to patients IV which requires the need for hospital / clinical site resources to assist and monitor patients during each infusion.
Delays in clinical testing could result in delays in commercializing our product candidates and our business may be substantially harmed.
We cannot predict whether any clinical trials will begin as planned, will need to be restructured or will be completed on schedule, if at all. Although, as of the date of this report, we do not foresee material delays to the enrollment of patients or timelines for our trials, the extent to which COVID-19 will impact the projected development goals will depend on future development, which are highly uncertain and cannot be predicted. Our product development costs will increase if we experience delays in clinical testing. Significant clinical trial delays could shorten any periods during which we may have the exclusive right to commercialize our product candidates or allow our competitors to bring products to market before us, which would impair our ability to successfully commercialize our product candidates and may harm our financial condition, results of operations and prospects. The recommencement and completion of clinical trials for our products, including the APTO-253 phase 1b clinical trial, the phase 1a/b clinical trial for CG-806 study for the treatment of patients having B-cell malignancies, and the IND acceptance of our planned Phase 1 study for the development of CG-806 for the treatment of patients with R/R AML may be delayed for a number of reasons, including delays related, but not limited, to:
| · | failure by regulatory authorities to grant permission to proceed with a clinical trial; |
| · | a regulatory decision to place or placing the clinical trial on hold; |
| · | patients failing to enroll or remain in our trials at the rate we expect; |
| · | suspension or termination of clinical trials by regulators for many reasons, including concerns about patient safety or failure of our contract manufacturers to comply with cGMP requirements; |
| · | any changes to our manufacturing process that may be necessary or desired; |
| · | delays or failure to obtain GMP-grade clinical supply from contract manufacturers of our products necessary to conduct clinical trials; |
| · | product candidates demonstrating a lack of safety or efficacy during clinical trials; |
| · | patients choosing an alternative treatment for the indications for which we are developing any of our product candidates or participating in competing clinical trials; |
| · | patients failing to complete clinical trials due to dissatisfaction with the treatment, side effects or other reasons; |
| · | reports of clinical testing on similar technologies and products raising safety and/or efficacy concerns; |
| · | competing clinical trials and scheduling conflicts with participating clinicians; |
| · | clinical investigators not performing our clinical trials on their anticipated schedule, dropping out of a trial, or employing methods not consistent with the clinical trial protocol, regulatory requirements or other third parties not performing data collection and analysis in a timely or accurate manner; |
| · | failure of our contract research organizations, or CROs, to satisfy their contractual duties or meet expected deadlines; |
| · | inspections of clinical trial sites by regulatory authorities or IRBs, or ethics committees or boards finding regulatory violations that require us to undertake corrective action, resulting in suspension or termination of one or more sites or the imposition of a clinical hold on the entire study; |
| · | one or more IRBs or ethics committees or boards rejecting, suspending or terminating the study at an investigational site, precluding enrollment of additional subjects, or withdrawing its approval of the trial; or |
| · | failure to reach agreement on acceptable terms with prospective clinical trial sites. |
Our product development costs will increase if we experience delays in testing or approval or if we need to perform more or larger clinical trials than planned. Additionally, changes in regulatory requirements and policies may occur, and we may need to amend study protocols to reflect these changes. Amendments may require us to resubmit our study protocols to regulatory authorities or IRBs or ethics committees or boards for re-examination, which may impact the cost, timing or successful completion of a trial. Delays or increased product development costs may have a material adverse effect on our business, financial condition and prospects.
We rely on contract manufacturers over whom we have limited control. If we are subject to quality, cost or delivery issues with the preclinical and clinical grade materials supplied by contract manufacturers, our business operations could suffer significant harm.
We rely on CMOs to manufacture our product candidates for some preclinical studies and clinical trials. We rely on CMOs for manufacturing, filling, packaging, storing and shipping of drug product in compliance with cGMP regulations applicable to our products. The FDA and other regulatory agencies ensure the quality of drug products by carefully monitoring drug manufacturers’ compliance with cGMP regulations. The cGMP regulations for drugs contain minimum requirements for the methods, facilities and controls used in manufacturing, processing and packing of a drug product.
We contracted with multiple CMOs for the manufacture of APTO-253 and CG-806 to supply the active ingredient and then drug product for our clinical trials. The synthesis of CG-806 is challenging from a scale-up synthetic chemistry perspective. The formulation and manufacture of APTO-253 is a complex process with many variables involved. We pre-qualified CMOs to have the capacity, the systems and the experience to supply CG-806 and APTO-253 for our clinical trials. We have qualified the manufacturing facilities and the FDA has also performed site audits for our selected CMOs. In spite of the efforts to prequalify CMOs, delays and errors may occur, and any such manufacturing failures, delays or compliance issues could cause delays in the completion of our clinical trial programs.
There can be no assurances that CMOs will be able to meet our timetable and requirements. We have contracted with alternate suppliers in the event our current CMOs are unable to scale up production, or if our current CMOs otherwise experience any other significant problems in the manufacture of CG-806 and APTO-253. However, it is possible that all third-party manufacturing sources may experience failure or delays and may demand commercially unreasonable terms, which may lead to further delays in the development of our product candidates. Further, contract manufacturers must operate in compliance with cGMP and failure to do so could result in, among other things, the disruption of product supplies. Our dependence upon third parties for the manufacture of our products may adversely affect our profit margins and our ability to develop and deliver products on a timely and competitive basis.
Although, as of the date of this report, we have not experienced any material delays in the manufacturing of CG-806 and APTO-253 due to COVID-19, the extent to which it will impact the manufacturing of our products will depend on future developments, which are highly uncertain and cannot be predicted. Should our suppliers involved in the manufacture of CG-806 be required to shut down their facilities due to COVID-19 either due to lack of materials or personnel, our trials would be negatively impacted. We are mitigating this risk by continuing to manufacture drug supply, but there is no guarantee that we will have enough drug to supply the trial if any of our manufacturers have a sustained shut down in their operations. COVID-19 may also affect the timing and delivery of labeled and packaged drug product for APTO-253 since it is an IV formulation which, compared to orally administered therapies, involves a more complex process. Factors related to COVID-19 caused a delay in the labeling and packaging of the APTO-253 drug product; however, going forward we do not anticipate this to materially affect the patient accrual for the ongoing Phase 1b trial.
Some components of our products are manufactured by third parties outside of the United States, and our business may be harmed by legal, regulatory, economic, political and public health risks associated with international trade and those markets.
We have third-party manufacturing partners in Germany and the United Kingdom; in addition, some materials used by our third-party manufacturers are supplied by companies located in other countries, including but not limited to India and China. Our reliance on suppliers and manufacturers in foreign markets creates risks inherent in doing business in foreign jurisdictions, including: (a) the burdens of complying with a variety of foreign laws and regulations, including laws relating to the importation and taxation of goods (b) public health crises, such as pandemics and epidemics, in the countries where our suppliers and manufacturers are located; (c) transportation interruptions or increases in transportation costs; and (d) foreign intellectual property infringement risks. For example, the ongoing COVID-19 outbreak emanating at the beginning of 2020 from China, but now affecting most nations, has resulted in extended shutdown of certain businesses and markets in many regions causing reduced availability for certain pharmaceutical ingredients. This public health crisis or any further political developments or health concerns in markets in which our products are manufactured or from which we obtain necessary pharmaceutical ingredients could adversely affect the supply of our drug products and, in turn, our business, financial condition, and results of operations.
If we have difficulty enrolling patients in clinical trials, the completion of the trials may be delayed or cancelled.
As our product candidates advance from preclinical testing to clinical testing, and then through progressively larger and more complex clinical trials, we will need to enroll an increasing number of patients that meet our eligibility criteria. There is significant competition for recruiting cancer patients in clinical trials, and we may be unable to enroll the patients we need to complete clinical trials for cancer indications on a smaller reporting company, wetimely basis or at all. Certain factors that affect enrollment of patients in our clinical trials are impacted by external forces that may be beyond our control. Such factors include, but are not requiredlimited to, the following:
| · | size and nature of the patient population; |
| · | eligibility and exclusion criteria for the trial; |
| · | design of the study protocol; |
| · | competition with other companies for clinical sites or patients; |
| · | the perceived risks and benefits of the product candidate under study; |
| · | the patient referral practices of physicians; and |
| · | the number, availability, location and accessibility of clinical trial sites. |
Although, as of the date of this report, we do not foresee material delays to the enrollment of patients or timelines for our trials due to COVID-19, the extent to which COVID-19 will impact the projected development goals will depend on future developments, which are highly uncertain and cannot be predicted.
As a result of intense competition and technological change in the biotechnical and pharmaceutical industries, the marketplace may not accept our products or product candidates, and we may not be able to compete successfully against other companies in our industry and achieve profitability.
Many of our competitors have:
| · | drug products that have already been approved or are in development; |
| · | large, well-funded research and development programs in the biotechnical and pharmaceutical fields; |
| · | substantially greater financial, technical and management resources, stronger intellectual property positions and greater manufacturing, marketing and sales capabilities, areas in which we have limited or no experience; and |
| · | significantly greater experience than we do in undertaking preclinical testing and clinical trials of new or improved pharmaceutical products and obtaining required regulatory approvals. |
Consequently, our competitors may obtain FDA, Health Canada and other regulatory approvals for product candidates sooner and may be more successful in manufacturing and marketing their products than we or our collaborators are.
Our competitors’ existing and future products, therapies and technological approaches will compete directly with the products we seek to develop. Current and prospective competing products may be more effective than our existing and future products insofar as they may provide this information.greater therapeutic benefits for a specific problem or may offer easier delivery or comparable performance at a lower cost.
For CG-806 and APTO-253 in AML, examples of potential competitors include Companies that have developed approved or are currently developing inhibitors that directly target the wild type include AbbVie (IMBRUVICA) and AstraZeneca (CALQUENCE) and Beigene Co., Ltd. (Zanubrutinib).
Others that are developing inhibitors that target the C481S-mutant BTK include Arqule, Inc. (ARQ 531), Roche, Sunesis Pharmaceuticals (SNS-062) and Eli Lilly among others.
For CG-806 and APTO-253 in AML, examples of potential competitors include companies that have developed approved or are currently developing non-targeted therapies include Jazz (VYXEOS), Pfizer (MYLOTARG) and Roche (VENCLEXTA), among others. Others that have developed or are developing highly targeted therapies such as FLT3 include Novartis (RYDAPT), Astellas (XOSAPTA), Daiichi Sankyo (QUIZARTINIB), Arog (CRENOLANIB), and IDH1 include Agios (TIBSOVO) and Celgene/BMS (IDHIFA) among others.
Any product candidate that we develop and that obtains regulatory approval must then compete for market acceptance and market share. Our products may not gain market acceptance among physicians, patients, healthcare payers, insurers, the medical community and other stakeholders. The degree of market acceptance of our product candidates, if approved for commercial sale, will depend on a number of factors, including:
| · | efficacy and potential advantages compared to alternative treatments; |
| · | the ability to offer our product candidates for sale at competitive prices; |
| · | convenience and ease of administration compared to alternative treatments; |
| · | the willingness of the target patient population to try new therapies and of physicians to prescribe these therapies; |
| · | the strength of marketing and distribution support; |
| · | sufficient third-party coverage or reimbursement; and |
| · | the prevalence and severity of any side effects. |
Further, any products we develop may become obsolete or face generic entry before we recover any expenses we incurred in connection with the development of these products. As a result, we may never achieve profitability.
ITEM 6.Item 6 – EXHIBITSExhibits
Exhibit Number | Description of Document |
| |
| 10.1 | Form of Common Share PurchaseEquity Distribution Agreement, dated May 7, 2019 by5, 2020, among Aptose Biosciences Inc., Piper Sandler & Co. and between the Company and Aspire Capital Fund,Canaccord Genuity LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s QuarterlyCurrent Report filed on Form 10-Q8-K on May 7, 2019)5, 2020.) |
10.231.1* | FormCertification of Registration Rights Agreement dated May 7, 2019 byPrincipal Executive Officer Pursuant to Rules 13a-14(a) and between15d-14(a) under the Company and Aspire Capital Fund, LLC LLC (incorporated herein by reference to Exhibit 10.1 to the Company’s Quarterly Report filed on Form 10-Q on May 7, 2019) |
10.3 | Equity Distribution Agreement, dated May 24, 2019, among Aptose Biosciences Inc, Piper Jaffray & Co and Cannacord Gennuity LLC (incorporated herein by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed with the SEC on May 24, 2019) |
10.4+ | FormSecurities Exchange Act of Executive Employment Agreement, dated June 3, 2019, between the Company and Dr. Jotin Marango |
31.1 | Certification1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002. |
31.231.2* | Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 20022002. |
32.132.1* | Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002. |
32.232.2* | Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 20022002. |
+ Management contract or compensatory plan.
| 101** | The following consolidated financial statements from the Aptose Biosciences Inc. Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, formatted in Extensible Business Reporting Language (XBRL): (i) statements of operations and comprehensive loss, (ii) balance sheets, (iii) statements of changes of shareholders’ equity, (iv) statements of cash flows, and (v) the notes to the financial statements. |
| * | Filed herewith. |
| ** | In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101 to this Quarterly Report on Form 10-Q is deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act, is deemed not filed for purposes of Section 18 of the Exchange Act, and otherwise is not subject to liability under these sections. |
SIGNATURESSignatures
Pursuant to the requirements of the Securities Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of San Diego, State of California, on the 6th4th day of August, 2019.2020.
| | Aptose Biosciences Inc.
APTOSE BIOSCIENCES INC. | |
| | | |
| By: | /s/ William G. Rice
William G. Rice
Chairman, Gregory K. Chow | |
| | Gregory K. Chow | |
| | Executive Vice President, | |
| | Chief ExecutiveFinancial Officer
| |
| | and PresidentDuly Authorized Officer | |
| | | |
| | | |
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