UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2023March 31, 2024
or
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number: 001-37758
MOLECULIN BIOTECH, INC. | |||||||||||||
(Exact name of registrant as specified in its charter) | |||||||||||||
Delaware | 2834 | 47-4671997 | |||||||||||
(State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification Number) |
5300 Memorial Drive, Suite 950 | ||||||||
Houston, TX | 77007 | |||||||
(Address of principal executive offices) | (Zip Code) |
713-300-5160
(Registrant’s telephone number, including area code)
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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Registration S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐
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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
Large accelerated filer ☐ | Smaller reporting company ☒ | |||||||
Non-accelerated filer ☒ | Emerging growth company ☐ | |||||||
Accelerated filer ☐ |
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. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act.): Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
Title of each class | Trading Symbol (s) | Name of each exchange on which registered | ||||||
Common Stock, par value $0.001 per share | MBRX | The NASDAQ Stock Market LLC |
The registrant had 29,810,4432,311,536 shares of common stock outstanding at AugustMay 1, 2023.2024.
Form 10-Q
Table of Contents
Page | ||||||||
Item 1. | ||||||||
Condensed Consolidated Balance Sheets as of | ||||||||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | |||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 1. | ||||||||
Item 1A. | ||||||||
Item 2. | Unregistered sales of Equity Securities and Uses of Proceeds | |||||||
Item 3. | ||||||||
Item 4. | ||||||||
Item 5. | ||||||||
Item 6. | ||||||||
Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
(Unaudited)
June 30, | December 31, | March 31, | December 31, | |||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Assets | ||||||||||||||||
Current assets: | ||||||||||||||||
Cash and cash equivalents | $ | 32,172 | $ | 43,145 | $ | 16,824 | $ | 23,550 | ||||||||
Prepaid expenses and other current assets | 3,208 | 2,451 | 2,133 | 2,723 | ||||||||||||
Total current assets | 35,380 | 45,596 | 18,957 | 26,273 | ||||||||||||
Furniture and equipment, net | 229 | 275 | 240 | 272 | ||||||||||||
Intangible assets | 11,148 | 11,148 | 11,148 | 11,148 | ||||||||||||
Operating lease right-of-use asset | 358 | 403 | 500 | 524 | ||||||||||||
Total assets | $ | 47,115 | $ | 57,422 | $ | 30,845 | $ | 38,217 | ||||||||
Liabilities and Stockholders’ Equity | ||||||||||||||||
Current liabilities: | ||||||||||||||||
Accounts payable | $ | 4,136 | $ | 2,095 | $ | 2,104 | $ | 2,498 | ||||||||
Accrued expenses and other current liabilities | 2,418 | 2,724 | 3,304 | 4,317 | ||||||||||||
Total current liabilities | 6,554 | 4,819 | 5,408 | 6,815 | ||||||||||||
Operating lease liability - long-term, net of current portion | 291 | 335 | 450 | 474 | ||||||||||||
Warrant liability - long-term | 2 | 77 | 3,400 | 4,855 | ||||||||||||
Total liabilities | 6,847 | 5,231 | 9,258 | 12,144 | ||||||||||||
Commitments and contingencies (Note 6) | ||||||||||||||||
Commitments and contingencies (Note 7) | ||||||||||||||||
Stockholders' equity | ||||||||||||||||
Preferred stock, $0.001 par value; 5,000,000 shares authorized, no shares issued or outstanding | — | — | — | — | ||||||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 29,789,322 and 28,627,827 shares issued and outstanding at June 30, 2023 and December 31, 2022, respectively | 30 | 29 | ||||||||||||||
Common stock, $0.001 par value; 100,000,000 shares authorized; 2,311,536 and 2,227,516 shares issued and outstanding at March 31, 2024 and December 31, 2023, respectively | 2 | 33 | ||||||||||||||
Additional paid-in capital | 155,957 | 153,985 | 158,177 | 157,653 | ||||||||||||
Accumulated other comprehensive income | 7 | 12 | ||||||||||||||
Accumulated other comprehensive income (loss) | (18 | ) | (9 | ) | ||||||||||||
Accumulated deficit | (115,726 | ) | (101,835 | ) | (136,574 | ) | (131,604 | ) | ||||||||
Total stockholders’ equity | 40,268 | 52,191 | 21,587 | 26,073 | ||||||||||||
Total liabilities and stockholders’ equity | $ | 47,115 | $ | 57,422 | $ | 30,845 | $ | 38,217 |
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | 3,888 | 4,204 | 9,576 | 8,824 | 4,252 | 5,687 | ||||||||||||||||||
General and administrative | 2,492 | 3,196 | 5,129 | 5,617 | 2,393 | 2,637 | ||||||||||||||||||
Depreciation and amortization | 31 | 34 | 61 | 66 | 32 | 30 | ||||||||||||||||||
Total operating expenses | 6,411 | 7,434 | 14,766 | 14,507 | 6,677 | 8,354 | ||||||||||||||||||
Loss from operations | (6,411 | ) | (7,434 | ) | (14,766 | ) | (14,507 | ) | (6,677 | ) | (8,354 | ) | ||||||||||||
Other income: | ||||||||||||||||||||||||
Gain from change in fair value of warrant liability | 36 | 603 | 75 | 763 | 1,455 | 39 | ||||||||||||||||||
Other income, net | 9 | 15 | 17 | 20 | 11 | 8 | ||||||||||||||||||
Interest income, net | 390 | 39 | 783 | 80 | 241 | 392 | ||||||||||||||||||
Net loss | $ | (5,976 | ) | $ | (6,777 | ) | $ | (13,891 | ) | $ | (13,644 | ) | $ | (4,970 | ) | $ | (7,915 | ) | ||||||
Net loss per common share - basic and diluted | $ | (0.20 | ) | $ | (0.24 | ) | $ | (0.48 | ) | $ | (0.48 | ) | $ | (2.02 | ) | $ | (4.13 | ) | ||||||
Weighted average common shares outstanding, basic and diluted | 29,688,862 | 28,583,014 | 29,222,012 | 28,580,689 | 2,466,174 | 1,916,665 | ||||||||||||||||||
Net Loss | $ | (5,976 | ) | $ | (6,777 | ) | $ | (13,891 | ) | $ | (13,644 | ) | $ | (4,970 | ) | $ | (7,915 | ) | ||||||
Other comprehensive loss: | ||||||||||||||||||||||||
Foreign currency translation | (1 | ) | (31 | ) | (5 | ) | (19 | ) | (9 | ) | (4 | ) | ||||||||||||
Comprehensive loss | $ | (5,977 | ) | $ | (6,808 | ) | $ | (13,896 | ) | $ | (13,663 | ) | $ | (4,979 | ) | $ | (7,919 | ) |
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net loss | $ | (13,891 | ) | $ | (13,644 | ) | $ | (4,970 | ) | $ | (7,915 | ) | ||||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||||||||||
Depreciation and amortization | 61 | 66 | 32 | 30 | ||||||||||||
Stock-based compensation | 1,012 | 1,041 | 493 | 499 | ||||||||||||
License rights expense settled in stock | 772 | — | — | 772 | ||||||||||||
Change in fair value of warrant liability | (75 | ) | (763 | ) | (1,455 | ) | (39 | ) | ||||||||
Operating lease, net | 104 | 84 | 108 | 110 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
Prepaid expenses and other current assets | (757 | ) | (1,729 | ) | 590 | 427 | ||||||||||
Accounts payable | 2,041 | 1,820 | (394 | ) | (156 | ) | ||||||||||
Accrued expenses and other current liabilities | (410 | ) | 319 | (1,121 | ) | 255 | ||||||||||
Net cash used in operating activities | (11,143 | ) | (12,806 | ) | (6,717 | ) | (6,017 | ) | ||||||||
Cash flows from investing activities: | ||||||||||||||||
Purchase of fixed assets | (15 | ) | (67 | ) | ||||||||||||
Net cash used in investing activities | (15 | ) | (67 | ) | ||||||||||||
Cash flows from financing activities: | ||||||||||||||||
Payment of tax liability for vested restricted stock units | (21 | ) | (12 | ) | ||||||||||||
Proceeds from sale of common stock, net of issuance costs | 211 | — | — | 141 | ||||||||||||
Net cash (used in) provided by financing activities | 190 | (12 | ) | |||||||||||||
Net cash provided by financing activities | — | 141 | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (5 | ) | (19 | ) | (9 | ) | (4 | ) | ||||||||
Net decrease in cash and cash equivalents | (10,973 | ) | (12,904 | ) | (6,726 | ) | (5,880 | ) | ||||||||
Cash and cash equivalents, - beginning of period | 43,145 | 70,903 | 23,550 | 43,145 | ||||||||||||
Cash and cash equivalents, - end of period | $ | 32,172 | $ | 57,999 | $ | 16,824 | $ | 37,265 | ||||||||
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except for shares)
(Unaudited)
Six Months Ended June 30, 2023 | ||||||||||||||||||||||||
Common Stock | Accumulated | |||||||||||||||||||||||
Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||
Balance, December 31, 2022 | 28,627,827 | $ | 29 | $ | 153,985 | $ | (101,835 | ) | $ | 12 | $ | 52,191 | ||||||||||||
Issuance of common stock with equity purchase agreement | 150,381 | — | 141 | — | — | 141 | ||||||||||||||||||
Common stock issued for license rights | 822,115 | 1 | 771 | — | — | 772 | ||||||||||||||||||
Stock-based compensation | — | — | 499 | — | — | 499 | ||||||||||||||||||
Net loss | — | — | — | (7,915 | ) | — | (7,915 | ) | ||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||
Balance, March 31, 2023 | 29,600,323 | $ | 30 | $ | 155,396 | $ | (109,750 | ) | $ | 8 | $ | 45,684 | ||||||||||||
Issuance of common stock with equity purchase agreement | 75,187 | — | 69 | — | — | 69 | ||||||||||||||||||
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) | 113,812 | — | (21 | ) | — | — | (21 | ) | ||||||||||||||||
Stock-based compensation | — | — | 513 | — | — | 513 | ||||||||||||||||||
Consolidated net loss | — | — | — | (5,976 | ) | — | (5,976 | ) | ||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (1 | ) | (1 | ) | ||||||||||||||||
Balance, June 30, 2023 | 29,789,322 | $ | 30 | $ | 155,957 | $ | (115,726 | ) | $ | 7 | $ | 40,268 |
Three Months Ended March 31, 2024 | ||||||||||||||||||||||||
Common Stock | Accumulated | |||||||||||||||||||||||
Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||
Balance, December 31, 2023 | 2,227,516 | $ | 33 | $ | 157,653 | $ | (131,604 | ) | $ | (9 | ) | $ | 26,073 | |||||||||||
Issuance of common stock in connection with Consulting Agreements | 6,834 | — | 37 | — | — | 37 | ||||||||||||||||||
Reverse stock split | 77,186 | (31 | ) | 31 | — | — | — | |||||||||||||||||
Stock-based compensation | — | — | 456 | — | — | 456 | ||||||||||||||||||
Net loss | — | — | — | (4,970 | ) | — | (4,970 | ) | ||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (9 | ) | (9 | ) | ||||||||||||||||
Balance, March 31, 2024 | 2,311,536 | $ | 2 | $ | 158,177 | $ | (136,574 | ) | $ | (18 | ) | $ | 21,587 |
Six Months Ended June 30, 2022 | Three Months Ended March 31, 2023 | |||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Accumulated | Common Stock | Accumulated | |||||||||||||||||||||||||||||||||||||||||||||
Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Total Stockholders' Equity | Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Total Stockholders' Equity | |||||||||||||||||||||||||||||||||||||
Balance, December 31, 2021 | 28,578,338 | $ | 29 | $ | 151,733 | $ | (72,810 | ) | $ | 41 | $ | 78,993 | ||||||||||||||||||||||||||||||||||||
Balance, December 31, 2022 | 1,908,522 | $ | 29 | $ | 153,985 | $ | (101,835 | ) | $ | 12 | $ | 52,191 | ||||||||||||||||||||||||||||||||||||
Issuance of common stock with equity purchase agreement | 10,026 | — | 141 | — | — | 141 | ||||||||||||||||||||||||||||||||||||||||||
Common stock issued for license rights | 54,808 | 1 | 771 | — | — | 772 | ||||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 527 | — | — | 527 | — | — | 499 | — | — | 499 | ||||||||||||||||||||||||||||||||||||
Net loss | — | — | — | (6,867 | ) | — | (6,867 | ) | — | — | — | (7,915 | ) | — | (7,915 | ) | ||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | 12 | 12 | — | — | — | — | (4 | ) | (4 | ) | ||||||||||||||||||||||||||||||||||
Balance, March 31, 2022 | 28,578,338 | $ | 29 | $ | 152,260 | $ | (79,677 | ) | $ | 53 | $ | 72,665 | ||||||||||||||||||||||||||||||||||||
Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) | 28,368 | — | (12 | ) | — | — | (12 | ) | ||||||||||||||||||||||||||||||||||||||||
Stock-based compensation | — | — | 514 | — | — | 514 | ||||||||||||||||||||||||||||||||||||||||||
Consolidated net loss | — | — | — | (6,777 | ) | — | (6,777 | ) | ||||||||||||||||||||||||||||||||||||||||
Cumulative translation adjustment | — | — | — | — | (31 | ) | (31 | ) | ||||||||||||||||||||||||||||||||||||||||
Balance, June 30, 2022 | 28,606,706 | $ | 29 | $ | 152,762 | $ | (86,454 | ) | $ | 22 | $ | 66,359 | ||||||||||||||||||||||||||||||||||||
Balance, March 31, 2023 | 1,973,356 | $ | 30 | $ | 155,396 | $ | (109,750 | ) | $ | 8 | $ | 45,684 |
See accompanying notes to condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business
The terms "MBI"“MBI” or "the Company"“the Company”, "we"“we”, "our",“our” and "us"“us” are used herein to refer to Moleculin Biotech, Inc. MBI is a Phase 2 clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, with clinical programs for hard-to-treat cancers and viruses. The Company has three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial, based substantially on discoveries made at and licensed from The University of Texas System on behalf of the MD Anderson Cancer Center (MD Anderson) in Houston, Texas. The Company has two wholly owned subsidiaries, Moleculin Australia Pty. Ltd., which was set up to perform certain preclinical development and Moleculin Amsterdam B.V., which acts as its legal representative for clinical trials in Europe. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials. The physician-sponsored trials utilize primarily external funds, such as grant funds, which are not presented in these financial statements. The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties. Additionally, the Company does not have a sales organization. The Company’s overall strategy is to seek potential out-licensing or outsourcing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distribution of its drugs, if approved.
In 2019, the Company sublicensed its technologies to Animal Life Sciences, Inc. (ALI), to enable research and commercialization for non-human use and share development data. As part of this agreement, ALI issued to the Company a 10% equity interest in ALI.
On May 5, 2023, the Company received a letter from NASDAQthe Nasdaq Capital Market (Nasdaq) notifying the Company that for the lastprior 30 consecutive business days the bid price for the Company's common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Capital Market pursuant to Nasdaq Listing Rule 5550(a)(2) (the "Bid(Bid Price Rule")Rule). The deficiency letter doesdid not result in the immediate delisting of the Company's common stock from the Nasdaq Capital Market.Nasdaq. In accordance with Nasdaq Listing Rule 5810(c)(3)(A), the Company has beenwas provided an initial period of 180 calendar days, or until November 1, 2023, to regain compliance with the Bid Price Rule. If, at any time beforeOn November 1, 2, 2023, the Company received a 180-calendar day extension, until April 29, 2024, from the Nasdaq to regain compliance with Bid Price Rule. On March 5, 2024, the Board of Directors approved a reverse 1-for-15 reverse stock split effective 11:59 P.M. (Eastern time) on March 21, 2024, with trading to commence on a split-adjusted basis on March 22, 2024. On April 8, 2024, the Company received a letter from Nasdaq notifying the Company that it had regained compliance with Bid Price Rule 5550(a)(2) as a result of the closing bid price forof the Company's common stock closesbeing at $1.00 per share or moregreater for a minimum ofthe 10 consecutive business days the Nasdaq Staff will provide written notification tofrom March 22, 2024 through April 5, 2024. Accordingly, the Company that it complies with the Bid Price Rule, unless the Staff exercises its discretion to extend this 10 day period pursuant to Nasdaq Listing Rule 5810(c)(3)(G). If the Company isnot in compliance with the Bid Price Rule by November 1, 2023, and Nasdaq considers the Company may be afforded a second180 calendar day period to regain compliance. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, except for the minimum bid price requirement. In addition, the Company would be required to notify Nasdaq of its intent to cure the minimum bid price deficiency, which may include, if necessary, implementing a reverse stock split. If the Company does not regain compliance with the Bid Price Rule by November 1, 2023, and is not eligible for an additional compliance period at that time, the Nasdaq Staff will provide written notification to the Company that its common stock may be delisted. The Company would then be entitled to appeal the Nasdaq Staff’s determination to a NASDAQ Listing Qualifications Panel and request a hearing. There can be no assurance that, if the Company does appeal a delisting determination by the Nasdaq Staff to the NASDAQ Listing Qualifications Panel, that such appeal would be successful. The Company intends to monitor the closing bid price of its common stock and may, if appropriate, consider available options to regain compliance with the Bid Price Rule, which could include effecting a reverse stock split. However, there can be no assurance that the Company will be able to regain compliance with the Bid Price Rule.matter closed.
2. Basis of presentation, principles of consolidation, and significant accounting policies and liquidity
Reverse Stock Split - On March 22, 2024, the Company completed a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 to 15. The accompanying consolidated financial statements and notes to the consolidated financial statements gives retroactive effect to the reverse stock split for all periods presented. Certain amounts previously reported include rounding up of fractional shares as a result of the reverse stock split.
Basis of Presentation – Condensed Consolidated Financial Information - The accompanying condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The condensed consolidated financial statements furnished reflect all normal adjustments, which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 20222023 and for the year then ended, including the notes thereto contained in the Form 10-K filed with the SEC on March 22, 2023.2024.
Principles of Consolidation - The accompanying condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. All material long-lived assets of the Company reside in the U.S.
Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 20222023. There have been no material changes to the significant accounting policies during the sixthree months ended June 30, 2023March 31, 2024.
Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of financial statements. Estimates are used in the following areas, among others: fair value estimates on intangible assets, warrants, and stock-based compensation expense, as well as accrued expenses and taxes.
Going Concern and Liquidity - These condensed consolidated financial statements have been prepared on a going concern basis, which assumes the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The continuation of the Company as a going concern is dependent upon the ability of the Company to obtain necessary equity financing to continue operations and the attainment of profitable operations. As of June 30, 2023March 31, 2024, the Company had an accumulated deficit of $115.7136.6 million since inception and had not yet generated any revenues from operations. Additionally, management anticipates that its cash on hand of $32.216.8 million aass of June 30, 2023March 31, 2024 isnot sufficient to fund its planned operations into butfor a period of at least notone beyond the near term.year from when these consolidated financial statements are issued. These factors raise substantial doubt regarding the Company's ability to continue as a going concern. These unaudited condensed consolidated financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern. The Company may intends to seek additional funding throughone or more of the following: a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. Management cannotThere can be certainno assurance that such events or a combination thereof can be achieved.
In March 2022, the Company received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are the Company's officers or directors) and entities, and materials related to the development of and statements regarding the Company's drug candidate for the treatment of COVID-19. The Company has received, and expects to continue to receive, periodic further requests from the SEC staff with respect to this matter. The Company is not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that it has made, the Company believes in the accuracy and adequacy of such prior disclosures. The correspondence from the SEC transmitting the subpoena to the Company states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. The Company cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation. TheDuring the three months ended March 31, 2024 and 2023, the Company expensed approximately $0.4approximately $0.1 million and $0.8 million$0.5 million, respectively, in related general and administrative fees and expenses for the three months ended June 30, 2023 and 2022, respectively, and $0.9 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively.expenses. The Company is in the process of filing a claim with its insurance carriers related to this loss which may cover a portion of the related expenses but not all. The claim is currently under review by the insurance company. The claim has not yet been approved nor has a reimbursement amount been determined.determined which, if any, would be limited by the applicable retention as defined under the policy. Accordingly, the Company has not recorded any provision for insurance reimbursement. The Company expects to record the insurance reimbursement at the time that the amount to be reimbursed is determined and approved by the insurance carrier. Any insurance reimbursement receivable will be recorded at an amount not to exceed the recorded loss and only if the terms of the legally enforceable insurance contracts support that the insurance recovery will not be disputed and is deemed collectible, or if recovery of the loss is probable.
Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains cash accounts principally at one financial institution in the U.S., which at times, may exceed the Federal Deposit Insurance Corporation’s limit. The Company has not experienced any losses from cash balances in excess of the insurance limit. The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held.
Prepaid Expenses and Other Current Assets - Prepaid expenses and other current assets consist of the following (table in thousands):
June 30, 2023 | December 31, 2022 | |||||||
Prepaid insurance and other | $ | 1,220 | $ | 1,028 | ||||
Prepaid sponsored research | 1,073 | 600 | ||||||
Vendor prepayments and deposits | 903 | 801 | ||||||
Non-trade receivables | 7 | 2 | ||||||
Related party receivables | 5 | 20 | ||||||
Total prepaid expenses and other current assets | $ | 3,208 | $ | 2,451 |
Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payable, and accrued expenses approximates their fair value because of the short-term maturity of such.
The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:
Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – Unobservable inputs for the asset or liability.
The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability discussed in Note 3.4.
The following table provides the financial liabilities reported at fair value and measured on a recurring basis at June 30, 2023March 31, 2024 and December 31, 20222023 (table in thousands):
Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Fair value of warrant liability as of June 30, 2023: | $ | 2 | $ | — | $ | — | $ | 2 | ||||||||
Fair value of warrant liability as of December 31, 2022: | $ | 77 | $ | — | $ | — | $ | 77 |
Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
Fair value of warrant liability as of March 31, 2024: | $ | 3,400 | $ | — | $ | — | $ | 3,400 | ||||||||
Fair value of warrant liability as of December 31, 2023: | $ | 4,855 | $ | — | $ | — | $ | 4,855 |
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of the beginning of the secondfirst quarter and then is adjusted for changes in fair value that occurred during the secondfirst quarter. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Three Months Ended June 30, 2023 | Warrant Liability Long-Term | |||
Balance, March 31, 2023 | $ | 38 | ||
Change in fair value - net | (36 | ) | ||
Balance, June 30, 2023 | $ | 2 |
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 2022 and then is adjusted for changes in fair value that occurred during the six months ended June 30, 2023. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
Six Months Ended June 30, 2023 | Warrant Liability Long-Term | |||
Balance, December 31, 2022 | $ | 77 | ||
Change in fair value - net | (75 | ) | ||
Balance, June 30, 2023 | $ | 2 |
Three Months Ended March 31, 2024 | Warrant Liability Long-Term | |||
Balance, December 31, 2023 | $ | 4,855 | ||
Change in fair value - net | (1,455 | ) | ||
Balance, March 31, 2024 | $ | 3,400 |
Loss Per Common Share - Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock are considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be anti-dilutive. For the three months ended June 30, 2023March 31, 2024 and 20222023, approximately 6.41.7 million and 4.9 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their anti-dilutive effect. For the six months ended June 30, 2023 and 2022, approximately 6.3 million and 4.80.4 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their anti-dilutive effect.
Subsequent Events - The Company’s management reviewed all material events through the date of these unaudited condensed consolidated financial statements. See Note 78 - Subsequent Events.
Recent Accounting Pronouncements - There are no recently issued accounting standards updates that are currently expected to have a material impact on the Company.
3. Accrued expenses and other current liabilities
Accrued expenses and other current liabilities consist of the following components (in thousands):
March 31, 2024 | December 31, 2023 | |||||||
Accrued research and development | $ | 1,565 | $ | 2,845 | ||||
Accrued payroll and bonuses | 1,092 | 765 | ||||||
Accrued legal, regulatory, professional and other | 477 | 547 | ||||||
Operating lease liability - current | 109 | 100 | ||||||
Accrued liabilities due to related party | 61 | 60 | ||||||
Total accrued expenses and other current liabilities | $ | 3,304 | $ | 4,317 |
Additionally, accounts payable includes $74,000 and $67,000 as of March 31, 2024 and December 31, 2023, respectively, for related party payables.
4.Warrants
Liability Classified Warrants
The Company uses the Black-Scholes option pricing model (BSM) to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model.
The assumptions used in determining the fair value of the Company's outstanding liability classified warrants are as follows:
| December 31, | |||||
Risk-free interest rate |
|
| ||||
Volatility |
|
| ||||
Expected life (years) | 0.1 to |
| ||||
Dividend yield | —% | —% |
A summary of the Company's liability classified warrant activity during the sixthree months ended June 30, 2023March 31, 2024 and related information follows:
Number of Shares | Range of Warrant Exercise | Weighted Average | Weighted Average Remaining Contractual | |||||||||||||||||
Under Warrant | Price per Share | Exercise Price | Life (Years) | |||||||||||||||||
Balance at January 1, 2023 | 2,656,296 | $ | 6.30 | $ | 16.80 | $ | 9.49 | 1.7 | ||||||||||||
Expired warrants | (26,914 | ) | $ | 13.92 | $ | 16.80 | $ | 16.22 | — | |||||||||||
Balance at June 30, 2023 | 2,629,382 | $ | 6.30 | $ | 16.80 | $ | 9.42 | 1.2 | ||||||||||||
Exercisable at June 30, 2023 | 2,629,382 | $ | 6.30 | $ | 16.80 | $ | 9.42 | 1.2 |
Number of Shares | Range of Warrant Exercise | Weighted Average | Weighted Average Remaining Contractual | |||||||||||||||||
Under Warrant | Price per Share | Exercise Price | Life (Years) | |||||||||||||||||
Balance at January 1, 2024 | 1,082,895 | $ | 9.60 | $ | 157.50 | $ | 24.32 | 5.1 | ||||||||||||
Expired warrants | (17,573 | ) | $ | 99.00 | $ | 99.00 | $ | 99.00 | — | |||||||||||
Balance at March 31, 2024 | 1,065,322 | $ | 9.60 | $ | 157.50 | $ | 23.09 | 4.4 | ||||||||||||
Exercisable at March 31, 2024 | 1,065,322 | $ | 9.60 | $ | 157.50 | $ | 23.09 | 4.4 |
For a summary of the changes in fair value associated with the Company's warrant liability for the sixthree months ended June 30, 2023March 31, 2024, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.
Equity Classified Warrants
In June 2023,March 2024, the Company granted equity-classified warrants to purchase 150,000up to 3,334 shares of Company common stock with a ten-year term and an exercise price of $0.60 vesting$9.15. The warrants vest annually over four years while services are being performed.
At June 30, 2023March 31, 2024, the Company had 796,501292,611 equity classified warrants outstanding and 420,509 warrantsand 266,591 warrants were exercisable. At December 31, 20222023, the Company had 646,501289,276 equity classified warrants outstanding and 400,859266,350 warrants were exercisable.
The Company recorded stock compensation expense for the non-employee consulting agreements of $46,000$34,000 and $83,000$46,000 for the three months ended June 30, 2023March 31, 2024 and 2022, respectively, and $92,000 and $166,000 for the six months ended June 30, 2023and 2022, respectively. At June 30, 2023March 31, 2024, there was $410,000$344,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.
4.5. Equity
Lincoln Park Equity Line
During theThe Company did sixnot months ended June 30, 2023, pursuant toutilize the 2021 Lincoln Park purchase agreement during the Company issued to Lincoln Park 225,568 shares of common stock for gross proceeds of $0.2 million.three months ended March 31, 2024. The 2021 Lincoln Park Agreement, which hashas $19.8 millionmillion available as of June 30, 2023March 31, 2024, terminates on July 1, 2024. The Company is in discussions with Lincoln Park Capital to effect the extension of this agreement. The Company intends to seek an extension of this agreement prior to termination, however no agreement has been reached as of the date these unaudited consolidated financial statements were issued. In the December 2023 Offering, the Company agreed not to utilize the Lincoln Park Agreement or any such extension thereof, until after June 26, 2024.
Other Components of Equity
In March 2023, the Company and WPD agreed to terminate the WPD Agreement. Pursuant to the termination, the Company agreed to pay WPD (or its designees) $700,000 in cash and shares of its common stock valued at $800,000. In March 2023,2024, the Company issued 822,1156,834 shares of common stock to WPD (or its designee) as part of satisfying this commitment. See Note 6 - Commitments and Contingencies. In addition, during the six months ended June 30, 2023, the Company issued 113,812 shares of common stock relatedconsultants in exchange for services to the vesting of restricted stock units.be provided.
Stock-Based Compensation and Outstanding Awards
The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights to employees, non-employee directors and consultants. In May 2023 and 2022, the 2015 Stock Plan (the Plan) was amended to authorize an additional 1,750,000116,667 shares and 2,000,000133,334 shares, respectively, such that 5,500,000366,667 total shares may be issued under the Plan. As of June 30, 2023March 31, 2024, there were 26,9192,053 shares remaining to be issued under the 2015 Stock Plan.
Stock-based compensation expense for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023, respectively, is as follows (table in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
General and administrative | $ | 379 | $ | 350 | $ | 748 | $ | 711 | $ | 381 | $ | 369 | ||||||||||||
Research and development | 134 | 164 | 264 | 330 | 112 | 130 | ||||||||||||||||||
Total stock-based compensation expense | $ | 513 | $ | 514 | $ | 1,012 | $ | 1,041 | $ | 493 | $ | 499 |
DuringOn May 8, 2024 the Company issued 1,000 options to purchase the company stock under the six2015 months endedStock Plan each to June 30, 2023two, the Company granted 1,496,000 stock options with a weighted average fair value of $0.49 per share and 979,376 shares of restricted stock units with a weighted average fair value of $0.60 per share. These stock options have a weighted average exercise price of $0.60 and vest over a one Science Advisory Board members. to four year period from the grant date on a straight-line basis over the requisite service period. The restricted stock units vest annually in four equal installments.
5.6. Income Taxes
Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company does not expect to pay any significant federal, state, or foreign income taxes in 20232024 as a result of the losses recorded during the three and sixmonths ended June 30, 2023March 31, 2024 and the additional losses expected for the remainder of 20232024 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of June 30, 2023March 31, 2024 and December 31, 20222023 the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded no income tax provision for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023, respectively. The effective tax rate for the sixthree months ended June 30, 2023March 31, 2024 and 20222023 is nilnil.. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants, Internal Revenue Code Section 162(m) limitations and ISO activity, as well as the valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.
6.7. Commitments and Contingencies
In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of June 30, 2023March 31, 2024.
Lease Obligations Payable
The following summarizes quantitative information about the Company's operating leases for the three and sixmonths ended June 30, 2023March 31, 2024 and 20222023, respectively (table in thousands):
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Lease cost: | ||||||||||||||||||||||||
Operating lease cost | $ | 33 | $ | 29 | $ | 65 | $ | 58 | $ | 38 | $ | 33 | ||||||||||||
Variable lease cost | 7 | 7 | 14 | 14 | 2 | 7 | ||||||||||||||||||
Total | $ | 40 | $ | 36 | $ | 79 | $ | 72 | $ | 40 | $ | 40 |
In September 2023, the Company executed an amendment to extend the corporate office lease until August 31, 2029, with an option to renew. The Company is required to remit base monthly rent of approximately $4,700 which will increase at an average approximate rate of 2% each year. The Company is also required to pay additional rent in the form of its pro-rata share of certain specified operating expenses of the building.
In June 2022, the Company extended the lab lease until September 30, 2027, with no further right or option to renew. The Company recorded approximately $12,000 and $10,000$12,000 in sublease income from a related party for the three months ended June 30, 2023March 31, 2024 and 2022, respectively, and $25,000 and $21,000 for the six months ended June 30, 2023and 2022, respectively. Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss. Operating cash flows from operating leases was $29,000 and $38,000 and $35,000 for the three months ended June 30, 2023March 31, 2024 and 20222023, respectively and $75,000 and $70,000 for the six months ended June 30, 2023 and 2022, respectively..
Licenses
MD Anderson - Total expenses related to the Company's license agreements with MD Anderson wewreere $54,000 and $64,000 and $56,000 forfor the three months ended June 30, 2023March 31, 2024 and 20222023, respectively and $129,000 and $133,000 for the six months ended June 30, 2023 and 2022, respectively..
HPI - The Company has two agreements with a related party, Houston Pharmaceuticals, Inc. (HPI) with total expenses of of $59,000 for eeachach of the three months ended June 30, 2023March 31, 2024 and 2022, respectively, and $117,000 for the six months ended June 30, 2023and 2022, respectively.
Sponsored Research Agreements -The Company has a sponsored research agreement with MD Anderson expiring December 31, 2024. In June 2023 and April 2023, the Company entered into amendments to the Sponsored Research Agreement with MD Anderson for total payments of $0.8 million to support the continuation of the project. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. The expenses recognized under the agreements were $176,000 and $313,000$156,000 and $155,000 for the three months ended June 30, 2023March 31, 2024 and 20222023, respectively, and $331,000 and $500,000 for the six months ended June 30, 2023 and 2022, respectively.
License Terminations
The Company was party to a sublicense agreement with WPD Pharmaceuticals (WPD), pursuant to which it sublicensed to WPD certain intellectual property rights, including rights to Annamycin, its WP1122 portfolio, and its WP1066 portfolio (as amended, the “WPD Agreement”). WPD is affiliated with Dr. Waldemar Priebe, the Company's founder. In March 2023, the Company and WPD agreed to terminate the WPD Agreement and agreed to pay WPD (or its designee) $700,000 in cash and shares of its common stock valued at $800,000. In March 2023, the Company issued 822,115 shares of common stock to WPD's designee as part of satisfying this commitment. With the termination of the WPD Agreement, the Company now has acquired the rights in certain territories previously sub-licensed to WPD to all of its licensed intellectual property, other than the rights related to non-human animals. Additionally, the Company acquired the in-process research and development that WPD has created during the term of the agreement.
In February 2022, the Company and Exploration Invest Pte Ltd. (Exploration) entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $400,000 to terminate certain License Agreements and extend confidentiality requirements until the 10-year anniversary of the license termination agreement. Total expenses, reflected in research and development expenses, related to the Company's license terminations were $1.5 million and $0.4 million for the three and six months ended June 30, 2023 and 2022, respectively.
7.8. Subsequent Events
In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion ofno other subsequent events were noted as occurring after June 30, 2023March 31, 2024.
In August 2023, the Company entered into an agreement with an entity to provide services. In connection with the services to be provided, the Company agreed to issue the entity a five-year warrant to purchase up to 100,000 shares of Company common stock with an exercise price of $0.62, which was equal to the market price of the Company's common stock on the effective date of the agreement. The warrant vests based on performance of certain services.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.
Forward-looking statements include, but are not limited to, statements about:
• | Our ability to continue our relationship with MD Anderson, including, but not limited to, our ability to maintain current licenses and license future intellectual property resulting from our sponsored research agreements with MD Anderson; | |
• | The success or the lack thereof, including the ability to recruit subjects on a timely basis, for a variety of reasons, of our clinical trials through all phases of clinical development; | |
• | Our ability to satisfy any requirements imposed by the US Food & Drug Administration (FDA) (or its foreign equivalents) as a condition of our clinical trials proceeding or beginning as planned; | |
• | World-wide events including the |
• | Our ability to obtain additional funding to commence or continue our clinical trials, fund operations and develop our product candidates; |
• | The need to obtain and retain regulatory approval of our drug candidates, both in the United States and in Europe, and in countries deemed necessary for future trials; |
• | Our ability to complete our clinical trials in a timely fashion and within our expected budget and resources; |
• | Our ability to source our drug products at reasonable prices; | |
• | Compliance with obligations under intellectual property licenses with third parties; |
• | Any delays in regulatory review and approval of drug candidates in clinical development; |
• | Potential efficacy of our drug candidates; | |
• | Our ability to commercialize our drug candidates; |
• | Market acceptance of our drug candidates; |
• | Competition from existing therapies or new therapies that may emerge; |
• | Potential product liability claims; |
• | Our dependency on third-party manufacturers to successfully, and timely, supply or manufacture our drug candidates for our preclinical work and our clinical trials; |
• | Our ability to establish or maintain collaborations, licensing or other arrangements; |
• | Our ability and third parties’ abilities to protect intellectual property rights; |
• | Our ability to adequately support future growth; and |
• | Our ability to attract and retain key personnel to manage our business effectively. |
We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.
Our Business
We are a clinical stage pharmaceutical company with a growing pipeline, including Phase 2 clinical programs for hard-to-treat cancers and viruses. We have three core technologies, each of which have had one or more drugs successfully complete a Phase 1 clinical trial, (subject to publishing final Clinical Study Report), based substantially on discoveries made at and licensed from the University of Texas MD Anderson Cancer Center (MD Anderson) in Houston, Texas. Three of our six drug candidates have shown human activity in clinical trials and are currently or have been in Phase 1b/1B/2 or Phase 2 clinical trials. Since our inception and as of March 2024, our drugs have completed, are currently in, or have received approvalbeen permitted to proceed in, eleventhirteen clinical trials. Annamycin is our lead molecule and is in three Phase 1B/2 clinical trials - one for treating Acute Myeloid Leukemia (AML) and two for treating Soft Tissue Sarcoma metastasized to the lungs (STS lung metastases, STS lung mets, or Advanced STS).
One of our core management beliefs is that anthracyclines represent the most important treatment for AML and Advanced STS, and we believe Annamycin may, for the first time ever, allow a majority of these patients to benefit from this treatment. This belief leads us to currently focus mainly on the development of Annamycin.
Our Core Technologies
Our core technologies consist of the following:following programs:
a) Annamycin or L-Annamycin is a “next generation” anthracycline (one of the most widely used classes of chemotherapy), designed to be different than currently approved anthracyclines, which are limited in utility because of cardiotoxicity risks and their susceptibility to multidrug resistance mechanisms. Annamycin was designed to avoid multidrug resistance and to be non-cardiotoxic and has shown no cardiotoxicity in subjects treated in clinical trials to date. Furthermore, we have demonstrated safe dosing beyond the dose limitations imposed by regulatory authorities upon currently prescribed anthracyclines due to their inherent cardiotoxicity;cardiotoxicity. As of March 2024, Annamycin demonstrated efficacy in two of its Phase 1B/2 trials in subjects with AML and Advanced STS. We believe that Annamycin has potential to fill an unmet need as a second line therapy (2nd line or 2L) in AML and potentially as first line therapy in Advanced STS.
As part of our Annamycin clinical trials, we have engaged an independent expert to assess cardiotoxicity associated with chemotherapy at the Cleveland Clinic (Expert or Independent Expert). The data made available to the Expert includes left ventricular ejection fraction (LVEF) as determined by echocardiograms, and ECHO strain imaging, as well as Troponin levels (a biochemical marker of acute heart damage). “ECHO strain imaging” is a method in echocardiography (medical ultrasound) for measuring regional or global deformation (contraction or beating) of the myocardium (heart muscle). By strain rate imaging, the simultaneous function of different regions can be displayed and measured. Cardiac health biomarkers such as blood Troponin levels are considered an indicator of potential long-term heart damage. The Expert has issued and will continue to issue periodic reports as additional data are provided to him in batches of subject data. Such data include some data which are preliminary and subject to change. In our discussions regarding the lack of Annamycin's cardiotoxicity, we rely on the Expert's assessment.
Annamycin benefits from a promising advancement in lipid enabled drug delivery developed in collaboration with and exclusively licensed from MD Anderson. The unique patented lipid composition allows us to combine a new concept in chemotherapeutic agents within a lipid structure that helps target the delivery of the payload and reduce the potential for toxicity. In the case of Annamycin, our unique use of lipid technology enables improved tissue/organ distribution, and as demonstrated in multiple clinical trials, dramatically reduced toxicity, including cardiotoxicity.
b) ourOur WP1066 Portfolio which includes WP1066, WP1193 and WP1220, twothree of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription 3)transcription) among other transcription factors associated with tumor activity, whileactivity. These also stimulatingstimulate a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs);. WP1066, in oral formulation, has been in two clinical trials, including compassionate use cases. WP1066 and WP1193 are being tested in preclinical programs in intravenous (IV) formulations. WP1066 and WP1220 have been in clinical trials in a topical formulation. WP1066 and WP1220 have both independently successfully completed Phase 1 clinical trials and have demonstrated efficacy.
c) ourOur WP1122 Portfolio which contains compounds (including WP1122, WP1096, and WP1097) designed to exploit the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we. We believe such compounds may provide an opportunity to cut off the fuelenergy supply of tumors by taking advantage of their high leveldegree of dependence on glucose in comparison to healthy cells, as well as viruses that also depend upon glycolysis and glycosylation to infect and replicate.
In discussions regarding Annamycin’s lack of cardiotoxicity, we rely on our expert's assessment of certain WP1122 has completed a Phase 1 clinical trial subject data including LVEF, ECHO strain analyses, and cardiac biomarkers – troponins I & T and our pre-clinical and clinical data, some of which are preliminary and subject to change.
Our Focus
We are focused on internally funded development of:
1) Annamycin for the treatment of Soft Tissue Sarcoma metastasized to the lungs (STS lung metastases or STS lung mets)
2) Annamycin in combination with Cytarabine (also known as Ara-C, the combination with Annamycin is referred to as AnnAraC) for the treatment of Relapsed or Refractory Acute Myeloid Leukemia (R/R AML or AML).
3) A better formulation for delivery of WP1066 to further support current and possibly future externally funded oncology clinical trials.
We have also recently establishedstudy, successfully establishing a Recommended Phase 2 Dose (RP2D) for WP1122 to potentially enable future externally funded oncology and virology trials. Beyond this, we support development of our core technologies through several externally funded clinical trials and primarily externally funded non-clinical research, with the potential for further studies in the near-term.
Our Clinical Trials
In the US and Europe, since our inception, we or independent investigators have approval to begin, are currently conducting or have completed eleven internally or externally funded clinical trials for four of our drug candidates – Annamycin, WP1066, WP1220, and WP1122. All clinical trials are or were in the Phase 1 or 2 stage. During 2021, we had four active clinical trials evaluating either Annamycin or WP1066 in the US and Europe. This increased to six active or recently completed trials in 2022 involving Annamycin, WP1066, and WP1122. In 2021 and 2022, there were five “right-to-try” (or their foreign equivalent) uses of Annamycin and WP1066. Three of the six clinical trials active in 2022 are internally funded trials of Annamycin and one is an internally funded Phase 1 clinical trial for WP1122 establishing an RP2D.
Moving into 2023, we are actively recruiting in three clinical trials in a Phase 1b or Phase 2 stage and have recently concluded one trial. These three currently active clinical trials are open label so we intend to periodically announce human activity that is being demonstrated in these trials during 2023. In February 2023, the externally funded Phase 1 clinical trial with WP1066 for the treatment of pediatric brain tumors concluded. We expect up to two externally funded Phase 1b/2 clinical trials for WP1066 in the treatment of GBM and other brain tumors in 2023. One more pediatric clinical trial may occur later subject to the results of the other two possible clinical trials.
During 2022 and 2023, we or independent investigators filed applications, began recruiting or are currently recruiting for six internally or externally funded clinical trials in the US and Europe.
Additionally, we are in discussions with research institutions in the US, Asia, and South America regarding possible externally funded trials or programs involving WP1066 and WP1122.
Recent Business Developments
Below are recent business developments.
Annamycin
MB-106 Annamycin in Combination with CytarabineClinical Trial for the Treatment of AML (in Combination with Cytarabine (MB-106)“
5+3 TherapyTable 1”
Study MB-106 Combination Therapy – Phase 1B/2 with Ara-C + Annamycin "5+3" | All Lines (Range 1-7) | 1st Line | 2nd Line |
All Subjects | |||
Recruited and Evaluable | 20 | 3 | 10 |
Subjects Evaluable Not Dosed Per Protocol | 2 | 0 | 1 |
Median Age - Years (Range) | 69 (19 - 78) | 49 (19 - 69) | 71 (53 - 78) |
Complete Remissions (CR) | 8 | 2 | 5 |
CR with incomplete recovery (CRi) | 1 | 0 | 1 |
Total Composite Complete Remission (CRc) | 9 | 2 | 6 |
Complete Remission (CR) Rate | 40% | 67% | 50% |
Complete Remission Composite (CRc) Rate | 45% | 67% | 60% |
Partial Remission (PRs) | 2 | 0 | 1 |
Overall Response Rate (CRc's + PRs) or ORR | 55% | 67% | 70% |
CRc Relapsed or Death To Date | 2 | 0 | 2 |
BMT to Date (in CR's) | 2 | 0 | 1 |
See Note 1 below |
)Note 1 for Table 1: Data from MB-106 is for Intent To Treat (ITT) subjects and is preliminary and subject to change. Median Durability of CRc is 4.9 months and climbing.
On May 2, 2023, we announced successful completion7, 2024, our management held a Key Opinion Leader conference call with Dr. Martin Tallman and Dr. Michael Andreeff. Management made a presentation of the first cohort in our Phase 1b portiondata above and discussion ensued with Drs Tallman and Andreeff on the significance of this data. Both Drs. Tallman and Andreeff are members of our Science Advisory Board.
The call included a discussion of the results to date for MB-106. We believe that the Phase 1b/1B/2 clinical trial usinghas been successful in establishing safety and efficacy of Annamycin in combination with Cytarabine (AnnAraC) for the treatment of AML, (MB-106). This study is utilizingand in providing sufficient data to support a “5+3” regimen where Annamycin is administered with the three days of infusion along with the five days of infusion of Cytarabine. This combination strategy is similarPhase 2 registration-directed clinical trial (MB-108) to the familiar “7+3” induction therapy that is consideredfurther provide data for efficacy which we intend to be a standard of care in AML, where seven days of Cytarabine infusions are paired with 3 days ofuse to support an approved anthracycline (typically, daunorubicin). In the first cohort three subjects were treated, all of whom were relapsed from multiple prior therapies. Annamycin was dosed at 190 mg/m2, along with Cytarabine at 2.0 g/m2/dayeventual application for 5 days (total dose of 10g/m2New Drug Approval (NDA). We, at the recommendation of the safety review committee, deemed the first cohort dose as safe
Preliminary Safety, Efficacy and opened the second cohort with the Annamycin dose being increased to 230 mg/m2. Durability Data
The medianpreliminary data for MB-106 demonstrate a CRc rate of 45% and an ORR of 55% for all subjects, regardless of the number of prior treatments (N=20). Segmenting the MB-106 subject population for 1st line (N=3) and, most notably, 2nd line (N=10) therapies in the trial, yields a CRc rate of 67% and 60% and an ORR of 67% and 70%, both respectively. We believe the CR and CRc rates demonstrated by AnnAraC in 2nd line patients substantially exceeds the performance reported by any drug currently approved for these three subjects were 5 (1 to 7). One of the subjects, who was 78 years of age at the time of the study initiation and enrolled after a single prior multi-year therapy, achieved a CR that has continued to be durable at five months. The other two subjects were shown to have disease progression.use in 2nd line AML.
On August 7, 2023, we successfully completed the second cohort at 230 mg/m2 Median durability of Annamycin in this combination study. Four subjects were treated in this cohort, one who is believed to be relapsed from one or more prior therapies and three of whom are believed to be refractory from up to three prior therapies. One subject was replaced due to a Serious Adverse Event (SAE) experienced on Day 1 of dosing. The SAE was determined to be unrelated to Annamycin and definitively related to Cytarabine. We, at the recommendation of the safety review committee, deemed the second cohort dose as safe and opened recruitment, including for both first line therapy and for subjects who are refractory to or relapsed after induction therapy, to the Phase 2 portion of the trial.
The median of prior therapiesremission (DoR) for the three evaluable subjects in the second cohort were two (one to three)9 CRcs is approximately 4.9 months and the median age was 67. One of the subjects, who was 64 years of age at the time of the study initiationdeveloping with one prior therapy, was preliminary recorded as a complete response with an incomplete recovery of the bone marrow or CRi per the protocol. The other two subjects were showndeath (related to have disease progression.
This brings the total CR or CRipneumonia) and one relapse to date out of the Phase 1b portionten CRcs. The first subject with a CRc (and who has yet to relapse) was treated in February 2023. The DoR is being measured from the initiation of this combination trialtreatment to two outrelapse or death.
Cardiovascular safety of sixAnnamycin is thoroughly monitored as independent assessments are made by an independent expert cardio-oncologist from Cleveland Clinic. As of April 1, 2024, data from 84 subjects or 33%. The median ageacross five trials (AML & STS, internal and externally funded trials) have been reviewed. Of note, most of these subjects was 66.have received greater than the lifetime cumulative anthracycline dose above 550 mg/m2 associated with increased risk of cardiomyopathy. Some subjects have received four times this amount following Annamycin administration(s). No signal of cardiotoxicity has been identified.
U.S Patents for Annamycin
All data presented aboveOn April 9, 2024, the United States Patent and Trademark Office (USPTO) issued U.S. Patent number 11,951,118 titled, “Preparation of Preliposomal Annamycin Lyophilizate” (the ‘118 patent’) to Moleculin and The University of Texas System Board of Regents. On April xx, 2024, we received an Issue Notification from the MB-106 trial are preliminaryUSPTO for an additional patent (U.S. Patent number 11,980,634) titled “Method of Reconstituting Liposomal Annamycin” (the ‘634 patent’) to be issued on May 14, 2024.
The ‘118 patent provides claims to compositions that contain Annamycin, and the ‘634 patent, when issued, will provide claims to liposomal Annamycin suspension compositions, both with a base patent term extending until June 2040, subject to change.extension to account for time required to fulfill regulatory requirements for FDA approval. Moleculin’s novel candidate for the treatment of acute myeloid leukemia (AML) and soft tissue sarcoma lung metastases (STS lung mets) uses a unique lipid-based delivery technology. In addition to the issued ‘118 and expected ‘634 U.S. patents, we have additional patent applications pending in major jurisdictions worldwide.
MB-107EMA issues ODD to Annamycin Monotherapy for the Treatmenttreatment of STS Lung MetsAML
In our MB-107 Phase 2We announced that the European Medicines Agency (EMA) has granted Orphan Drug Designation (ODD) to Annamycin for the treatment of AML. Combined with the Orphan Drug Designation we have in the US and with the new composition of matter and formulation patents just awarded by the US Patent and Trademark Office with coverage through 2040, we believe the commercial exclusivity of Annamycin is now well protected.
The EMA grants orphan drug designation to drugs and biologics intended for the treatment, diagnosis or prevention of rare, life-threatening or chronically debilitating diseases or conditions that affect fewer than five in 10,000 people in the European Union. Orphan designation potentially allows companies certain benefits, including reduced regulatory fees, clinical trial treating STS lung mets withprotocol assistance, research grants and up to 10 years of potential market exclusivity in the European Union if approved.
AACR Presentation of Data Demonstrating High Anti-Cancer Activity of Annamycin as monotherapy, fifteen subjects have been enrolled and treated. Thirteen subjects have been treated with at least two cycles of therapyNon-Cardiotoxic Properties
Preclinical data regarding the Company’s next-generation anthracycline, Annamycin, was presented at the confirmed Recommended Phase 2 Dose (RP2D)American Association for Cancer Research (AACR) Annual Meeting, which took place April 5-10, 2024 in San Diego, CA. The poster titled, Non-cardiotoxic Properties of 330 mg/m2Annamycin, a Clinically Evaluated Anthracycline and are evaluable for efficacy. One subjectPotent Topoisomerase 2β Poison, was withdrawnpresented in the “Late-Breaking Research: Experimental and Molecular Therapeutics 2” session held on Monday, April 8th. The presented poster outlined results from the study prior to receiving a scan due to the clinician’s assessment. Per the protocol, follow-up imaging or scansassessment and RECIST evaluation is required for a subject to be included in the efficacy population. One subject is pending initiationcomparison of the cycle 2 treatment.
Including the three subjects treated at the same dosepotency of doxorubicin (a commonly prescribed anthracycline) and Annamycin, Moleculin’s next-generation anthracycline, against topoisomerase II-alpha and II-beta and determine their impact on physiology of human cardiomyocytes demonstrating no pathologic changes in the Phase 1b portion of this trial, this equates to fifteen total subjects measurable for efficacy at the 330 mg/m2 dose level. Including all measurable subjects at all dose levelsmice hearts following chronic in the Phase 1b portion of the trial, there have been thirty-one subjects treated with at least one cycle in this study and twenty-six have received two cycles of treatment. For these subjects, the median time to entering the MB107 trial from the time of initial diagnosis is estimated to be approximately 20 months, and these subjects have been mostly heavily treated previously for STS lung mets prior to entering our study.
To date, 67% of the fifteen subjects receiving 330 mg/m2 and that have received end of cycle 2 scans in Phase 1b and Phase 2 have exhibited stable disease (SD) after receiving two cycles. We have one subject in the study who has not received end of cycle 2 scans and remains to be evaluated. Of the thirty-one subjects in the Phase 1b and Phase 2 portions of the study, 73% (n=26) have exhibited stable disease (SD) after receiving two cycles. Some subjects are continuing with the study so stable disease continues to be monitored, and overall survival is being followed for the study. We plan a more in-depth presentation of the topline data on progression free survival, overall survival after entering our study, overall survival, and other data on this study in the third quarter of this year.
All data presented above from the MB-107 trial are preliminary and subject to change.
vivo exposure.
WP1066
We continue discussions with two US academic institutions and another foreign academic institution for externally funded trials for the use of WP1066 for the treatment of glioblastomas and/or pediatric brain tumors. We expect to finalize agreementsOf note, we have finalized an agreement with Northwestern University (NU) and FDA filingswe expect NU to initiate an investigator initiated glioblastoma study in the second half of this yearnear-term (Clinicaltrials.gov ID: NCT05879250). We do not expect the pediatric study to begin until an adult brain tumor trial commences and generates additional data.
Regarding an intravenous formula for WP1066, we continue to work towardsbelieve that substantial progress has been made and we believe we will be able to announce progress regarding an IV formulation byin the end of 2023.near term.
WP1122
With the data generated from the MB-301 clinical trial setting an RP2D for WP1122 and additional sponsored research, we continue to explore avenues of external funding for further development of this portfolio. For this study, we have submitted the final clinical study report in late October 2023.
Other Trials and Publications
Externally Funded Annamycin Trial
A Phase 1b/2 investigator sponsored trial (externally funded) was initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets. This trial has enrolled and treated two subjects with two cycles in the first cohort of the Phase 1b portion of the study. There will be three subjects per cohort with the first cohort treating subjects with 35 mg/m2 of Annamycin per week (3 weeks on and 1 week off per cycle). After two cycles the subjects will receive their end of cycle 2 scan. At the end of two cycles both subjects treated to date demonstrated progressive disease. Preclinical data demonstrated a benefit to weekly dosing of Annamycin versus traditional chemotherapy dosing of every three weeks.
Publication of Data from Successful European Phase 1 Trial Evaluating Annamycin as Single Agent Treatment of Relapsed or Refractory AML
On July 13, 2023, we announced the publication of data from our completed MB-105 European Phase 1 clinical trial assessing the safety and efficacy of Annamycin as a single agent for the treatment of adults with relapsed or refractory AML. The manuscript titled, “Results of a Phase 1 Study of Liposomal Annamycin for the Treatment of Relapsed or Refractory AML Patients After Induction Therapy,” was published in the peer-reviewed British Journal of Cancer Research.
AACR Annamycin Presentation
We announced in April 2023 a presentation at the American Association for Cancer Research (AACR) Annual Meeting 2023 of positive pharmacokinetics and tissue-organ distribution data demonstrating high antitumor activity of Annamycin in preclinical cancer models, such data was based on research sponsored by us. In this research, Annamycin demonstrated increased penetration and accumulation in the liver, which correlated with high antitumor activity in HEPA 1-6 hepatocellular carcinoma and CT26 colon cancer liver metastasis models. This poster was presented at the AACR Annual Meeting 2023, which took place April 14-19, 2023, at the Orange County Convention Center in Orlando, FL. The poster titled, Exploration of Annamycin Organotropism to Target Primary and Metastatic Liver Cancers was presented by Rafal Zielinski, Ph.D., Department of Experimental Therapeutics, Division of Cancer Medicine, The University of Texas MD Anderson Cancer Center as part of the Experimental and Molecular Therapeutic Session: “Novel Antitumor Agents, PI3K/AKT Inhibitors, Proteasome Inhibitors, and Topoisomerases.” The poster outlined results from the analysis of the pharmacokinetics of two formulations of Annamycin, liposome formulated drug product (L-ANN) and free Annamycin (ANN), in the liver in comparison with doxorubicin (DOX) and to determine its tumoricidal potential in a hepatocellular carcinoma (HCC) model in situ and in experimental models of liver metastasis.
During the June 2023 meeting of the IV World Congress of Polish Physicians in Olsztyn, Poland. Dr. Waldemar Priebe, Chair of our Science Advisory Board was invited to lecture. He presented the above referenced AACR presentation “Discovery and Development of Novel Organotropic Anticancer Therapies”.
Corporate
Licensing
WPD Licensing Agreement
Since February 2019, we were party to a sublicense agreement with WPD Pharmaceuticals (WPD), pursuant to which we sublicensed to WPD certain intellectual property rights, including rights to Annamycin, our WP1122 portfolio, and our WP1066 portfolio (as amended, the “WPD Agreement”). WPD is affiliated with Dr. Waldemar Priebe, our founder. In March 2023, we and WPD agreed to terminate the WPD Agreement. Pursuant to the termination, we agreed to pay WPD (or its designee) $700,000 in cash and shares of our common stock valued at $800,000. In March 2023, we issued 822,115 shares of common stock to WPD's designee as part of the satisfaction of this commitment. With the termination of the WPD Agreement, we now have acquired the rights in certain territories previously sub-licensed to WPD to all of our licensed intellectual property, other than the rights related to non-human animals. Additionally, we acquired the in-process research and development that WPD has created during the term of the agreement. As part of this Agreement, WPD assigned their rights and duties to us for the Phase 1b/2 investigator sponsored trial (externally funded) initiated in Poland in 2022 to study an alternative dosing regimen for Annamycin in the treatment of STS lung mets. The approximate value of the grant supporting this investigator sponsored trial is $1.5 million.
Results of Operations
The following table sets forth, for the periods indicated, data derived from our statement of operations (table in thousands) and such changes in the periods are discussed below in approximate amounts:
Moleculin Biotech, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended June 30, | Six Months Ended June 30, | Three Months Ended March 31, | ||||||||||||||||||||||
2023 | 2022 | 2023 | 2022 | 2024 | 2023 | |||||||||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||
Operating expenses: | ||||||||||||||||||||||||
Research and development | 3,888 | 4,204 | 9,576 | 8,824 | 4,252 | 5,687 | ||||||||||||||||||
General and administrative | 2,492 | 3,196 | 5,129 | 5,617 | 2,393 | 2,637 | ||||||||||||||||||
Depreciation and amortization | 31 | 34 | 61 | 66 | 32 | 30 | ||||||||||||||||||
Total operating expenses | 6,411 | 7,434 | 14,766 | 14,507 | 6,677 | 8,354 | ||||||||||||||||||
Loss from operations | (6,411 | ) | (7,434 | ) | (14,766 | ) | (14,507 | ) | (6,677 | ) | (8,354 | ) | ||||||||||||
Other income: | ||||||||||||||||||||||||
Gain from change in fair value of warrant liability | 36 | 603 | 75 | 763 | 1,455 | 39 | ||||||||||||||||||
Other income, net | 9 | 15 | 17 | 20 | 11 | 8 | ||||||||||||||||||
Interest income, net | 390 | 39 | 783 | 80 | 241 | 392 | ||||||||||||||||||
Net loss | $ | (5,976 | ) | $ | (6,777 | ) | $ | (13,891 | ) | $ | (13,644 | ) | $ | (4,970 | ) | $ | (7,915 | ) |
Three Months Ended June 30, 2023March 31, 2024 Compared to Three Months Ended June 30, 2022March 31, 2023
Research and Development Expense. Research and development (R&D) expense was $3.94.3 million and $4.25.7 million for the three months ended June 30,March 31, 2024 and 2023 and 2022, respectively. The decrease of $0.3$1.4 million is mainly related to the timing of costs incurred for clinical trials and timing of sponsored research payments.activity levels.
General and Administrative Expense. General and administrative expense was $2.52.4 million and $3.22.6 million for the three months ended June 30,March 31, 2024 and 2023 and 2022, respectively. The decrease of $0.70.2 million is mainly related to a decrease in regulatory and legal services, and consulting & advisory fees.
Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $0.041.5 million inthe secondfirst quarter of 20232024 as compared to a net gain of $0.6$0.04 million in the secondfirst quarter of 2022,2023, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with certain of our previous stock offerings. We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred. We calculated the fair value of the warrants outstanding using the Black-Scholes model. A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.
Interest income, net. Interest income, net increaseddecreased by approximately $0.4$0.2 million for the comparable quarterly periods due to rising interest rates during the past year.
Six Months Ended June 30, 2023 Compared to Six Months Ended June 30, 2022
Research and Development Expense. Research and development (R&D) expense was $9.6 million and $8.8 million for the six months ended June 30, 2023 and 2022, respectively. The increase of $0.8 million is mainly related to the WPD sublicense termination, which enabled the reacquisition of our intellectual property rights in certain territories including parts of the European Union.
General and Administrative Expense. General and administrative expense was $5.1 million and $5.6 million for the six months ended June 30, 2023 and 2022, respectively. The decrease of $0.5 million is mainly related to a decrease in regulatory and legal services, and consulting & advisory fees.
Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $0.08 million in the six months ended June 30, 2023 as compared to a net gain of $0.8 million in the six months ended June 30, 2022, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings. We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred. We calculated the fair value of the warrants outstanding using the Black-Scholes model. A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.
Interest income, net. Interest income, net increased by approximately $0.7 million for the comparable quarterly periods due to rising interest ratesdecreasing cash balance during the past year.
Liquidity and Capital Resources
The following table sets forth our primary sources and uses of cash for the period indicated (table in thousands):
Six Months Ended June 30, | Three Months Ended March 31, | |||||||||||||||
2023 | 2022 | 2024 | 2023 | |||||||||||||
Net cash used in operating activities | $ | (11,143 | ) | $ | (12,806 | ) | $ | (6,717 | ) | $ | (6,017 | ) | ||||
Net cash used in investing activities | (15 | ) | (67 | ) | ||||||||||||
Net cash (used in) provided by financing activities | 190 | (12 | ) | |||||||||||||
Net cash provided by financing activities | — | 141 | ||||||||||||||
Effect of exchange rate changes on cash and cash equivalents | (5 | ) | (19 | ) | (9 | ) | (4 | ) | ||||||||
Net decrease in cash and cash equivalents | $ | (10,973 | ) | $ | (12,904 | ) | $ | (6,726 | ) | $ | (5,880 | ) |
As of June 30, 2023,March 31, 2024, there was $0.3$0.4 million of cash on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.
Cash used in operating activities
Cash used in operations waswas $11.16.7 million for the sixthree months ended June 30, 2023March 31, 2024. This $1.70.7 million decreaseincrease over the prior year period of $12.86.0 million was primarily due to an increase in accounts payablethe timing of costs incurred and license rights settled in stock.associated payments for drug production and clinical trial expenses.
Cash provided by financing activities
DuringWe did not sell any stock during the sixthree months ended June 30, 2023, utilizing the Lincoln Park Equity Line, we issued 225,568March 31, 2024 shares of common stock (including commitment shares), at an average price of $0.94 per share, resulting in gross proceeds of $0.2 million.
We believe that our existing cash and cash equivalents as of June 30, 2023March 31, 2024 will be sufficient to fund our planned operations, which include our current Phase 1B/2 clinical programs and preparations for future clinical trials, into the thirdfourth quarter of 2024, without the issuance of additional equity for cash. This takes into account cash outlays for preparations for clinical trials beyond the current active trials. The continuation of our Company as a going concern is dependent upon our ability to obtain necessary equity financing to continue operations and the attainment of profitable operations. We may seek additional funding through a combination of equity offerings, debt financings, government or other third-party funding, commercialization, marketing and distribution arrangements, other collaborations, strategic alliances and licensing arrangements and delay planned cash outlays or a combination thereof. We cannot be certainprovide assurance that such events or a combination thereof can be achieved.
In March 2022, we received a subpoena from the SEC requesting information and documents, including materials related to certain individuals (none of which are our officers or directors) and entities, and materials related to the development of and statements regarding our drug candidate for the treatment of COVID-19. We have received, and expect to continue to receive, periodic further requests from the SEC staff with respect to this matter. We are not aware of the specific nature of the underlying investigation by the SEC, and to the extent that this investigation relates to prior public disclosures that we have made, we believe in the accuracy and adequacy of such prior disclosures. The correspondence from the SEC transmitting the subpoena to us states that the SEC is trying to determine whether there have been any violations of federal securities laws, but that its investigation does not mean that the SEC has concluded that anyone has violated the law or that the SEC has a negative opinion of any person, entity, or security. We cannot predict when this matter will be resolved or what, if any, action the SEC may take following the conclusion of the investigation. We expensed approximately $0.4$0.1 million and $0.8$0.5 million in related general and administrative fees and expenses for the three months ended June 30,March 31, 2024 and 2023 and 2022, respectively and $0.9 million and $0.8 million for the six months ended June 30, 2023 and 2022, respectively..
Critical Accounting Policies and Significant Judgments and Estimates
There have been no material changes to our critical accounting policies and use of estimates from those disclosed in our Form 10-K for the year ended December 31, 2022.2023. For a discussion of our critical accounting policies and use of estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2022.2023.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable as we are a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that material information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that material information is accumulated and communicated to our management, including our Chief Executive Officer (CEO), who is our principal executive officer, and Chief Financial Officer (CFO), who is our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures. Our CEO and CFO have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures were effective as of June 30, 2023.March 31, 2024.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15-d-15(f) under the Exchange Act) during the three months ended June 30, 2023March 31, 2024 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
For information regarding factors that could affect our results of operations, financial condition and liquidity, refer to the section entitled “Risk Factors” in Part I, Item 1A in our annual report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year. There2023. Except as updated below, there have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2022, and in Part II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year,2023, as filed with the SEC.
We must comply with indirect tax laws in multiple jurisdictions, as well as complex customs duty regimes worldwide. Audits of our compliance with these rules may result in additional liabilities for taxes, duties, interest and penalties related to our international operations which would reduce our profitability.
Our operations may be subject to audit by tax authorities in various countries. Many countries have indirect tax systems where the sale and purchase of goods and services are subject to tax based on the transaction value. These taxes are commonly referred to as value-added tax (“VAT”) or goods and services tax (“GST”). In addition, the distribution of our products subjects us to numerous complex customs regulations, which frequently change over time. Failure to comply with these systems and regulations can result in the assessment of additional taxes, duties, interest, and penalties. While we believe we are in compliance with local laws, we cannot assure that tax and customs authorities will agree with our reporting positions and upon audit such tax and customs authorities may assess additional taxes, duties, interest, and penalties against us. Adverse action by any government agencies related to indirect tax laws could materially and adversely affect our business, results of operations and financial condition.
Errors in our assumptions, estimates and judgments related to tax matters, including those resulting from regulatory reviews, could adversely affect our financial results.
We may be subject to routine tax audits on various tax matters around the world in the ordinary course of business (including income tax, business tax, customs duties, sales and use tax, and value added tax (“VAT”) matters). We regularly assess the adequacy of our uncertain income tax positions and other reserves, which requires a significant amount of judgment. Although we may accrue for uncertain income tax positions and other regulatory audits, negotiations with taxing and customs authorities may lead to adjustments in excess of our accruals, resulting in liabilities for additional taxes, duties, penalties and interest.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the sixthree months ended June 30, 2023,March 31, 2024, the Company issued warrants to purchase 150,0003,334 shares of common stock with an exercise price of $0.60$9.15 per share to two entitiesan entity providing consulting services, which warrants will vest annually over four years while services are being performed. The foregoing securities were issued pursuant to Section4(a)Section 4(a)(2) of the Securities Act.
During the three months ended March 31, 2024, the Company issued 6,834 shares of common stock to consultants in exchange for services to be provided. The foregoing securities were issued pursuant to Section 4(a)(2) of the Securities Act.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
During the period covered by this Quarterly Report, none of the Company’s directors or executive officers has adopted or terminated a Rule 10b5-110b5-1 trading arrangement or a non-Rule 10b5-110b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).
* Filed herewith.
+ The certifications on Exhibit 32 hereto are deemed not “filed” for purposes of Section 18 of the Exchange Act or otherwise subject to the liability of that Section. Such certifications will not be deemed incorporated by reference into any filing under the Securities Act or the Exchange Act.
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MOLECULIN BIOTECH, INC. | ||||||||
Date: | By: | /s/ Walter V. Klemp | ||||||
Walter V. Klemp, | ||||||||
Chief Executive Officer and Chairman (Principal Executive Officer) | ||||||||
Date: | By: | /s/ Jonathan P. Foster | ||||||
Jonathan P. Foster, | ||||||||
Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) |