SEC Form 10-Q filed by Moleculin Biotech Inc.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
For the quarterly period ended
or
For the transition period from to
Commission File Number:
| MOLECULIN BIOTECH, INC. | |||||||||||||
| (Exact name of registrant as specified in its charter) | |||||||||||||
| | 2834 | | |||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification Number) | |||||||||||
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| (Address of principal executive offices) | (Zip Code) | |||||||
(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.
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).
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 | |||||||
| | 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
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol (s) | Name of each exchange on which registered | ||||||
| | | The |
The registrant had
Form 10-Q
Table of Contents
| Page |
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| Item 1. |
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| Condensed Consolidated Balance Sheets as of September 30, 2024 and December 31, 2023 |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
Unregistered sales of Equity Securities and Uses of Proceeds |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
(Unaudited)
| September 30, | December 31, | |||||||
| 2024 | 2023 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | $ | ||||||
| Prepaid expenses and other current assets | ||||||||
| Total current assets | ||||||||
| Furniture and equipment, net | ||||||||
| Intangible assets | ||||||||
| Operating lease right-of-use asset | ||||||||
| Total assets | $ | $ | ||||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | $ | ||||||
| Accrued expenses and other current liabilities | ||||||||
| Total current liabilities | ||||||||
| Operating lease liability - long-term, net of current portion | ||||||||
| Warrant liability - long-term | ||||||||
| Total liabilities | ||||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued or outstanding | ||||||||
| Common stock, $ par value; shares authorized; and shares issued and outstanding at September 30, 2024 and December 31, 2023, respectively | ||||||||
| Additional paid-in capital | ||||||||
| Accumulated other comprehensive income (loss) | ( | ) | ||||||
| Accumulated deficit | ( | ) | ( | ) | ||||
| Total stockholders’ equity | ||||||||
| Total liabilities and stockholders’ equity | $ | $ | ||||||
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 September 30, |
Nine Months Ended September 30, |
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| 2024 |
2023 |
2024 |
2023 |
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| Revenues |
$ | $ | $ | $ | ||||||||||||
| Operating expenses: |
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| Research and development |
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| General and administrative |
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| Depreciation and amortization |
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| Total operating expenses |
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| Loss from operations |
( |
) | ( |
) | ( |
) | ( |
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| Other income (loss): |
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| (Loss) gain from change in fair value of warrant liability |
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| Transaction costs allocated to warrant liabilities |
( |
) | ( |
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| Loss on issuance of warrant liabilities |
( |
) | ( |
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| Other income, net |
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| Interest income, net |
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| Net loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Net loss per common share - basic and diluted |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Weighted average common shares outstanding, basic and diluted |
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| Net Loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
| Other comprehensive income (loss): |
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| Foreign currency translation |
( |
) | ( |
) | ||||||||||||
| Comprehensive loss |
$ | ( |
) | $ | ( |
) | $ | ( |
) | $ | ( |
) | ||||
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
| Nine Months Ended September 30, |
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| 2024 |
2023 |
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| Cash flows from operating activities: |
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| Net loss |
$ | ( |
) | $ | ( |
) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Depreciation and amortization |
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| Stock-based compensation |
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| License rights expense settled in stock |
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| Change in fair value of warrant liability |
( |
) | ( |
) | ||||
| Loss on issuance of warrant liabilities |
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| Operating lease, net |
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| Transaction costs allocated to warrant liabilities |
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| Changes in operating assets and liabilities: |
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| Prepaid expenses and other current assets |
( |
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| Accounts payable |
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| Accrued expenses and other current liabilities |
( |
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| Net cash used in operating activities |
( |
) | ( |
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| Cash flows from investing activities: |
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| Purchase of fixed assets |
( |
) | ( |
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| Net cash used in investing activities |
( |
) | ( |
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| Cash flows from financing activities: |
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| Payment of tax liability for vested restricted stock units |
( |
) | ( |
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| Proceeds from sale of common stock, pre-funded and common warrants, net of issuance costs |
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| Net cash provided by financing activities |
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| Effect of exchange rate changes on cash and cash equivalents |
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| Net decrease in cash and cash equivalents |
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| Cash and cash equivalents, - beginning of period |
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| Cash and cash equivalents, - end of period |
$ | $ | ||||||
| Supplemental disclosures of cash flow information: |
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| Non-cash investing and financing activities: |
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| Transaction costs related to the sale of common stock, pre-funded and common warrants |
$ | $ | ||||||
| Transaction costs included in accounts payable and accrued liabilities |
$ | $ | ||||||
See accompanying notes to condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except for shares)
(Unaudited)
| Nine Months Ended September 30, 2024 |
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| Common Stock | Accumulated | |||||||||||||||||||||||
| Shares |
Par Value Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Other Comprehensive Income (Loss) |
Total Stockholders' Equity |
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| Balance, December 31, 2023 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Issuance of common stock in connection with Consulting Agreements |
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| Reverse stock split |
( |
) | ||||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||
| Net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
| Cumulative translation adjustment |
— | ( |
) | ( |
) | |||||||||||||||||||
| Balance, March 31, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Warrants exercised |
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| Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||
| Consolidated net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
| Cumulative translation adjustment |
— | |||||||||||||||||||||||
| Balance, June 30, 2024 |
$ | $ | $ | ( |
) | $ | ( |
) | $ | |||||||||||||||
| Issued for cash - sale of common stock, pre-funded and common warrants |
— | — | — | — | — | |||||||||||||||||||
| Warrants exercised |
— | — | — | — | — | |||||||||||||||||||
| Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) |
( |
) | ( |
) | ||||||||||||||||||||
| Stock-based compensation |
— | |||||||||||||||||||||||
| Consolidated net loss |
— | ( |
) | ( |
) | |||||||||||||||||||
| Cumulative translation adjustment |
— | |||||||||||||||||||||||
| Balance, September 30, 2024 |
$ | $ | $ | ( |
) | $ | $ | |||||||||||||||||
| Nine Months Ended September 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 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of common stock with equity purchase agreement | ||||||||||||||||||||||||
| Common stock issued for license rights | ||||||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Cumulative translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Issuance of common stock in connection with equity purchase agreement | ||||||||||||||||||||||||
| Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Consolidated net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Cumulative translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, June 30, 2023 | $ | $ | $ | ( | ) | $ | $ | |||||||||||||||||
| Common stock issued upon vesting of restricted stock units (net of shares withheld for payment of tax liability) | ( | ) | ( | ) | ||||||||||||||||||||
| Stock-based compensation | — | |||||||||||||||||||||||
| Consolidated net loss | — | ( | ) | ( | ) | |||||||||||||||||||
| Cumulative translation adjustment | — | ( | ) | ( | ) | |||||||||||||||||||
| Balance, September 30, 2023 | $ | $ | $ | ( | ) | $ | ( | ) | $ | |||||||||||||||
See accompanying notes to condensed consolidated financial statements.
Notes to the Condensed Consolidated Financial Statements
(Unaudited)
1. Nature of Business
The terms “MBI” or “the Company”, “we”, “our” and “us” are used herein to refer to Moleculin Biotech, Inc. MBI is a 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 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 MD Anderson Cancer Center (MD Anderson) in Houston, Texas. In July 2024 the Company’s lead program Annamycin completed a Phase 2 trial and has held it End-of-Phase 1/2 meeting with the Food and Drug Administration in the US and in August 2024 announced the preparations for a Phase 3 trial. 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 outlicensing 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
On May 5, 2023, the Company received a letter from the Nasdaq Capital Market (Nasdaq) notifying the Company that for the prior 30 consecutive business days the bid price for the Company's common stock had closed below the minimum $
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
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, 2023 and for the year then ended, including the notes thereto contained in the Form 10-K filed with the SEC on March 22, 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 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, 2023. There have been no material changes to the significant accounting policies during the nine months ended September 30, 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.
Intangible Assets – Intangible assets with finite lives are amortized using the straight-line method over their estimated period of benefit. Acquired intangible assets identified as in-process research and development (IPR&D) assets, are considered indefinite lived until the completion or abandonment of the associated research and development efforts. If the associated research and development effort is abandoned, the related IPR&D assets will be written-off and the Company will record a noncash impairment loss on its statements of operations. For those compounds that reach commercialization, the IPR&D assets will be amortized over their estimated useful lives. Intangible assets are tested for impairment on an annual basis, which was completed as of September 30, 2024, and between annual tests if indicators of potential impairment exist, using a fair-value-based approach. The Company evaluates the recoverability of intangible assets periodically and take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. No impairments of intangible assets have been identified during any of the periods presented.
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 September 30, 2024, the Company had an accumulated deficit of $
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. The company expensed approximately $
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.
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 condensed consolidated 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 4.
The following table provides the financial liabilities reported at fair value and measured on a recurring basis at September 30, 2024 and December 31, 2023 (table in thousands):
| Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Fair value of warrant liability as of September 30, 2024: | $ | $ | $ | $ | ||||||||||||
| Fair value of warrant liability as of December 31, 2023: | $ | $ | $ | $ | ||||||||||||
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of the beginning of the third quarter and then is adjusted for changes in fair value that occurred during the third 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 September 30, 2024 | Warrant Liability Long-Term | |||
| Balance, June 30, 2024 | $ | |||
| Issuances of warrants | ||||
| Warrant amendment | ||||
| Change in fair value - net | ||||
| Balance, September 30, 2024 | $ | |||
The table below of Level 3 liabilities (table in thousands) begins with the valuation as of December 31, 2023 and then is adjusted for changes in fair value that occurred during the nine months ended September 30, 2024. 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.
| Nine Months Ended September 30, 2024 | Warrant Liability Long-Term | |||
| Balance, December 31, 2023 | $ | |||
| Issuances of warrants | ||||
| Warrant amendment | ||||
| Change in fair value - net | ( | ) | ||
| Balance, September 30, 2024 | $ | |||
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 September 30, 2024 and 2023, approximately
Subsequent Events - The Company’s management reviewed all material events through the date of these unaudited condensed consolidated financial statements.
Recent Accounting Pronouncements - In November 2024, FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which requires disclosure in the notes to the financial statements of specified information about certain costs and expenses. The amendments are effective for fiscal years beginning after December 15, 2026, and for interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted. The amendments should be applied either prospectively to financial statements issued for reporting periods after the effective date of this ASU or retrospectively to any or all prior periods presented in the financial statements. The Company is currently evaluating the new guidance to determine the impact it may have on its consolidated financial statements and related disclosures, but expects additional disclosures upon adoption. There are no other 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):
| September 30, 2024 | December 31, 2023 | |||||||
| Accrued payroll and bonuses | $ | $ | ||||||
| Accrued research and development | ||||||||
| Accrued legal, regulatory, professional and other | ||||||||
| Operating lease liability - current | ||||||||
| Accrued liabilities due to related party | ||||||||
| Total accrued expenses and other current liabilities | $ | $ | ||||||
Additionally, accounts payable includes $
4. Warrants and Equity
2024 Warrant and Stock Issuances
In August 2024, the Company entered into a securities purchase agreement with an institutional investor for the sale by the Company of
The Company received gross proceeds of $
Lincoln Park Equity Line
The Company did not utilize the 2021 Lincoln Park purchase agreement during the nine months ended September 30, 2024. The 2021 Lincoln Park Agreement terminated in June 2024.
Other Components of Equity
In March 2024, the Company issued
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. Certain assumptions, including the expected term, are subjective and require judgment to develop. As a result, if factors or expected outcomes change and we use significantly different assumptions or estimates, our warrant liability could be materially different.
The assumptions used in determining the fair value of the Company's outstanding liability classified warrants are as follows:
| September 30, 2024 | December 31, 2023 | |||||
| Risk-free interest rate | | | ||||
| Volatility | | | ||||
| Expected life (years) | | | ||||
| Dividend yield | —% | —% |
A summary of the Company's liability classified warrant activity during the nine months ended September 30, 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, 2024 | $ | $ | $ | |||||||||||||||||
| Granted | $ | $ | $ | |||||||||||||||||
| Expired warrants | ( | ) | $ | $ | $ | — | ||||||||||||||
| Balance at September 30, 2024 | $ | $ | $ | |||||||||||||||||
| Exercisable at September 30, 2024 | $ | $ | $ | |||||||||||||||||
For a summary of the changes in fair value associated with the Company's warrant liability for the nine months ended September 30, 2024, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.
Equity Classified Warrants
In March 2024, the Company granted equity-classified warrants to purchase up to
At September 30, 2024, the Company had
5. Stock Based Compensation
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
Stock-based compensation expense for the three and nine months ended September 30, 2024 and 2023, respectively, is as follows (table in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| General and administrative | $ | $ | $ | $ | ||||||||||||
| Research and development | ||||||||||||||||
| Total stock-based compensation expense | $ | $ | $ | $ | ||||||||||||
The Company recorded stock compensation expense for the equity classified warrants relating to non-employee consulting agreements of $
In October and November 2024, the Company granted
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 2024 as a result of the losses recorded during the three and nine months ended September 30, 2024 and the additional losses expected for the remainder of 2024 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 September 30, 2024 and December 31, 2023 the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded
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 September 30, 2024.
Lease Obligations Payable
The following summarizes quantitative information about the Company's operating leases for the three and nine months ended September 30, 2024 and 2023, respectively (table in thousands):
| Three Months Ended September 30, | Nine Months Ended September 30, | |||||||||||||||
| 2024 | 2023 | 2024 | 2023 | |||||||||||||
| Lease cost: | ||||||||||||||||
| Operating lease cost | $ | $ | $ | $ | ||||||||||||
| Variable lease cost | ||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||
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 $
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 $
Licenses
MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were $
HPI - The Company has two agreements with a related party, Houston Pharmaceuticals, Inc. (HPI) with total expenses of $
Sponsored Research Agreements - The expenses recognized under the agreements were $
8. Subsequent Events
In addition to the subsequent events discussed elsewhere in these notes, no other subsequent events were noted as occurring after September 30, 2024.
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 wars in Ukraine and in the Middle East, the COVID-19 pandemic, and the general supply chain shortages effects on our clinical trials, clinical drug candidate supplies, preclinical activities and our ability to raise future financing; |
| • |
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 in line with our stated milestones and within our expected budget and resources; |
| • | Our ability to maintain compliance with the continued listing requirements of the Nasdaq Capital Market; | |
| • | 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 Phase 3 clinical stage pharmaceutical company with a portfolio of technologies 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, 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/2 or Phase 2 clinical trials. Since our inception, our drugs have completed, are currently in, or have been permitted to proceed in, fourteen clinical trials. Annamycin is our lead molecule and we have recently concluded one Phase 1B/2 clinical trial for treating Acute Myeloid Leukemia (AML) and are embarking on a Phase 3 clinical trial for the treatment of AML, which we believe will be pivotal. Annamycin is also in two Phase 1B/2 clinical trials 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, mainly due to its lack of cardiotoxicity (which is found in currently prescribed anthracyclines) and its ability to avoid multidrug resistance mechanisms. This belief, coupled with our limited resources, leads us to currently focus mainly on the development of Annamycin. We intend to advance our other drug candidates via investigator led studies – both clinically and preclinically.
Our Core Technologies
Our core technologies consist of the 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, with intensive cardiac monitoring, has shown no cardiotoxicity in subjects treated in our four Annamycin clinical trials to date. Furthermore, we have demonstrated safe dosing significantly beyond the dose limitations imposed by regulatory authorities upon commonly prescribed anthracyclines due to their inherent cardiotoxicity. Annamycin has 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 include left ventricular ejection fraction (LVEF) as determined by echocardiograms, and ECHO strain imaging, as well as serum 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. Annamycin has composition of matter patent protection through 2040.
b) Our WP1066 Portfolio includes WP1066, WP1193 and WP1220, three of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity. These also stimulate 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 for central nervous system (CNS) tumors, including compassionate use cases, in pediatric subjects. 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 in their varied indications.
c) Our WP1122 Portfolio 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). We believe such compounds may provide an opportunity to cut off the energy supply of tumors by taking advantage of their high degree of dependence on glucose in comparison to healthy cells, as well as viruses that also depend upon glycolysis and glycosylation to infect and replicate. WP1122 has completed a Phase 1 clinical study in normal volunteers, successfully establishing a Recommended Phase 2 Dose or RP2D.
Recent Business Developments
Below are recent business developments.
Annamycin
Phase 3 MIRACLE Trial
We are in the process of evaluating and visiting potential sites for our Phase 3 pivotal trial for the treatment of AML patients who are refractory to or relapsed after induction therapy (R/R AML) with Annamycin in combination with Cytarabine (also known as “Ara-C” and for which the combination of Annamycin and Ara-C is referred to as “AnnAraC”). This Phase 3 “MIRACLE” trial (derived from (M)olecul(i)n (R)/(r) AML (A)nnAraC (Cl)inical (E)valuation) will be a global trial.
We plan to focus on sites in the North America, Europe, Eastern Europe, Western Asia, and MENA (Middle East and Africa) for the initial Part A of MIRACLE. Our initial target will be approximately 45 sites. We expect that this will enable the enrollment of approximately 45 subjects by the third quarter of 2025 and approximately 90 subjects by the second half of 2026. The data may also be unblinded after the initial 45 subjects and, as currently planned, the data will be unblinded after approximately 90 subjects complete their efficacy analyses. We believe that we will have the data for approximately the first 90 subjects by the second half of 2026. The trial is designed to enable the review of interim analyses for safety and efficacy upon reaching these enrollment milestones.
We held a conference call on August 6, 2024, along with Dr. Michael Andreeff, a member of our Science Advisory Board, to discuss the results of our most recent meeting with the FDA and the plans for the MIRACLE trial. That meeting, the MIRACLE trial and the current data from the MB-106 trial are discussed further below.
On August 1, 2024, we announced the discussion in and our resulting plans from our End of Phase 1B/2 (EOP1B/2) meeting held in late June with the FDA supporting the advancement of Annamycin in combination with Cytarabine (AnnAraC to a Phase 3 pivotal trial for the treatment of AML patients who are refractory to or relapsed after induction therapy (R/R AML). This Phase 3 “MIRACLE” trial will be a global study, including sites in the US and consistent with the FDA’s recommendations, the adaptive Phase 3 trial is expected to rely solely on CR (complete remission) at day 35 (+/- 14 days) as the primary endpoint versus the control arm. We plan to utilize a double-blind, placebo-controlled design, where the control arm is high dose cytarabine (HiDAC) plus placebo. The MIRACLE trial will focus on AnnAraC as a 2nd line treatment for R/R AML subjects, with a subsequent trial to be focused on AnnAraC as a 3rd line treatment for R/R AML.
Based on our discussions with the FDA, we intend to amend our current investigational new drug application or IND to allow dosing above the lifetime maximum allowable dose (LTMAD) for currently prescribed anthracyclines in this trial in the US. The MIRACLE study, subject to appropriate future filings with and potential additional feedback from the FDA, their foreign equivalents and/or institutional review boards (IRBs), is expected to initially utilize an adaptive design whereby the first 90 subjects will be randomized to receive HiDAC combined with either placebo, 190 mg/m2 of Annamycin, or 230 mg/m2 of Annamycin with such doses recommended by the FDA based on their review of our safety and efficacy data. At that point, the trial data will be unblinded to select the optimum dose for Annamycin. For the second half of the trial, approximately 240 subjects will be randomized to receive either HiDAC plus placebo or HiDAC plus the optimum dose of Annamycin. The selection of the optimum dose by the independent Data Monitoring Committee will be based on the overall balance of efficacy, safety, and pharmacokinetics, consistent with the FDA’s new Project Optimus initiative.
We believe the FDA wants to see the durability of response (DoR) and overall survival (OS) as secondary endpoints. In addition, we believe the FDA wants to see data for subjects beyond 2nd line and, accordingly, our plan includes a follow-on MIRACLE2 trial in 3rd line subjects starting once the optimum dose is established in the MIRACLE trial.
We have established plans for the following milestones with regard to the MIRACLE trial:
| ● |
2024 2H – Begin contracting with MIRACLE trial sites |
| ● |
2025 Q1 – First subject treated in MIRACLE trial |
| ● | 2025 Q4 – Recruitment and interim data (n=~45) | |
| ● |
2H 2026 – Interim efficacy and safety data (n=~90) unblinded and Optimum Dose set for MIRACLE trial |
| ● |
2027 – Begin enrollment of 3rd line subjects in MIRACLE2 |
| ● |
2027 – Enrollment ends in 2nd line subjects |
| ● |
2028 – Primary endpoint efficacy data for 2nd line subjects in MIRACLE |
| ● |
2028 2H – Begin submission of a new drug application (NDA) the treatment of R/R AML for accelerated approval on primary endpoint of CR from MIRACLE |
Clinical Trial for the Treatment of AML in Combination with Cytarabine (MB-106)
Table 1
| Line of Therapy | All Lines (Range 1st-7th) | 1st Line | 2nd Line | 2nd and 3rd Line |
| Subjects Evaluable To Date | 22 | 4 | 10 | 14 |
| Subjects Evaluable Not Dosed Per Protocol | 2 | 0 | 1 |
1 |
| Median Age - Years (Range) | 67.5 (19-78) | 56.5 (19-69) | 71 (53-78) | 69.5 (53-78) |
| Complete Remission (CR) |
8 (36%) | 2 (50%) | 5 (50%) | 6 (43%) |
| Complete Remission Composite (CRc) | 9 (41%) | 2 (50%) | 6 (60%) | 7 (50%) |
| Partial Response (PR) | 2 | 0 | 1 | 2 |
| CRc Relapsed To Date | 5 | 1 | 4 | 4 |
| BMT To Date | 4 | 1 | 2 | 3 |
| See Note 1 below |
Note 1 for Table 1: Data from MB-106 is for Intent To Treat (ITT) subjects; is as of October 24, 2024; and, is preliminary and subject to change. Median Durability of all CRc's is ~8 months and climbing.
On May 7, 2024, our management held a Key Opinion Leader conference call with Dr. Martin Tallman and Dr. Michael Andreeff. Management made a presentation of the data 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/2 trial has been successful in establishing safety and efficacy of Annamycin in combination with Cytarabine (AnnAraC) for the treatment of AML, and in providing sufficient data to support a Phase 3 registration-directed clinical trial (MB-108) to further provide data for efficacy which we intend to use to support an eventual application for New Drug Approval (NDA).
Preliminary Safety, Efficacy and Durability Data
The preliminary data for MB-106 demonstrate a CR rate of 36% and a CRc rate of 41% for all subjects (N=22), regardless of the number of prior treatments, up to 6 prior treatments. Segmenting the MB-106 subject population for 2nd line subjects (N=10) yields a CR rate of 50% and CRc rate of 60%. Further segmenting for 2nd and 3rd line subjects (N=14) yields a CR rate of 43% and a CRc rate of 50%. We believe the results demonstrated by AnnAraC in 2nd line subjects substantially exceeds the performance reported by any drug currently approved for use in 2nd line AML.
Median durability of remission (DoR) for the 9 CRcs is approximately 8 months and developing. The DoR is being measured from the initiation of treatment to relapse or death.
Cardiovascular safety of Annamycin 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 across five trials (AML & STS, internal and externally funded trials) have been reviewed. Of note, most of these subjects 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.
Annamycin as Monotherapy for the Treatment of Soft Tissue Sarcoma Lung Metastases
Additionally, we expect to release in the near future the topline data from the MB-107 trial with Annamycin for the monotherapy treatment of soft tissue sarcoma lung metastases. This Phase 1B/2 clinical trial in the US is for subjects with STS lung metastases after first-line therapy for their disease. The trial began in the first half of 2021. The Phase 1B was concluded in July 2022. On September 21, 2023, we announced the completion of enrollment in the Phase 2 portion of our U.S. Phase 1B/2 clinical trial evaluating Annamycin as monotherapy for the treatment of soft tissue sarcoma lung metastases. Subjects who had stable disease at the time of study discontinuation will continue to be followed for progression free response and overall survival. The study database is locked and the clinical study report is being written and should be completed in early 2025 and will be released in detail at that time. The total number of intent to treat subjects in the trial is 36.
U.S Patents for Annamycin
On 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. Additionally on May 14, 2024, the USPTO issued an additional patent (U.S. Patent number 11,980,634) titled “Method of Reconstituting Liposomal Annamycin” (the ‘634 patent’). We have global, exclusive licenses to both patents.
The ‘118 patent provides claims to compositions that contain Annamycin, and the ‘634 patent, as issued, provides claims to liposomal Annamycin suspension compositions, both with a base patent term extending until June 2040, subject to 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.
EMA issues ODD to Annamycin for the treatment of AML
We 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 protocol assistance, research grants and up to 10 years of potential market exclusivity in the European Union if approved.
Presentation at the International Association for the Study of Lung Cancer 2024 World Conference on Lung Cancer
On September 23, 2024, we announced positive in vivo efficacy data of Annamycin in orthotopic and experimental lung metastatic models of sarcoma at the International Association for the Study of Lung Cancer (IASLC) 2024 World Conference on Lung Cancer. Treatment with Annamycin resulted in statistically significant inhibition of tumor growth and extension of survival in orthotopic lung cancer models and continues to be 100% non-cardiotoxic. The poster titled “Annamycin: Opening New Doors for Organotropic Targeting of Primary and Metastatic Lung Cancer,” authored by Waldemar Priebe, PhD (Founder, Founding Scientist, and Chair of Scientific Advisory Board for Moleculin) and coworkers was presented at the IASLC 2024 World Conference on Lung Cancer. The presented poster outlined results from the efficacy assessment studies of Annamycin, Moleculin’s next-generation anthracycline in orthotopic models of lung cancer and sarcoma lung metastasis models in comparison with doxorubicin (a commonly prescribed anthracycline.
Key Highlights of the Data Presented:
| • | Annamycin demonstrated high uptake and retention in lung parenchyma of mice and rats. | |
| • | The therapeutic effects of doxorubicin (DOX) are diminished due to low lung DOX uptake as demonstrated in the tested in vivo models. In contrast, Annamycin exhibits consistent efficacy in vivo in orthotopic and experimental lung metastatic models of sarcoma, breast, and colon cancer. This correlated with high Annamycin concentration in lungs, which exceeded DOX levels by 10- to 30-fold. | |
| • | Preclinical tests clearly demonstrate a better cardiac safety profile of Annamycin when compared to DOX and no cardiotoxicity of Annamycin in the in vivo models. No cardiotoxicity of Annamycin has been noted in ongoing clinical studies. | |
| • |
The observed organotropic properties of Annamycin, its efficacy in vivo, and its promising safety profile warrant further translational studies to evaluate Annamycin in patients with primary or metastatic lung cancers, as a single agent and in combination with currently used therapeutics. |
AACR Presentation of Data Demonstrating High Anti-Cancer Activity of Annamycin and Non-Cardiotoxic Properties
Preclinical data regarding the Company’s next-generation anthracycline, Annamycin, was presented at the 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 Annamycin, a Clinically Evaluated Anthracycline and Potent Topoisomerase 2β Poison, was presented in the “Late-Breaking Research: Experimental and Molecular Therapeutics 2” session held on Monday, April 8th. The presented poster outlined results from the assessment and comparison of the potency 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 mice hearts following chronic in vivo exposure.
WP1066
We announced on September 9, 2024, the beginning of enrollment and treatment of patients in an investigator-initiated Phase 2 study evaluating WP1066 in combination with radiation therapy for the treatment of adults with glioblastoma (NU 21C06). The study is being conducted under Northwestern University’s investigative New Drug application (IND) which cross references our own IND, which received clearance from the U.S. Food and Drug Administration (FDA) in April 2022. This trial is funded by the National Institutes of Health (NIH) and BrainUp®, a non-profit organization dedicated to bringing awareness to brain cancer. The NU 21C06 trial is a Phase 2, open-label, multi-arm trial of radiation therapy in combination with WP1066 in newly diagnosed IDH (isocitrate dehydrogenase) wild-type, MGMT-unmethylated glioblastoma patients. The primary outcome measure for the study is progression-free survival and secondary outcome measures include tumor microenvironment analysis. Four subjects have been treated as of November 1, 2024.
Regarding an intravenous formula for WP1066, we are pursuing a new patent that is co-owned by us and MD Anderson. We are in discussions regarding licensing or an option to license the MD Anderson rights to the new formulation.
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 submitted the final clinical study report in late October 2023.
General Business
Science Advisory Board Appointment
We announced on November 4, 2024, the appointment of Daniel D. Von Hoff, M.D., F.A.C.P., FASCO, FAACR to our Annamycin Scientific Advisory Board. Dr. Von Hoff currently serves as the Distinguished Professor at the Translational Genomics Research Institute (TGen) in Phoenix, Arizona and City of Hope.
August Issuance of Equity
On August 19, 2024, we announced the closing of our previously announced public offering of 283,000 shares of common stock and 2,183,368 pre-funded warrants to purchase shares of common stock, Series A warrants to purchase up to 2,466,368 shares of common stock and Series B warrants to purchase up to 2,466,368 shares of common stock, at a combined public offering price of $2.23 per share (or per common stock equivalent in lieu thereof) and accompanying warrants. The Series A warrants have an exercise price of $2.23, are exercisable immediately upon shareholder approval (which was received in October 2024) and will expire upon the earlier of (i) the 2 year anniversary of the date of stockholder approval or (ii) the 60th day following the date we release interim data for the first subject group from the MIRACLE trial whereby the complete remission rate for either doses of the Company’s study drug is greater than placebo. The Series B warrants have an exercise price of $2.23, are exercisable immediately upon shareholder approval (which was received in October 2024) and will expire upon the earlier of (i) the 5 year anniversary of the date of stockholder approval or (ii) the 6 month anniversary following the date we release final topline data from the MIRACLE trial and documented a statistically significant improvement in the primary efficacy endpoint. Pursuant to Nasdaq Listing Rule 5635(d), the exercise of the Series A warrants and Series B warrants were subject to shareholder approval, which was received.
The gross proceeds from the offering, before deducting the placement agent’s fees and other offering expenses payable by us, were approximately $5.5 million and we would receive up to an additional approximately $11.0 million in gross proceeds if the warrants are fully exercised for cash. We are using the net proceeds from this offering to advance Annamycin and our other two drug portfolios through clinical development, advance the remainder of our existing portfolio through preclinical studies and into INDs or their equivalent, sponsor research at MD Anderson and HPI, and for working capital.
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 September 30, |
Nine Months Ended September 30, |
|||||||||||||||
| 2024 |
2023 |
2024 |
2023 |
|||||||||||||
| Revenues |
$ | — | $ | — | $ | — | $ | — | ||||||||
| Operating expenses: |
||||||||||||||||
| Research and development |
4,932 | 3,280 | 13,274 | 12,855 | ||||||||||||
| General and administrative |
2,172 | 2,635 | 6,629 | 7,765 | ||||||||||||
| Depreciation and amortization |
31 | 32 | 95 | 92 | ||||||||||||
| Total operating expenses |
7,135 | 5,947 | 19,998 | 20,712 | ||||||||||||
| Loss from operations |
(7,135 | ) | (5,947 | ) | (19,998 | ) | (20,712 | ) | ||||||||
| Other income (loss): |
||||||||||||||||
| (Loss) gain from change in fair value of warrant liability |
(1,728 | ) | 1 | 1,423 | 76 | |||||||||||
| Transaction costs allocated to warrant liabilities |
(993 | ) | — | (993 | ) | — | ||||||||||
| Loss on issuance of warrant liabilities |
(847 | ) | — | (847 | ) | — | ||||||||||
| Other income, net |
9 | 13 | 31 | 30 | ||||||||||||
| Interest income, net |
102 | 324 | 503 | 1,106 | ||||||||||||
| Net loss |
$ | (10,592 | ) | $ | (5,609 | ) | $ | (19,881 | ) | $ | (19,500 | ) | ||||
Three Months Ended September 30, 2024 Compared to Three Months Ended September 30, 2023
Research and Development Expense. Research and development (R&D) expense was $4.9 million and $3.3 million for the three months ended September 30, 2024 and 2023, respectively. The increase of $1.6 million is mainly related to costs incurred for clinical trials (clinical research organization and drug production) and sponsored research costs.
General and Administrative Expense. General and administrative expense was $2.2 million and $2.6 million for the three months ended September 30, 2024 and 2023, respectively. The decrease of $0.4 million is mainly related to a decrease in regulatory and legal fees.
(Loss) Gain from Change in Fair Value of Warrant Liability. We recorded a net loss of $1.7 million in the third quarter of 2024 as compared to a net gain of $0.001 million in the third quarter of 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.
Transaction costs allocated to warrant liabilities and Loss on issuance of warrant liabilities. Proceeds of offerings are allocated between common shares and warrants first by allocating to the warrants classified as a liability based on their fair value and then allocating the residual to the equity instruments, which would include pre-funded warrants. As the fair value of the liability classified warrants in the August 2024 offering exceeded the total proceeds, no consideration was allocated to the Common Shares or Pre-Funded Warrants. The full proceeds of the August 2024 offering were recorded to warrant liabilities, with an initial liability of $6.1 million, and a loss on initial recognition of $0.8 million. The loss on modification of certain warrants of $0.4 million was also recorded as a loss on issuance of warrant liabilities in the three months ended September 30, 2024. Transaction costs related to the offering were correspondingly fully allocated to warrant liabilities, and $1.0 million in related transaction costs were expensed during the three and nine months ended September 30, 2024.
Interest income, net. Interest income, net decreased by approximately $0.2 million for the comparable quarterly periods due to a decreasing cash balance and decreasing interest rates during the past year.
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30, 2023
Research and Development Expense. Research and development (R&D) expense was $13.3 million and $12.9 million for the nine months ended September 30, 2024 and 2023, respectively. The increase of $0.4 million is mainly related to costs incurred for clinical trials (clinical research organization and drug production) and sponsored research costs. These increases were offset by a $1.5 million decrease mainly related to the WPD sublicense termination in 2023, 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 $6.6 million and $7.8 million for the nine months ended September 30, 2024 and 2023, respectively. The decrease of $1.2 million is mainly related to a decrease in regulatory and legal fees.
Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $1.4 million in the nine months ended 2024 as compared to a net gain of $0.1 million in the nine months ended 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.
Transaction costs allocated to warrant liabilities and Loss on issuance of warrant liabilities. Proceeds of offerings are allocated between common shares and warrants first by allocating to the warrants classified as a liability based on their fair value and then allocating the residual to the equity instruments, which would include pre-funded warrants. As the fair value of the liability classified warrants in the August 2024 offering exceeded the total proceeds, no consideration was allocated to the Common Shares or Pre-Funded Warrants. The full proceeds of the August 2024 offering were recorded to warrant liabilities, with an initial liability of $6.1 million, and a loss on initial recognition of $0.8 million. The loss on modification of certain warrants of $0.4 million was also recorded as a loss on issuance of warrant liabilities in the nine months ended September 30, 2024. Transaction costs related to the offering were correspondingly fully allocated to warrant liabilities, and $1.0 million in related transaction costs were expensed during the three and nine months ended September 30, 2024.
Interest income, net. Interest income, net decreased by approximately $0.6 million for the comparable quarterly periods due to a decreasing cash balance and decreasing interest rates 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):
| Nine Months Ended September 30, |
||||||||
| 2024 |
2023 |
|||||||
| Net cash used in operating activities |
$ | (18,779 | ) | $ | (18,694 | ) | ||
| Net cash used in investing activities |
(13 | ) | (43 | ) | ||||
| Net cash provided by financing activities |
4,634 | 186 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
13 | (15 | ) | |||||
| Net decrease in cash and cash equivalents |
$ | (14,145 | ) | $ | (18,566 | ) | ||
As of September 30, 2024, there was $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 was $18.8 million for the nine months ended September 30, 2024. This $0.1 million increase over the prior year period of $18.7 million was primarily due to the timing of costs incurred and associated payments for drug production and clinical trial expenses.
Cash provided by financing activities
On August 19, 2024, we announced the closing of our previously announced public offering of 283,000 shares of common stock and 2,183,368 pre-funded warrants to purchase shares of common stock, Series A warrants to purchase up to 2,466,368 shares of common stock and Series B warrants to purchase up to 2,466,368 shares of common stock, at a combined public offering price of $2.23 per share (or per pre-funded warrant in lieu thereof) and accompanying warrants. We received gross proceeds of $5.5 million, before deducting the placement agent's fees and other offering expenses.
We believe that our cash on hand and cash equivalents as of September 30, 2024, is sufficient to fund our planned operations into the first quarter of 2025. 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 financing to continue operations and the attainment of profitable operations. We must seek additional funding of approximately $15 million to support MIRACLE and our operations into the third quarter of 2025 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 to continue our operations in the near term. We cannot provide assurance that such events or a combination thereof can be achieved.
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, 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, 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 September 30, 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 September 30, 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, 2023. 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, 2023, and in Item II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year, as filed with the SEC.
We will require significant additional funding to complete the MIRACLE trial, which may not be available to us on acceptable terms, or at all, and, if not so available, may require us to delay, limit, reduce or cease our operations.
We have used and we intend to use our current cash resources and the proceeds from any possible future offerings, to, among other uses, advance our portfolio through preclinical studies and into INDs or their equivalent, and sponsoring research at MD Anderson and HPI. Developing pharmaceutical products, including conducting preclinical studies and clinical trials, is expensive. We estimate supporting of MIRACLE and our operations into the third quarter of 2025 will require additional funds beyond our current cash as of September 30, 2024, of approximately $15 million. As such, based on our current cash, in order to fund our operations, including MIRACLE, we will need to raise significant financing for which we have no commitments. If the FDA or its EU equivalent requires that we perform additional nonclinical studies or clinical trials, our expenses would further increase beyond what we currently expect and the anticipated timing of any potential approval of Annamycin would likely be delayed. Further, there can be no assurance that the costs we will need to incur to obtain regulatory approval of Annamycin will not increase.
Recently enacted legislation, future legislation and healthcare reform measures may increase the difficulty and cost for us to obtain marketing approval for and commercialize Annamycin and any future product candidates and may affect the prices we may set.
At the federal level, in July 2021, the Biden administration released an executive order, “Promoting Competition in the American Economy,” with multiple provisions aimed at prescription drugs. In response to Biden’s executive order, on September 9, 2021, HHS released a Comprehensive Plan for Addressing High Drug Prices that outlines principles for drug pricing reform and sets out a variety of potential legislative policies that Congress could pursue as well as potential administrative actions HHS can take to advance these principles. In addition, the Inflation Reduction Act (IRA), among other things, (1) directs HHS to negotiate the price of certain high-cost, single-source drugs and biologics covered under Medicare and (2) imposes rebates under Medicare Part B and Medicare Part D to penalize price increases that outpace inflation. The IRA permits HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. These provisions will take effect progressively starting in fiscal year 2023, although the Medicare drug price negotiation program is currently subject to legal challenges. HHS has and will continue to issue and update guidance as these programs are implemented. It is currently unclear how the IRA will be implemented but is likely to have a significant impact on the pharmaceutical industry. Under the IRA, certain categories of drugs are excluded from price negotiations, including drugs that receive orphan drug designation as the only FDA-approved indication. While we have obtained orphan drug designation for Annamycin, if we seek additional indications, or fail to maintain our orphan drug status, we may become subject to the price negotiation process. This could reduce the ultimate price that we receive for Annamycin, which could negatively affect our business, results of operations, financial conditions, and prospects. Further, in response to the Biden administration’s October 2022 executive order, on February 14, 2023, HHS released a report outlining three new models for testing by the Center for Medicare and Medicaid Innovation which will be evaluated on their ability to lower the cost of drugs, promote accessibility, and improve quality of care. It is unclear whether the models will be utilized in any health reform measures in the future.
At the state level, individual states in the United States have also increasingly passed legislation and implemented regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. Legally mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition, and prospects. In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs.
In June 2024, the U.S. Supreme Court reversed its longstanding approach under the Chevron doctrine, which provided for judicial deference to regulatory agencies, including the FDA. As a result of this decision, we cannot be sure whether there will be increased challenges to existing agency regulations or how lower courts will apply the decision in the context of other regulatory schemes without more specific guidance from the U.S. Supreme Court. For example, this decision may result in more companies bringing lawsuits against the FDA to challenge longstanding decisions and policies of the FDA, which could undermine the FDA’s authority, lead to uncertainties in the industry, and disrupt the FDA’s normal operations, which could impact the timely review of any regulatory filings or applications we submit to the FDA.
We cannot predict the likelihood, nature, or extent of health reform initiatives that may arise from future legislation or administrative action. We expect that the Affordable Care Act and other healthcare reform measures, including those that may be adopted in the future may result in additional reductions in Medicare and other healthcare funding, more rigorous coverage criteria, new payment methodologies and additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from third-party payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize Annamycin, if approved.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
During the period covered by this Quarterly Report, of the Company’s directors or executive officers has adopted or terminated a Rule 10b5-1 trading arrangement or a non-Rule 10b5-1 trading arrangement (each as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended).
On November 4, 2024, the Compensation Committee of the Board of Directors took the following actions in connection with the executive compensation for the 2023/2024 compensation year ( June 1, 2023 to May 31, 2024) with its named executive officers (Walter Klemp, President and Chief Executive Officer; Jonathan P. Foster, Executive Vice President and Chief Financial Officer; and Dr. Donald Picker, Chief Scientific Officer): (i) cash bonuses in the aggregate amount of $735,000 were granted based on the full achievement of the goals and objectives for the compensation year, however the payment of the bonuses was accrued and will be paid the earlier of a) 364 days or b) approval by the CEO after consultation with the Board of Directors; and (ii) the Compensation Committee agreed that the accrued bonuses will earn interest at a rate of 8% per annum.
On November 4, 2024, the Compensation Committee and the Board of Directors agreed to issue each non-employee director a 10-year option to purchase 10,000 shares of our common stock, under our shareholder approved stock plan, with vesting through the end of April 2025 and an exercise price equal the closing price of our common stock on the date of the approval.
* 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. |
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| Date: November 8, 2024 |
By: |
/s/ Walter V. Klemp |
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| Walter V. Klemp, |
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| Chief Executive Officer and Chairman (Principal Executive Officer) |
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| Date: November 8, 2024 | By: |
/s/ Jonathan P. Foster |
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| Jonathan P. Foster, |
||||||||
| Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) |
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