Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the
future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant
risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements
as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors”
and incorporated by reference herein. See also the “Special Cautionary Notice Regarding Forward-Looking Statements”
set forth at the beginning of this report.
You
should read the following discussion and analysis in conjunction with the unaudited financial statements, and the related footnotes
thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited
financial statements included in our annual report on Form 10-K for the year ended October 31, 2017. In addition, we intend to
use our media and investor relations website (http:// http://ir.advaxis.com/), SEC filings, press releases, public conference
calls and webcasts as well as social media to communicate with our subscribers and the public about Advaxis, its services and
other issues. It is possible that the information we post on social media could be deemed to be material information. Therefore,
in light of the SEC’s guidance, we encourage investors, the media, and others interested in Advaxis to review the information
we post on the U.S. social media channels listed on our website.
Overview
Advaxis, Inc. is a late-stage biotechnology
company focused on the discovery, development and commercialization of proprietary
Listeria monocytogenes
(“
Lm
”)
based antigen delivery products. The Company is using its
Lm
platform directed against tumor-specific targets in order
to engage the patient’s immune system to destroy tumor cells. Through a license from the University of Pennsylvania, Advaxis
has exclusive access to this proprietary formulation of attenuated
Lm
called
Lm
Technology. Advaxis’ proprietary
approach deploys a unique mechanism of action that awakens the immune system to attack cancer in three distinct ways by:
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Awakening
the immune system by activating multiple pathways in Antigen-presenting cells (“APCs”) with the equivalent of
multiple adjuvants;
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Attacking
the tumor by generating a strong, cancer-specific T cell response; and
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●
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Breaking
down tumor protection through suppression of the protective cells in the Tumor Microenvironment (“TME”) that shields
the tumor from the immune system. This enables the activated T cells to begin working to eliminate the tumor.
|
During
the second fiscal quarter, the Company began assessing the clinical and commercial viability of its R&D programs in
order to determine which were best suited for internal development and which were better suited for external development opportunities,
as well as determine other ways to reduce operating expenses, all in order to in order to find ways to treat cancer patients and
maximize stockholder value. In particular, we have determined to take the following actions:
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While
the Company’s lead HPV program, axalimogene filolisbac, has shown meaningful clinical efficacy and supports the manageable
safety profile of the
Lm
platform in HPV-related cancers, the Company intends to minimize future investment in cervical
cancer and focus on potential partnership opportunities. Our plan is to expand our search for a U.S. and/or European partner,
who will need to take on all development and commercialization activities and costs. In the event no partner emerges, the
Company intends to wind down the ongoing trial in high risk locally advanced cervical cancer (AIM2CERV) and would not conduct
the PD-1 combination trial in metastatic cervical cancer (ADVANCE), which has not yet been initiated.
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The
Company intends to continue to evaluate cost effective ways to invest in axalimogene filolisbac in head-and-neck cancer. These
may be internal or external investments, or both.
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●
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With
respect to the Company’s ongoing trial in metastatic prostate cancer with ADXS-PSA in combination with KEYTRUDA (“pembrolizumab”),
early clinical data have proven worthy of continued evaluation. The Company intends to continue to evaluate this program.
|
In
addition, on June 7, 2018, the Company announced that it would be implementing a reduction in force to align its staffing needs
with its intended strategy. The reduction involves the elimination approximately 24% of the Company’s work force.
Overall the cost of separation payments will be slightly higher than the savings of the work force reduction in the third quarter
by approximately $140,000 dollars. Beginning with the Company’s fourth quarter, results of operations net quarterly savings
will be approximately $1,150,000, or a total annualized workforce payroll savings of approximately $4,600,000. The net
savings generated by the elimination of these positions, in conjunction with the reduction in clinical expenditures, will
significantly lower the Company’s operating expenses and align its operations to focus on priority programs.
As
previously reported, the Company’s clinical trial collaboration agreement with MedImmune, the global biologics research
and development arm of AstraZeneca, related to the Phase 1/2, open-label, multicenter, two-part study to evaluate the safety and
efficacy of axalimogene filolisbac in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor,
durvalumab, as a combination treatment for patients with metastatic squamous or non-squamous carcinoma of the cervix and metastatic
HPV-associated squamous cell Carcinoma of the head and neck was placed on clinical hold by FDA on March 9, 2018 following its
review of a safety report regarding a Grade 5 Serious Adverse Event occurring on February 27, 2018 and involving respiratory failure
which followed a sixth combination cycle (11
th
dose of axalimogene filolisbac, 21
st
dose of durvalumab)
in the trial. Over 430 patients have received axalimogene filolisbac, and approximately 1,259 doses have been delivered across
multiple trials in HPV-associated cancers, to date, and this is the first time we have seen this type of event. Enrollment and
further dosing are on hold for this trial, and we are working closely with the site investigator and FDA to review this event
in detail and to determine a path forward from this clinical hold. The Company anticipates submitting a response to the FDA
shortly, intended to reach agreement on the appropriate measures to lift the clinical hold
.
We expect a response from the
FDA to this letter within 30 days of submission. At this time, this hold does not affect any other current clinical trials
or programs
.
On
June 6, 2018 the Company announced that Molly Henderson joined the Company as Chief Financial Officer effective as of June 6,
2018.
ADXS-HOT
The
Company is currently prioritizing product development in the most prevalent cancers, with the first tumor type to be NSCLC. Advaxis
plans to file multiple ADXS-HOT INDs in 2018, with a first-in-human trial in NSCLC to commence in 2018. Going forward, the Company
plans to submit additional INDs for the ADXS-HOT program in 2019.
ADXS-HOT
preclinical data was presented in a poster presentation at the 2018 AACR Annual Meeting. The study, entitled “Targeting
Shared Hotspot Cancer Mutations with a
Listeria monocytogenes
Immunotherapy Induce Potent Anti-Tumor Immunity” demonstrated
that the ADXS-HOT platform could effectively target common (public or shared) mutations (hotspots) and control tumor growth with
both single and multi-target constructs.
ADXS-NEO
Preclinical
findings in the ADXS-NEO program were discussed in poster presentations at the 2018 American Association for Cancer Research (AACR)
Annual Meeting. Additionally, portions of these data were presented by Amgen at a podium presentation during the European Neoantigen
Summit 2018.
The
first study, as discussed in a poster presentation at AACR entitled “Neoantigens that fail to elicit measurable T cell responses
following peptide immunization can control tumor growth when delivered using a Listeria-based immunotherapy platform,” showed
that ADXS-NEO generates T cell responses against neoantigen peptides that control tumor growth, even when they were identified
as “non-immunogenic” using a conventional peptide-adjuvant immunization.
In
the second study, discussed in a poster presentation at AACR entitled “Targeting frameshift mutations with a
Listeria
monocytogenes
immunotherapy drives neoantigen-specific antitumor immunity in MC38 and CT26 mouse tumor models,” Advaxis’
Lm
platform was shown to target frameshift mutations and generate T cells to multiple neoantigens per frameshift in these
models. This data highlighted the physical capacity of the Advaxis
Lm
platform and its ability to target frameshift mutations
of greater than 90 amino acids, and to generate T cells to multiple neoantigens per frameshift in tumor mouse models.
The initial tumor types for the trial are
microsatellite stable colorectal cancer, head and neck cancer, and NSCLC. The first patient, being treated for NSCLC, will
be dosed in June 2018.
ADXS-PSA
Advaxis is conducting a trial in collaboration
with Merck & Co. (“Merck”) evaluating the safety and efficacy of ADXS-PSA as monotherapy and in combination
with KEYTRUDA
®
(“pembrolizumab”), Merck’s anti PD-1 antibody, in a Phase 1/2, open-label, multicenter,
dose determination and expansion trial in patients with previously treated metastatic, castration-resistant prostate cancer (Keynote-046).
The Company presented data at the 2018 American Society of Clinical Oncology (“ASCO”) annual meeting. ADXS-PSA was
tested alone or in combination with KEYTRUDA in an advanced and heavily pretreated patient population who had progressed on androgen
deprivation therapy. A total of 13 and 37 patients were evaluated on monotherapy and combination therapy, respectively. Overall,
the safety profile was consistent with findings from prior clinical studies using the
Lm
platform. Treatment-related adverse
events (TRAEs) were mostly mild or moderate constitutional symptoms such as fever, chills, rigors, hypotension, nausea and fatigue,
consistent with immune activation and manageable with standard care. There were no new toxicities observed with the combination
therapy. In all treated patients, those who received the combination therapy experienced the longest overall survival (OS) at
data cut-off. Additional efficacy related data include:
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●
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Median
overall survival had not been reached in the combination arm after 13 months of follow-up (95%CI 7.16-NR), and was 7.79 months
(95%CI 3.52-11.9) in the monotherapy arm.
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●
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56.8%
of patients on combination therapy and 38.5% of patients on monotherapy did not experience disease progression.
|
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●
|
The
percentage of patients with PSA declines from baseline in the combination therapy arm was 40.5%, and 15.4% in the monotherapy
arm.
|
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●
|
In
all treated patients, an improvement in survival was observed in patients with PSA declines from baseline of 50% or greater
vs. those with PSA declines of less than 50%. There were 7 patients in the combination arm with 50% or greater declines in
PSA from baseline, and none in the monotherapy arm.
|
HPV
Related Cancers
We
have several programs in HPV-related cancers based on axalimogene filolisbac, an
Lm
–based antigen delivery product
designed to target cells expressing HPV. Axalimogene filolisbac is currently under investigation in three HPV-associated cancers:
cervical cancer, head and neck cancer, and anal cancer, either as a monotherapy or in combination with other therapies, and has
shown encouraging safety and efficacy in numerous clinical studies to date.
Cervical
Cancer
We
completed a randomized Phase 2 clinical study (
Lm
-LLO-E7-15), conducted exclusively in India, in 110 women with recurrent/refractory
cervical cancer. The final results showed that 34.9% (38/109) of patients were alive at 12 months, 24.8% (27/109) of patients
were Long-term Survivors (“LTS”) alive greater than 18 months. Of the 15 patients consenting to further follow-up
beyond 18 months, 12 (11%) achieved 24-month OS status (range 24 – 34+ months) at the time of study closure. Axalimogene
filolisbac was found to be well tolerated with the majority of the AEs were mild to moderate in severity (566 of 704 reported
AEs, 80.4%) and were not related to study drug (539 of 704 reported AEs, 76.6%). These data were published in the May 2018 edition
of the peer-reviewed
International Journal of Gynecological Cancer
.
Our
ongoing Phase 3 trial is evaluating axalimogene filolisbac in patients with high-risk, locally advanced cervical (“AIM2CERV”
or “
A
dvaxis
Im
munotherapy
2
Prevent
Cerv
ical Recurrence”). The study is being conducted
under a Special Protocol Assessment (“SPA”), and has been determined by the FDA to be adequate, well-designed, and
suitable for registration if successful. This study is being conducted in collaboration with the GOG/NRG Oncology, and we have
initiated the AIM2CERV study to support a Biologics License Application (“BLA”) submission in the U.S. and regulatory
registration in other territories around the world.
AIM2CERV
is a double-blind, randomized, placebo-controlled, Phase 3 study of adjuvant axalimogene filolisbac, following primary chemoradiation
treatment of women with high-risk locally advanced cervical cancer (“HRLACC”). The primary objective of AIM2CERV is
to compare the disease free survival of axalimogene filolisbac to placebo administered in the adjuvant setting following standard
concurrent chemotherapy and radiotherapy (“CCRT”) administered with curative intent to patients with HRLACC. Secondary
endpoints include examining overall survival and safety. Our goal is to develop a treatment to prevent or reduce the risk of cervical
cancer recurrence after primary, standard of care treatment in women who are at high risk of recurrence. The study is active in
fourteen countries with 129 sites open to date.
In
February 2018, the Company submitted a conditional MAA to the European Medicines Agency’s (“EMA”) Committee
for the Company’s lead
Lm
Technology product candidate, axalimogene filolisbac, for the treatment of adult women
who progress beyond first-line therapy of persistent/recurrent metastatic cervical cancer (“PRmCC”). The MAA submission
was primarily based on data from the GOG-0265 study, as well as supportive data from other clinical trials evaluating axalimogene
filolisbac and was validated by the EMA in March 2018.
The
Company is seeking a U.S. and/or European partner to fund the development and commercialization of axalimogene filolisbac in cervical
cancer including the completion of the AIM2CERV study. If a partner is not found, the program would be wound down in the near
future in a clinically responsible manner. In the short term, patients on trial would continue treatment.
We
have a clinical trial collaboration agreement with MedImmune, the global biologics research and development arm of AstraZeneca,
and are conducting a Phase 1/2, open-label, multicenter, two-part study to evaluate the safety and efficacy of axalimogene filolisbac
in combination with MedImmune’s investigational anti-PD-L1 immune checkpoint inhibitor, durvalumab, as a combination treatment
for patients with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. For the axalimogene
filolisbac and durvalumab dose escalation portion of the study, the dose-escalation phase has been completed. We have commenced
enrollment in the Part A (20 patients with SCCHN) and B (90 patients with cervical cancer) expansion phases; however, this trial
was placed on clinical hold by FDA on March 9, 2018. following its review of a safety report regarding a Grade 5 Serious Adverse
Event occurring on February 27, 2018 and involving respiratory failure which followed a sixth combination cycle (11th dose of
axalimogene filolisbac, 21st dose of durvalumab) in the trial. Over 430 patients have received axalimogene filolisbac, and approximately
1,259 doses have been delivered across multiple trials in HPV-associated cancers, to date, and this is the first time we have
seen this type of event. Enrollment and further dosing are on hold for this trial, and we are working closely with the site investigator
and FDA to review this event in detail. The Company anticipates submitting a response to the FDA shortly, intended to reach
agreement on the appropriate measures to lift the clinical hold
.
We expect a response to this letter from the FDA within
30 days of submission. At this time, this hold does not affect any other current clinical trials or programs.
We
had entered into a clinical development collaboration agreement with BMS to evaluate their PD-1 immune checkpoint inhibitor, OPDIVO
®
(nivolumab), in combination with axalimogene filolisbac as a potential treatment option for women with metastatic cervical
cancer. The ADVANCE trial was planned to evaluate this combination regimen in women with persistent, recurrent or metastatic (squamous
or non-squamous cell) carcinoma of the cervix who have failed at least one prior line of systemic chemotherapy. Under the terms
of the agreement, each party would bear its own internal costs and provide its immunotherapy agents. This trial has not yet been
initiated as the Company is seeking a U.S. and/or European partner to fund the cervical cancer program. If a partner is not found,
the study will not be initiated.
Head
and Neck Cancer
We
have entered into a clinical trial collaboration agreement with MedImmune to collaborate on a Phase 1/2, open-label, multicenter,
two part trial to evaluate safety and efficacy of axalimogene filolisbac, in combination with durvalumab (MEDI4736), for patients
with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. Part 1 of this trial is
complete, and the Company has commenced enrollment in the Part A (20 patients with SCCHN) and B (90 patients with cervical cancer)
expansion phases; however, this trial was placed on clinical hold as detailed above.
The Company is evaluating opportunities
to conduct a capital efficient trial evaluating axalimogene filolisbac in head and neck cancer. We will announce more
details on this program soon.
Results
of Operations for the Three Months Ended April 30, 2018 and 2017
Revenue
Revenue
decreased $1,677,900 to $1,747,480 for the three months ended April 30, 2018 compared to $3,425,380 for the three months ended
April 30, 2017. The decrease was due to a change in the estimated performance period associated with upfront fees received from
Amgen in conjunction with the collaboration agreement signed in August 2016.
Research
and Development Expenses
We
make significant investments in research and development to support our pre-clinical and clinical development programs. Research
and development expenses for the three months ended April 30, 2018 and 2017 were categorized as follows:
|
|
Three
Months Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
HPV-associated
cancers
|
|
$
|
4,386,321
|
|
|
$
|
5,001,228
|
|
Prostate
cancer
|
|
|
681,001
|
|
|
|
762,650
|
|
Neoantigen
therapy
|
|
|
530,630
|
|
|
|
646,078
|
|
Other
clinical trial expenses
|
|
|
7,597
|
|
|
|
519,582
|
|
Other
external research & development expenses
|
|
|
1,687,400
|
|
|
|
5,959,010
|
|
All
other expenses
|
|
|
5,133,300
|
|
|
|
6,418,312
|
|
Partner
reimbursements
|
|
|
(1,593,557
|
)
|
|
|
(3,000,000
|
)
|
Total
research & development expense
|
|
$
|
10,832,692
|
|
|
$
|
16,306,860
|
|
Axalimogene
Filolisbac
HPV-associated
expenses decreased $614,907 to $4,386,321 for the three months ended April 30, 2018 compared to $5,001,228 for the three
months ended April 30, 2017. The decrease results primarily from slower enrollment activities associated with the Phase 3 AIM2CERV
trial.
Other
Clinical Trial Expenses
Other
clinical trial expenses decreased $511,985 to $7,597 for the three months ended April 30, 2018 compared to $519,582 for the three
months ended April 30, 2017. The decrease relates to the dose findings of a HER2 Phase 1b trial being completed in fiscal 2017
and the Company’s decision not to proceed to the expansion phase of the trial.
Other
External Research & Development Expenses
Other
external research & development expenses consist primarily of professional fees and laboratory costs that have not been specifically
allocated to one of our franchises. The decrease of $4,271,610 to $1,687,400 for the three months ended April 30, 2018 compared
to $5,959,010 for the three months ended April 30, 2017 is primarily attributable to a decrease in laboratory costs and drug manufacturing
process validation and drug stability studies supporting the MAA which was filed in February 2018.
All
Other Expenses
All
other expenses include salary and benefit costs, stock based compensation expense, equipment costs and other internal costs associated
with our research & development activities. The decrease of $1,285,012 to $5,133,300 for the three months ended April 30,
2018 compared to $6,418,312 for the three months ended April 30, 2017 is primarily attributable to a decrease in stock compensation
resulting from a reduction in headcount.
Partner
reimbursements
Partner
reimbursements decreased $1,406,443 to $1,593,557 for the three months ended April 30, 2018 compared to $3,000,000 for the three
months ended April 30, 2017. The decrease relates to $3,000,000 from Stendhal for partner reimbursements supporting AIM2CERV in
the prior year compared to $1,593,557 from Amgen for partner reimbursements supporting ADXS-NEO in the current year.
General
and Administrative Expenses
General
and administrative expenses primarily include salary and benefit costs and stock based compensation expense for employees included
in our finance, legal and administrative organizations, outside legal and professional services, and facilities costs. General
and administrative expenses decreased $3,311,086 to $4,467,142 for the three months ended April 30, 2018, compared with $7,778,228
for the three months ended April 30, 2017. The decrease is primarily attributable to a decrease in stock based compensation related
to the resignation of the Company’s Chief Financial Officer and Chief Executive Officer in April 2018 and July 2017, respectively,
two Board members who did not seek re-election in March 2018 and the elimination of stock based compensation paid to consultants.
In addition, litigation settlements declined year over year. These decreases were offset by an increase in severance associated
with the resignation of the Interim Chief Executive Officer and Chief Financial Officer.
Results
of Operations for the Six Months Ended April 30, 2018 and 2017
Revenue
Revenue
decreased $3,413,115 to $3,803,107 for the six months ended April 30, 2018 compared to $7,216,222 for the six months ended April
30, 2017. The decrease was due to a change in the estimated performance period associated with upfront fees received from Amgen
in conjunction with the collaboration agreement signed in August 2016.
Research
and Development Expenses
We
make significant investments in research and development to support our pre-clinical and clinical development programs. Research
and development expenses for the six months ended April 30, 2018 and 2017 were categorized as follows:
|
|
Six
months Ended April 30,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
HPV-associated
cancers
|
|
$
|
9,937,495
|
|
|
$
|
8,965,813
|
|
Prostate
cancer
|
|
|
1,383,152
|
|
|
|
1,649,280
|
|
Neoantigen
therapy
|
|
|
902,437
|
|
|
|
1,043,852
|
|
Other
clinical trial expenses
|
|
|
226,517
|
|
|
|
990,546
|
|
Other
external research & development expenses
|
|
|
6,683,799
|
|
|
|
8,799,470
|
|
All
other expenses
|
|
|
11,863,115
|
|
|
|
11,506,453
|
|
Partner
reimbursements
|
|
|
(3,093,557
|
)
|
|
|
(3,000,000
|
)
|
Total
research & development expense
|
|
$
|
27,902,958
|
|
|
$
|
29,955,414
|
|
Axalimogene
Filolisbac
HPV-associated
expenses increased $971,682 to $9,937,495 for the six months ended April 30, 2018 compared to $8,965,813 for the six months ended
April 30, 2017. The increase resulted primarily from startup activities for additional countries in the Phase 3 AIM2CERV trial.
Other
Clinical Trial Expenses
Other
clinical trial expenses decreased $764,029 to $226,517 for the six months ended April 30, 2018 compared to $990,546 for
the six months ended April 30, 2017. The decrease relates to the dose findings of a HER2 Phase 1b trial being completed in fiscal
2017 and the Company’s decision not to proceed to the expansion phase of the trial.
Other
External Research & Development Expenses
Other
external research & development expenses consist primarily of professional fees and laboratory costs that have not been specifically
allocated to one of our franchises. The decrease of $2,115,671 to $6,683,799 for the six months ended April 30, 2018 compared
to $8,799,470 for the six months ended April 30, 2017 is primarily attributable to a decrease in laboratory costs and drug manufacturing
process validation and drug stability studies supporting the MAA which was filed in February 2018.
General
and Administrative Expenses
General
and administrative expenses primarily include salary and benefit costs and stock based compensation expense for employees included
in our finance, legal and administrative organizations, outside legal and professional services, and facilities costs. General
and administrative expenses decreased $5,106,063 to $9,999,974 for the six months ended April 30, 2018, compared with $15,106,037
for the six months ended April 30, 2017. The decrease is primarily attributable to a decrease in stock based compensation related
to the resignation of the Company’s Chief Financial Officer and Chief Executive Officer in April 2018 and July 2017, respectively,
two Board members who did not seek re-election in March 2018 and the elimination of stock based compensation paid to consultants.
In addition, litigation settlements declined year over year. These decreases were offset by an increase in severance associated
with the resignation of the Interim Chief Executive Officer and Chief Financial Officer.
Liquidity
and Capital Resources
Our
major sources of cash have been proceeds from various public and private offerings of our common stock, option and warrant exercises,
and interest income. From October 2013 through May 2018, we raised approximately $245.2 million in gross proceeds from various
public and private offerings of our common stock. We have not yet commercialized any drug, and we may not become profitable. Our
ability to achieve profitability depends on a number of factors, including our ability to complete our development efforts, obtain
regulatory approvals for our drug, successfully complete any post-approval regulatory obligations, successfully compete with other
available treatment options in the marketplace, overcome any clinical holds that the FDA may impose and successfully manufacture
and commercialize our drug alone or in partnership. We may continue to incur substantial operating losses even after we begin
to generate revenues from our drug candidates.
As
of April 30, 2018, the Company had approximately $58.8 million in cash, restricted cash, cash equivalents and short-term investment
securities on its balance sheet and working capital of $46.6 million. The Company has completed a thorough analysis of operating
expenses, as well as research and development (“R&D”) programs. Accordingly, Management’s plans to mitigate
such shortfall of cashflows include the approval of a work force reduction effective June 7, 2018, and also cost reductions regarding
select ongoing programs for clinical trials. Based upon these actions, we believe our current working capital position as of April
30, 2018 and cashflows expected to be generated from future operations is sufficient to enable the Company to meet its obligations
as they become due in the ordinary course of business for a period of at least one year from the issuance of these financial statements.
Had these actions not been taken, the Company’s future cashflows may not have been sufficient for the Company to meet its
obligations as they become due. The actual amount of cash that we will need to operate is subject to many factors, and the Company
has the ability to further reduce other variable costs if needed. Should further financing be needed, the Company could access
additional capital through the equity capital or debt markets although no assurance can be provided that the Company would be
successful in any capital raising efforts.
Since
our inception through April 30, 2018, we reported accumulated net losses of approximately $335.0 million and recurring
negative cash flows from operations. We anticipate that we will continue to generate significant losses from operations for the
foreseeable future.
Cash
Flows
Operating
Activities
Net
cash used in operating activities was approximately $30.8 million for the six months ended April 30, 2018 compared to $33.7 million
for the six months ended April 30, 2017. Net cash used in operating activities includes spending associated with our clinical
trial programs and general and administrative activities as well as an increase in proceeds received from the sale of our state
NOLs and R&D tax credits of approximately $1.9 million.
Investing
Activities
Net
cash provided by investing activities was approximately $34.8 million for the six months ended April 30, 2018 compared to $49.0
million for the six months ended April 30, 2017. The change was primarily due to higher level of the use of proceeds from matured
short-term investment securities to fund operating activities and fewer purchases of held-to-maturity investments. The change
was also impacted by restricted cash established with a letter of credit, purchases of property and equipment, legal cost spending
in support of our intangible assets (patents) and costs paid to Penn for patents.
Financing
Activities
Net
Cash provided by financing activities was approximately $21.0 million for the six months ended April 30, 2018 as compared to net
cash used in financing activities of $26,000 for the six months ended April 30, 2017. The increase resulted primarily from net
proceeds of approximately $18,383,000 from the sales of 10,000,000 shares of our common stock in a public offering and approximately
$2,659,000 million from the sale of 881,629 shares of our Common Stock at-the-market transactions.
Our
capital resources and operations to date have been funded primarily with the proceeds from both public and private
equity and debt financings, NOL tax sales and income earned on investments and grants. We have sustained losses from operations
in each fiscal year since our inception, and we expect losses to continue for the indefinite future, due to the substantial investment
in research and development. As of April 30, 2018, and October 31, 2017, we had an accumulated deficit of $335,041,765 and $301,142,227,
respectively, and stockholders’ equity of $45,455,318 and $54,260,167, respectively.
Contractual
Commitments and Obligations
The
disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended October
31, 2017 filed on December 21, 2017. There have been no material changes from the contractual commitments and obligations previously
disclosed in our Annual Report on Form 10-K other than the changes described in Note 10, “Commitments and Contingencies”
in this Quarterly Report on Form 10-Q.
Off-Balance
Sheet Arrangements
As
of April 30, 2018, we had no off-balance sheet arrangements.
Critical
Accounting Estimates
The
preparation of financial statements in accordance with GAAP accepted in the U.S. requires management to make estimates and assumptions
that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate
to be critical if:
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it
requires assumptions to be made that were uncertain at the time the estimate was made, and
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changes
in the estimate of difference estimates that could have been selected could have material impact in our results of operations
or financial condition.
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While
we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the
circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates
impact the following transactions or account balances: stock compensation, warrant liability valuation and impairment of intangibles.
See
Note 2 to our financial statements that discusses significant accounting policies.
New
Accounting Standards
See
Note 2 to our financial statements that discusses new accounting pronouncements.