Notes to Condensed Consolidated Financial
Statements
(Unaudited)
1. Nature of Business
The Company
Onconova Therapeutics, Inc. (the "Company")
was incorporated in the State of Delaware on December 22, 1998 and commenced operations on January 1, 1999. The Company's
headquarters are located in Newtown, Pennsylvania. The Company is a clinical-stage biopharmaceutical company focused on discovering
and developing novel small molecule product candidates primarily to treat cancer. The Company has proprietary targeted cancer agents
designed to work against specific cellular pathways that are important to cancer cells. We believe that the product candidates
in our pipeline have the potential to be efficacious in a variety of cancers. The Company has three clinical-stage product candidates
and several preclinical programs. During 2012, Onconova Europe GmbH was established as a wholly owned subsidiary of the Company
for the purpose of further developing business in Europe.
The Company has entered into several
license and collaboration agreements. In 2011, the Company entered into a license agreement, as subsequently amended, with
SymBio Pharmaceuticals Limited ("SymBio"), which grants SymBio certain rights to commercialize rigosertib in Japan
and Korea. In December 2017, the Company entered into a license and collaboration agreement with HanX for the further
development, registration and commercialization of ON 123300 in Greater China. ON 123300 is a preclinical compound which the
Company believes has the potential to overcome the limitations of current generation CDK 4/6 inhibitors. Under the terms of
the agreement, the Company received an upfront payment, and will receive regulatory and commercial milestone payments, as
well as royalties on Chinese sales. The key feature of the collaboration is that HanX provides all funding required for
Chinese IND enabling studies performed for Chinese Food and Drug Administration IND approval. The Company and HanX also
intended for these studies to comply with the FDA standards. Accordingly, such studies may be used by the Company for an IND
filing with the FDA. The Chinese IND was approved in January 2020. The Company plans to file a US IND related to 123300
after obtaining the required manufacturing data. The cGMP manufacturer for ON 123300 has been identified and qualified. It is
anticipated that the cGMP API would be available in 4-6 months. Subsequently, the drug product will be manufactured with an
anticipated filing of an IND in Q4 of 2020. The Company maintains global rights outside of China. On March 2, 2018, the
Company entered into a License, Development and Commercialization Agreement with Pint International SA (which, together with
its affiliate Pint Pharma GmbH, are collectively referred to as "Pint"). Under the terms of the agreement, the
Company granted Pint an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights
and know-how to develop and commercialize any pharmaceutical product containing rigosertib in all uses of rigosertib in
certain Latin America countries. In May 2019, the Company entered into a License and Collaboration Agreement (the
"HanX License Agreement") with HanX Biopharmaceuticals, Inc. ("HanX"). Under the terms of the HanX
License Agreement, the Company granted HanX an exclusive, royalty-bearing license, with the right to sublicense, under
certain Company patent rights and know-how to develop and commercialize any pharmaceutical product (the "HanX
Product") containing rigosertib in all uses of rigosertib or the HanX Product in humans therapeutics uses in the
People's Republic of China, Hong Kong, Macau and Taiwan (the "HanX Territory"). In connection with the License
Agreement, the Company also entered into a Securities Purchase Agreement with each of HanX and Abundant New Investments Ltd.
("Abundant"), an affiliate of HanX (each, a "Securities Purchase Agreement" and together, the
"Securities Purchase Agreements"). HanX did not fulfill its obligations under the HanX License Agreement and in
January 2020, in accordance with the terms of the HanX License Agreement, the HanX License Agreement was deemed to be
void ab initio. Upon this termination, the rights to HanX Product in the HanX Territory reverted to the Company in accordance
with the terms of the HanX License Agreement. In addition, the Securities Purchase Agreements terminated automatically
effective upon the termination of the HanX License Agreement in accordance with the Securities Purchase Agreements. In
November 2019, the Company entered into a Distribution, License and Supply Agreement (the "Knight License
Agreement") with Knight Therapeutics Inc. ("Knight"). Under the terms of the Knight License Agreement, the
Company granted Knight (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under certain Company
patent rights and know-how to develop and manufacture any product (the "Knight Licensed Product") containing
rigosertib for Canada (and Israel should Knight exercise its option) (the "Knight Territory") and in human uses
(the "Field"), and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain
Company patent rights and know-how to commercialize the Knight Licensed Product in the Knight Territory and in the Field.
Knight has also agreed to obtain from the Company us all of its requirements of the Knight Licensed Products for the Knight
Territory, and the Company has agreed to supply Knight with all of its requirements of the Knight Licensed Products. In
December 2019, the Company entered into a Distribution, License and Supply Agreement (the "STA License
Agreement") with Specialised Therapeutics Asia Pte. Ltd. ("STA"). Under the terms of the STA License
Agreement, the Company granted STA (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under
certain Company patent rights and know-how to develop and manufacture any product (the "STA Licensed Product")
containing rigosertib for Australia and New Zealand (the "STA Territory") and in human uses (the
"Field"), and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain Company
patent rights and know-how to commercialize the STA Licensed Product in the STA Territory and in the Field. STA has also
agreed to obtain from the Company all of its requirements of the STA Licensed Products for the STA Territory, and the Company
has agreed to supply STA with all of its requirements of the STA Licensed Products.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements
(Unaudited)
Liquidity
The Company has incurred recurring operating
losses since inception. For the three months ended March 31, 2020, the Company incurred a net loss of $5,092,000 and as of
March 31, 2020 the Company had generated an accumulated deficit of $408,491,000. The Company anticipates operating losses
to continue for the foreseeable future due to, among other things, costs related to research, development of its product candidates
and its preclinical programs, strategic alliances and its administrative organization. At March 31, 2020, the Company had
cash and cash equivalents of $31,036,000. The Company will require substantial additional financing to fund its ongoing clinical
trials and operations, and to continue to execute its strategy.
In February and March 2019 the
Company implemented a workforce reduction. Six employees were terminated, which represented approximately 24% of the Company's
workforce. A severance related charge of approximately $1,843,000, which included a non-cash charge of approximately $415,000 related
to the accelerated vesting of outstanding stock options, was recorded in the three months ended March 31, 2019. Of the total
severance related charge of $1,843,000; $1,562,000 was recorded in general and administrative operating expenses and $281,000 was
recorded in research and development operating expenses. The severance expense was paid in periodic amounts through February 2020.
On September 25, 2019 the Company closed
on an offering of common stock to certain investors. The Company issued 2,198,938 shares of common stock and amended warrants for
the purchase of 2,198,938 shares of common stock. The investors, who were also holders of the Company's preferred stock warrants
issued in February 2018 and/or May 2018, received a warrant amendment under which a certain number of such investors'
preferred stock warrants received a reduction in exercise price and an extension of term. Net proceeds from the sale of common
stock and the amendment of preferred stock warrants were approximately $3.3 million. In November 2019, the Company closed
on an offering of units of common stock and warrants. The Company issued 30,250,000 shares of common stock, pre-funded warrants
to purchase 24,750,000 shares of common stock, and common stock warrants to purchase 55,000,000 shares of common stock. Net proceeds
were approximately $9.7 million. On December 10, 2019, the Company closed on an offering of units of common stock and warrants.
The Company issued 14,326,648 shares of common stock and common stock warrants to purchase 7,163,324 shares of common stock. Net
proceeds were approximately $4.4 million. On December 19, 2019, the Company also closed on an offering of units of common
stock and warrants. The Company issued 13,878,864 shares of common stock and common stock warrants to purchase 6,939,432 shares
of common stock. Net proceeds were approximately $4.4 million. During 2019, pre-funded warrants were exercised for 23,720,784 shares
of common stock and net proceeds were $35,000. Also during 2019, common warrants were exercised for 21,014,378 shares of common
stock and net proceeds were approximately $4.9 million.
On January 3, 2020, the Company closed
on an offering of common stock. The Company issued 27,662,518 shares of common stock and net proceeds were approximately $9.0 million.
In addition, during the quarter ended March 31, 2020; 28,586,200 warrants from the November 2019 offering have been exercised,
resulting in proceeds of $5.7 million.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
The Company has and may continue to delay,
scale-back, or eliminate certain of its research and development activities and other aspects of its operations until such time
as the Company is successful in securing additional funding. The Company is exploring various dilutive and non-dilutive sources
of funding, including equity financings, strategic alliances, business development and other sources. The future success of the
Company is dependent upon its ability to obtain additional funding. There can be no assurance, however, that the Company will be
successful in obtaining such funding in sufficient amounts, on terms acceptable to the Company, or at all. The Company currently
anticipates that current cash and cash equivalents will be sufficient to meet its anticipated cash requirements into the third
quarter of 2021.
2. Summary of Significant Accounting Policies
Basis of Presentation
The condensed consolidated financial statements
are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim
financial information. Certain information and footnotes normally included in financial statements prepared in accordance with
GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”).
The financial statements include the consolidated accounts of the Company and its wholly-owned subsidiary, Onconova Europe GmbH.
All significant intercompany transactions have been eliminated.
Unaudited Interim Financial Information
The accompanying condensed
consolidated balance sheet as of March 31, 2020, the condensed consolidated statements of operations and comprehensive
loss for the three months ended March 31, 2020 and 2019, the consolidated statements of stockholders’ equity
(deficit) for the three months ended March 31, 2020 and 2019 and the condensed consolidated statements of cash flows for
the three months ended March 31, 2020 and 2019 are unaudited. The interim unaudited condensed consolidated financial
statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion
of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of
the Company’s financial position as of March 31, 2020, the results of its operations for the three months ended
March 31, 2020 and 2019, and its cash flows for the three months ended March 31, 2020 and 2019. The financial data
and other information disclosed in these notes related to the three months ended March 31, 2020 and 2019 are unaudited.
The results for the three months ended March 31, 2020 are not necessarily indicative of results to be expected for the
year ending December 31, 2019, any other interim periods, or any future year or period. These unaudited condensed
consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the
notes thereto for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K filed
with the SEC on March 27, 2020.
Segment Information
Operating segments are defined as components
of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or
decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and
manages its business in one segment, which is the identification and development of oncology therapeutics.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Significant Accounting Policies
The Company’s significant accounting
policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2019 included in the
Company’s annual report on Form 10-K filed with the SEC on March 27, 2020. Since the date of such financial statements,
there have been no changes to the Company’s significant accounting policies.
Fair Value Measurements
The carrying amounts reported in the accompanying
consolidated financial statements for cash and cash equivalents, accounts payable, and accrued liabilities approximate their respective
fair values because of the short-term nature of these accounts. The fair value of the warrant liability is discussed in Note 7,
“Fair Value Measurements.”
Revenue Recognition
The Company recognizes revenue in accordance
with Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (ASC 606), which the Company adopted
effective January 1, 2018 using the modified retrospective method. There was no material impact to our financial position
and results of operations as a result of the adoption. The Company applies ASC 606 to all contracts with customers, except for
contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.
In accordance with ASC 606, the Company recognizes revenue when its customer obtains control of promised goods or services, in
an amount that reflects the consideration which the Company expects to receive in exchange for those goods or services. To determine
revenue recognition for arrangements that the Company determines are within the scope of ASC 606, the Company performs the following
five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract;
(iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract;
and (v) recognize revenue when (or as) the Company satisfies a performance obligation. The Company only applies the five-step
model to contracts when it is probable that it will collect the consideration it is entitled to in exchange for the goods and services
it transfers to the customer. At contract inception, the Company assesses the goods or services promised within each contract that
falls under the scope of ASC 606, determines those that are performance obligations and assesses whether each promised good or
service is distinct. The Company then recognizes as revenue the amount of the transaction price that is allocated to
the respective performance obligation when (or as) the performance obligation is satisfied.
The Company derives revenue from collaboration
and licensing agreements and from the sale of products associated with material transfer, collaboration and supply agreements.
License, Collaboration and Other Revenues
The Company enters into licensing and collaboration
agreements, under which it licenses certain of its product candidates’ rights to third parties. The Company recognizes
revenue related to these agreements in accordance with ASC 606. The terms of these arrangements typically include payment from
third parties of one or more of the following: non-refundable, up-front license fees; development, regulatory and commercial milestone
payments; and royalties on net sales of the licensed product.
In determining the appropriate amount of
revenue to be recognized as it fulfills its obligation under each of its agreements, the Company performs the five steps described
above. As part of the accounting for these arrangements, the Company must develop assumptions that require judgment to determine
the stand-alone selling price, which may include forecasted revenues, development timelines, reimbursement of personnel costs,
discount rates and probabilities of technical and regulatory success.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Licensing
of Intellectual Property: If the license to the Company’s intellectual property is determined to be distinct from
the other performance obligations identified in the arrangement, the Company recognizes revenue from non-refundable, up-front fees
allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license.
For licenses that are bundled with other performance obligations, the Company utilizes judgment to assess the nature of the combined
performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and,
if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front-fees.
The Company evaluates the measure of progress each reporting period, and, if necessary, adjusts the measure of performance and
related revenue recognition.
Milestone
Payments: At the inception of each arrangement that includes development milestone payments, the Company evaluates whether
the milestones are considered probable of being reached and estimates the amount to be included in the transaction price using
the most likely amount method. If it is probable that a significant revenue reversal will not occur, the associated
milestone value is included in the transaction price. Milestone payments that are not within the control of the Company or the
licensees, such as regulatory approvals, are not considered probable of being achieved until those approvals are received. The
transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis, for which the
Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent
reporting period, the Company re-evaluates the probability of achievement of such development milestones and any related constraint
and, if necessary, adjusts its estimate of the overall transaction price. Any such adjustments are recorded on a cumulative
catch-up basis, which would affect revenues and earnings in their period of adjustment.
Manufacturing
supply services. Arrangements that include a promise for future supply of drug substance or drug product for either
clinical development or commercial supply at the customer’s discretion are generally considered as options. The Company assesses
if these options provide material rights to the licensee and if so, they are accounted for as separate performance obligations.
If the Company is entitled to additional payments when the customer exercises these options, any additional payments are recorded
when the customer obtains control of the goods, which is upon shipment.
Royalties:
For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and for which the
license is deemed to be the predominant item to which royalties relate, the Company recognizes revenue at the later of (i) when
the related sales occur, or (ii) when the performance obligation to which some of all of the royalty has been allocated has
been satisfied (or partially satisfied). To date, the Company has not recognized any royalty revenue from its license
agreements.
Leases
The Company accounts for leases in accordance
with Accounting Standards Codification Topic 842, Leases (ASC 842), which the Company adopted effective January 1,
2019. The Company determines whether an arrangement is a lease at contract inception by establishing if the contract conveys the
right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration.
Right of Use (ROU) Assets and Lease Liabilities
are recognized at the lease commencement date based on the present value of all minimum lease payments over the lease term. The
Company uses its incremental borrowing rate based on the information available at commencement date in determining the present
value of lease payments, when the implicit rate is not readily determinable. Lease terms may include options to extend or terminate
the lease. These options are included in the lease term when it is reasonably certain that the Company will exercise that option.
Operating lease expense is recognized on a straight-line basis over the lease term.
The Company has elected the following policy
elections on adoption: use of portfolio approach on leases of assets under master service agreements, exclusion of short term leases
(term of 12 months or less) on the balance sheet, and not separating lease and non-lease components.
At January 1, 2019 and March 31,
2020 the Company had one lease, which was for office space. The lease qualifies for the short term lease exception. Consequently,
no ROU Asset or Lease Liability was recorded. The lease payments are being recognized as an expense on a straight-line basis over
the lease term. Lease payments for the three months ended March 31, 2020 were $45,000. Remaining payments due under the lease
at March 31, 2020 are $166,000.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
In February 2016 and through subsequent
amendments, the FASB issued guidance which supersedes much of the previous guidance for leases. The new guidance requires lessees
to recognize a right-of-use asset and a lease liability on their balance sheets for all the leases with terms greater than twelve
months. Based on certain criteria, leases are classified as either financing or operating, with classification affecting the pattern
of expense recognition in the income statement. For leases with a term of twelve months or less, a lessee is permitted to make
an accounting policy election by class of underlying asset not to recognize lease assets and lease liabilities. If a lessee makes
this election, it should recognize lease expense for such leases generally on a straight-line basis over the lease term. The guidance
was effective for fiscal years beginning after December 15, 2018, and interim periods within those years, with early adoption
permitted. In transition, lessees and lessors were permitted to recognize and measure leases at the date of adoption using a modified
retrospective approach. The modified retrospective approach includes a number of optional practical expedients primarily focused
on leases that commenced before the effective date of the new guidance, including continuing to account for leases that commence
before the effective date in accordance with previous guidance, unless the lease is modified. The Company adopted the guidance
in ASC 842 effective January 1, 2019 using the modified retrospective method, which does not require the restatement of prior
period amounts. There was no impact to the Company’s financial position and results of operations as a result of the adoption.
In August 2018, the FASB issued guidance
which changes the disclosure requirements for fair value measurement. The guidance amends the disclosure requirements in ASC Topic
820 by adding, changing, or removing certain disclosures. The guidance is effective for fiscal years beginning after December 15,
2019. The Company adopted this guidance effective January 1, 2020. There was no impact to the Company’s financial position,
results of operations or financial statement disclosures as a result of the adoption.
In November 2018, the FASB issued guidance,
which clarifies the interaction between ASC Topic 808, Collaborative Arrangements , and ASC Topic 606, Revenue
from Contracts with Customers . The guidance, among other items, clarifies that certain transactions between collaborative
participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in
the context of a unit of account. The guidance is effective for fiscal years beginning after December 15, 2019. The Company
adopted this guidance effective January 1, 2020. There was no impact to the Company’s financial position and results
of operations as a result of the adoption.
In June 2016, the FASB issued new guidance
on the accounting for credit losses on financial instruments. The guidance was amended in November 2019. The new guidance
introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes
the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses
(and subsequent recoveries). The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods
within those years, with early adoption permitted. The Company is evaluating the impact of the adoption of the standard on its
consolidated financial statements.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
3. Revenue
The Company’s revenue during the three
ended March 31, 2020 and 2019 was from its license and collaboration agreement with SymBio.
|
|
Three Months Ended March 31,
|
|
|
|
2020
|
|
2019
|
|
Symbio
|
|
|
|
|
|
|
|
Upfront license fee recognition over time
|
|
$
|
56,000
|
|
$
|
57,000
|
|
Supplies and other
|
|
|
(4,000
|
)
|
|
11,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
52,000
|
|
$
|
68,000
|
|
Deferred revenue is as follows:
|
|
Symbio
|
|
|
|
Upfront Payment
|
|
Deferred balance at December 31, 2019
|
|
$
|
3,921,000
|
|
Recognition to revenue
|
|
|
56,000
|
|
|
|
|
|
|
Deferred balance at March 31, 2020
|
|
$
|
3,865,000
|
|
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
4. Net Loss Per Share of Common Stock
The following potentially dilutive securities
outstanding at March 31, 2020 and 2019 have been excluded from the computation of diluted weighted average shares outstanding,
as they would be antidilutive (reflects the number of common shares as if the dilutive securities had been converted to common
stock):
|
|
March 31,
|
|
|
2020
|
|
2019
|
|
Warrants
|
|
|
27,373,567
|
|
|
5,504,722
|
|
Stock options
|
|
|
1,017,393
|
|
|
345,794
|
|
|
|
|
28,390,960
|
|
|
5,850,516
|
|
5. Warrants
Common Stock warrants are accounted for
in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging — Contracts in Entity’s
Own Equity (ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the
warrant agreement. Some of the Company’s warrants are classified as liabilities because in certain circumstances they
could require cash settlement.
Warrants outstanding and warrant activity
(reflects the number of common shares as if the warrants were converted to common stock) for the three months ended March 31,
2020 is as follows:
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
|
|
Balance
|
|
|
|
|
|
Exercise
|
|
Expiration
|
|
December 31,
|
|
Warrants
|
|
Warrants
|
|
Warrants
|
|
March 31,
|
|
Description
|
|
Classification
|
|
Price
|
|
Date
|
|
2019
|
|
Issued
/ Amended
|
|
Exercised
|
|
Expired
/ Amended
|
|
2020
|
|
Non-tradable
warrants
|
|
Liability
|
|
$
|
172.50
|
|
July 2021
|
|
6,456
|
|
-
|
|
-
|
|
-
|
|
6,456
|
|
Tradable warrants
|
|
Liability
|
|
$
|
73.80
|
|
July 2021
|
|
212,801
|
|
-
|
|
-
|
|
-
|
|
212,801
|
|
Non-tradable pre-funded
warrants
|
|
Equity
|
|
$
|
0.15
|
|
July 2023
|
|
394
|
|
-
|
|
-
|
|
-
|
|
394
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
1.60
|
|
December 2022
|
|
392,834
|
|
-
|
|
-
|
|
-
|
|
392,834
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
14.10
|
|
March 2021
|
|
5,000
|
|
-
|
|
-
|
|
-
|
|
5,000
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
21.15
|
|
March 2021
|
|
8,333
|
|
-
|
|
-
|
|
-
|
|
8,333
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
7.7895
|
|
June 2021
|
|
15,000
|
|
-
|
|
-
|
|
-
|
|
15,000
|
|
Non-tradable pre-funded
warrants
|
|
Equity
|
|
$
|
0.15
|
|
none
|
|
52,834
|
|
-
|
|
-
|
|
-
|
|
52,834
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
1.600
|
|
December 2022
|
|
1,806,104
|
|
-
|
|
-
|
|
-
|
|
1,806,104
|
|
Non-tradable pre-funded
warrants
|
|
Equity
|
|
$
|
0.15
|
|
none
|
|
74,617
|
|
-
|
|
-
|
|
-
|
|
74,617
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
2.00
|
|
September 2023
|
|
109,585
|
|
-
|
|
-
|
|
-
|
|
109,585
|
|
Non-tradable pre-funded
warrants
|
|
Equity
|
|
$
|
0.0001
|
|
none
|
|
1,250,000
|
|
-
|
|
-
|
|
-
|
|
1,250,000
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.20
|
|
November 2024
|
|
41,037,000
|
|
-
|
|
(28,586,200
|
)
|
-
|
|
12,450,800
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.250
|
|
November 2024
|
|
2,521,875
|
|
-
|
|
-
|
|
-
|
|
2,521,875
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.287
|
|
December 2024
|
|
3,581,662
|
|
-
|
|
-
|
|
-
|
|
3,581,662
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.43625
|
|
December 2024
|
|
716,332
|
|
-
|
|
-
|
|
-
|
|
716,332
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.298
|
|
December 2024
|
|
3,469,716
|
|
-
|
|
-
|
|
-
|
|
3,469,716
|
|
Non-tradable warrants
|
|
Equity
|
|
$
|
0.45030
|
|
December 2024
|
|
693,943
|
|
-
|
|
|
|
-
|
|
693,943
|
|
Non-tradable
warrants
|
|
Equity
|
|
$
|
0.45190
|
|
December 2023
|
|
-
|
|
1,383,126
|
|
|
|
-
|
|
1,383,126
|
|
|
|
|
|
|
|
|
|
|
55,954,486
|
|
1,383,126
|
|
(28,586,200
|
)
|
-
|
|
28,751,412
|
|
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
6. Balance Sheet Detail
Prepaid expenses and other current assets:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
366,000
|
|
|
$
|
321,000
|
|
Manufacturing
|
|
|
39,000
|
|
|
|
25,000
|
|
Insurance
|
|
|
168,000
|
|
|
|
164,000
|
|
Other
|
|
|
222,000
|
|
|
|
140,000
|
|
|
|
$
|
795,000
|
|
|
$
|
650,000
|
|
Property and equipment:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Property and equipment
|
|
$
|
2,283,000
|
|
|
$
|
2,283,000
|
|
Accumulated depreciation
|
|
|
(2,236,000
|
)
|
|
|
(2,233,000
|
)
|
|
|
$
|
47,000
|
|
|
$
|
50,000
|
|
Accrued expenses and other current liabilities:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Research and development
|
|
$
|
1,863,000
|
|
|
$
|
2,016,000
|
|
Employee compensation
|
|
|
526,000
|
|
|
|
1,537,000
|
|
Professional fees
|
|
|
112,000
|
|
|
|
242,000
|
|
|
|
$
|
2,501,000
|
|
|
$
|
3,795,000
|
|
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
7. Fair Value Measurements
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 Company utilizes a valuation hierarchy
for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad
levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2
inputs are quoted prices for similar assets and 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
inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value.
A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is
significant to the fair value measurement.
On January 5, 2016, the Company entered
into a securities purchase agreement (the “Securities Purchase Agreement”) with an institutional investor providing
for the issuance and sale by the Company of 12,912 shares of Common Stock, at a purchase price of $142.50 per share and warrants
to purchase up to 6,456 shares of Common Stock (the “Warrants”) for aggregate gross proceeds of $1,840,000. The Company
has classified the warrants as a liability (see Note 5). The estimated fair value using the Black-Scholes pricing model was approximately
$0 at March 31, 2020 and December 31, 2019.
On July 29, 2016 the Company closed
on a Rights Offering, issuing 239,986 shares of Common Stock, 212,801 Tradable Warrants and 43,760 Pre-Funded Warrants. The Tradable
Warrants are exercisable for a period of five years for one share of Common Stock at an exercise price of $73.80 per share. After
the one-year anniversary of issuance, the Company may redeem the Tradable Warrants for $0.001 per Tradable Warrant if the volume
weighted average price of its Common Stock is above $184.50 for each of 10 consecutive trading days. The Company has classified
the Tradable Warrants as a liability (see Note 5). The Tradable Warrants have been listed on the Nasdaq Capital Market since
issuance and the Company regularly monitors the trading activity. The Company has determined that an active and orderly market
for the Tradable Warrants has developed and that the Nasdaq Capital Market price is the best indicator of fair value of the warrant
liability. The quoted market price was used to determine the fair value at December 31, 2019 and March 31, 2020.
The Company estimated the fair value of
the non-tradable warrant liability at March 31, 2020, using the Black-Scholes option pricing model with the following weighted-average
assumptions:
Risk-free interest rate
|
|
0.20
|
%
|
Expected volatility
|
|
82.18
|
%
|
Expected term
|
|
1.33 years
|
|
Expected dividend yield
|
|
0
|
%
|
Expected volatility is based on the historical
volatility of the Company’s Common Stock since its IPO in July 2013.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
7. Fair Value Measurements (Continued)
The following fair value hierarchy table
presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as
of March 31, 2020 and December 31, 2019:
|
|
Fair Value Measurement as of:
|
|
|
|
March 31, 2020
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
Tradable warrants liability
|
|
$
|
176,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
176,000
|
|
|
$
|
113,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
113,000
|
|
Non-tradable warrants liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
176,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
176,000
|
|
|
$
|
113,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
113,000
|
|
There were no transfers between Level 1
and Level 2 in any of the periods reported.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
8. Stock-Based Compensation
The 2007 Equity Compensation Plan as amended
(the “2007 Plan”), amended, restated and renamed the Company’s 1999 Stock Based Compensation Plan (the “1999
Plan”), which provided for the granting of incentive and nonqualified stock options and restricted stock to its employees,
directors and consultants at the discretion of the board of directors.
The 2013 Equity Compensation Plan (the “2013
Plan”), amended, restated and renamed the 2007 Plan. Under the 2013 Plan, the Company may grant incentive stock options,
non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, deferred share awards, performance
awards and other equity-based awards to employees, directors and consultants. The Company initially reserved 40,718 shares of Common
Stock for issuance, subject to adjustment as set forth in the 2013 Plan. The 2013 Plan included an evergreen provision, pursuant
to which the maximum aggregate number of shares that may be issued under the 2013 Plan is increased on the first day of each fiscal
year by the lesser of (a) a number of shares equal to four percent (4%) of the issued and outstanding Common Stock of the
Company, without duplication, (b) 13,333 shares and (c) such lesser number as determined by the Company’s board
of directors, subject to specified limitations.
The 2018 Omnibus Incentive Compensation
Plan (the “2018 Plan”) was unanimously approved by the Company’s Board of Directors on May 24, 2018 and
was approved by the Company’s stockholders on June 27, 2018. The 2018 Plan replaces the 2013 Plan. Upon stockholders’
approval of the 2018 Plan, no further awards will be made under the 2013 Plan. Awards granted under the 2013 Plan will continue
in effect in accordance with the terms of the applicable award agreement and the terms of the 2013 Plan in effect when the awards
were granted.
Under the 2018 Plan, the Company may grant
incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based
awards to employees, non-employee directors and consultants, and advisors. The maximum aggregate number of shares of the Company’s
common stock that may be issued under the 2018 Plan is 402,354, which is equal to the sum of (i) 400,000 shares of the Company’s
common stock, plus (ii) 2,354 shares, which is the number of shares of the Company common stock reserved for issuance under
the 2013 Plan that remained available as of the effective date of the 2018 Plan. In addition, the number of shares of common stock
subject to outstanding awards under the 2013 Plan that terminate, expire, or are cancelled, forfeited, exchanged, or surrendered
without having been exercised, vested, or paid in shares under the 2013 Plan after the effective date of the 2018 Plan will be
available for issuance under the 2018 Plan.
The 2018 Plan was amended following unanimous
approval of the Company’s Board of Directors on April 24, 2019 and was approved by the Company’s shareholders
on June 17, 2019. The amended 2018 Plan (the “Amended Plan”) allowed for an additional 589,500 shares of
the Company’s common stock that may be issued under the Amended Plan with respect to awards made on and after June 17,
2019. At March 31, 2020, there were 36,791 shares available for future issuance.
Stock-based compensation expense includes
stock options granted to employees and non-employees and has been reported in the Company’s statements of operations and
comprehensive loss in either research and development expenses or general and administrative expenses depending on the function
performed by the optionee. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s
inception. The Company recognized stock-based compensation expense as follows for the three ended March 31, 2020 and 2019:
|
|
Three Months ended March 31,
|
|
|
2020
|
|
2019
|
General and administrative
|
|
$
|
45,000
|
|
$
|
538,000
|
Research and development
|
|
48,000
|
|
112,000
|
|
|
$
|
93,000
|
|
$
|
650,000
|
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
8. Stock-Based Compensation (Continued)
A summary of stock option activity for the three months ended
March 31, 2020 is as follows:
|
|
|
|
Options Outstanding
|
|
|
|
Shares
Available
for Grant
|
|
Number of
Shares
|
|
Weighted-
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Contractual
Term (in years)
|
|
Aggregate
Intrinsic
Value
|
|
Balance, December 31, 2019
|
|
59,731
|
|
994,453
|
|
$
|
27.37
|
|
9.32
|
|
$
|
0
|
|
Authorized
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Granted
|
|
(34,750
|
)
|
34,750
|
|
$
|
0.303
|
|
10.00
|
|
|
|
Exercised
|
|
—
|
|
—
|
|
$
|
—
|
|
|
|
|
|
Forfeitures
|
|
11,810
|
|
(11,810
|
)
|
$
|
29.99
|
|
1.77
|
|
|
|
Balance, March 31, 2020
|
|
36,791
|
|
1,017,393
|
|
$
|
25.22
|
|
9.12
|
|
$
|
0
|
|
Vested or expected to vest, March 31, 2020
|
|
|
|
985,933
|
|
$
|
95.98
|
|
7.81
|
|
$
|
0
|
|
Exercisable at March 31, 2020
|
|
|
|
257,495
|
|
$
|
95.98
|
|
7.81
|
|
$
|
0
|
|
Information with respect to stock options
outstanding and exercisable at March 31, 2020 is as follows:
Exercise Price
|
|
Shares
|
|
Exercisable
|
|
$0.30 - $0.31
|
|
629,750
|
6
|
—
|
|
$3.39 – $3.72
|
|
51,998
|
|
7,000
|
|
$4.34 – $7.05
|
|
269,913
|
|
187,500
|
|
$16.35 – $97.50
|
|
48,133
|
|
45,410
|
|
$222.00 - $225.00
|
|
1,871
|
|
1,871
|
|
$348.00 – $597.00
|
|
4,867
|
|
4,866
|
|
$651.00 – $1,129.50
|
|
3,616
|
|
3,603
|
|
$1,992.00 - $2,268.00
|
|
6,910
|
|
6,910
|
|
$4,156.50 - $4,371.00
|
|
335
|
|
335
|
|
|
|
1,017,393
|
|
257,495
|
|
The Company uses the Black-Scholes option-pricing
model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain
estimates and assumptions, including estimating the fair value of the Company’s Common Stock, assumptions related to the
expected price volatility of the Common Stock, the period during which the options will be outstanding, the rate of return on risk-free
investments and the expected dividend yield for the Company’s stock.
As of March 31, 2020, there was $613,000
of unrecognized compensation expense related to the unvested stock options issued from April 24, 2013 through March 31,
2020, which is expected to be recognized over a weighted-average period of approximately 2.32 years.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
8. Stock-Based Compensation (Continued)
The weighted-average assumptions underlying
the Black-Scholes calculation of grant date fair value include the following:
|
|
Three Months ended March 31,
|
|
|
|
2020
|
|
2019
|
|
Risk-free interest rate
|
|
0.46
|
%
|
1.92
|
%
|
Expected volatility
|
|
105.30
|
%
|
82.58
|
%
|
Expected term
|
|
6.00 years
|
|
5.85 years
|
|
Expected dividend yield
|
|
0
|
%
|
0
|
%
|
Weighted average grant date fair value
|
|
$
|
0.24
|
|
$
|
1.81
|
|
The weighted-average valuation assumptions
were determined as follows:
·
Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities
in effect at the time of grant for a period that is commensurate with the assumed expected option term.
·
Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected life of its employee
stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin (SAB) No. 107, whereby
the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.
·
Expected stock price volatility: Expected volatility is based on the historical volatility of the Company’s Common
Stock since its IPO in July 2013.
·
Expected annual dividend yield: The Company has never paid, and does not expect to pay, dividends in the foreseeable future.
Accordingly, the Company assumed an expected dividend yield of 0.0%.
·
Expected Forfeiture rate: The Company’s estimated annual forfeiture rate on stock option grants was 4.14% in 2020 and 2019,
based on the historical forfeiture experience.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
9. Research Agreements
The Company has entered into various licensing
and right-to-sublicense agreements with educational institutions for the exclusive use of patents and patent applications, as well
as any patents that may develop from research being conducted by such educational institutions in the field of anticancer therapy,
genes and proteins. Results from this research have been licensed to the Company pursuant to these agreements. Under one of these
agreements with Temple University (“Temple”), the Company is required to make annual maintenance payments to Temple
and royalty payments based upon a percentage of sales generated from any products covered by the licensed patents, with minimum
specified royalty payments. As no sales had been generated through March 31, 2020 under the licensed patents, the Company
has not incurred any royalty expenses related to this agreement. In addition, the Company is required to pay Temple a percentage
of any sublicensing fees received by the Company.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
10. License and Collaboration Agreement
HanX Rigosertib Agreement (terminated)
On May 10, 2019, the Company entered
into a License and Collaboration Agreement (the "HanX License Agreement") with HanX and two Securities Purchase Agreements
(the "HanX Securities Purchase Agreements"), one with HanX and the other with an affiliate of HanX.
Under the terms of the HanX License Agreement,
the Company granted HanX an exclusive, royalty-bearing license, with the right to sublicense, to study and commercialize rigosertib
in greater China (the "HanX Territory," including the People's Republic of China, Hong Kong, Macau and Taiwan).
In exchange for these rights, the agreement
required HanX to make upfront payments to the Company totaling $4 million, including a $2.0 million upfront fee and an investment
totaling $2.0 million to purchase shares of the Company at a premium to market. HanX was also required to dedicate $2.0 million
in local currency, to be placed in escrow, for clinical development expenses in the HanX Territory. In addition, the agreement
provided for potential payments to the Company for regulatory, development and sales-based milestone payments up to $45.5 million
and tiered royalties up to double digits on net sales in in the HanX Territory. The Company would supply rigosertib for sale in
the HanX Territory.
The HanX License Agreement also contained
certain provisions for termination by either party in the event of breach of the HanX License Agreement by the other party, subject
to a cure period, or bankruptcy of the other party.
Under the terms of the HanX Securities Purchase
Agreement, HanX and its affiliate agreed to make upfront equity investments in the Company at a specified premium to the Company's
share price. The common stock purchased by HanX and its affiliates is subject to certain lock-up restrictions and HanX and its
affiliates are entitled to certain registration and participation rights.
The Company assessed the HanX License Agreement
for revenue recognition in accordance with ASC 606 and determined that there are two distinct performance obligations: the license
and the supply of rigosertib for sale in the HanX Territory. The Company concluded that control of the license had been transferred
to HanX during the three months ended June 30, 2019 and recognized license revenue of $1.7 million, which is net of applicable
taxes withheld by the Chinese government, related to the $2.0 million upfront fee. The Company believes a portion of the tax being
withheld by the Chinese government may be recoverable at a later date and could be recognized as license revenue if and when recovered
by the Company. The $1.7 million was recorded as a receivable at June 30, 2019 and the payment was received in August 2019.
Pursuant to the HanX Securities Purchase
Agreements, closing of one of the upfront equity investments occurred on May 15, 2019 when an affiliate of HanX purchased
103,520 shares of common stock for $0.5 million. The total amount of the premium was $0.1 million and this amount was recognized
as license revenue during the three months ended June 30, 2019. The remaining upfront equity investments represent equity-classified
forward contracts for the purchase of the Company's equity at a pre-determined price. The premium of the future equity purchase
from HanX as of the contract date of $0.2 million was recognized as license revenue during the three months ended June 30,
2019 and was included in other current assets, pending receipt of payment.
On July 9, 2019, the Company extended
the deadline for payments under the HanX License Agreement and the HanX Securities Purchase Agreements. On August 8, 2019
Onconova received the non-refundable license fee from HanX. On August 14, 2019, the Company further extended the deadline
of HanX's remaining upfront payments relating to its equity investment in the Company while HanX continued to seek Chinese regulatory
approval for such equity investment. In December 2019, the Company reassessed the likelihood of receiving the $0.2 million
premium on the equity investment previously recorded as revenue. The Company reversed the $0.2 million revenue in December 2019.
On January 16, 2020, the Company determined
HanX did not fulfill its obligations under the License Agreement and, in accordance with the terms of the License Agreement, the
License Agreement was deemed to be void ab initio. Upon this termination, the rights to Product in the Territory reverted to the
Company in accordance with the terms of the License Agreement. In addition, the Securities Purchase Agreements terminated automatically
effective upon the termination of the License Agreement in accordance with the Securities Purchase Agreements.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
11. Related-Party Transactions
The Company has entered into a research
agreement, as subsequently amended, with the Mount Sinai School of Medicine (“Mount Sinai”), with which a member of
its board of directors and a stockholder is affiliated. Mount Sinai is undertaking research on behalf of the Company on the terms
set forth in the agreements. Mount Sinai, in collaboration with the Company, will prepare applications for patents generated from
the research. Results from all projects will belong exclusively to Mount Sinai, but the Company will have an exclusive option to
license any inventions, resulting therefrom. Payments to Mount Sinai under this research agreement for the three months ended March 31,
2020 and 2019 were $124,000 and $88,000, respectively. At March 31, 2020 and December 31, 2019, the Company had $124,000
and $150,000, respectively, payable to Mount Sinai under this agreement.
The Company has entered into a consulting
agreement with a member of its board of directors. The board member provides consulting services to the Company on the terms set
forth in the agreement. Payments to this board member for both the three months ended March 31, 2020 and 2019 were $33,000.
At both March 31, 2020 and December 31, 2019, the Company had $33,000 payable under this agreement.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial
Statements (Continued)
(Unaudited)
12. Securities Registrations and Sales Agreements
January 2020 Offering
On December 31, 2019, the Company entered
into definitive securities purchase agreements with institutional investors for the issuance and sale in a registered direct offering
of 27,662,518 shares of the Company's common stock at an offering price of $0.3615 per share.
Pursuant to the December 2019 HCW Engagement
Letter, HCW agreed to serve as exclusive placement agent for the offering. In connection with the offering, the Company paid HCW
an aggregate cash fee equal to 7.0% of the gross proceeds in the offering, management fee equal to 1.0% of the gross proceeds raised
in the offering, $85,000 for non-accountable expenses; and $10,000 for clearing fees. The Company also issued to HCW or its designees
placement agent warrant to purchase up to 1,383,126 shares of common stock at an exercise price of $0.4519 per share. The placement
agent warrants are immediately exercisable and will expire on December 31, 2023.
The net proceeds to the Company from the
offering, after deducting HCW's placement agent fees and expenses and other estimated offering expenses payable by the Company
were approximately $9.0 million and were received in January 2020.
The offering was pursuant to a prospectus
dated December 28, 2017, and a prospectus supplement dated as of December 31, 2019 to be filed in connection with a takedown
from the Company's shelf registration statement on Form S-3 (File No. 333-221684). The offering closed on January 3,
2020.