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 products for patients with cancer. The Company has proprietary targeted anti-cancer agents designed to disrupt specific cellular
pathways that are important for cancer cell proliferation. The Company believes that the product candidates in its pipeline have the potential
to be efficacious in a variety of cancers with unmet medical need. The Company currently has the following two clinical-stage programs:
1. ON 123300 in solid tumors; and 2. oral rigosertib alone or in combination with PD-1 inhibitors for treatment of KRAS-mutated solid
tumors. 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 Biopharmaceuticals, Inc. (“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, which was received in January 2020. The Company and HanX also intended for these studies to
comply with the FDA standards for IND approval. Accordingly, such studies were used by the Company for an IND filing with the US FDA
in November 2020. The FDA Study May Proceed letter was issued in December 2020. The Company maintains global rights outside of China.
On March 2, 2018, the Company entered into a License, Development and Commercialization Agreement (the “Pint License 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 American countries. In May 2019, the Company entered into a License and Collaboration Agreement (the “HanX
License Agreement”) with 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 human therapeutic uses
in the People’s Republic of China, Hong Kong, Macau and Taiwan (the “HanX Territory”). In connection with the HanX
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 as set forth in the Knight License Agreement) (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 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, 2021, the Company incurred a net loss of $4,715,000 and as of March 31,
2021 the Company had generated an accumulated deficit of $433,271,000. 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, 2021, the Company had cash and cash equivalents of $48,005,000. The Company
will require substantial additional financing to fund its ongoing clinical trials and operations, and to continue to execute its strategy.
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 year ended December 31, 2020; 45,863,397 warrants were exercised, resulting in proceeds of $10.3 million.
On January 11, 2021, the Company closed on an
offering of common stock. The Company issued 19,551,124 shares of common stock and net proceeds were approximately $8.5 million. On February
16, 2021, the Company closed on an offering of common stock. The Company issued 28,750,000 shares of common stock and net proceeds were
approximately $26.7 million. In addition, during the quarter ended March 31, 2021; 2,400,000 warrants were exercised, resulting in proceeds
of $0.5 million.
Following the unsuccessful conclusion of the INSPIRE
trial, the Company has taken steps to reduce its cash expenditures. From September 2020 to December 2020, the Company implemented a workforce
reduction of employees in research and development who were primarily focused on preparing the NDA for the use of rigosertib in higher
risk MDS. In total, 10 employees were terminated, representing approximately 43% of the Company’s workforce. A severance related
charge of approximately $1,207,000, which includes a non-cash charge of approximately $29,000 related to the accelerated vesting of outstanding
stock options, was recorded in the year ended December 31, 2020. The accrued severance balance remaining at March 31, 2021 was $586,000
and is included in accrued expenses and other liabilities on the balance sheet. It will be paid in periodic amounts through September
2021. On October 30, 2020, the Company notified its landlord of its intention to not renew its office space lease. The lease expired in
February 2021 and was modified to a month-to-month lease for a portion of the space. The Company is evaluating less expensive space alternatives,
including having some or all employees work remotely.
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 believes that its cash and cash equivalents will be sufficient to
fund its ongoing trials and business operations for more than eighteen months from the date of this filing.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Continued)
(Unaudited)
COVID-19
While the Company is not aware of a material impact
from the novel coronavirus disease (“COVID-19”) pandemic through March 31, 2021, the full extent to which COVID-19 will directly
or indirectly impact the Company’s business, results of operations and financial condition, including manufacturing, clinical trials
and research and development costs, depends on future developments that are highly uncertain at this time.
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, 2021, the condensed consolidated statements of operations and comprehensive loss for the three months ended March
31, 2021 and 2020, the consolidated statements of stockholders’ equity for the three months ended March 31, 2021 and 2020 and the
condensed consolidated statements of cash flows for the three months ended March 31, 2021 and 2020 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, 2021, the results of its operations for the three months ended March 31, 2021
and 2020, and its cash flows for the three months ended March 31, 2021 and 2020. The financial data and other information disclosed in
these notes related to the three months ended March 31, 2021 and 2020 are unaudited. The results for the three months ended March 31,
2021 are not necessarily indicative of results to be expected for the year ending December 31, 2021, 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, 2020 included in the Company’s annual
report on Form 10-K filed with the SEC on March 18, 2021.
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, 2020 included in the Company’s
annual report on Form 10-K filed with the SEC on March 18, 2021. 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). 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.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Continued)
(Unaudited)
2. Summary of Significant Accounting Policies (Continued)
Recent Accounting Pronouncements
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 the Company in 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, 2021 and 2020 was from its license and collaboration agreement with SymBio.
|
|
Three Months Ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
Symbio
|
|
|
|
|
|
|
|
|
Upfront license fee recognition over time
|
|
$
|
56,000
|
|
|
$
|
56,000
|
|
Supplies and other
|
|
|
-
|
|
|
|
(4,000
|
)
|
|
|
|
|
|
|
|
|
|
|
|
$
|
56,000
|
|
|
$
|
52,000
|
|
Deferred revenue is as follows:
|
|
Symbio
|
|
|
|
Upfront Payment
|
|
Deferred balance at December 31, 2020
|
|
$
|
3,695,000
|
|
Recognition to revenue
|
|
|
56,000
|
|
|
|
|
|
|
Deferred balance at March 31, 2021
|
|
$
|
3,639,000
|
|
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, 2021 and 2020 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,
|
|
|
|
2021
|
|
|
2020
|
|
Warrants
|
|
|
7,683,037
|
|
|
|
27,373,567
|
|
Stock options
|
|
|
645,392
|
|
|
|
1,017,393
|
|
|
|
|
8,328,429
|
|
|
|
28,390,960
|
|
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, 2021 is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Balance
December 31,
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Warrants
|
|
|
Balance
March 31,
|
|
Description
|
|
Classification
|
|
|
Price
|
|
|
Date
|
|
|
2020
|
|
|
Issued
|
|
|
Exercised
|
|
|
Expired
|
|
|
2021
|
|
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 warrants
|
|
Equity
|
|
|
$
|
0.20
|
|
|
|
November 2024
|
|
|
|
6,142,500
|
|
|
|
-
|
|
|
|
(2,400,000
|
)
|
|
|
-
|
|
|
|
3,742,500
|
|
Non-tradable warrants
|
|
Equity
|
|
|
$
|
0.43625
|
|
|
|
December 2024
|
|
|
|
254,298
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
254,298
|
|
Non-tradable warrants
|
|
Equity
|
|
|
$
|
0.45030
|
|
|
|
December 2024
|
|
|
|
693,943
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
693,943
|
|
Non-tradable warrants
|
|
Equity
|
|
|
$
|
0.45190
|
|
|
|
December 2023
|
|
|
|
449,516
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
449,516
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
10,224,215
|
|
|
|
-
|
|
|
|
(2,400,000
|
)
|
|
|
(13,333
|
)
|
|
|
7,810,882
|
|
The tradable warrants which expire in July 2021
were issued in connection with a financing transaction completed in August 2016. Subsequent to the closing of that financing transaction,
the Company executed a one-for-fifteen reverse stock split in September 2018. As a result, each of the 3,192,140 warrants is exercisable
for one-fifteenth of one share of common stock at an exercise price of $4.92 per warrant. The table above shows the number of shares of
common stock which could be obtained by the exercise of all of the outstanding warrants, 212,801; and shows the exercise price for fifteen
of the warrants, $73.80.
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,
|
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
47,000
|
|
|
$
|
189,000
|
|
Manufacturing
|
|
|
99,000
|
|
|
|
90,000
|
|
Insurance
|
|
|
248,000
|
|
|
|
263,000
|
|
Other
|
|
|
213,000
|
|
|
|
180,000
|
|
|
|
$
|
607,000
|
|
|
$
|
722,000
|
|
Property and equipment:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Property and equipment
|
|
$
|
70,000
|
|
|
$
|
70,000
|
|
Accumulated depreciation
|
|
|
(21,000
|
)
|
|
|
(18,000
|
)
|
|
|
$
|
49,000
|
|
|
$
|
52,000
|
|
Accrued expenses and other current liabilities:
|
|
March 31,
|
|
|
December 31,
|
|
|
|
2021
|
|
|
2020
|
|
Research and development
|
|
$
|
1,903,000
|
|
|
$
|
2,541,000
|
|
Employee compensation
|
|
|
1,093,000
|
|
|
|
2,239,000
|
|
Professional fees
|
|
|
116,000
|
|
|
|
182,000
|
|
|
|
$
|
3,112,000
|
|
|
$
|
4,962,000
|
|
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, 2021 and
December 31, 2020.
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, 2020 and March 31, 2021.
The Company estimated the fair value of the non-tradable
warrant liability at March 31, 2021, using the Black-Scholes option pricing model with the following weighted-average assumptions:
Risk-free interest rate
|
|
|
0.06
|
%
|
Expected volatility
|
|
|
123.95
|
%
|
Expected term
|
|
|
0.83 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, 2021
and December 31, 2020:
|
|
Fair Value Measurement as of:
|
|
|
|
March 31, 2021
|
|
|
December 31, 2020
|
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Balance
|
|
Tradable warrants liability
|
|
$
|
957,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
957,000
|
|
|
$
|
321,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
321,000
|
|
Non-tradable warrants liability
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Total
|
|
$
|
957,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
957,000
|
|
|
$
|
321,000
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
321,000
|
|
There were no transfers between levels in any
of the periods reported.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Continued)
(Unaudited)
8. Stock-Based Compensation
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.
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.
The 2018 Plan was amended and restated 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,
2021, there were 365,792 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 months ended March 31, 2021 and 2020:
|
|
Three months ended March 31,
|
|
|
|
2021
|
|
|
2020
|
|
General and administrative
|
|
$
|
56,000
|
|
|
$
|
45,000
|
|
Research and development
|
|
|
9,000
|
|
|
|
48,000
|
|
|
|
$
|
65,000
|
|
|
$
|
93,000
|
|
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, 2021 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, 2020
|
|
185,089
|
|
869,095
|
|
$
|
24.58
|
|
8.38
|
|
$
|
—
|
|
Authorized
|
|
—
|
|
—
|
|
|
|
|
|
|
|
Granted
|
|
(15,000
|
)
|
15,000
|
|
$
|
0.845
|
|
9.85
|
|
|
|
Exercised
|
|
—
|
|
(43,000
|
)
|
$
|
0.31
|
|
8.96
|
|
$
|
6,699
|
|
Forfeitures
|
|
195,703
|
|
(195,703
|
)
|
$
|
66.30
|
|
7.35
|
|
|
|
Balance, March 31, 2021
|
|
365,792
|
|
645,392
|
|
$
|
12.99
|
|
8.37
|
|
$
|
—
|
|
Vested or expected to vest, March 31, 2021
|
|
|
|
633,564
|
|
$
|
12.99
|
|
8.37
|
|
$
|
—
|
|
Exercisable at March 31, 2021
|
|
|
|
359,688
|
|
$
|
22.79
|
|
8.08
|
|
$
|
—
|
|
Information with respect to stock options outstanding
and exercisable at March 31, 2021 is as follows:
Exercise Price
|
|
Shares
|
|
Exercisable
|
|
$0.30 - $0.85
|
|
|
472,140
|
|
|
203,546
|
|
$3.39 – $3.41
|
|
|
25,332
|
|
|
25,332
|
|
$4.34 – $7.05
|
|
|
126,207
|
|
|
109,097
|
|
$22.50 – $97.50
|
|
|
16,332
|
|
|
16,332
|
|
$222.00 - $223.50
|
|
|
594
|
|
|
594
|
|
$348.00 – $597.00
|
|
|
1,264
|
|
|
1,264
|
|
$651.00 – $1,129.50
|
|
|
1,637
|
|
|
1,637
|
|
$1,992.00 - $2,268.00
|
|
|
1,551
|
|
|
1,551
|
|
$4,156.50 - $4,371.00
|
|
|
335
|
|
|
335
|
|
|
|
|
645,392
|
|
|
359,688
|
|
The Company accounts for all stock-based payments
made to employees and directors using an option pricing model for estimating fair value. Accordingly, stock-based
compensation expense is measured based on the estimated fair value of the awards on the date of grant, net of forfeitures. Compensation
expense is recognized for the portion that is ultimately expected to vest over the period during which the recipient renders the required
services to the Company using the straight-line single option method. In accordance with authoritative guidance, the fair value of non-employee
stock-based awards is re-measured as the awards vest, and the resulting increase in fair value, if any, is recognized as expense in the
period the related services are rendered.
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, 2021, there was $157,000 of unrecognized
compensation expense related to the unvested stock options which is expected to
be recognized over a weighted-average period of approximately 1.61 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,
|
|
|
|
2021
|
|
2020
|
|
Risk-free interest rate
|
|
0.62
|
%
|
0.45
|
%
|
Expected volatility
|
|
124.67
|
%
|
105.14
|
%
|
Expected term
|
|
6.25 years
|
|
6.00 years
|
|
Expected dividend yield
|
|
0
|
%
|
0
|
%
|
Weighted average grant date fair value
|
|
$
|
0.24
|
|
$
|
0.25
|
|
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%.
· Estimated
forfeiture rate: The Company’s estimated annual forfeiture rate on stock option grants was 4.14% in 2021 and 2020, based on the
historical forfeiture experience.
Grants of PSUs and SARs
On July 9, 2020, the compensation
committee of the board of directors and the board approved a cash bonus program of cash-settled stock appreciation right (“2020
SAR”) awards and cash-settled performance stock unit (“2020 PSU”) awards to the Company’s employees. An aggregate
of 2020 SAR awards with respect to 3,850,700 shares of common stock and 2020 PSU awards with respect to 1,863,300 shares of common stock
were granted to the Company’s employees. The 2020 SAR awards will be settled in cash, vest 33% on the first anniversary of the date
of grant, and the remaining 67% monthly over the next 24 months, have a per-share base amount of $0.56, which was the closing sales price
of a share of the Company’s common stock on the grant date, and are in all cases subject to the terms and conditions of the Company’s
form of SAR award agreement.
The 2020 PSU awards vest 50% upon the submission
of a new drug application (“NDA”) to the U.S. FDA for rigosertib in higher-risk myelodysplastic syndromes (“HR-MDS”)
and 50% upon U.S. FDA approval of rigosertib for HR-MDS. The 2020 PSU awards have a maximum value of $1.44 per share. The maximum price
per share is the per-share value based on the Company’s market capitalization at $250 million and the Company’s outstanding
shares of common stock, which was 174,177,448 shares on July 9, 2020. In all cases, the 2020 PSU awards are subject to the terms and conditions
of the Company’s form of PSU award agreement.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Continued)
(Unaudited)
8. Stock-Based Compensation (Continued)
In addition, on July 9, 2020, based on the
recommendation of the compensation committee, the board approved a change in the non-employee director compensation policy that
would provide for an annual SAR award (“2020 Director SAR”) with respect to 125,000 shares of common stock for each of
the Company’s non-employee directors. No other changes to the non-employee director compensation policy were approved and, on
July 9, 2020, the Board approved the initial 125,000 2020 Director SAR award to each of the non-employee directors for an aggregate
total of 875,000 2020 Directors SAR awards granted. The 2020 Director SAR awards vest on the first anniversary of grant subject to the
director’s continued service and will be settled in cash, have a per-share base amount of $0.56, and are in all cases subject
to the terms and conditions of the Company’s form of 2020 Director SAR award agreement.
Each SAR subject to a 2020 SAR award represents
the right to a cash payment equal to the excess, if any, of (i) the fair market value of each underlying share of the Company’s
common stock, determined on the date of exercise of the SAR minus (ii) the base amount. Pursuant to the terms of the SAR awards, in no
event may the cash payment for each SAR exceed $0.88, which is the maximum price per share of $1.44, minus the base amount of $0.56, subject
to adjustment in accordance with the terms of the Stock Appreciation Right Award Agreement. The maximum price per share is the per-share
value based on the Company’s market capitalization at $250 million and the Company’s outstanding shares of common stock, which
was 174,177,448 shares on July 9, 2020.
On February 17, 2021, the compensation
committee of the board of directors and the board approved a cash bonus program of cash-settled stock appreciation right (“2021
SAR”) awards and cash-settled performance stock unit (“2021 PSU”) awards to the Company’s employees. An aggregate
of 2021 SAR awards with respect to 1,500,000 shares of common stock and 2021 PSU awards with respect to 1,500,000 shares of common stock
were granted to the Company’s employees. The 2021 SAR awards will be settled in cash, vest 33% on the first anniversary of the
date of grant, and the remaining 67% monthly over the next 24 months, have a per-share base amount of $1.51, which was the closing sales
price of a share of the Company’s common stock on the grant date, and are in all cases subject to the terms and conditions of the
Company’s form of SAR award agreement. As of March 31, 2021, the performance conditions associated with the 2020 and 2021 PSU awards
are not probable of achievement, and accordingly, no compensation expense has been recognized to date for these awards. Each SAR subject
to a 2021 SAR award represents the right to a cash payment equal to the excess, if any, of (i) the fair market value of each underlying
share of the Company’s common stock, determined on the date of exercise of the 2021 SAR minus (ii) the base amount. Pursuant to
the terms of the 2021 SAR awards, in no event may the cash payment for each SAR exceed $1.03, which is the maximum price per share of
$2.54, minus the base amount of $1.51, subject to adjustment in accordance with the terms of the Stock Appreciation Right Award Agreement.
The maximum price per share is the per-share value based on the Company’s market capitalization at $600 million and the Company’s
outstanding shares of common stock, which was 236,512,391 shares on February 17, 2021.
The 2021 PSU awards vest 20%
upon the initiation of a new clinical program with an in-licensed compound, 20% for reaching the recommended Phase 2 dose for any compound,
20% for the first patient enrolled in the expansion cohort of the Phase 1 ON123300 clinical trial, 20% for the first patient enrolled
in a registrational study for any compound, and 20% for the topline data of a registrational study for any compound. The 2021 PSU awards
have a maximum value of $2.54 per share. The maximum price per share is the per-share value based on the Company’s approximate market
capitalization at $350 million and the Company’s outstanding shares of common stock, which was 236,512,391 shares on February 17,
2021. In all cases, the 2021 PSU awards are subject to the terms and conditions of the Company’s form of PSU award agreement.
The fair value of the 2021 SARs granted has been
estimated using the Black-Scholes option-pricing model with the following weighted-average assumptions:
|
|
Three months
ended March 31,
2021
|
|
Risk-free interest rate
|
|
|
0.95
|
%
|
Expected volatility
|
|
|
129.79
|
%
|
Expected term
|
|
|
6.50 years
|
|
Expected dividend yield
|
|
|
0
|
%
|
Weighted average grant date fair value
|
|
$
|
0.04
|
|
During the three months ended March 31, 2021,
the Company recognized $476,000 of compensation expense related to the SARs. Included in compensation expense related to SARs is
$442,000 of expense resulting from the exercise of 2020 SARs during February 2021. As of March 31, 2021, the SARs liability was
$57,000 and Is included in accrued expenses. As of March 31, 2021, there was $103,000 of unrecognized compensation cost related to
the 2020 SARs and $44,000 of unrecognized compensation cost related to the 2021 SARs.
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.
10. Related-Party Transactions
The Company entered into a research
agreement, as subsequently amended, with the Mount Sinai School of Medicine (“Mount Sinai”), with which a former member
of its board of directors and a stockholder is affiliated. The agreement expired in June 2020 and was not renewed. The board member
left the Company’s board in August 2020. Mount Sinai is undertaking research on behalf of the Company on the terms set forth
in the agreements. Mount Sinai, in connection 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. Payments to Mount Sinai under this research agreement for the three months ended March 31, 2021 and 2020 were $0 and
$124,000, respectively. At both March 31, 2021 and December 31, 2020, the Company had $77,000 payable to Mount Sinai
under this agreement.
The Company entered into a consulting agreement
with a member of its board of directors, which was cancelled in June 2020. The board member left the Company’s board in August 2020.
The former board member provided consulting services to the Company on the terms set forth in the agreement. Payments to this board member
under this agreement for the three months ended March 31, 2021 and 2020 were $0 and $33,000, respectively. The Company had $0 payable
under this agreement at both March 31, 2021 and December 31, 2020.
Onconova Therapeutics, Inc.
Notes to Condensed Consolidated Financial Statements
(Continued)
(Unaudited)
11. 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.
January 7, 2021 Offering
On January 7, 2021, the Company entered into a
purchase agreement with certain institutional and accredited investors for the sale of an aggregate of 19,551,124 shares of the Company’s
common stock, at a purchase price of $0.445 per share.
Under the purchase agreement, subject to certain
exceptions, the Company is prohibited from effecting or entering into an agreement to effect any “variable rate transactions”
as defined in the purchase agreement for a period of five years following the closing of the offering.
In connection with the offering, pursuant to the
purchase agreement we reimbursed Lincoln Park Capital Fund, LLC, as the lead investor (“Lincoln Park”), an aggregate of $100,000
for expenses incurred in connection with the offering, including any due diligence expenses and legal fees. Furthermore, pursuant to the
purchase agreement, we have granted Lincoln Park certain rights to participate at fair value with other investors in up to 50% of the
amount of any future offerings of common stock or securities exercisable for or convertible into common stock that the Company seeks to
complete within one year after the closing of the offering, other than a firm commitment public offering.
The net proceeds to the Company from the offering,
after deducting Lincoln Park’s expenses and other estimated offering expenses payable by the Company were approximately $8.5 million.
The shares sold in the offering were offered and
sold by the Company directly to the investors, without a placement agent, underwriter, broker or dealer, pursuant to an effective shelf
registration statement on Form S-3 (File No. 333-237844) declared effective by the SEC on May 18, 2020, and the base prospectus contained
therein. The offering closed on January 12, 2021.
February 10, 2021 Offering
On February 10, 2021, the Company entered into
an underwriting agreement with Guggenheim Securities, LLC , as representative of several underwriters, for the public offering of 25,000,000
shares of the Company’s common stock, at a public offering price of $1.00 per share. Under the terms of the underwriting agreement,
the Company granted the underwriters an option, exercisable for 30 days, to purchase up to an additional 3,750,000 shares of common stock
at the same price. The option was exercised prior to closing.
In connection with the offering, the Company paid
the underwriters a cash fee equal to 6% of the gross proceeds in the offering and $100,000 in legal fees and expenses.
The net proceeds to the Company from the offering,
including exercise of the underwriters’ option, were approximately $26.7 million, after deducting fees and estimated offering expenses
payable by the Company.
The offering was made pursuant to a registration
statement (No. 333-237844) on Form S-3, which was initially filed by the Company with the SEC on April 24, 2020, amended on Form S-3/A
that was filed with the SEC on May 15, 2020, and was declared effective by the SEC on May 18, 2020. The offering closed on February 16,
2021.