ITEM
1 -
Financial Statements
Soligenix,
Inc. and Subsidiaries
Consolidated
Balance Sheets
|
|
June 30,
2019
|
|
|
December 31,
2018
|
|
|
|
(Unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
6,986,289
|
|
|
$
|
8,983,717
|
|
Contracts and grants receivable
|
|
|
1,675,545
|
|
|
|
1,201,715
|
|
Prepaid expenses
|
|
|
149,749
|
|
|
|
157,278
|
|
Total current assets
|
|
|
8,811,583
|
|
|
|
10,342,710
|
|
Security deposit
|
|
|
22,734
|
|
|
|
22,734
|
|
Office furniture and equipment, net
|
|
|
12,290
|
|
|
|
19,634
|
|
Deferred issuance costs
|
|
|
74,375
|
|
|
|
59,761
|
|
Intangible assets, net
|
|
|
33,281
|
|
|
|
46,863
|
|
Right-of-use assets
|
|
|
192,200
|
|
|
|
-
|
|
Other assets
|
|
|
46,500
|
|
|
|
-
|
|
Total assets
|
|
$
|
9,192,963
|
|
|
$
|
10,491,702
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,451,632
|
|
|
$
|
2,126,215
|
|
Deferred revenue
|
|
|
69,976
|
|
|
|
-
|
|
Accrued expenses
|
|
|
2,791,511
|
|
|
|
1,790,689
|
|
Accrued compensation
|
|
|
50,162
|
|
|
|
294,628
|
|
Lease
liabilities – current
|
|
|
136,890
|
|
|
|
-
|
|
Total current liabilities
|
|
|
5,500,171
|
|
|
|
4,211,532
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Lease liabilities, net of current
|
|
|
56,558
|
|
|
|
-
|
|
Total liabilities
|
|
|
5,556,729
|
|
|
|
4,211,532
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, 350,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.001 par value; 50,000,000 shares authorized; 18,741,210 shares and 17,682,839 shares issued and outstanding at June 30, 2019 and December 31, 2018, respectively
|
|
|
18,741
|
|
|
|
17,683
|
|
Additional paid-in capital
|
|
|
173,557,669
|
|
|
|
172,436,176
|
|
Accumulated other comprehensive loss
|
|
|
(7,008
|
)
|
|
|
(3,669
|
)
|
Accumulated deficit
|
|
|
(169,933,168
|
)
|
|
|
(166,170,020
|
)
|
Total shareholders’ equity
|
|
|
3,636,234
|
|
|
|
6,280,170
|
|
Total liabilities and shareholders’ equity
|
|
$
|
9,192,963
|
|
|
$
|
10,491,702
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Soligenix,
Inc. and Subsidiaries
Consolidated
Statements of Operations
For
the Three and Six Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenue
|
|
$
|
1,060,877
|
|
|
$
|
1,367,574
|
|
|
$
|
1,700,435
|
|
|
$
|
2,144,858
|
|
Grant revenue
|
|
|
484,087
|
|
|
|
357,971
|
|
|
|
989,317
|
|
|
|
700,460
|
|
Total revenues
|
|
|
1,544,964
|
|
|
|
1,725,545
|
|
|
|
2,689,752
|
|
|
|
2,845,318
|
|
Cost of revenues
|
|
|
(1,086,814
|
)
|
|
|
(1,493,676
|
)
|
|
|
(2,014,738
|
)
|
|
|
(2,472,597
|
)
|
Gross profit
|
|
|
458,150
|
|
|
|
231,869
|
|
|
|
675,014
|
|
|
|
372,721
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
1,853,950
|
|
|
|
1,170,333
|
|
|
|
3,496,668
|
|
|
|
2,973,693
|
|
General and administrative
|
|
|
769,091
|
|
|
|
650,826
|
|
|
|
1,643,300
|
|
|
|
1,382,419
|
|
Total operating expenses
|
|
|
2,623,041
|
|
|
|
1,821,159
|
|
|
|
5,139,968
|
|
|
|
4,356,112
|
|
Loss from operations
|
|
|
(2,164,891
|
)
|
|
|
(1,589,290
|
)
|
|
|
(4,464,954
|
)
|
|
|
(3,983,391
|
)
|
Other income, net
|
|
|
41,370
|
|
|
|
32,948
|
|
|
|
91,130
|
|
|
|
49,843
|
|
Net loss before income taxes
|
|
|
(2,123,521
|
)
|
|
|
(1,556,342
|
)
|
|
|
(4,373,824
|
)
|
|
|
(3,933,548
|
)
|
Income tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
610,676
|
|
|
|
-
|
|
Net loss applicable to common stockholders
|
|
$
|
(2,123,521
|
)
|
|
$
|
(1,556,342
|
)
|
|
$
|
(3,763,148
|
)
|
|
$
|
(3,933,548
|
)
|
Basic & diluted net loss per share
|
|
$
|
(0.12
|
)
|
|
$
|
(0.18
|
)
|
|
$
|
(0.21
|
)
|
|
$
|
(0.45
|
)
|
Basic & diluted weighted average common shares outstanding
|
|
|
18,436,894
|
|
|
|
8,742,569
|
|
|
|
18,258,932
|
|
|
|
8,738,728
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Soligenix,
Inc. and Subsidiaries
Consolidated
Statements of Comprehensive Loss
For
the Three and Six Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,123,521
|
)
|
|
$
|
(1,556,342
|
)
|
|
$
|
(3,763,148
|
)
|
|
$
|
(3,933,548
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(3,988
|
)
|
|
|
-
|
|
|
|
(3,339
|
)
|
|
|
-
|
|
Comprehensive loss
|
|
$
|
(2,127,509
|
)
|
|
$
|
(1,556,342
|
)
|
|
$
|
(3,766,487
|
)
|
|
$
|
(3,933,548
|
)
|
The
accompanying notes are an integral part of these consolidated financial statements.
Soligenix,
Inc. and Subsidiaries
Consolidated
Statement of Changes in Shareholders’ Equity
For
the Six Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
17,682,839
|
|
|
$
|
17,683
|
|
|
$
|
172,436,176
|
|
|
$
|
(3,669
|
)
|
|
$
|
(166,170,020
|
)
|
|
$
|
6,280,170
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
861,352
|
|
|
|
861
|
|
|
|
841,383
|
|
|
|
-
|
|
|
|
-
|
|
|
|
842,244
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,215
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,215
|
)
|
Issuance of common stock to vendors
|
|
|
197,019
|
|
|
|
197
|
|
|
|
160,860
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161,057
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
152,465
|
|
|
|
-
|
|
|
|
-
|
|
|
|
152,465
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,339
|
)
|
|
|
-
|
|
|
|
(3,339
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,763,148
|
)
|
|
|
(3,763,148
|
)
|
Balance, June 30, 2019
|
|
|
18,741,210
|
|
|
$
|
18,741
|
|
|
$
|
173,557,669
|
|
|
$
|
(7,008
|
)
|
|
$
|
(169,933,168
|
)
|
|
$
|
3,636,234
|
|
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2017
|
|
|
8,730,640
|
|
|
$
|
8,731
|
|
|
$
|
163,581,026
|
|
|
$
|
(157,270,045
|
)
|
|
$
|
6,319,712
|
|
Issuance of common stock pursuant to Lincoln Park Equity Line
|
|
|
20,161
|
|
|
|
20
|
|
|
|
38,380
|
|
|
|
-
|
|
|
|
38,400
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
198,395
|
|
|
|
-
|
|
|
|
198,395
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,933,548
|
)
|
|
|
(3,933,548
|
)
|
Balance, June 30, 2018
|
|
|
8,750,801
|
|
|
$
|
8,751
|
|
|
$
|
163,817,801
|
|
|
$
|
(161,203,593
|
)
|
|
$
|
2,622,959
|
|
The
accompanying notes are an integral part of these consolidated financial statements
.
Soligenix,
Inc. and Subsidiaries
Consolidated
Statement of Changes in Shareholders’ Equity
For
the Three Months Ended June 30, 2019 and 2018
(Unaudited)
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
18,189,208
|
|
|
$
|
18,189
|
|
|
$
|
173,076,044
|
|
|
$
|
(3,020
|
)
|
|
$
|
(167,809,647
|
)
|
|
$
|
5,281,566
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
414,983
|
|
|
|
415
|
|
|
|
319,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
319,660
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,832
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,832
|
)
|
Issuance of common stock to vendor
|
|
|
137,019
|
|
|
|
137
|
|
|
|
103,320
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,457
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
72,892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,892
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,988
|
)
|
|
|
-
|
|
|
|
(3,988
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,123,521
|
)
|
|
|
(2,123,521
|
)
|
Balance, June 30, 2019
|
|
|
18,741,210
|
|
|
$
|
18,741
|
|
|
$
|
173,557,669
|
|
|
$
|
(7,008
|
)
|
|
$
|
(169,933,168
|
)
|
|
$
|
3,636,234
|
|
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2018
|
|
|
8,740,723
|
|
|
$
|
8,741
|
|
|
$
|
163,708,786
|
|
|
$
|
(159,647,251
|
)
|
|
$
|
4,070,276
|
|
Issuance of common stock pursuant to Lincoln Park Equity Line
|
|
|
10,078
|
|
|
|
10
|
|
|
|
18,590
|
|
|
|
-
|
|
|
|
18,600
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
90,425
|
|
|
|
-
|
|
|
|
90,425
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(1,556,342
|
)
|
|
|
(1,556,342
|
)
|
Balance, June 30, 2018
|
|
|
8,750,801
|
|
|
$
|
8,751
|
|
|
$
|
163,817,801
|
|
|
$
|
(161,203,593
|
)
|
|
$
|
2,622,959
|
|
The
accompanying notes are an integral part of these consolidated financial statements
.
Soligenix,
Inc. and Subsidiaries
Consolidated
Statements of Cash Flows
For
the Six Months Ended June 30,
(Unaudited)
|
|
2019
|
|
|
2018
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(3,763,148
|
)
|
|
$
|
(3,933,548
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
22,992
|
|
|
|
22,384
|
|
Non-cash lease expenses
|
|
|
60,041
|
|
|
|
-
|
|
Share-based compensation
|
|
|
152,465
|
|
|
|
198,395
|
|
Issuance of common stock for services
|
|
|
114,557
|
|
|
|
-
|
|
Realized gain on sale of office furniture
|
|
|
(3,843
|
)
|
|
|
-
|
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Contracts and grants receivable
|
|
|
(473,830
|
)
|
|
|
(604,484
|
)
|
Prepaid expenses
|
|
|
7,504
|
|
|
|
140,356
|
|
Income tax receivable
|
|
|
-
|
|
|
|
416,810
|
|
Operating lease liability
|
|
|
(59,197
|
)
|
|
|
-
|
|
Deferred revenue
|
|
|
69,976
|
|
|
|
56,692
|
|
Accounts payable and accrued expenses
|
|
|
1,308,577
|
|
|
|
379,206
|
|
Accrued compensation
|
|
|
(244,466
|
)
|
|
|
(276,903
|
)
|
Total adjustments
|
|
|
954,776
|
|
|
|
332,456
|
|
Net cash used in operating activities
|
|
|
(2,808,372
|
)
|
|
|
(3,601,092
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchases of office furniture and equipment
|
|
|
-
|
|
|
|
(1,924
|
)
|
Proceeds from the sale of office furniture
|
|
|
5,500
|
|
|
|
-
|
|
Net cash
provided by (used in) investing activities
|
|
|
5,500
|
|
|
|
(1,924
|
)
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
842,244
|
|
|
|
-
|
|
Costs associated with FBR At Market Sales Issuance Agreement
|
|
|
(29,291
|
)
|
|
|
-
|
|
Proceeds from issuance of common stock pursuant to the equity line
|
|
|
-
|
|
|
|
38,400
|
|
Financing lease principal repayments
|
|
|
(3,317
|
)
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
809,636
|
|
|
|
38,400
|
|
Effect of foreign exchange rate on cash and cash equivalents
|
|
|
(4,192
|
)
|
|
|
-
|
|
Net decrease in cash and cash equivalents
|
|
|
(1,997,428
|
)
|
|
|
(3,564,616
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
8,983,717
|
|
|
|
7,809,487
|
|
Cash and cash equivalents at end of period
|
|
$
|
6,986,289
|
|
|
$
|
4,244,871
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Cash paid for state income tax
|
|
$
|
5,000
|
|
|
$
|
-
|
|
Cash paid for lease liabilities:
|
|
|
|
|
|
|
|
|
Operating lease
|
|
$
|
69,750
|
|
|
$
|
-
|
|
Financing lease
|
|
|
4,272
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Non-cash activities:
|
|
|
|
|
|
|
|
|
Right-of-use assets and lease liabilities recognized on January 1, 2019
|
|
$
|
255,962
|
|
|
$
|
-
|
|
Deferred issuance cost included in accounts payable
|
|
|
18,537
|
|
|
|
140,246
|
|
Deferred issuance cost reclassified to additional-paid-in capital
|
|
|
7,679
|
|
|
|
-
|
|
Issuance of restricted common stock to vendor for website re-development
|
|
|
46,500
|
|
|
|
-
|
|
The
accompanying notes are an integral part of these consolidated financial statements.
Soligenix,
Inc.
Notes
to Consolidated Financial Statements
(Unaudited
)
Note
1. Nature of Business
Basis
of Presentation
Soligenix, Inc. (the “Company”)
is a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where there
is an unmet medical need. The Company maintains two active business segments: Specialized BioTherapeutics (formerly “BioTherapeutics”)
and Public Health Solutions (formerly “Vaccines/BioDefense”).
The
Company’s Specialized BioTherapeutics business segment is developing a novel photodynamic therapy (SGX301) utilizing topical
synthetic hypericin activated with safe visible fluorescent light for the treatment of cutaneous T-cell lymphoma (“CTCL”),
its first-in-class innate defense regulator (“IDR”) technology, dusquetide (SGX942) for the treatment of oral mucositis
in head and neck cancer, and proprietary formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment
of gastrointestinal (“GI”) disorders characterized by severe inflammation, including pediatric Crohn’s disease
(SGX203) and acute radiation enteritis (SGX201).
The
Company’s Public Health Solutions business segment includes active development programs for RiVax
®
, its ricin
toxin vaccine candidate and SGX943, a therapeutic candidate for antibiotic resistant and emerging infectious disease. The development
of the vaccine program is currently supported by the heat stabilization technology, known as ThermoVax
®
, under
existing and on-going government contract funding. With the government contract from the National Institute of Allergy and Infectious
Diseases (“NIAID”), the Company will attempt to advance the development of RiVax
®
to protect against
exposure to ricin toxin.
The
Company generates revenues under government grants primarily from the National Institutes of Health (“NIH”) and government
contracts from NIAID. The Company is currently developing RiVax
®
under a NIAID contract of up to $24.7 million
over six years, and SGX301 and SGX942 under two separate NIH grants of approximately $1.5 million each over two years. The Company
will continue to apply for additional government funding.
The Company is subject to risks common to
companies in the biotechnology industry including, but not limited to, development of new technological innovations, dependence
on key personnel, protections of proprietary technology, compliance with the United States Food and Drug Administration (the “FDA”)
regulations, and other regulatory authorities, litigation, and product liability. Results for the six months ended June 30, 2019
are not necessarily indicative of results that may be expected for the full year.
Liquidity
In
accordance with Accounting Standards Codification 205-40, Going Concern, the Company has evaluated whether there are conditions
and events, considered in the aggregate, that raise substantial doubt about its ability to continue as a going concern within
one year after the date the consolidated financial statements are issued. As of June 30, 2019, the Company had an accumulated
deficit of $169,933,168. During the six months ended June 30, 2019, the Company incurred a net loss of $3,763,148 and used $2,808,372
of cash in operating activities. The Company expects to continue to generate losses in the foreseeable future. The Company’s
liquidity needs will be largely determined by the budgeted operational expenditures incurred in regards to the progression of
its product candidates. The Company’s plans to meet its liquidity needs primarily include its ability to control the timing
and spending on its research and development programs and raising additional funds through potential partnership and/or financings.
Management is evaluating all options to raise sufficient funds to fund the Company’s working capital requirements. These
options include proceeds from government contract and grant programs, proceeds available from the At Market Issuance Sales Agreement
(“FBR Sales Agreement”) with B. Riley FBR Inc. (“FBR”) and raising additional funds through potential
partnerships and /or debt and equity financings. There can be no assurances, however, that management will be able to obtain sufficient
additional funds when needed, or that such funds, if available, will be on terms satisfactory to the Company. The ability of the
Company to continue as a going concern is dependent upon its ability to raise additional capital. The financial statements do
not include any adjustments relating to the recoverability and classification of recorded assets and liabilities that might be
necessary should the Company be unable to continue as a going concern.
As
of June 30, 2019, the Company had cash and cash equivalents of $6,986,289 as compared to $8,983,717 as of December 31, 2018, representing
a decrease of $1,997,428 or 22%. As of June 30, 2019, the Company had working capital of $3,311,412 as compared to working capital
of $6,131,178 as of December 31, 2018, representing a decrease of $2,819,766 or 46%. The decrease in cash and working capital
was primarily related to expenditures incurred in the expansion of the pivotal Phase 3 trial of SGX942 in addition to the ongoing
expenditures incurred in the pivotal Phase 3 clinical trial of SGX301.
Management’s
business strategy can be outlined as follows:
|
●
|
Following positive interim analysis, complete enrollment and report final results in the Company’s pivotal Phase 3 clinical trial of SGX301 for the treatment of CTCL;
|
|
●
|
Continue enrollment of the pivotal Phase 3 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
|
|
●
|
Continue development of RiVax
®
in combination with the Company’s ThermoVax
®
technology to develop a new heat stable vaccine in biodefense with NIAID funding support;
|
|
●
|
Continue to apply for and secure additional government funding for each of the Company’s Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements;
|
|
●
|
Pursue business development opportunities for the Company’s pipeline programs, as well as explore merger/acquisition strategies; and
|
|
●
|
Acquire or in-license new clinical-stage compounds for development.
|
The Company’s plans with respect
to its liquidity management include, but are not limited to, the following:
|
●
|
The Company has up to $12.4 million in active government contract and grant funding still available as of June 30, 2019, to support its associated research programs through 2019 and beyond, provided the federal agencies exercise all options and do not elect to terminate the contracts or grants for convenience. The Company plans to submit additional contract and grant applications for further support of its programs with various funding agencies;
|
|
●
|
The Company has continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expects to continue to do so for the foreseeable future;
|
|
●
|
The Company will continue to pursue Net Operating Loss (“NOL”) sales in the state of New Jersey pursuant to its Technology Business Tax Certificate Transfer Program if available;
|
|
●
|
The Company plans to pursue potential partnerships for pipeline programs. However, there can be no assurances that it can consummate such transactions;
|
|
●
|
The
Company has up to $6.6 million remaining from the FBR Sales Agreement as of August 8, 2019 under the prospectus supplement
updated October 3, 2018; and
|
|
●
|
The Company may seek additional capital in the private and/or public equity markets, to continue its operations, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. The Company is evaluating additional equity/debt financing opportunities on an ongoing basis and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or consummate a transaction at favorable pricing.
|
Note
2. Summary of Significant Accounting Policies
Principles
of Consolidation
The
consolidated financial statements include Soligenix, Inc., and its wholly and majority owned subsidiaries. All significant intercompany
accounts and transactions have been eliminated as a result of consolidation.
Operating
Segments
Operating
segments are defined as components of an enterprise about which separate financial information is available that is evaluated
on a regular basis by the chief operating decision maker, or decision making group, in deciding how to allocate resources to an
individual segment and in assessing the performance of the segment. The Company divides its operations into two operating segments:
Specialized BioTherapeutics and Public Health Solutions.
Cash
and Cash Equivalents
The
Company considers all highly liquid investments with maturities of three months or less when purchased to be cash equivalents.
Contracts
and Grants Receivable
Contracts
and grants receivable consist of amounts due from various grants from the NIH and contracts from NIAID, an institute of NIH, for
costs incurred prior to the period end under reimbursement contracts. The amounts were billed to the respective governmental agencies
in the month subsequent to period end and collected shortly thereafter. Accordingly, no allowance for doubtful amounts has been
established. If amounts become uncollectible, they are charged to operations.
Intangible
Assets
One
of the most significant estimates or judgments that the Company makes is whether to capitalize or expense patent and license costs.
The Company makes this judgment based on whether the technology has alternative future uses, as defined in Financial Accounting
Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 730,
Research and Development
.
Based on this consideration, the Company capitalizes payments made to legal firms that are engaged in filing and protecting rights
to intellectual property and rights for its current products in both the domestic and international markets. The Company believes
that patent rights are one of its most valuable assets. Patents and patent applications are a key component of intellectual property,
especially in the early stage of product development, as their purchase and maintenance gives the Company access to key product
development rights from Soligenix’s academic and industry partners. These rights can also be sold or sub-licensed as part
of its strategy to partner its products at each stage of development as the intangible assets have alternative future use. The
legal costs incurred for these patents consist of work associated with filing new patents designed to protect, preserve and maintain
the Company’s rights, and perhaps extend the lives of the patents. The Company capitalizes such costs and amortizes intangibles
on a straight-line basis over their expected useful life – generally a period of 11 to 16 years.
The
Company did not capitalize any patent related costs during the six months ended June 30, 2019 and 2018.
These
intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable or if the underlying program is no longer being pursued. If the sum of the expected undiscounted cash flows
is less than the carrying value of the related asset or group of assets, a loss is recognized for the difference between the fair
value and carrying value of the related asset or group of assets. No such write downs have occurred for the six months ended June
30, 2019 and 2018.
Website
Development Costs
In February 2019, the Company engaged a third
party vendor to re-develop its website. Upon completion of the project in June 2019, the Company capitalized the related website
development costs of $46,500 in accordance with FASB Codification ASC 350-50 “Accounting for Web Site Development Costs”,
which was reported in other assets in the consolidated balance sheet as of June 30, 2019. Beginning in the quarter ending September
30, 2019, the Company will amortize the website development costs on a straight-line basis over three years, the estimated useful
life of the website. The Company will also review its capitalized website development costs periodically for impairment.
Impairment
of Long-Lived Assets
Office
furniture and equipment and intangible assets with finite lives are evaluated and reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. The Company recognizes impairment of long-lived assets
in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets.
If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a
loss is recognized for the difference between the fair value and the carrying value of the related asset or group of assets. Such
analyses necessarily involve significant judgment.
The
Company did not record any impairment of long-lived assets for the six months ended June 30, 2019 and 2018.
Fair
Value of Financial Instruments
FASB
ASC 820 —
Fair Value Measurements and Disclosures,
defines fair value as the price that would be received to sell
an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. FASB ASC
820 requires disclosures about the fair value of all financial instruments, whether or not recognized, for financial statement
purposes. Disclosures about the fair value of financial instruments are based on pertinent information available to the Company
on June 30, 2019. Accordingly, the estimates presented in these financial statements are not necessarily indicative of the amounts
that could be realized on disposition of the financial instruments.
FASB
ASC 820 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable
or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market
assumptions. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities
(Level 1 measurement) and the lowest priority to unobservable inputs (Level 3 measurement).
The
three levels of the fair value hierarchy are as follows:
|
●
|
Level
1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to
access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market
prices such as exchange-traded instruments and listed equities.
|
|
●
|
Level
2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly
or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These
models consider various assumptions, including volatility factors, current market prices and contractual prices for the underlying
financial instruments. Substantially all of these assumptions are observable in the marketplace, can be derived from observable
data or are supported by observable levels at which transactions are executed in the marketplace.
|
|
●
|
Level
3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values
are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption
or input is unobservable.
|
The
carrying amounts reported in the consolidated balance sheet for cash and cash equivalents, contracts and grants receivable, accounts
payable, accrued expenses, and accrued compensation approximate their fair value based on the short-term maturity of these instruments.
Revenue
Recognition
The
Company’s revenues are primarily generated from government contracts and grants. The revenue from government contracts and
grants is based upon subcontractor costs and internal costs incurred that are specifically covered by the contracts and grants,
plus a facilities and administrative rate that provides funding for overhead expenses and management fees. These revenues are
recognized when expenses have been incurred by subcontractors or when the Company incurs reimbursable internal expenses that are
related to the government contracts and grants.
Research
and Development Costs
Research
and development costs are charged to expense when incurred in accordance with FASB ASC 730,
Research and Development
. Research
and development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative
future use, supplies and materials, salaries, share-based compensation, employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development expense represents the value assigned or paid for acquired
research and development for which there is no alternative future use as of the date of acquisition.
Share-Based
Compensation
Stock
options are issued with an exercise price equal to the market price on the date of grant. Stock options issued to directors upon
re-election vest quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued
to employees generally vest 25% on the grant date, then 25% each subsequent year for a period of three years. These options have
a ten year life for as long as the individuals remain employees or directors. In general, when an employee or director terminates
their position, the options will expire within three months, unless otherwise extended by the Board.
From
time to time, the Company issues restricted shares of common stock to vendors and consultants as compensation for services performed.
In June 2018, the FASB amended the accounting for share-based compensation issued to nonemployees in ASU 2018-07. Under the revised
guidance, the scope of Topic 718 was expanded to include share-based payments issued to nonemployees, supersedes Subtopic 505-50
and generally aligns the accounting for awards issued to nonemployees to the accounting for employee awards. The Company adopted
the new guidance effective January 1, 2019, and in accordance with the new guidance, stock compensation expense for equity-classified
awards to nonemployees is measured on the date of grant and is recognized when the services are performed. The adoption of ASU
2018-07 did not have a material impact on the Company’s financial statements.
During
the six months ended June 30, 2019 and 2018, the Company issued 74,300 common stock options at a weighted average exercise price
of $0.93 per share, and 600 common stock options at a weighted average exercise price of $1.59 per share, respectively. The fair
value of options issued during the six months ended June 30, 2019 and 2018 were estimated using the Black-Scholes option-pricing
model and the following assumptions:
|
●
|
a
dividend yield of 0%;
|
|
●
|
an
expected life of 4 years;
|
|
●
|
volatility ranging from 90.87% - 92.93% for 2019 and from 91.17%-91.18% for 2018;
|
|
●
|
forfeitures
at a rate of 12%; and
|
|
●
|
risk free interest rates ranging from 1.84% - 2.50% for 2019 and from 2.68%-2.85% for 2018.
|
The
fair value of each option grant made during 2019 was estimated on the date of each grant using the Black-Scholes option pricing
model and recognized as share-based compensation expense ratably over the option vesting periods, which approximates the service
period.
For the six months ended June 30, 2019, the
Company issued 197,019 shares of common stock to third-party vendors as partial consideration for services performed. In accordance
with ASU 2018-07, the Company recognized $107,447 of share-based compensation expenses, capitalized $46,500 of website development
costs, and recorded $7,110 of prepaid vendor service expenses based on the market prices of the Company’s common stock on
the issue dates. The Company did not issue shares of common stock to third party vendors during the six months ended June 30, 2018.
Foreign
Currency Transactions and Translation
In
2018, the Company changed the status of a wholly owned subsidiary in the United Kingdom (“UK”) from inactive to
active and incurred expenditures in multiple currencies including the U.S. dollar, the British Pound and the Euro to fund its
clinical trial operations in the UK and select countries in Europe. In accordance with ASC 830
Foreign Currency
Matters
, the UK subsidiary expresses its U.S. dollar and Euro denominated transactions in its functional currency, the
British Pound, with related transaction gains or losses included in net loss. On a quarterly basis, the financial statements
of the UK subsidiary are translated into U.S. dollars and consolidated into the Company’s financials, with related
translation adjustments reported as a cumulative translation adjustment (“CTA”), which is a component of
accumulated other comprehensive loss. During the six months ended June 30, 2019, the Company did not incur any material
foreign currency transaction or translation gain or loss. No foreign currency transaction or translation gain or loss was
recorded in the six months ended June 30, 2018.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established when
it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive
and negative evidence is considered, including the Company’s current and past performance, the market environment in which
the Company operates, the utilization of past tax credits, and the length of carryback and carryforward periods. Deferred tax
assets and liabilities are measured utilizing tax rates expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The Company recognized an income tax benefit of $610,676 from the sale of
New Jersey NOL carryforward during the six months ended June 30, 2019. No income tax benefit was recognized for the six months
ended June 30, 2018. The Company recognizes accrued interest and penalties associated with uncertain tax positions, if any, as
part of the income tax provision. There were no tax related interest and penalties recorded for the periods ended June 30, 2019
or 2018. Additionally, the Company has not recorded an asset for unrecognized tax benefits or a liability for uncertain tax positions
at June 30, 2019 and December 31, 2018.
Earnings
Per Share
Basic
earnings per share (“EPS”) excludes dilution and is computed by dividing income (loss) available to common stockholders
by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock that shared in the earnings of the entity. Since there is a significant number of options and warrants
outstanding, fluctuations in the actual market price can have a variety of results for each period presented.
The
following table summarizes potentially dilutive adjustments to the weighted average number of common shares which were excluded
from the calculation because their effect would be anti-dilutive:
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
|
2019
|
|
|
2018
|
|
Common stock purchase warrants
|
|
|
6,303,643
|
|
|
|
2,575,988
|
|
|
|
6,303,643
|
|
|
|
2,575,988
|
|
Stock options
|
|
|
1,093,032
|
|
|
|
761,855
|
|
|
|
1,093,032
|
|
|
|
761,855
|
|
Total
|
|
|
7,396,675
|
|
|
|
3,337,843
|
|
|
|
7,396,675
|
|
|
|
3,337,843
|
|
The
weighted average exercise price of the Company’s stock options and warrants outstanding at June 30, 2019 were $4.97 and
$3.09 per share, respectively, and at June 30, 2018 were $7.25 and $4.38 per share, respectively.
Use
of Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management
to make estimates and assumptions such as the fair value of warrants and stock options and the useful life of intangibles that
affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
Accounting
for Leases
On
January 1, 2019, the Company adopted ASC No. 2016-02, “Leases” (Topic 842) (the “Lease Standard”), a new
FASB standard which requires all leases with terms longer than 12 months be recognized by the lessee on its balance sheet as a
right-of-use asset and a corresponding lease liability, including leases currently accounted for as operating leases, and key
information about leasing arrangements to be disclosed.
The
Company adopted the Lease Standard under the alternative transition method permitted by ASU 2018-11. This transition method allowed
the Company to initially apply the requirements of the Lease Standard at the adoption date, versus at the beginning of the earliest
period presented. The Company elected the transition package of practical expedients, which permits not separating lease and non-lease
components for all of its leases and the short-term lease recognition exemption for all of its leases that qualify; it did not
elect the use of hindsight practical expedient.
As
a result of the adoption of the Lease Standard, the Company classified a lease for its office space at 29 Emmons Drive, Suite
B-10 in Princeton, New Jersey and a lease for a copier machine in the office as an operating lease and a financing lease, respectively,
and recorded related right-of-use assets and lease liabilities accordingly. As of June 30, 2019, the Company’s consolidated
balance sheet included a right-of-use asset of $175,453 for the office space and $16,747 for the copier machine. Lease liabilities
in the Company’s consolidated balance sheet included corresponding lease liabilities of $176,297 and $17,151, respectively.
During the six months ended June 30, 2019, the Company recognized lease expense of $70,594 for the operating lease, in addition
to amortization expense of $3,721 and interest expense of $955 for the financing lease in the Company’s consolidated statement
of operations.
The
following represented a reconciliation of contractual lease cash flows to the right-of-use lease assets and liabilities recognized
in the financial statements upon adoption:
|
|
Operating
Lease
|
|
|
Financing
Lease
|
|
Contractual cash payments for the remaining lease term as of January 1, 2019:
|
|
|
|
|
|
|
2019
|
|
$
|
140,016
|
|
|
$
|
8,544
|
|
2020
|
|
|
118,830
|
|
|
|
8,544
|
|
2021
|
|
|
-
|
|
|
|
6,408
|
|
Total
|
|
$
|
258,846
|
|
|
$
|
23,496
|
|
Discount rate applied
|
|
|
10
|
%
|
|
|
10
|
%
|
Present value of contractual cash payments for the remaining lease term as of January 1, 2019
|
|
$
|
235,494
|
|
|
$
|
20,468
|
|
|
|
|
|
|
|
|
|
|
Right-of-use lease asset:
|
|
|
|
|
|
|
|
|
Right-of-use lease asset, January 1, 2019
|
|
$
|
235,494
|
|
|
$
|
20,468
|
|
Less: reduction/amortization
|
|
|
60,041
|
|
|
|
3,721
|
|
Right-of-use lease asset, June 30, 2019
|
|
$
|
175,453
|
|
|
$
|
16,747
|
|
|
|
|
|
|
|
|
|
|
Lease liability:
|
|
|
|
|
|
|
|
|
Lease liability, January 1, 2019
|
|
$
|
235,494
|
|
|
$
|
20,468
|
|
Less: principal repayments
|
|
|
59,197
|
|
|
|
3,317
|
|
Lease liability, June 30, 2019
|
|
$
|
176,297
|
|
|
$
|
17,151
|
|
|
|
|
|
|
|
|
|
|
Lease expenses for the six months ended on June 30, 2019:
|
|
|
|
|
|
|
|
|
Lease expense
|
|
$
|
70,594
|
|
|
$
|
-
|
|
Amortization expense
|
|
|
-
|
|
|
|
3,721
|
|
Interest expense
|
|
|
-
|
|
|
|
955
|
|
Total
|
|
$
|
70,594
|
|
|
$
|
4,676
|
|
|
|
|
|
|
|
|
|
|
Contractual cash payments for the remaining lease term as of June 30, 2019:
|
|
|
|
|
|
|
|
|
July through December 2019
|
|
$
|
70,266
|
|
|
$
|
4,272
|
|
2020
|
|
|
118,830
|
|
|
|
8,544
|
|
2021
|
|
|
-
|
|
|
|
6,408
|
|
Total
|
|
$
|
189,096
|
|
|
$
|
19,224
|
|
Remaining
lease term (months) as of June 30, 2019
|
|
|
16
|
|
|
|
27
|
|
Note
3. Intangible Assets
The
following is a summary of intangible assets which consists of licenses and patents:
|
|
Cost
|
|
|
Accumulated
Amortization
|
|
|
Net Book Value
|
|
June 30, 2019
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
462,234
|
|
|
$
|
428,953
|
|
|
$
|
33,281
|
|
Patents
|
|
|
1,893,185
|
|
|
|
1,893,185
|
|
|
|
-
|
|
Total
|
|
$
|
2,355,419
|
|
|
$
|
2,322,138
|
|
|
$
|
33,281
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2018
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
462,234
|
|
|
$
|
415,371
|
|
|
$
|
46,863
|
|
Patents
|
|
|
1,893,185
|
|
|
|
1,893,185
|
|
|
|
-
|
|
Total
|
|
$
|
2,355,419
|
|
|
$
|
2,308,556
|
|
|
$
|
46,863
|
|
Amortization
expense was $6,791 and $6,791 for the three months ended June 30, 2019 and 2018, respectively, and $13,582 and $13,507 for the
six months ended June 30, 2019 and 2018, respectively.
Based
on the balance of licenses and patents at June 30, 2019, future annual amortization expense is expected to be as follows:
|
|
Amortization
Expense
|
|
July
1 through December 31, 2019
|
|
$
|
13,582
|
|
2020
|
|
$
|
19,699
|
|
License
fees and royalty payments are expensed as incurred, as the Company does not attribute any future benefits to such payments.
Note
4. Accrued Expenses
The
following is a summary of the Company’s accrued expenses:
|
|
June 30,
2019
|
|
|
December
31,
2018
|
|
|
|
|
|
|
|
|
Clinical
trial expenses
|
|
$
|
2,655,845
|
|
|
$
|
1,633,713
|
|
Other
|
|
|
135,666
|
|
|
|
156,976
|
|
Total
|
|
$
|
2,791,511
|
|
|
$
|
1,790,689
|
|
Note
5. Income Taxes
The
Company had gross NOLs at December 31, 2018 of approximately $104,131,000 for federal tax purposes, approximately $14,028,000
for state tax purposes and approximately $688,000 for foreign tax purposes. Portions of these NOLs will begin to expire in 2019.
In addition, the Company has $8,333,000 of various tax credits which expire from 2019 to 2037. The Company may be able to utilize
its NOLs to reduce future federal and state income tax liabilities. However, these NOLs are subject to various limitations under
Internal Revenue Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an
ownership change of more than 50 percentage points. In addition, the NOL carryforwards are subject to examination by the taxing
authority and could be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis,
it is likely that the utilization of the NOLs may be substantially limited.
The State of New Jersey’s Technology
Business Tax Certificate Program allows certain high technology and biotechnology companies to sell unused NOL carryforwards to
other New Jersey-based corporate taxpayers. In accordance with this program, the Company sold our 2017 New Jersey NOL carryforwards
in March 2019, resulting in the recognition of $610,676 of income tax benefit, for which the Company subsequently received payment
in April 2019. There can be no assurance as to the continuation or magnitude of this program in future years. Other than this
tax benefit, there was no additional tax provision for the periods ended June 30, 2019 or 2018 due to losses incurred and the
recognition of a full valuation allowance recorded against net deferred tax assets.
On July 1, 2018, the New Jersey governor signed
into law a bill which included significant changes to the New Jersey taxation of corporations. Chiefly, this legislation imposes
a 2.5% surtax on taxpayers with allocated net income over $1 million for 2018 and 2019, and a 1.5% surtax for taxpayers with allocated
net income over $1 million for 2020 and 2021. Further, there are changes to the state’s computation of its dividend received
deduction and application of IRC section 163(j). The Company has considered these changes and does not believe this change in law
will have a material impact on its tax provision going forward, due to the full valuation allowance and current year losses.
Note
6. Shareholders’ Equity
Preferred
Stock
The
Company has 350,000 shares of preferred stock authorized, none of which are issued or outstanding.
Common
Stock
During
the six months ended June 30, 2019, the Company issued the following shares of common stock:
|
●
|
On
January 2, 2019, the Company issued 60,000 shares of common stock to a vendor as partial consideration for its service performed.
The fair value of the shares was $0.96 per share.
|
|
●
|
From
January 4 to January 23, 2019, the Company issued 446,369 shares of common stock pursuant to the FBR Sales Agreement at a weighted
average price of $1.17 per share.
|
|
●
|
On
April 29, 2019, the Company issued 8,681 shares of common stock to a vendor as consideration for its service performed. The
fair value of the shares was $0.73 per share.
|
|
●
|
On
May 15, 2019, the Company issued 50,000 shares of common stock to a vendor as partial consideration for its service performed.
The fair value of the shares was $0.83 per share.
|
|
●
|
On
June 28, 2019, the Company issued 78,338 shares of common stock to Altamont Pharmaceutical Holdings, LLC (“Altamont”),
a company which owns 5% or more of the Company’s shares of common stock, as reimbursement for its cost incurred related
to the re-development of the Company’s website and partial consideration for its service performed. The fair value
of the shares was $0.71 per share.
|
|
●
|
During
the quarter ended June 30, 2019, the Company issued 414,983 shares of common stock pursuant to the FBR Sales Agreement at
a weighted average price of $0.77 per share.
|
FBR
At Market Issuance Sales Agreement
On
August 11, 2017, the Company entered into the FBR Sales Agreement to sell shares of its common stock from time to time, through
an “at-the-market” equity offering program under which FBR acts as sales agent. Under the FBR Sales Agreement, the
Company sets the parameters for the sale of shares, including the number of shares to be issued, the time period during which
sales may be requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum
price below which sales may not be made. The FBR Sales Agreement provides that FBR is entitled to compensation for its services
in an amount equal to 3% of the gross proceeds from the sale of shares sold under the FBR Sale Agreement. The Company has no obligation
to sell any shares under the FBR Sales Agreement, and may suspend solicitation and offers under the FBR Sales Agreement at any
time.
Sales
of common stock made pursuant to the FBR Sales Agreement, if any, will be made pursuant to the Company’s effective shelf
registration statement on
Form S-3
(File No. 333-217738) filed on May 5, 2017 with the SEC, the base prospectus filed as part
of such registration statement, and any prospectus supplements. The shares sold pursuant to the FBR Sales Agreement have been
and will be issued pursuant to General Instruction I.B.6 of Form S-3, which permits the Company to sell shelf securities in a
public primary offering with a value not exceeding one-third of the average market value of the Company’s voting and non-voting
common equity held by non-affiliates in any 12-month period as long as the aggregate market value of the Company’s outstanding
voting and non-voting common equity held by non-affiliates is less than $75 million.
On
August 11, 2017, the Company filed a prospectus supplement for the sale of up to $4.8 million of shares of common stock pursuant
to the FBR Sales Agreement, and sold an aggregate of approximately $1 million of shares thereunder. The offering costs incurred
to register the shares pursuant to the prospectus supplement dated August 11, 2017 were $164,825. On October 3, 2018, the Company
filed an updated prospectus supplement with the SEC and may offer and sell shares of the Company’s common stock pursuant
to the FBR Sales Agreement having an aggregate offering price of up to $9.0 million, from time to time. The prospectus supplement
filed on October 3, 2018, supersedes the prospectus supplement dated August 11, 2017, and no additional shares will be offered
or sold pursuant to the prospectus supplement dated August 11, 2017. As of August 8, 2019, there was $6.6 million available for
the sale of common stock under the FBR Sales Agreement.
Subsequent to June 30, 2019, the Company sold
1,525,594 shares of common stock pursuant to the FBR Sales Agreement for gross proceeds of $1,567,709.
Note
7. Related Party Transaction
In February 2019, Altamont Pharmaceutical Holdings,
LLC (“Altamont”), a company which owns 5% or more of the Company’s shares of common stock, signed a service agreement
with a third-party vendor to re-develop the Company’s website. Upon completion of the project at the end of June 2019, the
Company issued 78,338 shares of common stock of the Company, including 65,493 shares with a fair value of $46,500 to Altamont as
reimbursement for the website development costs incurred by Altamont on behalf of the Company. In accordance with FASB Codification
ASC 350-50 “Accounting for Web Site Development Cost”, the Company has capitalized the website development costs of
$46,500, which are included in other assets in the accompanying consolidated balance sheet as of June 30, 2019, and will amortize
the cost over the estimated useful life of the website beginning in the quarter ending September 30, 2019. The balance of 12,845
shares with a fair value of $9,120 was issued to Altamont as consideration for its contractual investor relation and web hosting
services, $2,010 of which was expensed during the six months ended June 30, 2019.
Note
8. Commitments and Contingencies
The
Company has commitments of approximately $450,000 as of June 30, 2019 for several licensing agreements with consultants and universities.
Additionally, the Company has collaboration and license agreements, which upon clinical or commercialization success, may require
the payment of milestones of up to $7.9 million and/or royalties up to 6% of net sales of covered products, if and when achieved.
However, there can be no assurance that clinical or commercialization success will occur.
The
Company currently leases approximately 6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey
pursuant to a lease that was amended in October 2017 and expires in October 2020. This office space currently serves as the Company’s
corporate headquarters. The rent for the first 12 months was $11,367 per month, or approximately $22.00 per square foot. The rent
increased to $11,625 per month, or approximately $22.50 per square foot, for the 12 months beginning November 1, 2018 and will
increase beginning November 1, 2019 to $11,883 per month, or approximately $23.00 per square foot for the remainder of the lease.
On
September 3, 2014, the Company entered into an asset purchase agreement with Hy Biopharma, Inc. (“Hy Biopharma”) pursuant
to which the Company acquired certain intangible assets, properties and rights of Hy Biopharma related to the development of Hy
BioPharma’s synthetic hypericin product. As consideration for the assets acquired, the Company paid $275,000 in cash and
issued 184,912 shares of common stock with a fair value based on the Company’s stock price on the date of grant of $3,750,000.
These amounts were charged to research and development expense during the third quarter of 2014 as the assets will be used in
the Company’s research and development activities and do not have alternative future use pursuant to generally accepted
accounting principles in the U.S. Provided all future success-oriented milestones are attained, the Company will be required to
make additional payments of up to $10.0 million, if and when achieved. Payments will be payable in restricted securities of the
Company provided they do not exceed 19.9% ownership of the Company’s outstanding stock. As of June 30, 2019, no milestone
or royalty payments have been paid or accrued.
In February 2007, the Company’s Board
of Directors authorized the issuance of 5,000 shares of common stock to Dr. Schaber immediately prior to the completion of a transaction,
or series or a combination of related transactions, negotiated by its Board of Directors whereby, directly or indirectly, a majority
of its capital stock or a majority of its assets are transferred from the Company and/or its stockholders to a third party. Dr.
Schaber’s amended employment agreement includes the Company’s obligation to issue such shares if such event occurs.
In May 2019, the Company entered into a four-month
service agreement with a third party vendor, which requires the Company to issue at pre-determined intervals an aggregate 100,000
restricted shares of common stock as partial compensation for the services provided. In accordance with the agreement, the Company
issued 50,000 shares of common stock with a fair value of $0.83 per share on May 15, 2019 and 25,000 shares of common stock with
a fair value of $0.98 on July 15, 2019. The Company will issue the remaining 25,000 shares of common stock on August 15, 2019.
The service agreement may be terminated at any time upon written notice.
As
a result of the above agreements as of June 30, 2019, the Company has future contractual obligations over the next five years as
follows:
Year
|
|
Research and Development
|
|
|
Property and Other Leases
|
|
|
Total
|
|
July 1 through December 31, 2019
|
|
$
|
50,000
|
|
|
$
|
74,538
|
|
|
$
|
124,538
|
|
2020
|
|
|
100,000
|
|
|
|
127,374
|
|
|
|
227,374
|
|
2021
|
|
|
100,000
|
|
|
|
6,408
|
|
|
|
106,408
|
|
2022
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2023
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
Total
|
|
$
|
450,000
|
|
|
$
|
208,320
|
|
|
$
|
658,320
|
|
Note
9. Operating Segments
The
Company maintains two active operating segments: Specialized BioTherapeutics and Public Health Solutions. Each segment includes
an element of overhead costs specifically associated with its operations, with its corporate shared services group responsible
for support functions generic to both operating segments.
|
|
Three Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
1,095,865
|
|
|
$
|
1,449,044
|
|
Specialized BioTherapeutics
|
|
|
449,099
|
|
|
|
276,501
|
|
Total
|
|
$
|
1,544,964
|
|
|
$
|
1,725,545
|
|
|
|
|
|
|
|
|
|
|
Income (Loss) from Operations
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
204,121
|
|
|
$
|
30,299
|
|
Specialized BioTherapeutics
|
|
|
(1,463,334
|
)
|
|
|
(923,960
|
)
|
Corporate
|
|
|
(905,678
|
)
|
|
|
(695,629
|
)
|
Total
|
|
$
|
(2,164,891
|
)
|
|
$
|
(1,589,290
|
)
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
4,316
|
|
|
$
|
4,512
|
|
Specialized BioTherapeutics
|
|
|
4,168
|
|
|
|
5,345
|
|
Corporate
|
|
|
4,448
|
|
|
|
1,313
|
|
Total
|
|
$
|
12,932
|
|
|
$
|
11,170
|
|
|
|
|
|
|
|
|
|
|
Interest Income, Net
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
39,851
|
|
|
$
|
32,948
|
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
8,072
|
|
|
$
|
12,818
|
|
Specialized BioTherapeutics
|
|
|
19,094
|
|
|
|
21,898
|
|
Corporate
|
|
|
45,726
|
|
|
|
55,709
|
|
Total
|
|
$
|
72,892
|
|
|
$
|
90,425
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2019
|
|
|
2018
|
|
Revenues
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
1,776,218
|
|
|
$
|
2,258,300
|
|
Specialized BioTherapeutics
|
|
|
913,534
|
|
|
|
587,018
|
|
Total
|
|
$
|
2,689,752
|
|
|
$
|
2,845,318
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) from Operations
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
195,110
|
|
|
$
|
(55,906
|
)
|
Specialized BioTherapeutics
|
|
|
(2,798,891
|
)
|
|
|
(2,445,308
|
)
|
Corporate
|
|
|
(1,861,173
|
)
|
|
|
(1,482,177
|
)
|
Total
|
|
$
|
(4,464,954
|
)
|
|
$
|
(3,983,391
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
8,718
|
|
|
$
|
8,992
|
|
Specialized BioTherapeutics
|
|
|
8,845
|
|
|
|
10,729
|
|
Corporate
|
|
|
5,429
|
|
|
|
2,663
|
|
Total
|
|
$
|
22,992
|
|
|
$
|
22,384
|
|
|
|
|
|
|
|
|
|
|
Interest Income, Net
|
|
|
|
|
|
|
|
|
Corporate
|
|
$
|
84,604
|
|
|
$
|
49,843
|
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
13,268
|
|
|
$
|
28,486
|
|
Specialized BioTherapeutics
|
|
|
40,002
|
|
|
|
50,216
|
|
Corporate
|
|
|
99,195
|
|
|
|
119,693
|
|
Total
|
|
$
|
152,465
|
|
|
$
|
198,395
|
|
|
|
As of
June 30,
2019
|
|
|
As of
December 31,
2018
|
|
|
|
|
|
|
|
|
Identifiable Assets
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
1,564,020
|
|
|
$
|
1,181,114
|
|
Specialized BioTherapeutics
|
|
|
150,782
|
|
|
|
78,336
|
|
Corporate
|
|
|
7,478,161
|
|
|
|
9,232,252
|
|
Total
|
|
$
|
9,192,963
|
|
|
$
|
10,491,702
|
|
ITEM
2 –
Management’s Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The
following discussion and analysis provides information to explain our results of operations and financial condition. You should
also read our unaudited consolidated interim financial statements and their notes included in this Form 10-Q, and our audited
consolidated financial statements and their notes, Risk Factors and other information included in our Annual Report on
Form 10-K
for the year ended December 31, 2018. This report contains forward-looking statements. Forward-looking statements within this
Form 10-Q are identified by words such as “believes,” “anticipates,” “expects,” “intends,”
“may,” “will” “plans” and other similar expressions, however, these words are not the exclusive
means of identifying such statements. In addition, any statements that refer to expectations projections or other characterizations
of future events or circumstances are forward-looking statements. These forward-looking statements are subject to significant
risks, uncertainties and other factors, which may cause actual results to differ materially from those expressed in, or implied
by, these forward-looking statements. Except as expressly required by the federal securities laws, we undertake no obligation
to publicly update or revise any forward-looking statements to reflect events, circumstances or developments occurring subsequent
to the filing of this Form 10-Q with the U.S. Securities and Exchange Commission or for any other reason and you should not place
undue reliance on these forward-looking statements. You should carefully review and consider the various disclosures we make in
this report and our other reports filed with the U.S. Securities and Exchange Commission that attempt to advise interested parties
of the risks, uncertainties and other factors that may affect our business. We provide addresses to internet sites solely for
the information to investors. We do not intend any addresses to be active links or to otherwise incorporate the contents of any
website into this report.
Our
Business Overview
We
are a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where
there is an unmet medical need. We maintain two active business segments: Specialized BioTherapeutics (formerly
“BioTherapeutics”) and Public Health Solutions (formerly “Vaccines/BioDefense”).
Our
Specialized BioTherapeutics business segment is developing a novel photodynamic therapy (SGX301) utilizing topical synthetic hypericin
activated with safe visible fluorescent light for the treatment of cutaneous T-cell lymphoma (“CTCL”), our first-in-class
innate defense regulator technology, dusquetide (SGX942) for the treatment of oral mucositis in head and neck cancer, and proprietary
formulations of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal (“GI”)
disorders characterized by severe inflammation, including pediatric Crohn’s disease (SGX203) and acute radiation enteritis
(SGX201).
Our
Public Health Solutions business segment includes active development programs for RiVax
®
, our ricin toxin vaccine
candidate and SGX943, our therapeutic candidate for antibiotic resistant and emerging infectious disease. The development of our
vaccine programs currently is supported by our heat stabilization technology, known as ThermoVax
®
, under existing
and on-going government contract funding. With the government contract from the National Institute of Allergy and Infectious Diseases
(“NIAID”), we will attempt to advance the development of RiVax
®
to protect against exposure to ricin
toxin.
An
outline of our business strategy follows:
|
●
|
Following
positive interim analysis, complete enrollment and report final results in our pivotal Phase 3 clinical trial of SGX301 for
the treatment of CTCL;
|
|
●
|
Continue
enrollment of the pivotal Phase 3 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
|
|
●
|
Continue
development of RiVax
®
in combination with our ThermoVax
®
technology to develop a new heat stable
vaccine in biodefense with NIAID funding support;
|
|
●
|
Continue
to apply for and secure additional government funding for each of our Specialized BioTherapeutics and Public Health Solutions
programs through grants, contracts and/or procurements;
|
|
●
|
Pursue
business development opportunities for our pipeline programs, as well as explore merger/acquisition strategies; and
|
|
●
|
Acquire
or in-license new clinical-stage compounds for development.
|
Corporate
Information
We
were incorporated in Delaware in 1987 under the name Biological Therapeutics, Inc. In 1987, we merged with Biological Therapeutics,
Inc., a North Dakota corporation, pursuant to which we changed our name to “Immunotherapeutics, Inc.” We changed
our name to “Endorex Corp.” in 1996, to “Endorex Corporation” in 1998, to “DOR BioPharma, Inc.”
in 2001, and finally to “Soligenix, Inc.” in 2009. Our principal executive offices are located at 29 Emmons Drive,
Suite B-10, Princeton, New Jersey 08540 and our telephone number is (609) 538-8200.
Our
Product Candidates in Development
The
following tables summarize our product candidates under development:
Specialized
BioTherapeutic Product Candidates
Soligenix
Product Candidate
|
|
Therapeutic
Indication
|
|
Stage
of Development
|
|
|
|
|
|
SGX301
|
|
Cutaneous
T-Cell Lymphoma
|
|
Phase
2 trial completed; demonstrated significantly higher response rate compared to placebo; Phase 3 clinical trial enrolled first
patient in December 2015, with positive interim analysis received in October 2018, and final results expected in the first
quarter of 2020
|
|
|
|
|
|
SGX942
|
|
Oral
Mucositis in Head and Neck Cancer
|
|
Phase
2 trial completed; demonstrated significant response compared to placebo with positive long-term (12 month) safety also reported;
Phase 3 clinical trial enrolled first patient in December 2017, with interim analysis enrollment completed in the first half
of 2019 and the interim analysis anticipated in the third quarter of 2019 ; final results expected in the first half
of 2020
|
|
|
|
|
|
SGX203**
|
|
Pediatric
Crohn’s disease
|
|
Phase
1/2 clinical trial completed; efficacy data, pharmacokinetic (PK)/pharmacodynamic (PD) profile and safety profile demonstrated;
Phase 3 clinical trial initiation contingent upon additional funding, such as through partnership
|
|
|
|
|
|
SGX201**
|
|
Acute
Radiation Enteritis
|
|
Phase
1/2 clinical trial completed; safety profile and preliminary efficacy demonstrated; further clinical development contingent
upon additional funding, such as through partnership
|
Vaccine
Thermostability Platform**
Soligenix
Product Candidate
|
|
Indication
|
|
Stage
of Development
|
|
|
|
|
|
ThermoVax
®
|
|
Thermostability
of aluminum
adjuvanted vaccine for ricin
|
|
Pre-clinical
|
Public
Health Solutions Products**
Soligenix
Product Candidate
|
|
Indication
|
|
Stage
of Development
|
RiVax
®
|
|
Vaccine
against
Ricin Toxin Poisoning
|
|
Phase
1a and 1b trials completed, safety and neutralizing antibodies for protection demonstrated; Phase 2 trial planned for the
second half of 2019
|
|
|
|
|
|
OrbeShield
®
|
|
Therapeutic
against GI ARS
|
|
Pre-clinical
|
|
|
|
|
|
SGX943
|
|
Therapeutic
against Emerging Infectious Diseases
|
|
Pre-clinical
|
**
|
Contingent
upon continued government contract/grant funding or other funding source.
|
Specialized
BioTherapeutics Overview
SGX301
– for Treating Cutaneous T-Cell Lymphoma
SGX301
is a novel, first-in-class, photodynamic therapy that utilizes safe visible light for activation. The active ingredient in SGX301
is synthetic hypericin, a photosensitizer which is topically applied to skin lesions and then activated by fluorescent light 16
to 24 hours later. Hypericin is also found in several species of
Hypericum
plants, although the drug used in SGX301 is
chemically synthesized by a proprietary manufacturing process and not extracted from plants. Importantly, hypericin is optimally
activated with visible light thereby avoiding the negative consequences of ultraviolet light. Other light therapies using UVA
light result in serious adverse effects including secondary skin cancers.
Combined
with photoactivation, in clinical trials synthetic hypericin has demonstrated significant anti-proliferative effects on activated
normal human lymphoid cells and inhibited growth of malignant T-cells isolated from CTCL patients. In both settings, it appears
that the mode of action is an induction of cell death in a concentration as well as a light dose-dependent fashion. These effects
appear to result, in part, from the generation of singlet oxygen during photoactivation of hypericin.
Hypericin
is one of the most efficient known generators of singlet oxygen, the key component for phototherapy. The generation of singlet
oxygen induces necrosis and apoptosis in adjacent cells. The use of topical synthetic hypericin coupled with directed visible
light results in generation of singlet oxygen only at the treated site. We believe that the use of visible light (as opposed to
cancer-causing ultraviolet light) is a major advance in photodynamic therapy. In a published Phase 2 clinical study in CTCL, after
six weeks of twice weekly therapy, a majority of patients experienced a statistically significant (p
<
0.04) improvement
with SGX301 whereas the placebo was ineffective: 58.3% compared to 8.3%, respectively.
SGX301
has received Orphan Drug designation as well as Fast Track designation from the U.S. Food and Drug Administration (“FDA”).
The Orphan Drug Act is intended to assist and encourage companies to develop safe and effective therapies for the treatment of
rare diseases and disorders. In addition to providing a seven-year term of market exclusivity for SGX301 upon final FDA approval,
Orphan Drug designation also positions us to be able to leverage a wide range of financial and regulatory benefits, including
government grants for conducting clinical trials, waiver of FDA user fees for the potential submission of a New Drug Application
(“NDA”) for SGX301, and certain tax credits. In addition, Fast Track is a designation that the FDA reserves for a
drug intended to treat a serious or life-threatening condition and one that demonstrates the potential to address an unmet medical
need for the condition. Fast Track designation is designed to facilitate the development and expedite the review of new drugs.
For instance, should events warrant, we will be eligible to submit a NDA for SGX301 on a rolling basis, permitting the FDA to
review sections of the NDA prior to receiving the complete submission. Additionally, NDAs for Fast Track development programs
ordinarily will be eligible for priority review. SGX301 for the treatment of CTCL also was granted Orphan Drug designation from
the European Medicines Agency (“EMA”) Committee for Orphan Medical Products and Promising Innovative Medicine (“PIM”)
designation from the Medicines and Healthcare Products Regulatory Agency (“MHRA”) in the United Kingdom (“UK”).
In
August 2018, the U.S. Patent Office granted us a patent titled “Systems and Methods for Producing Synthetic Hypericin”
for the unique proprietary process manufacturing the highly purified form of synthetic hypericin, the active pharmaceutical ingredient
in SGX301.
We
initiated our pivotal Phase 3 clinical study of SGX301 for the treatment of CTCL during December 2015. This trial, referred to
as the “FLASH” study (
F
luorescent
L
ight
A
ctivated
S
ynthetic
H
ypericin), aims to
evaluate the response to SGX301 as a skin directed therapy to treat early stage CTCL. We are actively enrolling patients with
approximately 35 CTCL centers across the U.S. participating in this pivotal trial. The Phase 3 protocol is a highly powered, double-blind,
randomized, placebo-controlled, multicenter trial and seeks to enroll approximately 160 evaluable subjects. The trial consists
of three treatment cycles, each of eight weeks duration. Treatments are administered twice weekly for the first six weeks and
treatment response is determined at the end of the eighth week. In the first treatment cycle, approximately 107 subjects receive
SGX301 and 53 receive placebo treatment of their index lesions. In the second cycle, all subjects receive SGX301 treatment of
their index lesions, and in the third cycle all subjects receive SGX301 treatment of all of their lesions. The majority of subjects
enrolled to date have elected to continue into the third optional, open-label cycle of the study. We continue to work closely
with the Cutaneous Lymphoma Foundation, as well as the National Organization for Rare Disorders. Subjects are followed for an
additional six months after their last evaluation visit. The primary efficacy endpoint is assessed on the percentage of patients
in each of the two treatment groups (i.e., SGX301 and placebo) achieving a partial or complete response of the treated lesions,
defined as a ≥ 50% reduction in the total Composite Assessment of Index Lesion Disease Severity (“CAILS”) score
for three index lesions at the Cycle 1 evaluation visit (Week 8) compared to the total CAILS score at baseline. Other secondary
measures assess treatment response including duration, degree of improvement, time to relapse and safety.
During
September 2017, the National Cancer Institute (“NCI”), part of the National Institutes of Health (“NIH”)
awarded us a Small Business Innovation Research (“SBIR”) grant of approximately $1.5 million over two years to support
the conduct of our pivotal, Phase 3, randomized, double-blind, placebo-controlled study evaluating SGX301 (synthetic hypericin)
as a treatment for CTCL.
During
October 2018, an Independent Data Monitoring Committee (“DMC”) completed an unblinded interim analysis with data from
approximately 100 subjects, including an assessment of the Phase 3 FLASH study’s primary efficacy endpoint. The DMC provided
a positive recommendation to randomize approximately 40 additional subjects into the trial to maintain the rigorous assumption
of 90% statistical power for the primary efficacy endpoint. No safety concerns were reported by the DMC based on the interim analysis.
We
estimate the potential worldwide market for SGX301 is in excess of $250 million for all applications, including the treatment
of CTCL. This potential market information is a forward-looking statement, and investors are urged not to place undue reliance
on this statement. While we have determined this potential market size based on assumptions that we believe are reasonable, there
are a number of factors that could cause our expectations to change or not be realized.
Cutaneous
T-Cell Lymphoma
CTCL
is a class of non-Hodgkin’s lymphoma (“NHL”), a type of cancer of the white blood cells that are an integral
part of the immune system. Unlike most NHLs, which generally involve B-cell lymphocytes (involved in producing antibodies), CTCL
is caused by an expansion of malignant T-cell lymphocytes (involved in cell-mediated immunity) normally programmed to migrate
to the skin. These skin-trafficking malignant T-cells migrate to the skin, causing various lesions to appear that may change shape
as the disease progresses, typically beginning as a rash and eventually forming plaques and tumors. Mycosis fungoides (“MF”)
is the most common form of CTCL. It generally presents with skin involvement only, manifested as scaly, erythematous patches.
Advanced disease with diffuse lymph node and visceral organ involvement is usually associated with a poorer response rate to standard
therapies. A relatively uncommon sub-group of CTCL patients present with extensive skin involvement and circulating malignant
cerebriform T-cells, referred to as Sézary syndrome. These patients have substantially graver prognoses (expected five-year
survival rate of 24%), than those with MF (expected five-year survival rate of 88%).
CTCL
mortality is related to stage of disease, with median survival generally ranging from about 12 years in the early stages to only
2.5 years when the disease has advanced. There is currently no FDA-approved drug for front-line treatment of early stage CTCL.
Treatment of early-stage disease generally involves skin-directed therapies. One of the most common unapproved therapies used
for early-stage disease is oral 5 or 8-methoxypsoralen (“Psoralen”) given with ultraviolet A (“UVA”) light,
referred to as PUVA, which is approved for dermatological conditions such as disabling psoriasis not adequately responsive to
other forms of therapy, idiopathic vitiligo and skin manifestations of CTCL in persons who have not been responsive to other forms
of treatment. Psoralen is a mutagenic chemical that interferes with DNA causing mutations and other malignancies. Moreover, UVA
is a carcinogenic light source that when combined with the Psoralen, results in serious adverse effects including secondary skin
cancers; therefore, the FDA requires a Black Box warning for PUVA.
CTCL
constitutes a rare group of NHLs, occurring in about 4% of the approximate 500,000 individuals living with NHL. We estimate, based
upon review of historic published studies and reports and an interpolation of data on the incidence of CTCL, that it affects over
20,000 individuals in the U.S., with approximately 2,800 new cases seen annually.
Dusquetide
Dusquetide
(research name: SGX94) is an innate defense regulator (“IDR”) that regulates the innate immune system to simultaneously
reduce inflammation, eliminate infection and enhance tissue healing.
Dusquetide
is based on a new class of short, synthetic peptides known as IDRs. It has a novel mechanism of action in that it modulates the
body’s reaction to both injury and infection and is both simultaneously anti-inflammatory and anti-infective. IDRs have
no direct antibiotic activity but modulate host responses, increasing survival after infections with a broad range of bacterial
Gram-negative and Gram-positive pathogens including both antibiotic sensitive and resistant strains, as well as accelerating resolution
of tissue damage following exposure to a variety of agents including bacterial pathogens, trauma and chemo- or radiation-therapy.
IDRs represent a novel approach to the control of infection and tissue damage via highly selective binding to an intracellular
adaptor protein, sequestosome-1, also known as p62, which has a pivotal function in signal transduction during activation and
control of the innate defense system. Preclinical data indicate that IDRs may be active in models of a wide range of therapeutic
indications including life-threatening bacterial infections as well as the severe side-effects of chemo- and radiation-therapy.
Additionally, due to selective binding to p62, dusquetide may have potential anti-tumor action.
Dusquetide
has demonstrated efficacy in numerous animal disease models including mucositis, colitis, skin infection and other bacterial infections
and has been evaluated in a double-blind, placebo-controlled Phase 1 clinical trial in 84 healthy volunteers with both single
ascending dose and multiple ascending dose components. Dusquetide was shown to have a good safety profile and be well-tolerated
in all dose groups when administered by IV over 7 days and was consistent with safety results seen in pre-clinical studies. We
believe that market opportunities for dusquetide include, but are not limited to, oral and gastrointestinal mucositis, acute Gram-positive
bacterial infections (e.g., methicillin resistant
Staphylococcus aureus
(MRSA)), acute Gram-negative infections (e.g.,
acinetobacter, melioidosis), and acute radiation syndrome.
SGX942
– for Treating Oral Mucositis in Head and Neck Cancer
SGX942
is our product candidate containing our IDR technology, dusquetide, targeting the treatment of oral mucositis in head and neck
cancer patients. Oral mucositis in this patient population is an area of unmet medical need where there are currently no approved
drug therapies. Accordingly, we received Fast Track designation for the treatment of oral mucositis as a result of radiation and/or
chemotherapy treatment in head and neck cancer patients from the FDA. In addition, dusquetide has been granted PIM designation
in the UK by the MHRA for the treatment of severe oral mucositis in head and neck cancer patients receiving chemoradiation therapy.
The U.S. Patent and Trademark Office and the European Patent Office granted us the patent titled “Novel Peptides and Analogs
for Use in the Treatment of Oral Mucositis” on August 16, 2016 and January 23, 2019, respectively. The newly issued patent
claims therapeutic use of dusquetide and related IDR analogs, and adds to composition of matter claims for dusquetide and related
analogs that have been granted in the U.S. and worldwide.
We
initiated a Phase 2 clinical study of SGX942 for the treatment of oral mucositis in head and neck cancer patients in December
of 2013. We completed enrollment in this trial in the second half of 2015, and in December 2015 released positive preliminary
results. In this Phase 2 proof-of-concept clinical study that enrolled 111 patients, SGX942, at a dose of 1.5 mg/kg, successfully
reduced the median duration of severe oral mucositis by 50%, from 18 days to 9 days (p=0.099) in all patients and by 67%, from
30 days to 10 days (p=0.040) in patients receiving the most aggressive chemoradiation therapy for treatment of their head and
neck cancer. The p-values met the prospectively defined statistical threshold of p<0.1 in the study protocol. A less severe
occurrence of oral mucositis, ulcerative oral mucositis (defined as oral mucositis with a WHO score ≥2 corresponding to the
occurrence of overt ulceration in the mouth), was also monitored during the study. In the patients receiving the most aggressive
chemoradiation therapy, the median duration of oral mucositis was found to decrease from 65 days in the placebo treated patients
to 51 days in the patients treated with SGX942 1.5 mg/kg (p=0.099).
In
addition to identifying the best dose of 1.5 mg/kg, this study achieved all objectives, including increased incidence of “complete
response” of tumor at the one month follow-up visit (47% in placebo vs. 63% in SGX942 at 1.5 mg/kg). Decreases in mortality
and decreases in infection rate were also observed with SGX942 treatment, consistent with the preclinical results observed in
animal models.
SGX942
was found to be generally safe and well tolerated, consistent with the safety profile observed in the prior Phase 1 study conducted
in 84 healthy volunteers. The long-term (12 month) follow-up data was consistent with the preliminary positive safety and efficacy
findings. While the placebo population experienced the expected 12-month survival rate of approximately 80%, as defined in the
Surveillance, Epidemiology, and End Results statistics 1975-2012 from the National Cancer Institute, the SGX942 1.5 mg/kg treatment
group reported a 12-month survival rate of 93% (7% mortality in the SGX942 1.5 mg/kg group compared to 19% in the placebo group).
Similarly, tumor resolution (complete response) at 12 months was better in the SGX942 1.5 mg/kg treatment group relative to the
placebo population (80% in the 1.5 mg/kg group compared to 74% in the placebo group). Moreover, in the patients receiving chemotherapy
every third week, the SGX942 1.5 mg/kg treatment group had a tumor resolution rate (complete response) of 82% throughout the 12
months following chemoradiation therapy, while the placebo group experienced a 64% complete response rate. The long-term follow-up
results from the Phase 2 study are reviewed in “Dusquetide: Reduction in Oral Mucositis associated with Enduring Ancillary
Benefits in Tumor Resolution and Decreased Mortality in Head and Neck Cancer Patients” published online in Biotechnology
Reports and available at the following link: https://doi.org/10.1016/j.btre.2017.05.002. In addition to safety, evaluations of
other secondary efficacy endpoints, such as the utilization of opioid pain medication, indicated that the SGX942 1.5mg/kg treatment
group had a 40% decrease in the use of opioids at the later stage of the treatment phase of the trial, when oral mucositis is
usually most severe and expected to increase pain medication use. This was in contrast to the placebo group, which demonstrated
a 10% increase in use of opioids over this same period. Data from this Phase 2 trial was published online in the Journal of Biotechnology.
The publication also delineates the supportive nonclinical data in this indication, demonstrating consistency in the qualitative
and quantitative biological response, including dose response, across the nonclinical and clinical data sets. The results are
available at the following link: http://authors.elservier.com/sd/article/S01681656116315668.
On
September 9, 2016, we and SciClone Pharmaceuticals, Inc. (“SciClone”) entered into an exclusive license agreement,
pursuant to which we granted rights to SciClone to develop, promote, market, distribute and sell SGX942 in defined territories.
Under the terms of the license agreement, SciClone will be responsible for all aspects of development, product registration and
commercialization in the territories, having access to data generated by us. In exchange for exclusive rights, SciClone will pay
us royalties on net sales, and we will supply commercial drug product to SciClone on a cost-plus basis, while maintaining worldwide
manufacturing rights.
We
have received clearance from the FDA to advance the pivotal Phase 3 protocol for SGX942 in the treatment of oral mucositis in
patients with head and neck cancer receiving chemoradiation therapy. Additionally, we have received positive Scientific Advice
from the EMA for the development of SGX942 as a treatment for oral mucositis in patients with head and neck cancer. The Scientific
Advice from the EMA indicates that a single, double-blind, placebo-controlled, multinational, Phase 3 pivotal study, if successful,
in conjunction with the Phase 2 dose-ranging study, is generally considered sufficient to support a marketing authorization application
(“MAA”) to the EMA for potential licensure in Europe. The advice also provided several suggestions to strengthen the
study design and data collection that were integrated into the final protocol. Scientific Advice is offered by the EMA to stakeholders
for clarification of questions arising during development of medicinal products. The scope of Scientific Advice is limited to
scientific issues and focuses on development strategies rather than pre-evaluation of data to support an MAA. Scientific Advice
is legally non-binding and is based on the current scientific knowledge which may be subject to future changes.
We
are working with leading oncology centers, a number of which participated in the Phase 2 study, to advance this Phase 3 clinical
trial referred to as the “DOM–INNATE” study (
D
usquetide treatment in
O
ral
M
ucositis –
by modulating
INNATE
immunity). Based on the positive and previously published Phase 2 results (Study IDR-OM-01), the pivotal
Phase 3 clinical trial (Study IDR-OM-02) is a highly powered, double-blind, randomized, placebo-controlled, multinational trial
that will seek to enroll approximately 190 subjects with squamous cell carcinoma of the oral cavity and oropharynx who are scheduled
to receive a minimum total cumulative radiation dose of 55 Gy fractionated as 2.0-2.2 Gy per day with concomitant cisplatin chemotherapy
given as a dose of 80-100 mg/m
2
every third week. Subjects are randomized to receive either 1.5 mg/kg SGX942 or placebo
given twice a week during and for two weeks following completion of chemoradiation therapy (“CRT”). The primary endpoint
for the study is the median duration of severe oral mucositis, which is assessed by oral examination at each treatment visit and
then through six weeks following completion of CRT. Oral mucositis is evaluated using the WHO Grading system. Severe oral mucositis
is defined as a WHO Grade of ≥3. Subjects are followed for an additional 12 months after the completion of treatment.
During
July 2017, we initiated our pivotal Phase 3 study with a controlled roll-out of U.S. study sites, followed by the addition of
European centers in 2018. We anticipate that approximately 50 U.S. and European oncology centers will be participating in this
pivotal Phase 3 study, and that an interim analysis report from an independent data monitoring committee will become available
in September 2019.
During
September 2017, the National Institute of Dental and Craniofacial Research (“NIDCR”), part of the NIH, awarded us
a SBIR grant of approximately $1.5 million over two years to support the conduct of our Phase 3, multinational, randomized, double-blind,
placebo-controlled study evaluating SGX942 (dusquetide) as a treatment for severe oral mucositis in patients with head and neck
cancer receiving CRT.
On
April 9, 2019, the U.S. Patent Office issued a new patent No. 10,253,068 titled “Novel Peptides for Treating and Preventing
Immune-Related Disorders, Including Treating and Preventing Infection by Modulating Innate Immunity” for our dusquetide
related analogs.
In
April, 2019, the Paediatric Committee of the EMA approved our Paediatric Investigation Plan (“PIP”) for SGX942, a
prerequisite for filing a Marketing Authorization Application (“MAA”) for any new medicinal product in Europe. The
EMA also agreed that we may defer conducting the PIP until successful completion of our ongoing pivotal Phase 3 clinical trial
of SGX942, which allows us to file the adult indication MAA prior to completion of the PIP.
During
the month of April 2019, we reached a significant milestone by enrolling sufficient patients to support the planned interim efficacy
analysis by the independent Data Monitoring Committee (DMC).
We
estimate the potential worldwide market for SGX942 is in excess of $500 million for all applications, including the treatment
of oral mucositis. This potential market information is a forward-looking statement, and investors are urged not to place undue
reliance on this statement. While we have determined this potential market size based on assumptions that we believe are reasonable,
there are a number of factors that could cause our expectations to change or not be realized.
Oral
Mucositis
Mucositis
is the clinical term for damage done to the mucosa by anticancer therapies. It can occur in any mucosal region, but is most commonly
associated with the mouth, followed by the small intestine. We estimate, based upon our review of historic studies and reports,
and an interpolation of data on the incidence of mucositis, that mucositis affects approximately 500,000 people in the U.S. per
year and occurs in 40% of patients receiving chemotherapy. Mucositis can be severely debilitating and can lead to infection, sepsis,
the need for parenteral nutrition and narcotic analgesia. The GI damage causes severe diarrhea. These symptoms can limit the doses
and duration of cancer treatment, leading to sub-optimal treatment outcomes.
The
mechanisms of mucositis have been extensively studied and have been recently linked to the interaction of chemotherapy and/or
radiation therapy with the innate defense system. Bacterial infection of the ulcerative lesions is regarded as a secondary consequence
of dysregulated local inflammation triggered by therapy-induced cell death, rather than as the primary cause of the lesions.
We
estimate, based upon our review of historic studies and reports, and an interpolation of data on the incidence of oral mucositis,
that oral mucositis is a subpopulation of approximately 90,000 patients in the U.S., with a comparable number in Europe. Oral
mucositis almost always occurs in patients with head and neck cancer treated with radiation therapy (greater than 80% incidence
of severe mucositis) and is common in patients undergoing high dose chemotherapy and hematopoietic cell transplantation, where
the incidence and severity of oral mucositis depends greatly on the nature of the conditioning regimen used for myeloablation.
Oral
BDP
Oral
BDP (beclomethasone 17,21-dipropionate) represents a first
-
of
-
its
-
kind oral, locally acting therapy tailored
to treat GI inflammation. BDP has been marketed in the U.S. and worldwide since the early 1970s as the active pharmaceutical ingredient
in a nasal spray and in a metered-dose inhaler for the treatment of patients with allergic rhinitis and asthma. Oral BDP is specifically
formulated for oral administration as a single product consisting of two tablets. One tablet is intended to release BDP in the
upper sections of the GI tract and the other tablet is intended to release BDP in the lower sections of the GI tract.
Based
on its pharmacological characteristics, oral BDP may have utility in treating other conditions of the gastrointestinal tract having
an inflammatory component. We are planning to pursue development programs for the treatment of pediatric Crohn’s disease,
acute radiation enteritis and GI ARS pending further grant funding. We are also exploring the possibility of testing oral BDP
for local inflammation associated with ulcerative colitis, among other indications.
We
estimate the potential worldwide market for oral BDP is in excess of $500 million for all applications, including the treatment
of pediatric Crohn’s disease. This potential market information is a forward-looking statement, and investors are urged
not to place undue reliance on this statement. While we have determined this potential market size based on assumptions that we
believe are reasonable, there are a number of factors that could cause our expectations to change or not be realized.
SGX203
– for Treating Pediatric Crohn’s Disease
SGX203
is a two tablet delivery system of BDP specifically designed for oral use that allows for administration of immediate and delayed
release BDP throughout the small bowel and the colon. The FDA has given SGX203 Orphan Drug designation as well as Fast Track designation
for the treatment of pediatric Crohn’s disease. We will pursue a pivotal Phase 3 clinical trial of SGX203 for the treatment
of pediatric Crohn’s disease contingent upon additional funding, such as through partnership funding support.
Pediatric
Crohn’s Disease
Crohn’s
disease causes inflammation of the GI tract. Crohn’s disease can affect any area of the GI tract, from the mouth to the
anus, but it most commonly affects the lower part of the small intestine, called the ileum. The swelling caused by the disease
extends deep into the lining of the affected organ. The swelling can induce pain and can make the intestines empty frequently,
resulting in diarrhea. Because the symptoms of Crohn’s disease are similar to other intestinal disorders, such as irritable
bowel syndrome and ulcerative colitis, it can be difficult to diagnose. People of Ashkenazi Jewish heritage have an increased
risk of developing Crohn’s disease.
Crohn’s
disease can appear at any age, but it is most often diagnosed in adults in their 20s and 30s. However, approximately 30% of people
with Crohn’s disease develop symptoms before 20 years of age. We estimate, based upon our review of historic published studies
and reports, and an interpolation of data on the incidence of pediatric Crohn’s disease, that pediatric Crohn’s disease
is a subpopulation of approximately 80,000 patients in the U.S. with a comparable number in Europe. Crohn’s disease tends
to be both severe and extensive in the pediatric population and a relatively high proportion (approximately 40%) of pediatric
Crohn’s patients have involvement of their upper gastrointestinal tract.
Crohn’s
disease presents special challenges for children and teens. In addition to bothersome and often painful symptoms, the disease
can stunt growth, delay puberty, and weaken bones. Crohn’s disease symptoms may sometimes prevent a child from participating
in enjoyable activities. The emotional and psychological issues of living with a chronic disease can be especially difficult for
young people.
SGX201
– for Preventing Acute Radiation Enteritis
SGX201
is a delayed-release formulation of BDP specifically designed for oral use. In 2012, we completed a Phase 1/2 clinical trial testing
SGX201 in prevention of acute radiation enteritis. Patients with rectal cancer scheduled to undergo concurrent radiation and chemotherapy
prior to surgery were randomized to one of four dose groups. The objectives of the study were to evaluate the safety and maximal
tolerated dose of escalating doses of SGX201, as well as the preliminary efficacy of SGX201 for prevention of signs and symptoms
of acute radiation enteritis. The study demonstrated that oral administration of SGX201 was safe and well tolerated across all
four dose groups. There was also evidence of a potential dose response with respect to diarrhea, nausea and vomiting and the assessment
of enteritis according to National Cancer Institute Common Terminology Criteria for Adverse Events for selected gastrointestinal
events. In addition, the incidence of diarrhea was lower than that seen in recent published historical control data in this patient
population. This program was supported in part by a $500,000 two-year SBIR grant awarded by the NIH. We continue to work with
our Radiation Enteritis medical advisors to identify additional funding opportunities to support the clinical development program.
We
have received Fast Track designation from the FDA for SGX201 for acute radiation enteritis.
Acute
Radiation Enteritis
External
radiation therapy is used to treat most types of cancer, including cancer of the bladder, uterine, cervix, rectum, prostate, and
vagina. During delivery of treatment, some level of radiation will also be delivered to healthy tissue, including the bowel, leading
to acute and chronic toxicities. The large and small bowels are very sensitive to radiation and the larger the dose of radiation
the greater the damage to normal bowel tissue. Radiation enteritis is a condition in which the lining of the bowel becomes swollen
and inflamed during or after radiation therapy to the abdomen, pelvis, or rectum. Most tumors in the abdomen and pelvis need large
doses, and almost all patients receiving radiation to the abdomen, pelvis, or rectum will show signs of acute enteritis.
Patients
with acute enteritis may have nausea, vomiting, abdominal pain and bleeding, among other symptoms. Some patients may develop dehydration
and require hospitalization. With diarrhea, the gastrointestinal tract does not function normally, and nutrients such as fat,
lactose, bile salts, and vitamin B12 are not well absorbed.
Symptoms
will usually resolve within two to six weeks after therapy has ceased. Radiation enteritis is often not a self-limited illness,
as over 80% of patients who receive abdominal radiation therapy complain of a persistent change in bowel habits. Moreover, acute
radiation injury increases the risk of development of chronic radiation enteropathy, and overall 5% to 15% of the patients who
receive abdominal or pelvic irradiation will develop chronic radiation enteritis.
We
estimate, based upon our review of historic published studies and reports, and an interpolation of data on the treatment courses
and incidence of cancers occurring in the abdominal and pelvic regions, there to be over 100,000 patients annually in the U.S.,
with a comparable number in Europe, who receive abdominal or pelvic external beam radiation treatment for cancer, and these patients
are at risk of developing acute and chronic radiation enteritis.
Public
Health Solutions Overview
ThermoVax
®
– Thermostability Technology
ThermoVax
®
is a novel method of rendering aluminum salt, (known colloquially as Alum), adjuvanted vaccines stable at elevated temperatures.
Alum is the most widely employed adjuvant technology in the vaccine industry. The value of ThermoVax
®
lies in its
potential ability to eliminate the need for cold chain production, transportation, and storage for Alum adjuvanted vaccines. This
would relieve the high costs of producing and maintaining vaccines under refrigerated conditions. Based on historical reports
from the World Health Organization and other scientific reports, we believe that a meaningful proportion of vaccine doses globally
are wasted due to excursions from required cold chain temperature ranges. This is due to the fact that most Alum adjuvanted vaccines
need to be maintained at between 2 and 8 degrees Celsius (“C”) and even brief excursions from this temperature range
(especially below freezing) usually necessitates the destruction of the product or the initiation of costly stability programs
specific for the vaccine lots in question. ThermoVax
®
has the potential to facilitate easier storage and distribution
of strategic national stockpile vaccines for ricin exposure in emergency settings.
ThermoVax
®
development was supported pursuant to our $9.4 million NIAID grant enabling
development of thermo-stable ricin (RiVax
®
) and anthrax vaccines. Proof-of-concept preclinical studies with ThermoVax
®
indicate that it is able to produce stable vaccine formulations using adjuvants, protein immunogens, and other components that
ordinarily would not withstand long temperature variations exceeding customary refrigerated storage conditions. These studies were
conducted with our aluminum-adjuvanted ricin toxin vaccine, RiVax
®
and our aluminum-adjuvanted anthrax vaccine.
Each vaccine was manufactured under precise lyophilization conditions using excipients that aid in maintaining native protein structure
of the key antigen. When RiVax
®
was kept at 40 degrees C (104 degrees Fahrenheit) for up to one year, all of the
animals vaccinated with the lyophilized RiVax
®
vaccine developed potent and high titer neutralizing antibodies.
In contrast, animals that were vaccinated with the liquid RiVax
®
vaccine kept at 40 degrees C did not develop neutralizing
antibodies and were not protected against ricin exposure. The ricin A chain is extremely sensitive to temperature and rapidly loses
the ability to induce neutralizing antibodies when exposed to temperatures higher than 8 degrees C. When the anthrax vaccine was
kept for up to 16 weeks at 70 degrees C, it was able to develop a potent antibody response, unlike the liquid formulation kept
at the same temperature. Moreover, we also have demonstrated the compatibility of our thermostabilization technology with other
secondary adjuvants such as TLR-4 agonists.
We
also entered into a collaboration agreement with Axel Lehrer, PhD of the Department of Tropical Medicine, Medical Microbiology
and Pharmacology, John A. Burns School of Medicine, University of Hawai
ʻ
i
at Manoa (“UH Manoa”) and Hawaii Biotech, Inc. (“HBI”) to develop a heat stable subunit Ebola vaccine.
Dr. Lehrer, a co-inventor of the Ebola vaccine with HBI, has shown proof of concept efficacy with subunit Ebola vaccines in non-human
primates. The most advanced Ebola vaccines involve the use of vesicular stomatitis virus and adenovirus vectors – live,
viral vectors which complicate the manufacturing, stability and storage requirements. Dr. Lehrer’s vaccine candidate is
based on highly purified recombinant protein antigens, circumventing many of these manufacturing difficulties. Dr. Lehrer and
HBI have developed a robust manufacturing process for the required proteins. Application of ThermoVax
®
may allow
for a product that can avoid the need for cold chain distribution and storage, yielding a vaccine ideal for use in both the developed
and developing world. This agreement has expired in accordance with its terms.
On
December 21, 2010, we executed a worldwide exclusive license agreement with the University of Colorado (“UC”) for
certain patents relating to ThermoVax
®
in all fields of use. In April 2018, the UC delivered a notice of termination
of our license agreement based upon our failure to achieve one of the development milestones: initiation of the Phase 1 clinical
trial of the heat stabilization technology by March 31, 2018. After negotiating with the UC, we and the UC agreed to extend the
termination date to October 31, 2018 in order to allow us time to agree upon a potential agreement that would allow us to keep
the rights to, and to continue to develop, the heat stabilization technology or a product candidate containing the heat stabilization
technology in our field of use.
On
October 31, 2018, in a series of related transactions, (a) we and the UC agreed to terminate the original license agreement, (b)
the UC and VitriVax, Inc. (“VitriVax”) executed a worldwide exclusive license agreement for the heat stabilization
technology for all fields of use, and (c) we and VitriVax executed a worldwide exclusive sublicense agreement for the heat stabilization
technology for use in the fields of ricin and Ebola vaccines. We paid a $100,000 sublicense fee on the effective date of the sublicense
agreement. To maintain the sublicense we are obliged to pay a minimum annual royalty of $20,000 until first commercial sale of
a sublicensed product, upon which point, we shall pay an earned royalty of 2% of net sales subject to a minimum royalty of $50,000
each year. We are also required to pay royalty on any sub-sublicense income based on a declining percentage of all sub-sublicense
income calculated within the contractual period until reaching a minimum of 15% after two years. In addition, we are required
to pay VitriVax milestone fees of: (a) $50,000 upon initiation of a Phase II clinical trial of the sublicensed product, (b) $200,000
upon regulatory approval of a sublicensed product, and (c) $1 million upon achieving $10 million in aggregate net sales of a sublicensed
product in the U.S. or equivalent. To date none of these milestones have been met.
During
September 2017, we announced that we would be participating in a NIAID Research Project (R01) grant awarded to UH Manoa for the
development of a trivalent thermostabilized Ebola vaccine, with our awarded funding of approximately $700,000 over five years.
Previous collaborations demonstrated the feasibility of developing a heat stable subunit Ebola vaccine. Under the terms of the
subaward, we will continue to support vaccine formulation development with our proprietary vaccine thermostabilization technology,
ThermoVax
®
. Ultimately, the objective is to produce a thermostable trivalent filovirus vaccine for protection against
Ebola and related diseases, allowing worldwide distribution without the need for cold storage.
On February 7, 2019, European Journal of Pharmaceutics and Biopharmaceutics published a scientific article
demonstrating the successful thermostabilization of an Ebola subunit vaccine candidate.
RiVax
®
–
Ricin Toxin Vaccine
RiVax
®
is our proprietary vaccine candidate being developed to protect against exposure to ricin toxin and if approved, would be
the first ricin vaccine. The immunogen in RiVax
®
induces a protective immune response in animal models of ricin
exposure and functionally active antibodies in humans. The immunogen consists of a genetically inactivated ricin A chain subunit
that is enzymatically inactive and lacks residual toxicity of the holotoxin. RiVax
®
has demonstrated statistically
significant (p < 0.0001) preclinical survival results, providing 100% protection against acute lethality in an aerosol exposure
non-human primate model (Roy et al, 2015, Thermostable ricin vaccine protects rhesus macaques against aerosolized ricin: Epitope-specific
neutralizing antibodies correlate with protection, PNAS USA 112:3782-3787), and has also been shown to be well tolerated and immunogenic
in two Phase 1 clinical trials in healthy volunteers. Results of the first Phase 1 human trial of RiVax
®
established
that the immunogen was safe and induced antibodies that we believe may protect humans from ricin exposure. The antibodies generated
from vaccination, concentrated and purified, were capable of conferring immunity passively to recipient animals, indicating that
the vaccine was capable of inducing functionally active antibodies in humans. The outcome of this study was published in the Proceedings
of the National Academy of Sciences (Vitetta et al., 2006, A Pilot Clinical Trial of a Recombinant Ricin Vaccine in Normal Humans,
PNAS, 103:2268-2273). The second trial which was completed in September 2012 and was sponsored by University of Texas Southwestern
Medical Center (“UTSW”), evaluated a more potent formulation of RiVax
®
that contained an aluminum adjuvant
(Alum). The results of the Phase 1b study indicated that Alum-adjuvanted RiVax
®
was safe and well tolerated, and
induced greater ricin neutralizing antibody levels in humans than adjuvant-free RiVax
®
. The outcomes of this second
study were published in the Clinical and Vaccine Immunology (Vitetta et al., 2012, Recombinant Ricin Vaccine Phase 1b Clinical
Trial, Clin. Vaccine Immunol. 10:1697-1699). We have adapted the original manufacturing process for the immunogen contained in
RiVax
®
for thermostability and large scale manufacturing and recent studies have confirmed that the thermostabilized
RiVax
®
formulation enhances the stability of the RiVax
®
antigen, enabling storage for at least 1
year at temperatures up to 40°C (104 °F). The program will pursue approval via the FDA “Animal Rule” since
it is not possible to test the efficacy of the vaccine in a clinical study which would expose humans to ricin. Uniform, easily
measured and species-neutral immune correlates of protection that can be measured in humans and animals, and are indicative of
animal survival to subsequent ricin challenge, are central to the application of the “Animal Rule”. Recent work has
identified such potential correlates of immune protection in animals and work to qualify and validate these approaches is continuing,
with the goal of utilizing these assays in a planned Phase 1/2 clinical trial with the thermostable RiVax
®
formulation.
During September 2018, we published an extended stability study of RiVax
®
, showing up to 100% protection in mice
after 12 months storage at 40°C (104 °F) as well as identification of a potential in vitro stability indicating assay,
critical to adequately confirming the long-term shelf life of the vaccine. We have entered into a collaboration with IDT Biologika
GmbH to scale-up the formulation/filling process and continue development and validation of analytical methods established at
IDT to advance the program. We also have initiated a development agreement with Emergent BioSolutions, Inc. to implement a commercially
viable, scalable production technology for the RiVax
®
drug substance protein antigen.
The
development of RiVax
®
has been sponsored through a series of overlapping challenge grants, UC1, and cooperative
grants, U01, from the NIH, granted to us and to UTSW where the vaccine originated. The second clinical trial was supported by
a grant from the FDA’s Office of Orphan Products to UTSW. To date, we and UTSW have collectively received approximately
$25 million in grant funding from the NIH for the development of RiVax
®
. In September 2014, we entered into a contract
with the NIH for the development of RiVax
®
that would provide up to an additional $24.7 million of funding in the
aggregate if options to extend the contract are exercised by the NIH. The development agreements with Emergent BioSolutions and
IDT are specifically funded under this NIH contract.
During
June 2017 NIAID exercised an option for the evaluation of RiVax
®
to fund additional animal efficacy studies. The
exercised option will provide us with approximately $2.0 million in additional funding. Additionally, during August 2017 NIAID
exercised an option to fund good manufacturing practices compliant RiVax
®
bulk drug substance and finished drug
product manufacturing, which is required for the conduct of future preclinical and clinical safety and efficacy studies. The exercised
option will provide us with approximately $2.5 million in additional non-dilutive funding, bringing the total amount awarded to
date under this contract to $21.2 million, of which $13.5 million is still available. If all contract options are exercised, the
total award of up to $24.7 million will support the preclinical, manufacturing and clinical development activities necessary to
advance heat stable RiVax
®
with the FDA. In addition to the ongoing funding of up to $24.7 million for the development
of RiVax
®
, biomarkers for RiVax
®
testing have been successfully identified, facilitating potential
approval under the FDA Animal Rule.
RiVax
®
has been granted Orphan Drug designation by the FDA for the prevention of ricin intoxication. In addition, RiVax
®
has also been granted Orphan Drug designation in the EU from the EMA Committee for Orphan Medical Products.
Assuming
development efforts are successful for RiVax
®
, we believe potential government procurement contract(s) could
reach as much as $200 million. This potential procurement contract information is a forward-looking statement, and investors are
urged not to place undue reliance on this statement. While we have determined this potential procurement contract value based
on assumptions that we believe are reasonable, there are a number of factors that could cause our expectations to change or not
be realized.
As
a new chemical entity, an FDA approved RiVax
®
vaccine has the potential to qualify for a biodefense Priority Review
Voucher (“PRV”). Approved under the 21st Century Cures Act in late 2016, the biodefense PRV is awarded upon approval
as a medical countermeasure when the active ingredient(s) have not been otherwise approved for use in any context. PRVs are transferable
and can be sold, with sales in recent years in excess of $100 million. When redeemed, PRVs entitle the user to an accelerated
review period of nine months, saving a median of seven months review time as calculated in 2009. However, FDA must be advised
90 days in advance of the use of the PRV and the use of a PRV is associated with an additional user fee ($2.7 million in 2017).
Ricin
Toxin
Ricin
toxin can be cheaply and easily produced, is stable over long periods of time, is toxic by several routes of exposure and thus
has the potential to be used as a biological weapon against military and/or civilian targets. As a bioterrorism agent, ricin could
be disseminated as an aerosol, by injection, or as a food supply contaminant. The potential use of ricin toxin as a biological
weapon of mass destruction has been highlighted in a Federal Bureau of Investigation Bioterror report released in November 2007
titled Terrorism 2002-2005, which states that “Ricin and the bacterial agent anthrax are emerging as the most prevalent
agents involved in WMD investigations” (http://www.fbi.gov/stats-services/publications/terrorism-2002-2005/terror02_05.pdf).
In recent years, Al Qaeda in the Arabian Peninsula has threatened the use of ricin toxin to poison food and water supplies and
in connection with explosive devices. Domestically, the threat from ricin remains a concern for security agencies. In April 2013,
letters addressed to the U.S. President, a Senator and a judge tested positive for ricin. As recently as October 2018, an envelope
addressed to President Trump was suspected to contain this potent and potentially lethal toxin, which was subsequently confirmed
to contain pieces of castor beans used to make ricin.
The
Centers for Disease Control and Prevention has classified ricin toxin as a Category B biological agent. Ricin works by first binding
to glycoproteins found on the exterior of a cell, and then entering the cell and inhibiting protein synthesis leading to cell
death. Once exposed to ricin toxin, there is no effective therapy available to reverse the course of the toxin. The recent ricin
threat to government officials has heightened the awareness of this toxic threat. Currently, there is no FDA approved vaccine
to protect against the possibility of ricin toxin being used in a terrorist attack, or its use as a weapon on the battlefield
nor is there a known antidote for ricin toxin exposure.
SGX943
– for Treating Emerging and/or Antibiotic-Resistant Infectious Diseases
SGX943
is an IDR, containing the same active ingredient as SGX942. Dusquetide is a fully synthetic, 5-amino acid peptide with high aqueous
solubility and stability. Extensive
in vivo
preclinical studies have demonstrated enhanced clearance of bacterial infection
with SGX943 administration. SGX943 has shown efficacy against both Gram-negative and Gram-positive bacterial infections in preclinical
models, independent of whether the bacteria is antibiotic-resistant or antibiotic-sensitive.
The
innate immune system is responsible for rapid and non-specific responses to combat bacterial infection. Augmenting these responses
represents an alternative approach to treating bacterial infections. In animal models, IDRs are efficacious against both antibiotic-sensitive
and antibiotic-resistant infections, both Gram-positive and Gram-negative bacteria, and are active irrespective of whether the
bacteria occupies a primarily extracellular or intracellular niche. IDRs are also effective as stand-alone agents or in conjunction
with antibiotics. An IDR for the treatment of serious bacterial infections encompasses a number of clinical advantages including:
|
●
|
Treatment
when antibiotics are contraindicated, such as:
|
|
o
|
before
the infectious organism and/or its antibiotic susceptibility is known; or
|
|
o
|
in
at-risk populations prior to infection.
|
|
●
|
An
ability to be used as an additive, complementary treatment with antibiotics, thereby:
|
|
o
|
enhancing
efficacy of sub-optimal antibiotic regimens (e.g., partially antibiotic-resistant infections);
|
|
o
|
enhancing
clearance of infection, thereby minimizing the generation of antibiotic resistance; and
|
|
o
|
reducing
the required antibiotic dose, again potentially minimizing the generation of antibiotic resistance.
|
|
●
|
An
ability to modulate the deleterious consequences of inflammation in response to the infection, including the inflammation
caused by antibiotic-driven bacterial lysis; and
|
|
●
|
Being
unlikely to generate bacterial resistance since the IDR acts on the host, and not the pathogen.
|
Importantly,
systemic inflammation and multi-organ failure is the ultimate common outcome of not only emerging and/or antibiotic-resistant
infectious diseases, but also of most biothreat agents (e.g.,
Burkholderia pseudomallei
), indicating that dusquetide would
be applicable not only to antibiotic-resistant infection, but also to biothreat agents, especially where the pathogen is not known
and/or has been engineered for enhanced antibiotic resistance.
In
May 2019, the Company was awarded a subcontract of approximately $600,000 over three years to participate in a biodefense contract
for the development of medical countermeasures against bacterial threat agents. As of June 30, 2019, there was no revenue earned or expense incurred related to the DTRA subcontract.
Critical
Accounting Policies
Our
discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements,
which have been prepared in accordance with accounting principles generally accepted in the U.S. The preparation of these financial
statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses, and
related disclosure of contingent assets and liabilities. We evaluate these estimates and judgments on an on-going basis.
Revenue
Recognition
Our
revenues are primarily generated from government contracts and grants. The revenue from government contracts and grants is based
upon subcontractor costs and internal costs incurred that are specifically covered by the contracts and grants, plus a facilities
and administrative rate that provides funding for overhead expenses and management fees. These revenues are recognized when expenses
have been incurred by subcontractors or when we incur internal expenses that are related to the government contracts and grants.
Research
and Development Costs
Research
and development costs are charged to expense when incurred in accordance with FASB ASC 730,
Research and Development
. Research
and development includes costs such as clinical trial expenses, contracted research and license agreement fees with no alternative
future use, supplies and materials, salaries, share-based compensation, employee benefits, equipment depreciation and allocation
of various corporate costs. Purchased in-process research and development expense represents the value assigned or paid for acquired
research and development for which there is no alternative future use as of the date of acquisition.
Share-Based
Compensation
Stock
options are issued with an exercise price equal to the market price on the date of grant. Stock options issued to directors upon
re-election vest quarterly for a period of one year (new director issuances are fully vested upon issuance). Stock options issued
to employees generally vest 25% on the grant date, then 25% each subsequent year for a period of three years. Stock options vest
over each three-month period from the date of issuance to the end of the three-year period. These options have a ten year life
for as long as the individuals remain employees or directors. In general, when an employee or director terminates their position
the options will expire within three months, unless otherwise extended by the Board.
From
time to time, we issue restricted shares of common stock to vendors and consultants as compensation for services performed. Typically
these instruments vest upon issuance and therefore the entire share-based compensation expense is recognized upon issuance to
the vendors and/or consultants.
In
June 2018, the FASB amended the accounting for share-based compensation issued to nonemployees in ASU 2018-07. Under the revised
guidance, the scope of Topic 718 was expanded to include share-based payments issued to nonemployees, supersedes Subtopic 505-50
and generally aligns the accounting for awards issued to nonemployees to the accounting for employee awards. The Company adopted
the new guidance effective January 1, 2019, and in accordance with the new guidance, stock compensation expense for equity-classified
awards to nonemployees is measured on the date of grant and is recognized when the services are performed.
The fair value of each option grant made during
the six months ended June 30, 2019 and 2018 was estimated on the date of each grant using the Black-Scholes option pricing model
and amortized ratably over the option vesting periods, which approximates the service period. The fair value of restricted shares
of common stock issued to the third-party vendors during the six months ended June 30, 2019 was measured at the market price of
the Company’s common stock on the date of grant. Stock compensation expense was recognized on the date of grant since the
service had been rendered and all other conditions necessary for the award had been satisfied. The Company did not issue shares
of common stock to third party vendors during the six months ended June 30, 2018.
Income
Taxes
Deferred
tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax basis. A valuation allowance is established when
it is more likely than not that all or a portion of a deferred tax asset will not be realized. A review of all available positive
and negative evidence is considered, including our current and past performance, the market environment in which we operate, the
utilization of past tax credits, and the length of carryback and carryforward periods. Deferred tax assets and liabilities are
measured utilizing tax rates expected to apply to taxable income in the years in which the temporary differences are expected
to be recovered or settled. We recognized an income tax benefit of $610,676 from the sale of the New Jersey NOL carryforward during
the six months ended June 30, 2019. No income tax benefit was recognized for the six months ended June 30, 2018. We recognize
accrued interest and penalties associated with uncertain tax positions, if any, as part of the income tax provision. There were
no tax related interest and penalties recorded for June 30, 2019 or 2018. Additionally, we have not recorded an asset for unrecognized
tax benefits or a liability for uncertain tax positions at June 30, 2019 and December 31, 2018.
Earnings
Per Share
Basic
earnings per share (“EPS”) excludes dilution and is computed by dividing income (loss) available to common stockholders
by the weighted-average number of common shares outstanding for the period. Diluted EPS reflects the potential dilution that could
occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the
issuance of common stock that shared in the earnings of the entity. Since there is a significant number of options and warrants
outstanding, fluctuations in the actual market price can have a variety of results for each period presented.
Use
of Estimates and Assumptions
The
preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management
to make estimates and assumptions such as the fair value of warrants and stock options and recovery of the useful life of intangibles
that affect the reported amounts in the financial statements and accompanying notes. Actual results could differ from those estimates.
Material
Changes in Results of Operations
Three
and Six months Ended June 30, 2019 Compared to June 30, 2018
For the three months ended June 30, 2019,
we had a net loss of $2,123,521 as compared to a net loss of $1,556,342 for the same period in the prior year, representing an
increase of $567,179 or 36%. The increase in the quarterly loss was primarily due to higher clinical trial expenses incurred in
2019 to support the pivotal Phase 3 clinical trial of SGX301 for the treatment of CTCL and the pivotal Phase 3 clinical trial of
SGX942 for the treatment of oral mucositis in head and neck cancer. For the six months ended June 30, 2019, we had a net loss of
$3,763,148 as compared to a net loss of $3,933,548 for the same period in the prior year, representing a decrease in the net loss
of $170,400 or 4%. This decrease in year-to-date net loss was primarily the result of the $610,676 income tax benefit from the
sale of the New Jersey 2017 NOL carryforwards and $251,212 milestone fee income from the RiVax
®
program, offset
by higher clinical trial expenses incurred during the six months ended June 30, 2019 for our two Phase 3 clinical trials of SGX301
and SGX942.
Our revenues and associated costs incurred
were related to the government contracts and grants awarded in support of our pivotal Phase 3 trials of SGX301 and SGX942 in addition
to the development of the ThermoVax
®
and RiVax
®
programs. For the three months ended June 30, 2019,
we had total revenue of $1,544,964 as compared to $1,725,545 for the same period in the prior year, representing a decrease of
$180,581 or 10%. For the six months ended June 30, 2019, we had total revenue of $2,689,752 as compared to $2,845,318 for the same
period in the prior year, representing a decrease of $155,566 or 5%. We incurred costs related to those revenues for the three
months ended June 30, 2019 and 2018 of $1,086,814 and $1,493,676, respectively, representing a decrease of $406,862 or 27%. For
the six months ended June 30, 2019, costs related to revenues were $2,014,738 as compared to $2,472,597 for the same period in
the prior year, representing a decrease of $457,859 or 19%. As a result, our gross profit for the three months ended June 30, 2019
was $458,150 or 30% of revenue, as compared to $231,869 or 13% of revenue for the same period in 2018, representing an increase
of $226,281 or 98%. Gross profit for the six months ended June 30, 2019 was $675,014 or 25% of revenues, as compared to $372,721
or 13% of revenues for the same period in 2018, representing an increase of $302,293 or 81%. The increase in gross profit during
the three and six months ended June 30, 2019 was primarily the result of the $251,212 milestone fee income earned in June 2019
from the RiVax
®
program and a higher share of reimbursable costs available for contracted fixed overhead reimbursement
in 2019, resulting in an increase in gross profit percentage of 16% and 12%, respectively, for the three months and six months
ended June 30, 2019 over the comparable periods in 2018.
Research
and development expenses were $1,853,950 for the three months ended June 30, 2019 as compared to $1,170,333 for the same
period in 2018, representing an increase of $683,617 or 58%. Research and development expenses were $3,496,668 for the six
months ended June 30, 2019 as compared to $2,973,693 for the same period in 2018, representing an increase of $522,975 or
18%. The increases in research and development spending for the three and six months ended June 30, 2019 were primarily
attributable to higher clinical trial expenditures incurred in 2019 compared to the same
periods in 2018 to support the pivotal Phase 3 clinical trial of SGX301 for the treatment of CTCL and the pivotal Phase 3
clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer.
General
and administrative expenses were $769,091 for the three months ended June 30, 2019, as compared to $650,826 for the same period
in 2018, representing an increase of $118,265 or 18%. General and administrative expenses were $1,643,300 for the six months ended
June 30, 2019, as compared to $1,382,419 for the same period in 2018, representing an increase of $260,881 or 19%. The increase
was primarily attributable to higher professional fees incurred during the three and six months ended June 30, 2019.
Other income for the three months ended
June 30, 2019 was $41,370 as compared to $32,948 for the same period in 2018, representing an increase of $8,422 or 26%. Other
income for the six months ended June 30, 2019 was $91,130 as compared to $49,843 for the same period in 2018, representing an increase
of $41,287 or 83%. The increases were due to higher interest and dividend rates on our cash and cash equivalents for both the three
and six months ended June 30, 2019 as compared to the same periods in 2018.
Financial
Condition
Cash
and Working Capital
As
of June 30, 2019, we had cash and cash equivalents of $6,986,289 as compared to $8,983,717 as of December 31, 2018,
representing a decrease of $1,997,428 or 22%. As of June 30, 2019, we had working capital of $3,311,412 as compared to
working capital of $6,131,178 as of December 31, 2018, representing a decrease of $2,819,766 or 46% in working capital. The
decrease in cash and cash equivalents and working capital was primarily related to expenditures incurred to support the
pivotal Phase 3 clinical trial of SGX301 for the treatment of CTCL and expenditures incurred in the pivotal Phase 3 clinical
trial of SGX942 for the treatment of oral mucositis in head and neck cancer.
We expect to continue to incur losses for the
foreseeable future and will need to raise additional capital to support ongoing operations. Management is evaluating all options
to raise sufficient funds to fund our working capital requirements. These options include proceeds from government contract and
grant programs, proceeds available from the At Market Issuance Sales Agreement (“FBR Sales Agreement”) with B. Riley
FBR Inc. and raising additional funds through potential partnerships and /or debt and equity financings. There can be no assurances,
however, that management will be able to obtain sufficient additional funds when needed, or that such funds, if available, will
be on terms satisfactory to us.
Our
plans with respect to our liquidity management include, but are not limited to, the following:
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●
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We
have up to $12.4 million in active government contract funding still available as of June 30, 2019 to support our associated
research programs through 2020 and beyond, provided the federal agencies exercise all options and do not elect to terminate
the contracts for convenience. We plan to submit additional contract and grant applications for further support of our programs
with various funding agencies;
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|
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●
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We
have continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners
and expect to continue to do so for the foreseeable future;
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●
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We
will continue to pursue Net Operating Loss (“NOL”) sales in the state of New Jersey pursuant to its Technology
Business Tax Certificate Transfer Program if the program is available;
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|
|
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●
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We
plan to pursue potential partnerships for pipeline programs. However, there can be no assurances that we can consummate such
transactions;
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|
|
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●
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We
have up to $6.6 million remaining from the FBR Sales Agreement as of August 8, 2019 under the prospectus supplement updated
October 3, 2018; and
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●
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We
may seek additional capital in the private and/or public equity markets, pursue government contracts and grants as well as
business development activities, to continue our operations, respond to competitive pressures, develop new products and
services, and to support new strategic partnerships. We are currently evaluating additional equity/debt financing opportunities
on an ongoing basis and may execute them when appropriate. However, there can be no assurances that we can consummate such
a transaction, or consummate a transaction at favorable pricing.
|
Expenditures
Under
our budget and based upon our existing product development agreements and license agreements pursuant to letters of intent
and option agreements, we expect our total research and development expenditures for the next 12 months to be approximately
$11.1 million before any contract or grant reimbursements, of which $7.3 million relates to the Specialized BioTherapeutics
business and $3.8 million relates to the Public Health Solutions business. We anticipate contract and grant
reimbursements in the next 12 months of approximately $4.3 million to offset research and development expenses in both the
Specialized BioTherapeutics and the Public Health Solutions business segments.
The
table below details our costs for research and development by program and amounts reimbursed for the six months ended June 30,
2019:
|
|
2019
|
|
|
2018
|
|
Research & Development Expenses
|
|
|
|
|
|
|
RiVax
®
and ThermoVax
®
Vaccines
|
|
$
|
174,039
|
|
|
$
|
223,975
|
|
Dusquetide (SGX94)
|
|
|
2,379,270
|
|
|
|
1,725,594
|
|
SGX301
|
|
|
721,507
|
|
|
|
909,275
|
|
Other
|
|
|
221,852
|
|
|
|
114,849
|
|
Total
|
|
$
|
3,496,668
|
|
|
$
|
2,973,693
|
|
|
|
|
|
|
|
|
|
|
Reimbursed under Government Contracts and Grants
|
|
|
|
|
|
|
|
|
RiVax
®
and ThermoVax
®
Vaccines
|
|
|
1,406,500
|
|
|
|
2,081,239
|
|
SGX942
|
|
|
321,461
|
|
|
|
187,144
|
|
SGX301
|
|
|
286,777
|
|
|
|
204,214
|
|
Total
|
|
$
|
2,014,738
|
|
|
$
|
2,472,597
|
|
Grand Total
|
|
$
|
5,511,406
|
|
|
$
|
5,446,290
|
|
Contractual
Obligations
We
have commitments of approximately $450,000 as of June 30, 2019 for several licensing agreements with entities, consultants and
universities. Additionally, we have collaboration and license agreements, which upon clinical or commercialization success may
require the payment of milestones of up to $7.9 million and/or royalties up to 6% of net sales of covered products, if and when
achieved. However, there can be no assurance that clinical or commercialization success will occur.
We
currently lease approximately 6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey pursuant
to a lease that was amended in October 2017 and expires in October 2020. This office space currently serves as our corporate headquarters.
The rent for the first 12 months was $11,367 per month, or approximately $22.00 per square foot. The rent increased to $11,625
per month, or approximately $22.50 per square foot, for the next 12 months beginning November 1, 2018 and will increase beginning
November 1, 2019 to $11,883 per month, or approximately $23.00 per square foot for the remainder of the lease.
On
September 3, 2014, we entered into an asset purchase agreement with Hy Biopharma, Inc. (“Hy Biopharma”) pursuant to
which we acquired certain intangible assets, properties and rights of Hy Biopharma related to the development of Hy BioPharma’s
synthetic hypericin product. As consideration for the assets acquired, we paid $275,000 in cash and issued 184,912 shares of common
stock with a fair value of $3,750,000. These amounts were charged to research and development expense during the third quarter
of 2014 as the assets will be used in our research and development activities and do not have alternative future use pursuant
to generally accepted accounting principles in the U.S. Provided all future success-oriented milestones are attained, we will
be required to make payments of up to $10.0 million, if and when achieved. Payments will be payable in restricted securities of
the Company not to exceed 19.9% ownership of our outstanding stock. As of June 30, 2019, no milestone payments have been made
or accrued.
In
February 2007, our Board of Directors authorized the issuance of 5,000 shares of our common stock to Dr. Schaber immediately prior
to the completion of a transaction, or series or a combination of related transactions, negotiated by our Board of Directors whereby,
directly or indirectly, a majority of our capital stock or a majority of our assets are transferred from us and/or our stockholders
to a third party. Dr. Schaber’s amended employment agreement includes our obligation to issue such shares if such event
occurs.
In May 2019, the Company entered into a
four-month service agreement with a third party vendor, which requires the Company to issue at pre-determined intervals an aggregate
of 100,000 restricted shares of common stock as partial compensation for the services provided. In accordance with the agreement,
the Company has issued 50,000 shares of common stock with a fair value of $0.83 per share on May 15, 2019 and 25,000 shares of
common stock with a fair value of $0.98 on July 15, 2019. The Company will issue the remaining 25,000 shares of common stock on
August 15, 2019. The service agreement may be terminated at any time upon written notice.
As
a result of the above agreements, we have future contractual obligations over the next five years as follows:
Year
|
|
Research and Development
|
|
|
Property and
Other Leases
|
|
|
Total
|
|
July 1 through December 31, 2019
|
|
$
|
50,000
|
|
|
$
|
74,538
|
|
|
$
|
124,538
|
|
2020
|
|
|
100,000
|
|
|
|
127,374
|
|
|
|
227,374
|
|
2021
|
|
|
100,000
|
|
|
|
6,408
|
|
|
|
106,408
|
|
2022
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2023
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
Total
|
|
$
|
450,000
|
|
|
$
|
208,320
|
|
|
$
|
658,320
|
|