United
States
Securities
and Exchange Commission
Washington,
DC 20549
FORM 10-Q
| þ | Quarterly
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the quarterly period ended June 30, 2015 |
| ¨ | Transition
Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from ___________________
to __________________. |
Commission file number 001-15070
RegeneRx
Biopharmaceuticals, Inc.
(Exact Name of Registrant as Specified in
its Charter)
Delaware |
52-1253406 |
(State of Incorporation) |
(IRS Employer I.D. Number) |
15245 Shady Grove Road
Suite 470
Rockville, Maryland 20850
(Address of Principal Executive Offices)
(301) 208-9191
(Registrant's Telephone Number, Including
Area Code)
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days.
Yes
þ No ¨
Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant
to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit
and post such files).
Yes
þ No ¨
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See definitions of “accelerated filer,”
“large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Securities Exchange
Act of 1934. (Check one):
Large accelerated filer ¨ |
|
Accelerated filer ¨ |
Non-accelerated filer ¨ |
|
Smaller reporting company þ |
(Do not check if a smaller reporting company) |
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No þ
101,640,092
shares of common stock, par value $0.001 per share, were outstanding as of August 14, 2015.
RegeneRx Biopharmaceuticals, Inc.
Form 10-Q
Quarterly Period Ended June 30, 2015
Index
Part I – Financial
Information
| Item 1. | Condensed Financial Statements |
RegeneRx Biopharmaceuticals, Inc.
Condensed Balance Sheets
| |
June 30, | | |
December 31, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(See Note 1) | |
ASSETS | |
| | | |
| | |
Current assets | |
| | | |
| | |
Cash and cash equivalents | |
$ | 562,922 | | |
$ | 844,043 | |
Prepaid expenses and other current assets | |
| 55,391 | | |
| 86,525 | |
Total current assets | |
| 618,313 | | |
| 930,568 | |
Property and equipment, net of accumulated depreciation of $87,132 and $85,392 | |
| 12,207 | | |
| 12,871 | |
Other assets | |
| 5,752 | | |
| 5,752 | |
Total assets | |
$ | 636,272 | | |
$ | 949,191 | |
| |
| | | |
| | |
LIABILITIES AND STOCKHOLDERS' DEFICIT | |
| | | |
| | |
Current liabilities | |
| | | |
| | |
Accounts payable | |
$ | 215,164 | | |
$ | 232,610 | |
Accrued expenses | |
| 206,728 | | |
| 177,009 | |
Total current liabilities | |
| 421,892 | | |
| 409,619 | |
| |
| | | |
| | |
Long-Term liabilities | |
| | | |
| | |
Unearned revenue | |
| 895,000 | | |
| 400,000 | |
Convertible promisory note | |
| 300,000 | | |
| 300,000 | |
Convertible promisory notes, net of derivative liability | |
| 326,932 | | |
| 266,021 | |
Fair value of derivative liability | |
| 3,738,670 | | |
| 1,285,170 | |
Total liabilities | |
| 5,682,494 | | |
| 2,660,810 | |
| |
| | | |
| | |
Commitments and contingencies | |
| | | |
| | |
| |
| | | |
| | |
Stockholders' deficit | |
| | | |
| | |
Preferred stock, $.001 par value per share, 1,000,000 shares authorized; no shares issued | |
| - | | |
| - | |
Common stock, par value $.001 per share, 200,000,000 shares authorized, 101,640,092 and 101,316,580 issued and outstanding | |
| 101,640 | | |
| 101,317 | |
Additional paid-in capital | |
| 98,137,194 | | |
| 97,991,419 | |
Accumulated deficit | |
| (103,285,056 | ) | |
| (99,804,355 | ) |
Total stockholders' deficit | |
| (5,046,222 | ) | |
| (1,711,619 | ) |
Total liabilities and stockholders' deficit | |
$ | 636,272 | | |
$ | 949,191 | |
The accompanying notes are an integral part of these condensed
financial statements.
RegeneRx Biopharmaceuticals,
Inc.
Condensed Statements of Operations
| |
Three Months ended June 30, | | |
Six Months ended June 30, | |
| |
2015 | | |
2014 | | |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| | |
| | |
| |
Revenues | |
$ | 5,000 | | |
$ | - | | |
$ | 45,000 | | |
$ | - | |
| |
| | | |
| | | |
| | | |
| | |
Operating expenses | |
| | | |
| | | |
| | | |
| | |
Research and development | |
| 78,460 | | |
| 149,066 | | |
| 114,931 | | |
| 223,766 | |
General and administrative | |
| 477,141 | | |
| 256,947 | | |
| 871,641 | | |
| 545,804 | |
Total operating expenses | |
| 555,601 | | |
| 406,013 | | |
| 986,572 | | |
| 769,570 | |
Loss from operations | |
| (550,601 | ) | |
| (406,013 | ) | |
| (941,572 | ) | |
| (769,570 | ) |
Interest and other income | |
| 24 | | |
| 39 | | |
| 101 | | |
| 42 | |
Interest expense | |
| (43,101 | ) | |
| (46,479 | ) | |
| (85,730 | ) | |
| (92,186 | ) |
Change in fair value of derivative | |
| (1,168,334 | ) | |
| 233,666 | | |
| (2,453,500 | ) | |
| (1,482,168 | ) |
Net loss | |
$ | (1,762,012 | ) | |
$ | (218,787 | ) | |
$ | (3,480,701 | ) | |
$ | (2,343,882 | ) |
| |
| | | |
| | | |
| | | |
| | |
Basic and diluted net loss per common share | |
$ | (0.02 | ) | |
$ | (0.00 | ) | |
$ | (0.03 | ) | |
$ | (0.03 | ) |
Weighted average number of common shares outstanding | |
| 101,509,149 | | |
| 92,983,247 | | |
| 101,413,396 | | |
| 87,637,943 | |
The accompanying notes are an integral part
of these condensed financial statements.
RegeneRx Biopharmaceuticals, Inc.
Condensed Statements of Cash Flows
| |
For the six months ended June 30, | |
| |
2015 | | |
2014 | |
| |
(Unaudited) | | |
(Unaudited) | |
| |
| | |
| |
Operating activities: | |
| | | |
| | |
Net loss | |
$ | (3,480,701 | ) | |
$ | (2,343,882 | ) |
Adjustments to reconcile net loss to net cash used in operating activities: | |
| | | |
| | |
Depreciation and amortization | |
| 1,740 | | |
| 1,803 | |
Share-based compensation | |
| 137,998 | | |
| 110,644 | |
Shares issued as compensation to non-employees | |
| 8,100 | | |
| - | |
Non-cash interest expense | |
| 60,911 | | |
| 67,419 | |
Change in fair value of derivative | |
| 2,453,500 | | |
| 1,482,168 | |
Changes in operating assets and liabilities: | |
| | | |
| | |
Unearned revenue | |
| 495,000 | | |
| - | |
Prepaid expenses and other current assets | |
| 31,134 | | |
| (53,276 | ) |
Accounts payable | |
| (17,446 | ) | |
| (217,265 | ) |
Accrued expenses | |
| 29,719 | | |
| 65,812 | |
Net cash used in operating activities | |
| (280,045 | ) | |
| (886,577 | ) |
| |
| | | |
| | |
Investing activities: | |
| | | |
| | |
Purchase of property and equipment | |
| (1,076 | ) | |
| - | |
Net cash used in investing activities | |
| (1,076 | ) | |
| - | |
| |
| | | |
| | |
Financing activities: | |
| | | |
| | |
Proceeds from sale of common stock and issuance of warrants | |
| - | | |
| 1,500,000 | |
Proceeds from issuance of debt | |
| - | | |
| 55,000 | |
Cash provided by financing activities | |
| - | | |
| 1,555,000 | |
Net (decrease) increase in cash and cash equivalents | |
| (281,121 | ) | |
| 668,423 | |
| |
| | | |
| | |
Cash and cash equivalents at beginning of period | |
| 844,043 | | |
| 6,306 | |
Cash and cash equivalents at end of period | |
$ | 562,922 | | |
$ | 674,729 | |
| |
| | | |
| | |
| |
| | | |
| | |
Supplemental Disclosure of Non-Cash Operating and Financing Activities | |
| | | |
| | |
Fair value of derivative liability at issuance | |
$ | - | | |
$ | 55,000 | |
| |
| | | |
| | |
Cashless exercise of warrants | |
$ | 294 | | |
$ | - | |
The accompanying notes are an integral part
of these condensed financial statements.
RegeneRx Biopharmaceuticals, Inc.
Notes to Condensed Financial Statements
For the three and six months ended June
30, 2015 and 2014 (Unaudited)
| 1. | organization,
business overview and basis of presentation |
Organization and Nature of Operations.
RegeneRx Biopharmaceuticals, Inc. (“RegeneRx”,
the “Company”, “We”, “Us”, “Our”), a Delaware corporation, was incorporated in
1982. We are focused on the discovery and development of novel molecules to accelerate tissue and organ repair. Our operations
are confined to one business segment: the development and marketing of product candidates based on Thymosin Beta 4 (“Tβ4”),
an amino acid peptide.
Management Plans to Address Operating
Conditions.
On January 28, 2015, we announced that
we had entered into a Joint Venture Agreement (the “Joint Venture Agreement”) with G-treeBNT Co., Ltd., a Korean
pharma company (“G-treeBNT”) and shareholder of the Company. The Joint Venture Agreement provides for the creation
of an entity (the “Joint Venture” or “ReGenTree”), jointly owned by us and G-treeBNT, that will
commercialize RGN-259 for treatment of dry eye and neurotrophic keratopathy, an orphan indication in the United States. G-treeBNT
will be responsible for funding all product development and commercialization efforts, and holds a majority interest of ReGenTree
that varies depending on development milestones achieved and eventual commercialization path, if successful. In conjunction with
the Joint Venture Agreement, we also entered into a royalty-bearing license agreement (the “License Agreement”)
with ReGenTree pursuant to which we granted to ReGenTree the right to develop and exclusively commercialize RGN-259 in the United
States. We will receive a total of $1 million in two tranches under the terms of the License Agreement, the first tranche of $500,000
which was received in March 2015 and a second in the amount of $500,000, within forty-five business days after enrollment of the
first patient in an ophthalmic trial in the U.S. We are also entitled to royalties as a percentage of net of sales ranging from
the mid-single digits to the low-double digits based on the medical indications approved and whether the Joint Venture commercializes
products directly or through a third party. RegeneRx possesses one of three board seats and certain major decisions within ReGenTree,
such as commercialization strategy, mergers, acquisitions, require unanimous consent of the board. In March 2015, RegeneRx’s
joint venture partner and licensee, G-treeBNT, received $7.28 million to expand international development of its product candidate,
RGN-259 (designated GBT-201 in Korea). The $7.28 million will be used for development of RGN-259/GBT-201 for dry eye syndrome and
neurotrophic keratopathy (an orphan indication) in the U.S. through the U.S. joint venture, ReGenTree, LLC.
Currently, we have active partnerships
in three major territories: the U.S., China and Pan Asia. Our partners have been moving forward and making significant progress
in each territory and are prepared to initiate their clinical trials programs this year. In each case, the cost of development
is being borne by our partners with no financial obligation for RegeneRx. Patient accrual, treatment, and follow-up for the ophthalmic
trials are relatively fast, as opposed to most other clinical efforts, so data should be forthcoming in months, not years, after
patients begin enrollment. We believe we should be able to maintain our existing operations at the current level while we await
results from these trials and continue to seek additional partnership opportunities.
We still have significant clinical assets
to develop, primarily RGN-352 (injectable formulation of Tβ4 for cardiac and CNS disorders) in the U.S., Pan Asia, and Europe,
and RGN-259 in the EU. Our goal is to wait until the results are obtained from the current ophthalmic clinical trials before moving
into the EU with RGN-259. If successful, this should allow us to obtain a higher value for the asset at that time. However, we
intend to continue to develop RGN-352, either by obtaining grants to fund a Phase 2a clinical trial in the cardiovascular or central
nervous system fields or finding a suitable partner with the resources and capabilities to develop it as we have with RGN-259.
We anticipate incurring additional losses
in the future as we continue to explore the potential clinical benefits of Tβ4-based product candidates over multiple indications.
We have entered into a series of strategic partnerships under licensing and joint venture agreements (see Note 7) where our partners
are responsible to advance development of our product candidates with multiple clinical trials starting in the later part of 2015.
After extending the maturity date of our
October 2012 Notes ($300,000 face value) until October 2017, we will need substantial additional funds if we wish to internally
advance development of our unlicensed programs and to fund our operations into the second quarter of 2016. Accordingly, we will
continue to evaluate opportunities to raise additional capital and are in the process of exploring various alternatives, including,
without limitation, a public or private placement of our securities, debt financing, corporate collaboration and licensing arrangements,
government grants, or the sale of our company or certain of our intellectual property rights.
These factors raise substantial doubt about
our ability to continue as a going concern. The accompanying condensed financial statements have been prepared assuming that we
will continue as a going concern. This basis of accounting contemplates the recovery of our assets and the satisfaction of our
liabilities in the normal course of business.
Although we intend to continue to seek
additional financing and additional strategic partners, we may not be able to complete a financing or corporate transaction, either
on favorable terms or at all. If we are unable to complete a financing or strategic transaction, we may not be able to continue
as a going concern after our funds have been exhausted, and we could be required to significantly curtail or cease operations,
file for bankruptcy or liquidate and dissolve. There can be no assurance that we will be able to obtain any sources of funding.
The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts
and classification of liabilities that might be necessary should we be forced to take any such actions.
In order to operate as efficiently and
effectively as possible, we continually refine our operating strategy and evaluate new ways to develop Tβ4. Although we have
entered strategic partnerships where our partners are responsible for all product development funding, additional financial resources
will be needed for continued operations before we will be able to achieve sustained profitability. Consequently, we continually
evaluate alternative sources of financing such as the sharing of development costs through strategic collaboration agreements and
grants. There can be no assurance that any future financing initiatives will be successful and, if we are not able to obtain sufficient
levels of financing, it would delay certain clinical and/or research activities not currently funded by our partners and our financial
condition would be materially and adversely affected. Even if we are able to obtain sufficient funding, other factors including
competition, dependence on third parties, uncertainty regarding patents, protection of proprietary rights, manufacturing of peptides,
and technology obsolescence could have a significant impact on us and our operations.
To achieve profitability we, and/or a partner,
must successfully conduct pre-clinical studies and clinical trials, obtain required regulatory approvals and successfully manufacture
and market those pharmaceuticals we wish to commercialize. The time required to reach profitability is highly uncertain, and there
can be no assurance that we will be able to achieve sustained profitability, if at all.
Basis of Presentation.
The accompanying unaudited condensed interim
financial statements reflect, in the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary
for a fair presentation of our financial position, results of operations and cash flows for each period presented. These statements
have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and with the rules and
regulations of the SEC, for interim financial statements. Accordingly, they do not include all of the information and footnotes
required by GAAP. The accounting policies underlying our unaudited condensed interim financial statements are consistent with those
underlying our audited annual financial statements. These unaudited condensed interim financial statements should be read in conjunction
with the audited annual financial statements as of and for the year ended December 31, 2014, and related notes thereto, included
in our Annual Report on Form 10-K for the year ended December 31, 2014 (the “Annual Report”).
The accompanying December 31, 2014 financial
information was derived from our audited financial statements included in the Annual Report. Operating results for the three and
six month periods ended June 30, 2015 are not necessarily indicative of the results to be expected for the year ending December
31, 2015 or any other future period.
References in this Quarterly Report on
Form 10-Q to “authoritative guidance” are to the Accounting Standards Codification issued by the Financial Accounting
Standards Board (“FASB”).
Use of Estimates.
The preparation of financial statements
in conformity with accounting principles generally accepted in the United Stated of America (“U.S. GAAP”) requires
management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.
Critical accounting policies involved in applying our accounting policies are those that require management to make assumptions
about matters that are highly uncertain at the time the accounting estimate was made and those for which different estimates reasonably
could have been used for the current period. Critical accounting estimates are also those which are reasonably likely to change
from period to period, and would have a material impact on the presentation of our financial condition, changes in financial condition
or results of operations. Our most critical accounting estimates relate to accounting policies for fair value measurements in connection
with derivative liabilities, clinical trial accruals and share-based arrangements. Management bases its estimates on historical
experience and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ
from those estimates.
Convertible
Notes with Detachable Warrants.
In accordance with Accounting Standards
Codification (ASC) 470-20, Debt with Conversion and Other Options, the proceeds received from convertible notes are allocated
between the convertible notes and the detachable warrants based on the relative fair value of the convertible notes without the
warrants and the relative fair value of the warrants. The portion of the proceeds allocated to the warrants is recognized as additional
paid-in capital and a debt discount. The debt discount related to warrants is accreted into interest expense through maturity of
the notes.
Derivative Financial Instruments
Derivative financial instruments consist
of financial instruments or other contracts that contain a notional amount and one or more underlying variables (e.g. interest
rate, security price or other variable), which require no initial net investment and permit net settlement. Derivative financial
instruments may be free-standing or embedded in other financial instruments. Further, derivative financial instruments are initially,
and subsequently, measured at fair value and recorded as liabilities or, in rare instances, assets.
The Company does not use derivative financial
instruments to hedge exposures to cash-flow, market or foreign-currency risks. However, the Company has issued financial instruments
including warrants that are either (i) not afforded equity classification, (ii) embody risks not clearly and closely related to
host contracts, or (iii) may be net-cash settled by the counterparty. In certain instances, these instruments are required to be
carried as derivative liabilities, at fair value, in the Company’s financial statements. In other instances these instruments
are classified as equity instruments in the Company’s financial statements.
The Company estimates the fair values of
its derivative financial instrument using the Black-Scholes option pricing model because it embodies all of the requisite assumptions
(including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments. Estimating fair
values of derivative financial instruments requires the development of significant and subjective estimates that may, and are likely
to, change over the duration of the instrument with related changes in internal and external market factors. In addition, option-based
techniques are highly volatile and sensitive to changes in the trading market price of the Company’s common stock, which
has a high-historical volatility. Since derivative financial instruments are initially and subsequently carried at fair values,
the Company’s operating results reflect the volatility in these estimate and assumption changes in each reporting period.
Revenue
Recognition.
We recognize revenue in accordance with
the authoritative guidance for revenue recognition. We recognize revenue when all of the following criteria are met: (i) persuasive
evidence of an arrangement exists, (ii) delivery (or passage of title) has occurred or services have been rendered, (iii) the seller's
price to the buyer is fixed or determinable, and (iv) collectability is reasonably assured. We also comply with the authoritative
guidance for revenue recognition regarding arrangements with multiple deliverables. Multiple-element arrangements are analyzed
to determine whether the deliverables, which may include a license together with performance obligations such as providing a clinical
supply of product and steering committee services, can be separated or whether they must be accounted for as a single unit of accounting.
Revenue associated with licensing agreements consists of non-refundable upfront license fees and milestone payments. Non-refundable
upfront license fees received under license agreements, whereby continued performance or future obligations are considered inconsequential
to the relevant license technology, are recognized as revenue upon delivery of the technology.
Whenever we determine that an arrangement
should be accounted for as a single unit of accounting, we must determine the period over which the performance obligations will
be performed and revenue will be recognized. Revenue will be recognized using either a relative performance or straight-line method.
We recognize revenue using the relative performance method provided that the we can reasonably estimate the level of effort required
to complete our performance obligations under an arrangement and such performance obligations are provided on a best-efforts basis.
Revenue recognized is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue earned,
as determined using the relative performance method, as of each reporting period.
If we cannot reasonably estimate the level
of effort required to complete our performance obligations under an arrangement, the performance obligations are provided on a
best-efforts basis and we can reasonably estimate when the performance obligation ceases or the remaining obligations become inconsequential
and perfunctory, then the total payments under the arrangement, excluding royalties and payments contingent upon achievement of
substantive milestones, would be recognized as revenue on a straight-line basis over the period we expect to complete our performance
obligations. Revenue is limited to the lesser of the cumulative amount of payments received or the cumulative amount of revenue
earned, as determined using the straight-line basis, as of the period ending date.
If we cannot reasonably estimate when our
performance obligation either ceases or becomes inconsequential and perfunctory, then revenue is deferred until we can reasonably
estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated
period of performance.
We recognize consideration that is contingent
upon the achievement of a milestone in its entirety as revenue in the period in which the milestone is achieved only if the milestone
is substantive in its entirety. A milestone is considered substantive when it meets all of the following criteria:
| · | The consideration is commensurate with either the entity's performance to achieve the milestone
or the enhancement of the value of the delivered item(s) as a result of a specific outcome resulting from the entity's performance
to achieve the milestone; |
| · | The consideration relates solely to past performance; and |
| · | The consideration is reasonable relative to all of the deliverables
and payment terms within the arrangement. |
A milestone is defined as an event (i)
that can only be achieved based in whole or in part on either the entity's performance or on the occurrence of a specific outcome
resulting from the entity's performance, (ii) for which there is substantive uncertainty at the date the arrangement is entered
into that the event will be achieved and (iii) that would result in additional payments being due to us.
Amounts received prior to satisfying the
above revenue recognition criteria are recorded as deferred revenue in our accompanying condensed balance sheets.
Variable Interest Entities
The Company has determined that the Joint
Venture is a “variable interest entity”, since the total equity investment at risk is not sufficient to permit the
Joint Venture to finance its activities without additional subordinated financial support. Further, because of G-treeBNT’s
majority equity stake in the Joint Venture, voting control, control of the board of directors, and substantive management rights,
and given that the Company does not have the power to direct the Joint Venture’s activities that most significantly impact
its economic performance, the Company determined that it is not the primary beneficiary of the Joint Venture and therefore is not
required to consolidate the Joint Venture. The Company reports its equity stake in the Joint Venture using the equity method of
accounting because, while it does not control the Joint Venture, the Company can exert significant influence over the Joint Ventures
activities by virtue of its board representation.
Because the Company is not obligated to
fund the Joint Venture, and has not provided any financial support and has no commitment to provide financial support in the future
to the Joint Venture, the carrying value of its investment in the Joint Venture is zero. As a result, the Company is not recognizing
its share (49%) of the Joint Venture’s operating losses and will not recognize any such losses until the Joint Venture produces
net income (as opposed to net losses) and at that point the Company will reduce its share of the Joint Venture’s net income
by its share of previously suspended net losses. As of June 30, 2015, because it has not provided any financial support, the Company
has no financial exposure as a result of its variable interest in the Joint Venture.
Research and Development.
Research and development (“R&D”)
costs are expensed as incurred and include all of the wholly-allocable costs associated with our various clinical programs passed
through to us by our outsourced vendors. Those costs include: manufacturing Tβ4; formulation of Tβ4 into the various
product candidates; stability for both Tβ4 and the various formulations; pre-clinical toxicology; safety and pharmacokinetic
studies; clinical trial management; medical oversight; laboratory evaluations; statistical data analysis; regulatory compliance;
quality assurance; and other related activities. R&D includes cash and non-cash compensation, payroll taxes, travel and other
miscellaneous costs of our internal R&D personnel, part-time hourly employees and external consultants dedicated to R&D
efforts. R&D also includes a pro-ration of our common infrastructure costs for office space and communications.
Cost of Preclinical Studies and Clinical
Trials.
We accrue estimated costs for preclinical
studies based on estimates of work performed. We estimate expenses incurred for clinical trials that are in process based on patient
enrollment and based on clinical data collection and management. Costs based on clinical data collection and management are recognized
based on estimates of unbilled goods and services received in the reporting period. We monitor the progress of the trials and their
related activities and adjust the accruals accordingly. Adjustments to accruals are charged to expense in the period in which the
facts that give rise to the adjustment become known. In the event of early termination of a clinical trial, we would accrue an
amount based on estimates of the remaining non-cancelable obligations associated with winding down the clinical trial.
Recent Accounting Pronouncements.
In August
2014, the FASB issued Accounting Standard Update (“ASU”) 2014-15, Presentation
of Financial Statements – Going Concern. The new standard requires management to evaluate on a regular basis whether
any conditions or events have arisen that could raise substantial doubt about the entity’s ability to continue as a going
concern. The guidance 1) provides a definition for the term “substantial doubt,” 2) requires an evaluation every reporting
period, interim periods included, 3) provides principles for considering the mitigating effect of management’s plans to alleviate
the substantial doubt, 4) requires certain disclosures if the substantial doubt is alleviated as a result of management’s
plans, 5) requires an express statement, as well as other disclosures, if the substantial doubt is not alleviated, and 6) requires
an assessment period of one year from the date the financial statements are issued. The standard is effective for the Company’s
reporting year beginning January 1, 2017 and early adoption is not permitted. The Company is currently evaluating the impact, if
any, that this new accounting pronouncement will have on its financial statements.
In May 2014, the FASB issued ASU 2014-09, Revenue
from Contracts with Customers, which provides guidance for revenue recognition for contracts, superseding the previous revenue
recognition requirements, along with most existing industry-specific guidance. The guidance requires an entity to review contracts
in five steps: 1) identify the contract, 2) identify performance obligations, 3) determine the transaction price, 4) allocate the
transaction price, and 5) recognize revenue. The new standard will result in enhanced disclosures regarding the nature, amount,
timing and uncertainty of revenue arising from contracts with customers. The standard is effective for the Company’s reporting
year beginning January 1, 2017 and early adoption is not permitted. The Company is currently evaluating the impact, if any, that
this new accounting pronouncement will have on its financial statements.
In April 2015, the FASB issued ASU
2015-03, Interest – Imputation of Interest, which amends the presentation of debt issuance costs. These costs
will now be presented as a direct reduction from the carrying amount of that debt liability. The update is effective
for financial statements issued for reporting periods beginning after December 15, 2015. This guidance should be applied
on a retrospective basis with disclosures for a change in accounting principle applicable. The Company has not yet adopted
this update and is currently evaluating the impact, if any, it may have on its financial condition and results of operations.
| 2. | Net Loss per
Common Share |
Net loss per common share for the three
and six month periods ended June 30, 2015 and 2014 is based on the weighted-average number of shares of common stock outstanding
during the periods. Basic and diluted loss per share are identical for all periods presented as potentially dilutive securities
have been excluded from the calculation of the diluted net loss per common share because the inclusion of such securities would
be antidilutive. The potentially dilutive securities include 22,586,951 shares and 45,374,121 shares in 2015 and 2014, respectively,
reserved for the conversion of convertible debt or exercise of outstanding options and warrants.
| 3. | Stock-Based
Compensation |
We measure stock-based compensation expense
based on the grant date fair value of the awards, which is then recognized over the period which service is required to be provided.
We estimate the value of our stock option awards on the date of grant using the Black-Scholes option pricing model and amortize
that cost over the expected term of the grant. We recognized $109,859 and $27,077 in stock-based compensation expense for the three
months ended June 30, 2015 and 2014 and $137,998 and $110,644 for the six months of 2015 and 2014, respectively. We expect to recognize
the compensation cost related to non-vested options as of June 30, 2015 of $400,077 over the weighted average remaining recognition
period of 1.37 years.
We used the following forward-looking range
of assumptions to value the 1,635,000 stock options granted to employees, consultants and directors during the six months ended
June 30, 2015 and the 2,060,000 stock options granted to employees, consultants and directors during the six months ended June
30, 2014:
| |
2015 | | |
2014 | |
| |
| | |
| |
Dividend yield | |
| 0.0 | % | |
| 0.0 | % |
Risk-free rate of return | |
| 1.53-1.63 | % | |
| 1.70-1.76 | % |
Expected life in years | |
| 4.5 - 4.75 | | |
| 4
- 5 | |
Volatility | |
| 92-94 | % | |
| 91-98 | % |
Forfeiture rate | |
| 2.6 | % | |
| 2.6 | % |
As of June 30, 2015, there have been no
material changes to our uncertain tax positions disclosures as provided in Note 9 of the Annual Report. The tax returns for all
years in the Company’s major tax jurisdictions are not settled as of January 1, 2015; no changes in settled tax years have
occurred through June 30, 2015. Due to the existence of tax attribute carryforwards (which are currently offset by a full valuation
allowance), the Company treats all years’ tax positions as unsettled due to the taxing authorities’ ability to modify
these attributes.
| 5. | Fair Value
Measurements |
The authoritative guidance for fair value
measurements defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit
price) in the principal or the most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. Market participants are buyers and sellers in the principal market that are (i) independent, (ii) knowledgeable,
(iii) able to transact, and (iv) willing to transact. The guidance describes a fair value hierarchy based on the levels of inputs,
of which the first two are considered observable and the last unobservable, that may be used to measure fair value which are the
following:
Level 1 — Quoted prices
in active markets for identical assets and liabilities.
Level 2 — Observable inputs
other than quoted prices in active markets for identical assets and liabilities.
Level 3 — Unobservable inputs.
As of June 30, 2015 and 2014, our only
qualifying assets that required measurement under the foregoing fair value hierarchy were money market funds included in Cash and
Cash Equivalents valued at $563,000 and $675,000, respectively, using Level 1 inputs. Our June 30, 2015 and December 31, 2014 balance
sheets reflect qualifying liabilities resulting from the price protection provision in the convertible promissory notes issued
in March, July and September of 2013 and January 2014 (see Note 6). We evaluated the derivative liability embedded in the series
of convertible notes to determine if an adjustment to the carrying value of the liability was required at June 30, 2015 using the
following assumptions.
| |
March 2013 | | |
July 2013 | | |
Sept 2013 | | |
Jan 2014 | |
| |
| | |
| | |
| | |
| |
Dividend yield | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % | |
| 0.00 | % |
Risk-free rate of return | |
| 1.01 | % | |
| 1.01 | % | |
| 1.01 | % | |
| 1.01 | % |
Expected life in years | |
| 2.75 | | |
| 3 | | |
| 3.2 | | |
| 3.5 | |
Volatility | |
| 111.4 | % | |
| 107.3 | % | |
| 104.3 | % | |
| 102.2 | % |
Given the conditions surrounding the trading
of the Company’s equity securities, the Company values its derivative instruments related to embedded conversion features
from the issuance of convertible debentures in accordance with the Level 3 guidelines. For the period ended June 30,
2015, the following table reconciles the beginning and ending balances for financial instruments that are recognized at fair value
in these financial statements.
| |
Balance at | | |
| | |
| | |
Balance at | |
| |
March 31, | | |
New | | |
Change in | | |
June 30, | |
| |
2015 | | |
Issuances | | |
Fair Values | | |
2015 | |
| |
| | |
| | |
| | |
| |
Level 3 - | |
| | | |
| | | |
| | | |
| | |
Derivative liabilities from: | |
| | | |
| | | |
| | | |
| | |
Conversion features | |
| | | |
| | | |
| | | |
| | |
March 2013 | |
$ | 825,000 | | |
$ | - | | |
$ | 375,000 | | |
$ | 1,200,000 | |
July 2013 | |
| 366,667 | | |
| - | | |
| 166,667 | | |
| 533,334 | |
September 2013 | |
| 1,177,000 | | |
| - | | |
| 535,000 | | |
| 1,712,000 | |
January 2014 | |
| 201,669 | | |
| - | | |
| 91,667 | | |
| 293,336 | |
Derivative instruments | |
$ | 2,570,336 | | |
$ | - | | |
$ | 1,168,334 | | |
$ | 3,738,670 | |
2012 Convertible
Note
On October 19, 2012 we
completed a private placement of convertible notes (the “2012 Notes”) raising an aggregate of $300,000 in gross proceeds.
The 2012 Notes were originally to mature after twenty-four (24) months from issuance. In order to conserve the Company’s
capital, in October 2014 the Investors agreed to extend the maturity date to October 19, 2017, all other terms were unchanged.
The 2012 Notes bear interest at a rate of five percent (5%) per annum and are convertible into shares of our common stock at a
conversion price of fifteen cents ($0.15) per share (subject to adjustment as described in the 2012 Notes) at any time prior to
repayment, at the election of the Investors. In the aggregate, the 2012 Notes are convertible into up to 2,000,000 shares of our
common stock excluding interest.
At any time prior to
maturity of the 2012 Notes, with the consent of the holders of a majority in interest of the 2012 Notes, we may prepay the outstanding
principal amount of the 2012 Notes plus unpaid accrued interest without penalty. Upon the commission of any act of bankruptcy by
the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing by or against the Company
of a petition in bankruptcy or any petition for relief under the federal bankruptcy act or the continuation of such petition without
dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take possession of the property
or assets of the Company, the outstanding principal and all accrued interest on the 2012 Notes will accelerate and automatically
become immediately due and payable.
In connection with the
issuance of the 2012 Notes we also issued warrants to each Investor. The warrants are exercisable for an aggregate of 400,000 shares
of common stock with an exercise price of fifteen cents ($0.15) per share for a period of five years. The relative fair value of
the warrants issued is $27,097, calculated using the Black-Scholes-Merton valuation model value of $0.07 with an expected and contractual
life of 5 years, an assumed volatility of 74.36%, and a risk-free interest rate of 0.77%. The warrants were recorded as additional
paid-in-capital and a discount on the 2012 Notes of $27,097. Non-cash interest expense related to the debt discount during the
three and six months ended June 30, 2014 totaled $3,341 and $6,682, respectively.
The Investors, and the
principal amount of their respective 2012 Notes and number of shares of common stock issuable upon exercise of their respective
warrants, are as set forth below:
Investor | |
Note Principal | | |
Warrants | |
Sinaf S.A. | |
$ | 200,000 | | |
| 266,667 | |
Joseph C. McNay | |
$ | 50,000 | | |
| 66,667 | |
Allan L. Goldstein | |
$ | 35,000 | | |
| 46,666 | |
J.J. Finkelstein | |
$ | 15,000 | | |
| 20,000 | |
Sinaf S. A. is a
direct wholly-owned subsidiary of Aptafin S.p.A., or Aptafin. Aptafin is owned directly by Paolo Cavazza and members of his
family, who directly and indirectly own 38% of Sigma-Tau, our largest stockholder. The other Investors are members of our
Board of Directors including Mr. Finkelstein who serves as our CEO and also the Chairman of our Board of Directors and
Dr. Goldstein who also serves as our Chief Scientific Advisor.
In the fourth quarter
of 2014, the Company amended the existing October 2012 convertible debt agreement with the lenders, solely to extend the due date
of the principal and accrued unpaid until interest October 19, 2017. No other terms of the original debt were amended or
modified, and the lenders did not reduce the borrowed amount or change the interest rate of the debt. The Company considered
the restructuring a troubled debt restructuring as a result of the Company’s financial condition (see Note 1 discussion of
management plans to address operating conditions). At the date of the amendment, all existing debt discounts and deferred
financing fees were fully amortized and the amendment did not involve any additional fees paid to the lender or third parties;
as such there was no gain recognized as a result of the amendment.
2013 Convertible
Notes
On March 29, 2013, we
completed a private placement of convertible notes (the “March 2013 Notes”) raising an aggregate of $225,000 in gross
proceeds. The March 2013 Notes bear interest at a rate of five percent (5%) per annum, mature sixty (60) months after their date
of issuance and are convertible into shares of our common stock at a conversion price of six cents ($0.06) per share (subject to
adjustment as described in the March 2013 Notes) at any time prior to repayment, at the election of the investor. In the aggregate,
the March 2013 Notes are initially convertible into up to 3,750,000 shares of our common stock.
At any time prior to
maturity of the March 2013 Notes, with the consent of the holders of a majority in interest of the March 2013 Notes, we may prepay
the outstanding principal amount of the March 2013 Notes plus unpaid accrued interest without penalty. Upon the commission of any
act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing
by or against the Company of a petition in bankruptcy or any petition for relief under the Federal bankruptcy act or the continuation
of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take
possession of the property or assets of the Company, the outstanding principal and all accrued interest on the March 2013 Notes
will accelerate and automatically become immediately due and payable.
The investors in the
offering included two directors of the Company, Dr. Goldstein and Joseph C. McNay, an outside director. The principal amounts of
their respective March 2013 Notes are as set forth below:
Investor | |
Note Principal | |
Joseph C. McNay | |
$ | 50,000 | |
Allan L. Goldstein | |
$ | 25,000 | |
The Company has evaluated
the terms of the March 2013 Notes which contain a down round provision under which the conversion price could be decreased as a
result of future equity offerings, as defined in the March 2013 Notes. The adjustment would reduce the conversion price
of the March 2013 Notes to be equivalent to that of the newly issued stock or stock-related instruments. As a result,
the Company concluded that the conversion feature represented an embedded conversion feature for accounting purposes and should
be recognized as a derivative liability, requiring a mark-to-market adjustment at the end of each reporting period until the related
March 2013 Notes have been settled. The bifurcated liability of $225,000 was recorded on the date of issuance which resulted
in a residual debt value of $0. The discount related to the embedded feature will be accreted back to debt through the maturity
of the notes.
On July 5, 2013, we completed
a private placement of convertible notes (the “July 2013 Notes”) raising an aggregate of $100,000 in gross proceeds.
The July 2013 Notes bear interest at a rate of five percent (5%) per annum, mature sixty (60) months after their date of issuance
and are convertible into shares of our common stock at a conversion price of six cents ($0.06) per share (subject to adjustment
as described in the July 2013 Notes) at any time prior to repayment, at the election of the investor. In the aggregate, the July
2013 Notes are initially convertible into up to 1,666,667 shares of our common stock.
At any time prior to
maturity of the July 2013 Notes, with the consent of the holders of a majority in interest of the July 2013 Notes, we may prepay
the outstanding principal amount of the July 2013 Notes plus unpaid accrued interest without penalty. Upon the commission of any
act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of creditors, the filing
by or against the Company of a petition in bankruptcy or any petition for relief under the Federal bankruptcy act or the continuation
of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver or trustee to take
possession of the property or assets of the Company, the outstanding principal and all accrued interest on the July 2013 Notes
will accelerate and automatically become immediately due and payable.
The investors in the
offering included four directors of the Company, Mr. Finkelstein, Dr. Goldstein, Mr. McNay and L. Thompson Bowles, an outside director.
The principal amounts of their respective July 2013 Notes are as set forth below:
Investor | |
Note Principal | |
Joseph C. McNay | |
$ | 50,000 | |
Allan L. Goldstein | |
$ | 10,000 | |
J.J. Finkelstein | |
$ | 5,000 | |
L. Thompson Bowles | |
$ | 5,000 | |
The Company has evaluated
the terms of the July 2013 Notes which contain a down round provision under which the conversion price could be decreased as a
result of future equity offerings, as defined in the July 2013 Notes. The adjustment would reduce the conversion price
of the July 2013 Notes to be equivalent to that of the newly issued stock or stock-related instruments. As a result,
the Company concluded that the conversion feature represented an embedded conversion feature for accounting purposes and should
be recognized as a derivative liability, requiring a mark-to-market adjustment at the end of each reporting period until the related
July 2013 Notes have been settled. The bifurcated liability of $66,667 was recorded on the date of issuance which resulted
in a residual debt value of $33,333. The discount related to the embedded feature will be accreted back to debt through the maturity
of the notes.
On September 11, 2013,
we completed a private placement of convertible notes raising an aggregate of $321,000 in gross proceeds (the “September
2013 Notes”). The September 2013 Notes bear interest at a rate of five percent (5%) per annum, mature sixty (60)
months after their date of issuance and are convertible into shares of our common stock at a conversion price of six cents ($0.06)
per share (subject to adjustment as described in the September 2013 Notes) at any time prior to repayment, at the election of the
investor. In the aggregate, the September 2013 Notes are initially convertible into up to 5,350,000 shares of our common
stock.
At any time prior to
maturity of the September 2013 Notes, with the consent of the holders of a majority in interest of the September 2013 Notes, we
may prepay the outstanding principal amount of the September 2013 Notes plus unpaid accrued interest without penalty. Upon
the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of
creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy
act or the continuation of such petition without dismissal for a period of ninety (90) days or more, or the appointment of a receiver
or trustee to take possession of the property or assets of the Company, the outstanding principal and all accrued interest on the
September 2013 Notes will accelerate and automatically become immediately due and payable.
The investors in the
offering included an affiliate and four directors of the Company. The principal amounts of the affiliate and directors respective
September 2013 Notes are as set forth below:
Investor | |
Note Principal | |
SINAF S.A. | |
$ | 150,000 | |
Joseph C. McNay | |
$ | 100,000 | |
Allan L. Goldstein | |
$ | 11,000 | |
L. Thompson Bowles | |
$ | 5,000 | |
R. Don Elsey | |
$ | 5,000 | |
The Company has evaluated
the terms of the September 2013 Notes which contain a down round provision under which the conversion price could be decreased
as a result of future equity offerings, as defined in the September 2013 Notes. The adjustment would reduce the conversion
price of the September 2013 Notes to be equivalent to that of the newly issued stock or stock-related instruments. As
a result, the Company concluded that the conversion feature represented an embedded conversion feature for accounting purposes
and should be recognized as a derivative liability, requiring a mark-to-market adjustment at the end of each reporting period until
the related September 2013 Notes have been settled. The bifurcated liability of $267,500 was recorded on the date of
issuance which resulted in a residual debt value of $53,500. The discount related to the embedded feature will be accreted back
to debt through the maturity of the notes.
2014 Convertible
Notes
On January 7, 2014, we
completed a private placement of convertible notes raising an aggregate of $55,000 in gross proceeds (the “January 2014 Notes”).
The January 2014 Notes will pay interest at a rate of 5% per annum, mature 60 months after their date of issuance and are convertible
into shares of our common stock at a conversion price of $0.06 per share (subject to adjustment as described in the January 2014
Notes) at any time prior to repayment, at the election of the Investor. In the aggregate, the Notes are initially convertible
into up to 916,667 shares of our common stock.
At any time prior to
maturity of the January 2014 Notes, with the consent of the holders of a majority in interest of the January 2014 Notes, we may
prepay the outstanding principal amount of the January 2014 Notes plus unpaid accrued interest without penalty. Upon
the commission of any act of bankruptcy by the Company, the execution by the Company of a general assignment for the benefit of
creditors, the filing by or against the Company of a petition in bankruptcy or any petition for relief under the federal bankruptcy
act or the continuation of such petition without dismissal for a period of 90 days or more, or the appointment of a receiver or
trustee to take possession of the property or assets of the Company, the outstanding principal and all accrued interest on the
January 2014 Notes will accelerate and automatically become immediately due and payable.
The Investors in the
offering included three directors of the Company. The principal amounts of their respective Notes are as set forth below:
Investor | |
Note Principal | |
Joseph C. McNay | |
$ | 25,000 | |
Allan L. Goldstein | |
$ | 10,000 | |
L. Thompson Bowles | |
$ | 5,000 | |
The Company has evaluated
the terms of the January 2014 Notes which contain a down round provision under which the conversion price could be decreased as
a result of future equity offerings, as defined in the January 2014 Notes. The adjustment would reduce the conversion
price of the January 2014 Notes to be equivalent to that of the newly issued stock or stock-related instruments. As
a result, the Company concluded that the conversion feature represented an embedded conversion feature for accounting purposes
and should be recognized as a derivative liability, requiring a mark-to-market adjustment at the end of each reporting period until
the related January 2014 Notes have been settled. The bifurcated liability of $55,000 was recorded on the date of issuance
which resulted in a residual debt value of $0. The discount related to the embedded feature will be accreted back to debt through
the maturity of the notes.
The Company recorded
interest expense and discount accretion as set forth below:
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| | |
| | |
| |
2012 Notes | |
$ | 3,738 | | |
$ | 7,116 | | |
$ | 7,441 | | |
$ | 14,157 | |
| |
| | | |
| | | |
| | | |
| | |
March 2013 Notes | |
| 14,024 | | |
| 14,024 | | |
| 27,894 | | |
| 27,894 | |
| |
| | | |
| | | |
| | | |
| | |
July 2013 Notes | |
| 4,571 | | |
| 4,571 | | |
| 9,091 | | |
| 9,091 | |
| |
| | | |
| | | |
| | | |
| | |
September 2013 Notes | |
| 17,340 | | |
| 17,340 | | |
| 34,489 | | |
| 34,489 | |
| |
| | | |
| | | |
| | | |
| | |
January 2014 notes | |
| 3,428 | | |
| 3,428 | | |
| 6,815 | | |
| 6,555 | |
| |
| | | |
| | | |
| | | |
| | |
Total | |
$ | 43,101 | | |
$ | 46,479 | | |
$ | 85,730 | | |
$ | 92,186 | |
The fair value of the
derivative liability is as follows:
| |
June 30, 2015 | | |
December 31, 2014 | |
| |
| | | |
| | |
March 2013 Notes | |
$ | 1,200,000 | | |
$ | 412,500 | |
| |
| | | |
| | |
July 2013 Notes | |
| 533,334 | | |
| 183,334 | |
| |
| | | |
| | |
September 2013 Notes | |
| 1,712,000 | | |
| 588,500 | |
| |
| | | |
| | |
January 2014 notes | |
| 293,336 | | |
| 100,836 | |
| |
| | | |
| | |
Total fair value of derivative liability | |
$ | 3,738,670 | | |
$ | 1,285,170 | |
The change in fair value
of derivative liability is as follows:
| |
For the three months ended | | |
For the six months ended | |
| |
June 30, 2015 | | |
June 30, 2014 | | |
June 30, 2015 | | |
June 30, 2014 | |
| |
| | |
| | |
| | |
| |
March 2013 Notes | |
| 375,000 | | |
| (75,000 | ) | |
| 787,500 | | |
| 487,500 | |
| |
| | | |
| | | |
| | | |
| | |
July 2013 Notes | |
| 166,667 | | |
| (33,333 | ) | |
| 350,000 | | |
| 216,668 | |
| |
| | | |
| | | |
| | | |
| | |
September 2013 Notes | |
| 535,000 | | |
| (107,000 | ) | |
| 1,123,500 | | |
| 695,500 | |
| |
| | | |
| | | |
| | | |
| | |
January 2014 notes | |
| 91,667 | | |
| (18,333 | ) | |
| 192,500 | | |
| 82,500 | |
| |
| | | |
| | | |
| | | |
| | |
Total change in fair value of derivative | |
$ | 1,168,334 | | |
$ | (233,666 | ) | |
$ | 2,453,500 | | |
$ | 1,482,168 | |
Joint Venture Agreement
with G-treeBNT
On January 28, 2015,
the Company entered into the Joint Venture Agreement with G-treeBNT, a shareholder in the Company. The Joint Venture Agreement
provides for the creation of the Joint Venture, jointly owned by the Company and G-treeBNT, that will commercialize RGN-259 for
treatment of dry eye and neurotrophic keratopathy in the United States.
G-treeBNT is solely responsible
for funding all the product development and commercialization efforts of the Joint Venture. G-treeBNT made an initial contribution
of $3 million in cash and received an initial equity stake of 51%. G-treeBNT’s equity stake may increase upon the Joint Venture
achieving certain product development milestones (including receipt of a new drug application (NDA) by the U.S. FDA) and the additional
funding by G-treeBNT.
Pursuant to the Joint
Venture Agreement, the Company and the Joint Venture entered into a royalty-bearing license agreement (the “License Agreement”)
pursuant to which the Company granted to the Joint Venture the right to develop and exclusively commercialize RGN-259 in the United
States, and received an initial equity stake in the Joint Venture of 49% which may be diluted as G-treeBNT’s ownership increases.
The Company is not required or otherwise obligated to provide financial support to the Joint Venture.
The Joint Venture is
responsible for executing all development and commercialization activities under the License Agreement, which activities will be
directed by a joint development committee comprised of representatives of the Company and G-treeBNT. The License Agreement has
a term that extends to the later of the expiration of the last patent covered by the License Agreement or 25 years from the first
commercial sale under the License Agreement. The License Agreement may be earlier terminated if the Joint Venture fails to meet
certain commercialization milestones, if either party breaches the License Agreement and fails to cure such breach, as a result
of government action that limits the ability of the Joint Venture to commercialize the product, as a result of a challenge to a
licensed patent, following termination of the license between the Company and certain agencies of the United States federal government,
or upon the bankruptcy of either party.
Under the License Agreement,
the Company received $0.5 million in up-front payments and is also entitled to an additional payment of $0.5 million upon the achievement
of certain defined milestones, and to royalties on the Joint Venture’s future sales of products. The Company is accounting
for the License Agreement with the Joint Venture as a revenue arrangement. The Company has determined that the deliverables within
the License Agreement, including a delivered element (providing the license) and an undelivered element (participation on the joint
development committee), do not have stand-alone value and, as such, are treated as a single unit of accounting. As a result, the
Company is recognizing the up-front milestone payments as revenue ratably over the anticipated life of the joint development committee,
or 25 years. The joint development committee commenced activities as of June 30, 2015 therefore the Company recognized $5,000 of
revenue for the license fee. Revenue will be recognized for future royalty payments as they are earned.
In April 2015
we entered into a contract with an investor relations firm to provide services for six months. Under the agreement the Company
issued 30,000 shares of common stock and recorded $8,100 of associated compensation expense related to these common shares.
In addition,
in May 2015 the Company issued 293,512 shares of common stock pursuant to the “cashless” exercise of 957,641 warrants
issued in 2010 and 2011.
Our current office space
lease commitment is through May 2017 and our rental payments for this period are approximately $4,500 per month.
| ITEM 2. | Management’s Discussion and Analysis of Financial
Condition and Results of Operations |
This Quarterly Report on Form 10-Q,
including this Part I., Item 2., “Management’s Discussion and Analysis of Financial Condition and Results of Operations,”
contains forward-looking statements regarding us and our business, financial condition, results of operations and prospects within
the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements may be identified by the words
“project,” “believe,” “anticipate,” “plan,” “expect,” “estimate,”
“intend,” “should,” “would,” “could,” “will,” “may” or
other similar expressions. In addition, any statements that refer to projections of our future financial performance,
our clinical development programs and schedules, our future capital resources and funding requirements, our anticipated growth
and trends in our business and other characterizations of future events or circumstances are forward-looking statements. We cannot
guarantee that we will achieve the plans, intentions or expectations expressed or implied in our forward-looking statements.
There are a number of important factors that could cause actual results, levels of activity, performance or events to differ materially
from those expressed or implied in the forward-looking statements we make, including those described under “Risk Factors”
set forth below in Part II., Item 1A. In addition, any forward-looking statements we make in this document speak only as of the
date of this report, and we do not intend to update any such forward-looking statements to reflect events or circumstances that
occur after that date.
Business Overview
We are a biopharmaceutical company focused
on the development of a novel therapeutic peptide, Thymosin beta 4, or Tß4, for tissue and organ protection, repair, and
regeneration. We have formulated Tß4 into three distinct product candidates in clinical development:
• RGN-259,
a preservative-free topical eye drop for regeneration of corneal tissues damaged by injury, disease or other pathology;
• RGN-352,
an injectable formulation to treat cardiovascular diseases, central and peripheral nervous system diseases, and other medical indications
that may be treated by systemic administration; and
• RGN-137,
a topical gel for dermal wounds and reduction of scar tissue.
We are continuing strategic partnership
discussions with biotechnology and pharmaceutical companies regarding the further clinical development of all of our product candidates.
Future Plans
On January 28, 2015, we announced that
we entered into a Joint Venture, ReGenTree, LLC (“ReGenTree”), jointly owned by us and G-treeBNT Co., Ltd., a Korean
pharma company headquartered in Gyeonggi-do, Korea (“G-treeBNT”) that will commercialize RGN-259 for treatment of patients
with dry eye and neurotrophic keratopathy in the United States. G-treeBNT is responsible for funding all product development and
commercialization efforts and holds a majority interest of ReGenTree that varies depending on development milestones achieved and
eventual commercialization path, if successful. In conjunction with the Joint Venture Agreement, we also entered into a royalty-bearing
license agreement pursuant to which we granted to ReGenTree the right to develop and exclusively commercialize RGN-259 in the United
States. We will receive a total of $1 million in two tranches under the terms of the License Agreement, the first of which was
received in March 2015 and a second in the amount of $500,000, within forty-five business days after enrollment of the first patient
in an ophthalmic trial in the U.S. We are also entitled to royalties as a percentage of net of sales ranging from the mid-single
digits to the low-double digits based on the medical indications approved and whether the Joint Venture commercializes products
directly or through a third party. RegeneRx possesses one of three board seats and certain major decisions within ReGenTree, such
as commercialization strategy, mergers, and acquisitions, require unanimous consent of the board.
In March 2015, RegeneRx’s joint venture
partner and licensee, G-treeBNT, received $7.28 million USD to expand international development of its product candidate, RGN-259
(designated GBT-201 in Korea). The $7.28 million will be used for development of RGN-259/GBT-201 for dry eye syndrome and neurotrophic
keratopathy in the U.S. through ReGenTree.
Currently, we have active partnerships
in three major territories: the U.S., China and Pan Asia. Our partners have been moving forward and making significant progress
in each territory and are preparing to initiate their clinical trials programs this year. In July, G-treeBNT received permission
by the Korean Ministry of Food and Drug Safety to conduct a Phase 2b/3 clinical trial in patients with dry eye syndrome. Also in
July, ReGenTree met with the U.S, FDA and is cleared to initiate its Phase 2b/3 clinical in patients with dry-eye syndrome. In
each case, the cost of development is being borne by our partners with no financial obligation for RegeneRx. Patient accrual, treatment,
and follow-up for the ophthalmic trials are relatively fast, as opposed to most other clinical efforts, so data should be forthcoming
in months, not years, after patients begin enrollment. We believe we should be able to maintain our existing operations at the
current level into the second quarter of 2016 while we await results from these trials and continue to seek additional partnership
opportunities.
We still have significant
clinical assets to develop, primarily RGN-352 (injectable formulation of Tβ4 for cardiac and CNS disorders) in the U.S., Pan
Asia, and Europe, and RGN-259 in the EU. Our goal is to wait until the results are obtained from the current ophthalmic clinical
trials before moving into the EU with RGN-259, which, if successful, should allow us to obtain a higher value for the asset at
that time. We intend to continue to develop RGN-352, either by obtaining grants to fund a Phase 2a clinical trial in the cardiovascular
or central nervous system fields or finding a suitable strategic partner with the resources and capabilities to develop it as we
have with RGN-259. Such potential partnership discussions are ongoing.
Development of Product Candidates
RGN-259
RGN-259 is our proprietary
preservative-free eye drop formulation of Thymosin beta 4. In September 2011, we completed a Phase 2a exploratory clinical trial
evaluating the safety and efficacy of RGN-259 in 72 patients with moderate dry eye syndrome. Patients were randomly assigned to
receive either RGN-259 or placebo in this double-masked, placebo-controlled trial. All patients received either RGN-259 (0.1% concentration)
or placebo, twice daily for 30 days. Various signs and symptoms of dry eye, such as the degree of ocular surface damage, ocular
itching, burning and grittiness, among others, were graded periodically during and following the treatment period. The trial was
conducted by Ora Inc., an ophthalmic contract research organization that specializes in dry eye research and clinical trials, and
utilized Ora’s Controlled Adverse Environment (CAE®) chamber, which is a model that exacerbates and standardizes
signs and symptoms in the dry eye patient.
In November 2011, we
reported preliminary safety and efficacy results from the trial. RGN-259 was deemed safe and well-tolerated, with no observed drug-related
adverse events.
The co-primary outcome
measures evaluated in the trial were inferior corneal fluorescein staining and decreased ocular discomfort on day 29, 24 hours
after CAE® challenge. Various secondary outcome efficacy measures were also evaluated in the trial. While the study
did not meet statistical significance for reducing inferior corneal fluorescein staining, it did show a positive trend in this
exploratory trial. RGN-259 did, however, show a statistically significant efficacy result in the other co-primary endpoint of decreased
ocular discomfort and also demonstrated statistical significance in several secondary endpoints such as reduction of central corneal
and superior corneal staining, important signs in dry eye patients and approvable endpoints by the FDA.
Key outcome measures
were as follows:
| · | Patients receiving RGN-259 experienced a 325% greater reduction from baseline in central corneal
fluorescein staining compared to placebo at the 24 hour recovery period (p = 0.0075). Reduction of fluorescein staining is indicative
of a reduction in ocular surface damage of the central cornea; |
| · | Patients receiving RGN-259 experienced a 257% greater reduction from baseline in exacerbation of
superior corneal fluorescein staining in the CAE® chamber as compared to the placebo (p = 0.0210); and |
| · | Patients receiving RGN-259 experienced a 27.3% greater reduction in exacerbation of ocular discomfort
at day 28 during a 75-minute challenge in the CAE chamber compared to the placebo group (p = 0.0244). Reduction indicates that
RGN-259 can slow progression of ocular symptoms in patients with dry eye syndrome. |
| · | Other CAE®-related findings, such as peripheral (combination of the average of superior
and inferior) corneal staining reduction, were observed having statistical significance, while others had positive trends after
treatment with RGN-259. These observations are in line with the known biological properties and mechanisms of action of RGN-259
reported in various nonclinical studies. |
With respect to inferior
corneal fluorescein staining, we did see a positive trend toward improvement, at day 28 during exposure to adverse conditions in
the CAE® chamber in patients receiving RGN-259 compared to placebo, although this improvement was not deemed to
be statistically significant (p = 0.0968).
Statistical significance
(p value) of ≤ 0.05 is the generally accepted threshold for showing an outcome did not happen merely by chance.
The co-primary outcome
measures, selected at the outset of this initial Phase 2a exploratory trial, were based on the best available animal data at the
time but without the benefit of any actual human clinical experience in dry eye. Therefore, we believe that not having met one
of the two co-primary outcome measures at this stage is not as important as identifying statistically significant outcomes that
could potentially serve as approvable endpoints in later stage or in pivotal Phase 3 clinical trials. We believe that the statistically
significant observation of reduction in central and/or superior corneal staining, as well as symptom improvements observed in the
trial and described above, reflect actual patient benefits and would represent acceptable outcome measures to the FDA for use in
follow-up Phase 2b or confirmatory pivotal Phase 3 trials. We prepared a clinical study report for submission to the FDA that describes
the results of the exploratory Phase 2a clinical trial and the results were published in an appropriate medical journal.
In June 2012, we reported
preliminary results from a double-masked, vehicle-controlled, physician-sponsored Phase 2 clinical trial evaluating RGN-259 for
the treatment of patients with severe dry eye. RGN-259 was observed to be safe and well-tolerated and met key efficacy objectives
with statistically significant sign and symptom improvements, compared to vehicle control, at various time intervals, including
28 days post-treatment.
In the trial, nine patients
with severe dry eye (18 eyes) were treated with RGN-259 or vehicle control six times daily over a period of 28 days. They were
evaluated upon entering the study after a two-week washout period, at weekly intervals during the treatment phase, at the end of
the 28-day treatment period, and at a follow-up visit 28 days after treatment. Statistically significant differences in sign and
symptom assessments, such as ocular discomfort and corneal fluorescein staining, were seen at various time points throughout the
study. Of particular note were the differences between RGN-259 and vehicle control 28 days post-treatment, or the follow-up period.
The RGN-259-treated group had a 35.1% reduction of ocular discomfort compared to vehicle control (p = 0.0141), and a 59.1% reduction
of total corneal fluorescein staining compared to vehicle control (p = 0.0108) at 28 days after treatment showing that the repair
was sustained long after treatment cessation.
Consistent with the reduction
of ocular discomfort and fluorescein staining at the 28-day follow-up visit, other improvements seen in the RGN-259-treated patients
included tear film breakup time and increased tear volume production. Likewise, these improvements were seen at other time points
in the study. These results were recently published in an appropriate medical journal.
Strategic Partnerships
Lee’s Pharmaceuticals.
In July 2012, we entered into a License Agreement with Lee’s Pharmaceutical (HK) Limited (“Lee’s”), headquartered
in Hong Kong, for the license of Thymosin Beta 4 in any pharmaceutical form, including our RGN-259, RGN-352 and RGN-137 product
candidates, in China, Hong Kong, Macau and Taiwan. Lee’s has filed an investigational new drug application IND with the Chinese
FDA to conduct a Phase 2, randomized, double-masked, dose-response clinical trial with RGN-259 in China for dry-eye syndrome. They
had informed us that they expected to begin enrollment of the first patient before the end of the second quarter of 2015 and complete
the study by the end of the year. However, according to Lee’s, manufacturing questions regarding the source of Tβ4 are
currently being addressed with the Chinese FDA, which has caused a delay of the approval to initiate the Phase 2 clinical trial
in China. Lee’s is an affiliate of Sigma-Tau, which collectively with its affiliates is our largest stockholder.
G-treeBNT.
In March 2014, we entered into a License Agreement with G-treeBNT for the license of RGN-259. G-treeBNT licensed certain development
and commercialization rights for RGN-259, in Asia (excluding China, Hong Kong, Macau and Taiwan) G-treeBNT is currently our second
largest shareholder. G-tree filed an IND with the Korean Ministry of Food and Drug Safety to conduct a Phase 2b/3 study with RGN-259
in patients with dry eye syndrome and in July 2015 received approval to conduct the trial. G-tree has informed us that it is targeting
the end of the third quarter of 2015 to begin enrolling patients in the clinical trial.
U.S. Joint Venture
(ReGenTree, LLC). On January 28, 2015, we announced that we entered into a Joint Venture Agreement (the “Joint
Venture Agreement”) with G-treeBNT. The Joint Venture Agreement provides for the creation of an entity (the “Joint
Venture” or “ReGenTree”), owned by us and G-treeBNT, that will commercialize RGN-259 for treatment of dry eye
and neurotrophic keratopathy in the United States. G-treeBNT will be responsible for funding product development and commercialization
efforts, and hold a majority interest, of ReGenTree. In conjunction with the Joint Venture Agreement, we also entered into a royalty-bearing
license agreement (the “License Agreement”) with ReGenTree pursuant to which we granted to ReGenTree the right to develop
and exclusively commercialize RGN-259 in the United States.
ReGenTree expects to
initiate the Phase 3 protocol for neurotrophic keratopathy (an orphan indication) in September 2015. ReGenTree has contracted with
Ora Inc. (“Ora”), a well know contract research organization (CRO), specializing in ophthalmology, to manage the trial
in the U.S. We expected to evaluate 42 patients in the randomized, double-masked, placebo-controlled clinical trial.
ReGenTree has met with
the U.S. FDA to discuss its plans for a Phase 2b/3 clinical trial in patients with dry eye syndrome using Ora’s CAE®
model. Ora has also been contracted to manage this trial and based on our meeting with the FDA we are planning to begin enrolling
patients in this randomized, double-masked, placebo-controlled clinical trial in September 2015.
G-treeBNT has continued
building the CMC (chemistry manufacturing controls) dossier required for Phase 3 clinical trials in the U.S. and in Korea. This
comprehensive and critical effort ensures that final drug product manufacturing, packaging, stability, purity, reproducibility,
etc., meets regulatory guidelines and product specifications.
RGN-352
During 2009, we completed
a Phase 1a and Phase 1b clinical trial evaluating the safety, tolerability and pharmacokinetics of the intravenous administration
of RGN-352 in 60 healthy subjects (40 in each group, 20 of whom participated in both Phases). Based on the results of these Phase
1 trials and extensive preclinical efficacy data published in peer-reviewed journals, in the second half of 2010, we began start-up
activities for a Phase 2 study to evaluate RGN-352 (Tß4 Injectable Solution) in patients who had suffered an AMI. We had
planned to begin enrolling patients in this clinical trial in the second quarter of 2011. However, in March 2011, we were notified
by the FDA that the trial was placed on clinical hold as a result of our contract manufacturer’s alleged failure to comply
with the current Good Manufacturing Practice (cGMP) regulations. We have since learned that the manufacturer has closed its manufacturing
facility and filed for bankruptcy protection. The FDA prohibited us from using any of the active drug or placebo formulated by
this manufacturer in human trials; consequently, we must have study drug (RGN-352 and RGN-352 placebo) manufactured by a new cGMP-compliant
manufacturer in the event we seek to move forward with this trial. While we have identified a qualified manufacturer for RGN-352,
we have elected to postpone activities on this trial until the requisite funding or a partner is secured.
In addition to the potential
application of RGN-352 for the treatment of cardiovascular disease, preclinical research published in the scientific journals Neuroscience
and the Journal of Neurosurgery, among others, indicates that RGN-352 may also prove useful for patients with multiple sclerosis,
or MS, as well as patients
suffering a stroke, traumatic
brain injury, peripheral neuropathy, or spinal cord injury. In these preclinical studies, the administration of Tß4 resulted
in regeneration of neuronal tissue by promoting remyelination of axons and stimulating oligodendrogenesis, resulting in improvement
of neurological functional activity. In 2012, researchers studying Tß4 under a material transfer agreement (MTA) found that
Tß4 had beneficial effects in animal models of peripheral neuropathy, one of the major complications of diabetes. This research
was published in the journal of Neurobiology of Disease in 2012 and appears to corroborate previous findings using Tß4 for
repair of central nervous system disorders. We are discussing possible partnership opportunities with companies interested in developing
RGN-352 for this indication.
Based on our Phase 1
data and the preclinical research discussed above, we are evaluating various opportunities for government funding for a Phase 2a
clinical trial to show proof-of-concept in each case while also talking with prospective strategic partners with the interest,
capabilities and resources to further develop product candidate in these fields.
RGN-137
Clinical Development —
Epidermolysis Bullosa (EB). In 2005, we began enrolling patients in a Phase 2 clinical trial designed to assess
the safety and effectiveness of RGN-137 for the treatment of patients with EB. EB is a genetic disease of approximately 10 gene
mutations that results in fragile skin and other epithelial structures (e.g., cornea and GI tract) that can blister spontaneously
or separate at the slightest trauma or friction, creating a wound that at times does not heal or heals poorly. In severe cases,
recurrent blistering and tissue loss may be life threatening. EB has been designated as an “orphan” indication by the
FDA’s Office of Orphan Drugs. A portion of this trial was funded by a grant of $681,000 received from the FDA. In this randomized,
double-blind, placebo-controlled, dose-response trial, nine U.S. clinical sites evaluated the safety, tolerability, and wound healing
effectiveness of three different concentrations of RGN-137 compared to placebo. RGN-137 was applied topically to the skin, once
daily for up to 56 consecutive days. We completed enrollment of 30 out of the original target of 36 patients and closed the Phase
2 trial in late 2011 as the availability of eligible patients had been exhausted. We submitted the final report to the FDA in 2014.
Clinical Development —
Pressure Ulcers. In late 2005, we began enrolling patients in a Phase 2 clinical trial designed to assess the
safety and effectiveness of RGN-137 for the treatment of patients with chronic pressure ulcers, commonly known as bedsores. In
this randomized, double-blind, placebo-controlled, dose-response trial, 15 clinical sites in the United States enrolled a total
of 72 patients to evaluate the safety, tolerability, and wound healing effectiveness of three different concentrations of RGN-137
compared to placebo. RGN-137 was applied topically to patients’ ulcers, once daily for up to 84 consecutive days. Patients
in the trial were between 19 and 85 years old and had at least one stable Stage III or IV pressure ulcer with a surface area between
5 and 70 cm2. Stage III and IV pressure ulcers are full thickness wounds that penetrate through the skin and muscle,
sometimes completely to the bone.
In January 2009, we reported final data
from this trial. RGN-137 was well-tolerated at all three dose levels studied, with no dose-limiting adverse events, which achieved
the primary objective of the study. As for efficacy, all Tß4 doses performed similarly compared to placebo, with no statistically
significant efficacy results. However, patients treated with the middle dose showed a 17% improvement of wound healing, which was
the highest rate among the three active doses evaluated. The improvement in ulcer healing in this middle dose group following nine
weeks of treatment was equal to the improvement in patients treated with placebo after 12 weeks of treatment. A follow-on evaluation,
reported at the 3rd International Symposium on the Thymosins in Health and Disease in March 2012, showed that for those pressure
ulcer patients’ wounds that healed, RGN-137 mid dose (0.02% Tβ4 gel product) accelerated wound closure with a median
time to healing of 22 days as compared to 57 days for the placebo. Although those results are clinically significant, they were
not statistically significant.
Clinical Development —
Venous Stasis Ulcers. In mid-2006 we began enrolling patients in a Phase 2 clinical trial designed to assess the safety
and effectiveness of RGN-137 for the treatment of patients with venous stasis ulcers. Venous stasis ulcers are a common type of
chronic wound that develops on the ankle or lower leg in patients with chronic vascular disease. In these patients blood flow in
the lower extremities is impaired leading to venous hypertension, edema (swelling) and mild redness and scaling of the skin that
gradually progresses to ulceration. In this double-blind, placebo-controlled, dose-response study, 8 European sites in Italy (N=5)
and Poland (N=3) make up the 72 patients randomized to receive three different concentrations of RGN-137 or placebo. RGN-137 or
placebo was applied topically to patients’ ulcers once daily for consecutive days. A patient’s ulcer size and ulcer
stability for enrollment were between 3 and 30 cm2 and at least 6 weeks in duration, respectively.
In 2009, we reported final data from that
trial. All doses of RGN-137 were well tolerated. More patients achieved healing in the RGN-137 mid dose (0.03% Tβ4 gel product)
than in any other dose group. The mid dose showed both an increased incidence of wound healing and a faster healing time compared
to placebo. The mid dose decreased the median time to healing by 45% among those wounds that completely healed. A follow-on evaluation,
reported at the 3rd International Symposium on the Thymosins in Health and Disease in March 2012, showed that for those venous
stasis ulcer patients’ wounds greater than 3 cm2 that healed, the RGN-137 mid dose (0.03% Tβ4 gel product)
accelerated wound closure with a median time to healing of 49 days as compared to 78 days for the placebo. Those results were both
clinically and statistically significant.
G-treeBNT. In March 2014, we entered
into a License Agreement with G-treeBNT to license certain development and commercialization rights for RGN-137 in the U.S. G-treeBNT
has purchased approximately 19.6 million shares of our common stock in two closings and is currently our second largest shareholder.
Our Strategy
We seek to maximize the value of our product
candidates by advancing their clinical development and then identifying suitable partners for further development, regulatory approval,
and marketing. We intend to engage in strategic partnerships with companies with clinical development and commercialization strengths
in desired pharmaceutical therapeutic fields. We are actively seeking partners with suitable infrastructure, expertise and a long-term
initiative in our medical fields of interest. To that end, we have entered several important licensing and joint venture agreements
with pharmaceutical companies to develop our product candidates.
On January 28, 2015, we announced that
we entered into a Joint Venture, ReGenTree, LLC (“ReGenTree”), owned by us and G-treeBNT, that will develop and commercialize
RGN-259 for treatment of dry eye and neurotrophic keratopathy in the United States. G-treeBNT will be responsible for funding product
development and commercialization efforts, and hold a majority interest of ReGenTree that varies depending on development milestones
achieved and eventual commercialization path, if successful. In conjunction with the Joint Venture Agreement, we also entered into
a royalty-bearing license agreement pursuant to which we granted to ReGenTree the right to develop and exclusively commercialize
RGN-259 in the United States.
The Joint Venture with G-TreeBNT follows
on two previous transactions with G-TreeBNT signed in March 2014 when we had entered into License Agreements for the license of
the RGN-259 and RGN-137 product candidates. G-treeBNT licensed the development and commercialization rights for RGN-259 in Asia
(excluding China, Hong Kong, Macau and Taiwan) while also licensing the development and commercialization rights for RGN-137 in
the U.S.
We have entered into a License Agreement
with Lee’s Pharmaceutical (HK) Limited, headquartered in Hong Kong, for the license of Thymosin Beta 4 in any pharmaceutical
form, including our RGN-259, RGN-352 and RGN-137 product candidates, in China, Hong Kong, Macau and Taiwan. Lee’s is an affiliate
of Sigma-Tau, which collectively with its affiliates is our largest stockholder.
We have entered into a strategic partnership
with Defiante Farmaceutica S.A., (“Defiante”), a subsidiary and one of several entities affiliated with Sigma-Tau Group,
a leading international pharmaceutical company which collectively comprise our largest shareholder, or Sigma-Tau, for development
and marketing of RGN-137 and RGN-352 for specified indications in Europe and other contiguous countries. Defiante merged with Sigma-Tau
Industrie Farmaceutiche Riunite S.p.A. in 2013 and Sigma-Tau has recently merged Alfa Wasserman S.p.A., an Italian pharmaceutical
company.
Financial Operations Overview
We have never
generated product revenues, and we do not expect to generate product revenues until the FDA approves one of our product candidates,
if ever, and one or more products are marketed and sold. We expect to invest limited amounts in the furtherance of our current
clinical stage programs and are seeking strategic partners to conduct clinical and commercial development of our product candidates.
Nonetheless, we will need to generate product revenues in order to ultimately achieve and then maintain profitability. We cannot
assure investors that access to capital needed for the clinical stage programs and to seek and support strategic partners will
be available when needed, on acceptable terms, or at all.
Most of our expenditures
to date have been for research and development, or R&D, activities and general and administrative, or G&A, activities.
Historically our R&D costs have included all of the wholly-allocable costs associated with our various clinical programs to
date passed through to us by our outsourced vendors. Those costs include manufacturing Tß4 and peptide fragments, formulation
of Tß4 into our product candidates, stability studies for both Tß4, and the various formulations, preclinical toxicology,
safety and pharmacokinetic studies, clinical trial management, medical oversight, laboratory evaluations, statistical data analysis,
regulatory compliance, quality assurance and other related activities. R&D includes cash and non-cash compensation, payroll
taxes, travel and other miscellaneous costs of our internal R&D personnel, three persons in total, who are dedicated on a part-time
hourly basis to R&D efforts. R&D also includes a proration of our common infrastructure costs for office space and communications.
We expense our R&D costs as they are incurred.
G&A costs include outside professional
fees for legal, business development, audit and accounting services. G&A also includes cash and non-cash compensation, travel
and other miscellaneous costs of our internal G&A personnel, two in total, who are wholly dedicated to G&A efforts. G&A
also includes a proration of our common infrastructure costs for office space, and communications. Our G&A expenses also include
costs to maintain our intellectual property portfolio. Historically we have expanded our patent prosecution activities and in some
cases, we have filed patent applications for non-critical strategic purposes intended to prevent others from filing similar patent
claims. We continue to closely monitor our patent applications in the United States, Europe and other countries with the advice
of outside legal counsel to determine if they will continue to provide strategic benefits. In cases where we believe the benefit
has been realized or it becomes unnecessary due to the issuance of other patents, or for other reasons that will not affect the
strength of our intellectual property portfolio, we have and will continue to abandon these patent applications in order to reduce
our costs of continued prosecution or maintenance.
Critical Accounting Policies
In Item 7, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations,” of our Annual Report on Form 10-K for the year
ended December 31, 2014, which was filed with the SEC on March 31, 2015, which we refer to as the Annual Report, we included a
discussion of the most significant accounting policies and estimates used in the preparation of our financial statements. There
has been no material change in the policies and estimates used in the preparation of our financial statements since the filing
of our Annual Report.
Results of Operations
Comparison of the three months ended
June 30, 2015 and 2014
Revenues. For
the three months ended June 30, 2015, we recorded revenue in the amount of $5,000 which reflects
the amortization of the upfront license fee over the life of the ReGenTree license agreement of 25 years. We did not record any
revenue in the three months ended June 30, 2014.
R&D Expenses.
For the three months ended June 30, 2015, our R&D expenses decreased by approximately $71,000,
or 47%, to $78,000 from $149,000 for the same period in 2014. The decrease from 2014 reflects the execution of our strategy to
out license or partner our development programs, in addition to our entry into the ReGenTree joint venture agreement in 2015. In
the first half of 2014 our primary R&D activity was in support of planning activities related to RGN-259 development for neurotrophic
keratopathy under the orphan drug designation. Responsibility the development has been transferred to the ReGenTree joint venture.
The R&D expenses for both periods reflect our limited development activity and are comprised of compensation, facility, overhead
allocation and insurance. The 2015 decrease reflects the absence of costs associated with the 2014 planning activities with decreases
seen in personnel (decrease of $19,000), allocations (decrease of $7,000) and R&D consulting (decrease of $69,000) which were
offset by an increase in stock option compensation (increase of $24,000). We expect our R&D expenses will remain at low levels
unless we decide to reinitiate internal R&D efforts for our unpartnered programs.
G&A Expenses.
For the three months ended June 30, 2015, our G&A expenses increased by approximately $220,000, or 86%, to $477,000, from $257,000
for the same period in 2014. The increase was primarily the result of increases in legal costs incurred in association with completing
the ReGenTree joint venture agreement and the reinitiating of investor relations communications. Increases are reflected in professional
services ($124,000), consulting fees ($25,000), investor relations related expenses ($37,000) and stock option expense ($58,000).
These increases were offset by decreases in personnel related expenses ($11,000), and facilities
costs ($13,000). The increase in consulting and the decrease in personnel costs reflects the engagement of our prior CFO as a financial
consultant as well as the addition of a business development consultant. We expect that our G&A expenses will stabilize as
we wait for data from the upcoming clinical trials being conducted by our partners. If we enter into additional partnerships or
other business transactions we will incur additional legal and transaction related expenses.
Net Loss. We
incurred a net loss of $1,762,012 for the quarter ended June 30, 2015, a significant increase from the net loss of $218,787 recorded
in the quarter ended June 30, 2014. In the 2015 period, the increase in net loss resulted primarily from our evaluation of the
derivative liability associated with the conversion feature of the debt instruments issued by the company from March 2013 through
January 2014. The value of this conversion feature is indexed to the share price of our common stock and increases as our share
price increases. The share price of our common stock increased from $0.26 on March 31, 2015 to $0.36 on June 30, 2015, which resulted
in an increase in the fair value of our convertible debt derivative component and the recording of an unrealized loss of $1,168,334
for the three months ended June 30, 2015. In the prior year period the share price of our common stock decreased from $0.20 on
March 31, 2014 to, $0.18 on June 30, 2014, which resulted in a decrease in the fair value of our convertible debt derivative component
and the recording increase in fair value of $233,666 for the three months ended June 30, 2014.
Comparison of the six months ended
June 30, 2015 and 2014
Revenues.
For the six months ended June 30, 2015, we recorded revenue in the amount of $45,000, $40,000
of this revenue related to the sale of unformulated Tß4 to G-treeBNT for use in their product development work in Korea.
There were no associated costs with this transaction as the cost of Tß4 had been expensed in a prior period. We also recorded
revenue in the amount of $5,000 which reflects the amortization of the upfront license fee over the life of the ReGenTree license
agreement of 25 years. We did not record any revenue in the six months ended June 30, 2014.
R&D Expenses.
For the six months ended June 30, 2015, our R&D expenses decreased by approximately $109,000,
or 49%, to $114,000 from $224,000 for the same period in 2014. The decrease from 2014 reflects the execution of the our strategy
to out license or partner our development programs in addition to our entry into the ReGenTree joint venture agreement in 2015.
In the first half of 2014 our primary R&D activity was in support of planning activities related to RGN-259 development for
neurotrophic keratopathy under the orphan drug designation. Responsibility the development has been transferred to the ReGenTree
joint venture. The R&D expenses for both periods reflect our limited development activity and are comprised of compensation,
facility and G&A allocation and insurance. The 2015 decrease reflects the absence of costs associated with the 2014 planning
activities with decreases seen in technology license and other (decrease of $9,000), personnel (decrease of $20,000), R&D consulting
(decrease of $82,000) and allocations (decrease of $7,000) these decreases were offset by an increase in stock option compensation
(increase of $9,000). We expect our R&D expenses will remain at low levels unless we decide to reinitiate internal R&D
efforts for our unpartnered programs.
G&A Expenses.
For the six months ended June 30, 2015, our G&A expenses increased by approximately $326,000, or 60%, to $872,000, from $546,000
for the same period in 2014. The increase was primarily the result of compensation increases as well as legal costs incurred in
association with completing the ReGenTree joint venture agreement. Increases are reflected in professional services (approximately
$212,000), personnel costs ($33,000), consulting fees ($39,000), investor relations related expenses ($33,000) and stock option
expense ($18,000). The increase in consulting reflects the addition of a business development consultant. These increases were
offset by decreases in charitable donations ($5,000) and facilities ($4,000). We expect that our G&A expenses will stabilize
as we wait for data from the upcoming clinical trials being conducted by our partners. If we enter into additional partnerships
or other business transactions we will incur additional legal and transaction-related expenses.
Net Loss. We
incurred a net loss of $3,480,701 for the six months ended June 30. 2015, an increase from the net loss of $2,343,882 recorded
in the six months ended June, 2014. In each period a significant portion of the net loss resulted from our evaluation of the derivative
liability associated with the conversion feature of the debt instruments issued by the company from March 2013 through January
2014. The value of this conversion feature is indexed to the share price of our common stock and increases as our share price increases.
The share price of our common stock has increased from $0.14 on December 31, 2014 to $0.36 on June 30, 2015, which resulted in
an increase in the fair value of our convertible debt derivative component and the recording of an unrealized loss of $2,453,500
for the six months ended June 30, 2015. In the prior year period the share price of our common stock increased from $0.05 on December
31, 2013 to $0.18 on June 30, 2014, which resulted in an increase in the fair value of our convertible debt derivative component
and the recording of an unrealized loss of $1,482,168 for the six months ended June 30, 2014.
Liquidity and Capital Resources
Overview
We have not commercialized
any of our product candidates to date and have incurred significant losses since inception. Over the past couple of years we have
primarily financed our operations through the sale of a series of convertible promissory notes through private placements with
accredited investors and the March and August 2014 private placements of common stock with G-TreeBNT. The report of our independent
registered public accounting firm regarding our financial statements for the year ended December 31, 2014 contained an explanatory
paragraph regarding our ability to continue as a going concern based upon our history of net losses and dependence on future financing
in order to meet our planned operating activities.
We had cash and cash equivalents of approximately
$563,000 at June 30, 2015. This amount coupled with a second $500,000 payment that will be triggered by the enrollment of the first
patient on a RGN-259 clinical trial conducted by ReGenTree, which is planned to occur in September 2015, should fund our planned
operations into the second quarter of 2016. This estimate could change if patient enrollment is delayed. This estimate also does
not include receipt of any funds from grants, new partnerships or the raising of additional capital if the market climate warrants.
Additionally, we intend to continue to pursue additional partnering activities, particularly for RGN-352, our injectable systemic
product candidate for cardiac and central nervous system indications.
Cash Flows for the Six Months Ended
June 30, 2015 and 2014
Net cash used by operating activities was
approximately $280,000 for the six months ended June 30, 2015 compared to approximately $887,000 used in operating activities for
the six months ended June 30, 2014. During the first half of 2015 we received $500,000 from ReGenTree pursuant to the license agreement
with ReGenTree, our joint venture, which served to reduce the net cash used in operations versus the comparable period when net
cash used in operations totaled $887,000, reflecting a material reduction of our accounts payable liability for patent services.
During the six months ended June 30, 2014, we received $1,500,000 from the sale of common stock to G-treeBNT in March 2014 and
$55,000 in January 2014, representing the net proceeds of the sale of convertible notes as described in Note 6 to our unaudited
condensed financial statements included in this report. We did not sell any common stock or issue any convertible notes in the
six-month period ending June 30, 2015.
Future Funding
Requirements
The expenditures that
will be necessary to execute our business plan are subject to numerous uncertainties that may adversely affect our liquidity and
capital resources. Currently, we have active partnerships in three major territories: the U.S., China and Pan Asia. Our partners
have been moving forward and making significant progress in each territory and are prepared to initiate their clinical trials programs
this year. In each case, the cost of development is being borne by our partners with no financial obligation for RegeneRx. Patient
accrual, treatment, and follow-up for ophthalmic trials are relatively fast, in comparison to most other clinical efforts, so data
should be forthcoming in months, not years, after patients begin enrollment. We, therefore, should be able to maintain our existing
operations into the second quarter of 2016 at the current level while we await results from these trials and continue to seek additional
partnership opportunities.
We still have significant
clinical assets to develop, primarily RGN-352 (injectable formulation of Tβ4 for cardiac and CNS disorders) in the U.S., Pan
Asia, and Europe, and RGN-259 in the EU. Our goal is to wait until the results are obtained from the current ophthalmic clinical
trials before moving into the EU with RGN-259, which, if successful, should allow us to obtain a higher value for the asset at
that time. However, we intend to continue to develop RGN-352, either by obtaining grants to fund a Phase 2a clinical trial in the
cardiovascular or central nervous system fields or finding a suitable strategic partner with the resources and capabilities to
develop it as we have with RGN-259. Such potential partnership discussions are ongoing.
Our current cash, together
with the second $500,000 payment that will be triggered by the enrollment of the first patient on a RGN-259 clinical trial conducted
by ReGenTree, total approximately $1.1 million. Based on our preliminary operating budget, we believe we have funds to last into
the second quarter of 2016. This estimate could change if patient enrollment is delayed for the two planned U.S. ophthalmic clinical
trials. This estimate also does not include receipt of any funds from grants, new partnerships or the raising of additional capital.
In addition, the length
of time required for clinical trials varies substantially according to the type, complexity, novelty and intended use of a product
candidate. Some of the factors that could impact our liquidity and capital needs include, but are not limited to:
| · | the progress of our clinical trials; |
| · | the progress of our research activities; |
| · | the number and scope of our research programs; |
| · | the progress of our preclinical development activities; |
| · | the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent
and other intellectual property claims; |
| · | the costs related to development and manufacture of preclinical, clinical and validation lots for
regulatory purposes and commercialization of drug supply associated with our product candidates; |
| · | our ability to enter into corporate collaborations and the terms and success of these collaborations; |
| · | the costs and timing of regulatory approvals; and |
| · | the costs of establishing manufacturing, sales and distribution capabilities. |
Moreover, the duration
and the cost of clinical trials may vary significantly over the life of a project as a result of differences arising during the
clinical trial protocol, including, among others, the following:
| · | the number of patients that ultimately participate in the trial; |
| · | the duration of patient follow-up that seems appropriate in view of the results; |
| · | the number of clinical sites included in the trials; and |
| · | the length of time required to enroll suitable patient subjects. |
Also, we test our product
candidates in numerous preclinical studies to identify indications for which they may be efficacious. We may conduct multiple clinical
trials to cover a variety of indications for each product candidate. As we obtain results from trials, we may elect to discontinue
clinical trials for certain product candidates or for certain indications in order to focus our resources on more promising product
candidates or indications.
Our proprietary product
candidates have not yet achieved FDA regulatory approval, which is required before we can market them as therapeutic products.
In order to proceed to subsequent clinical trial stages and to ultimately achieve regulatory approval, the FDA must conclude that
our clinical data establish safety and efficacy. Historically, the results from preclinical studies and early clinical trials have
often not been predictive of results obtained in later clinical trials. A number of new drugs and biologics have shown promising
results in clinical trials, but subsequently failed to establish sufficient safety and efficacy data to obtain necessary regulatory
approvals.
Our current facility
lease commitment is through May 2017 and our rental payments for this period will be approximately $4,500 per month.
Sources of Liquidity
We have not commercialized
any of our product candidates to date and have primarily financed our operations through the issuance of common stock and common
stock warrants in private and public financings in addition to a series of five convertible debt placements from October 2012 to
January 2014. In March 2014 we entered into a strategic transaction with G-treeBNT which includes the purchase of approximately
19.6 million shares of common stock by G-treeBNT in two tranches, making G-treeBNT our second largest stockholder. Our largest
stockholder group, which we refer to as Sigma-Tau, has historically provided significant equity capital to us, including $200,000
pursuant to the convertible debt placement in October 2012 and $150,000 pursuant to the convertible debt placement in September
2013.
On January 28, 2015,
we announced that we entered into a Joint Venture, ReGenTree, owned by us and G-treeBNT, that will commercialize RGN-259 for treatment
of dry eye and neurotrophic keratopathy in the United States. G-treeBNT will be responsible for funding product development and
commercialization efforts of, and hold a majority interest in, ReGenTree. In conjunction with the Joint Venture Agreement, we also
entered into a royalty-bearing license agreement pursuant to which we granted to ReGenTree the right to develop and exclusively
commercialize RGN-259 in the United States. We will receive a total of $1 million in two tranches under the terms of the License
Agreement: (i) within forty-five business days after closing and (ii) within forty-five business days after enrollment of the first
patient in an ophthalmic trial in the U.S. In March 2015, we received the first of the two $500,000 payments under the license
agreement. This amount, plus our current cash, coupled with the second $500,000 payment that will be triggered by the enrollment
of the first patient on a RGN-259 clinical trial conducted by ReGenTree, which is planned to occur in September 2015, should fund
our planned operations into the second quarter of 2016. This estimate could change if patient enrollment is delayed. This estimate
also does not include receipt of any funds from grants, new partnerships or the raising of additional capital if the market climate
warrants. Additionally, we intend to continue to pursue additional partnering activities, particularly for RGN-352, our injectable
systemic product candidate for cardiac and central nervous system indications.
Licensing Agreements
As noted above, we have
entered into two strategic agreements with G-treeBNT. G-treeBNT licensed the development and commercialization rights for RGN-259
in Asia (excluding China, Hong Kong, Macau and Taiwan) while also licensing the development and commercialization rights for RGN-137
in the U.S. Most recently we entered into a joint venture and licensing agreement with G-treeBNT that, under the name ReGenTree,
will commercialize RGN-259 for treatment of dry eye and neurotrophic keratopathy in the United States. The license agreements provide
for the opportunity for us to receive milestone payments upon specified commercial events and royalty payments in connection with
any commercial sales of the licensed products in the respective territories. In the case of the Joint Venture, we will also retain
an equity interest of ReGenTree that varies depending on development milestones achieved by our Joint Venture partner and eventual
commercialization path, if successful. However, there are no assurances that we will be able to attain any such milestones or generate
any such royalty payments under the agreements.
We have a license agreement
with Sigma-Tau that provides the opportunity for us to receive milestone payments upon specified events and royalty payments in
connection with commercial sales of Tß4 in Europe. However, we have not received any milestone payments to date, and there
can be no assurance that we will be able to attain such milestones and generate any such payments under the agreement.
We also have entered
into a license agreement with Lee’s Pharmaceuticals that provides for the opportunity for us to receive milestone payments
upon specified events and royalty payments in connection with any commercial sales of Tß4-based products in China, Hong Kong,
Macau and Taiwan. However, there are no assurances that we will be able to attain any such milestones or generate any such royalty
payments under the agreement.
Government Grants
We have pursued, and
continue to pursue, government funding for both RGN-259 and RGN-352.
Other Financing
Sources
Other potential sources
of outside capital include entering into additional strategic business relationships, additional issuances of equity securities
or debt financing or other similar financial instruments, and the exercise of our outstanding warrants. If we raise additional
capital through a strategic business relationship, we may have to give up valuable rights to our intellectual property. If we raise
funds by selling additional shares of our common stock or securities convertible into our common stock, the ownership interest
of our existing stockholders may be significantly diluted. In addition, if additional funds are raised through the issuance of
preferred stock or debt securities, these securities are likely to have rights, preferences and privileges senior to our common
stock and may involve significant fees, interest expense, restrictive covenants and the granting of security interests in our assets.
Our failure to successfully
address liquidity requirements could have a materially negative impact on our business, including the possibility of surrendering
our rights to some technologies or product opportunities, delaying our clinical trials, or ceasing operations. There can be no
assurance that we will be able to obtain additional capital in sufficient amounts, on acceptable terms, or at all.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements,
as such term is defined in Item 303(a)(4) of Regulation S-K.
Item 3. Quantitative and Qualitative
Disclosures About Market Risk.
Our cash equivalents,
which are generally comprised of Federally-insured bank deposits, are subject to default, changes in credit rating and changes
in market value. These investments are also subject to interest rate risk and will decrease in value if market interest rates increase.
As of June 30, 2015, these cash equivalents were approximately $563,000. Due to the short-term nature of these investments, if
market interest rates differed by 10% from their levels as of June 30, 2015, the change in fair value of our financial instruments
would not have been material.
Item 4. Controls and Procedures
a) Evaluation of
Disclosure Controls and Procedures
Our management, under the supervision and
with the participation of our President and Chief Executive Officer, in his capacity as our principal executive officer and our
principal financial officer, performed an evaluation of the effectiveness of the design and operation of our “disclosure
controls and procedures” (as defined in Rule 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended)
as of June 30, 2015. Based upon this evaluation, management has concluded that, as of June 30, 2015, our disclosure controls and
procedures were effective to provide reasonable assurance that the information required to be disclosed is recorded, processed,
summarized and reported within the time periods specified under applicable rules of the SEC, and that such information is accumulated
and communicated to management, including our President and Chief Executive Officer, as appropriate, to allow timely decisions
regarding required disclosures.
b) Changes in Internal
Controls
There
were no changes in our internal control over financial reporting during the three months ended June 30, 2015 that have materially
affected, or which are reasonably likely to materially affect, our internal control over financial reporting.
Part
II – Other Information
None.
Set forth below and elsewhere in this report
and in other documents we file with the SEC are risks and uncertainties that could cause actual results to differ materially from
the results contemplated by the forward-looking statements contained in this report. The descriptions below include any material
changes to and supersede the description of the risk factors affecting our business previously disclosed in “Part II, Item
1A. Risk Factors” of the Annual Report.
Risks Related to
Our Liquidity and Need for Financing
Before giving effect to any potential
additional sales of our securities, we estimate that our existing capital resources and the anticipated cash inflows from the January
2015 Joint Venture and License Agreement with G-treeBNT will only be sufficient to fund our operations into the second quarter
of 2016.
As of June 30, 2015 we had cash and cash
equivalents on hand of approximately $563,000, which reflects the March 25, 2015 receipt of $500,000 pursuant to the license agreement
signed between RegeneRx and ReGenTree “the Joint Venture”. Pursuant to the Joint Venture Agreement G-treeBNT will be
responsible for funding the product development and commercialization efforts of the Joint Venture and will hold a majority equity
stake in the Joint Venture. With the completion of the Joint Venture Agreement we intend to continue to pursue additional partnering
activities, most notably for RGN-352, our injectable systemic product candidate for cardiac and central nervous system indications.
We estimate that our current cash resources coupled with a second payment of $500,000 expected to be received from ReGenTree in
late 2015 predicated on the enrollment of the first patient in an ophthalmic trial, will fund our planned operations into the second
quarter of 2016. This estimate could change and we may need additional capital in less than 12 months if we undertake additional
efforts to support our objectives or the patient enrollment is delayed.
Our forecast of the period of time through
which our financial resources will be adequate to support our operations is a forward-looking statement and involves risks and
uncertainties, and actual results could vary as a result of a number of factors, including the factors discussed elsewhere in this
report. We have based this estimate on assumptions that may prove to be wrong, and we could use our available capital resources
sooner than we currently expect.
In addition to our current development
objectives, we will need substantial additional capital for the continued development of product candidates through marketing approval
and for our longer-term future operations.
Beyond our current liquidity needs, we
anticipate that substantial new capital resources will be required to continue our longer-term independent product development
efforts, including any and all follow-on trials that will result from our current clinical programs beyond those currently contemplated,
and to scale up manufacturing processes for our product candidates. However, the actual amount of funds that we will need will
be determined by many factors, some of which are beyond our control. These factors include, without limitation:
| · | the scope of our clinical trials, which
is significantly influenced by the quality of clinical data achieved as trials are completed and the requirements established by
regulatory authorities; |
| · | the speed with which we complete our clinical
trials, which depends on our ability to attract and enroll qualifying patients and the quality of the work performed by our clinical
investigators and contract research organizations chosen to conduct the studies; |
| · | the time required to prosecute, enforce
and defend our intellectual property rights, which depends on evolving legal regimes and infringement claims that may arise between
us and third parties; |
| · | the ability to manufacture at scales sufficient
to supply commercial quantities of any of our product candidates that receive regulatory approval, which may require levels of
effort not currently anticipated; and |
| · | the successful commercialization of our
product candidates, which will depend on our ability to either create or partner with an effective commercialization organization
and which could be delayed or prevented by the emergence of equal or more effective therapies. |
Emerging biotechnology companies like us
may raise capital through corporate collaborations and by licensing intellectual property rights to other biotechnology or pharmaceutical
enterprises. We intend to pursue this strategy, but there can be no assurance that we will be able to enter into additional license
agreements with respect to our intellectual property or product development programs on commercially reasonable terms, if at all.
There are substantial challenges and risks that will make it difficult to successfully implement any of these alternatives. If
we are successful in raising additional capital through such a license or collaboration, we may have to give up valuable rights
to our intellectual property. In addition, the business priorities of a strategic partner may change over time, which creates the
possibility that the interests of the strategic partner in developing our technology may diminish and could have a potentially
material negative impact on the value of our interest in the licensed intellectual property or product candidates.
Further, if we raise additional funds by
selling shares of our common stock or securities convertible into our common stock the ownership interest of our existing stockholders
may be significantly diluted. If additional funds are raised through the issuance of preferred stock or debt securities, these
securities are likely to have rights, preferences and privileges senior to our common stock and may involve significant fees, interest
expense, restrictive covenants or the granting of security interests in our assets.
Our failure to successfully address our
long-term liquidity requirements would have a material negative impact on our business, including the possibility of surrendering
our rights to some technologies or product opportunities, delaying our clinical trials or ceasing our operations.
We have incurred losses since inception
and expect to incur significant losses in the foreseeable future and may never become profitable.
We have not commercialized any product
candidates to date and incurred net operating losses every year since our inception in 1982. We believe these losses will continue
for the foreseeable future, and may increase, as we pursue our product development efforts related to Tß4. As of June, 2015,
our accumulated deficit totaled approximately $103 million.
As we expand our research and development
efforts and seek to obtain regulatory approval of our product candidates to make them commercially viable, we anticipate substantial
and increasing operating losses. Our ability to generate revenues and to become profitable will depend largely on our ability,
alone or through the efforts of third-party licensees and collaborators, to efficiently and successfully complete the development
of our product candidates, obtain necessary regulatory approvals for commercialization, scale-up commercial quantity manufacturing
capabilities either internally or through third-party suppliers, and market our product candidates. There can be no assurance that
we will achieve any of these objectives or that we will ever become profitable or be able to maintain profitability. Even if we
do achieve profitability, we cannot predict the level of such profitability. If we sustain losses over an extended period of time
and are not otherwise able to raise necessary funds to continue our development efforts and maintain our operations, we may be
forced to cease operations.
Our common stock is quoted on the
over-the-counter market, which subjects us to the SEC’s penny stock rules and may decrease the liquidity of our common stock.
Our common stock is traded over-the-counter
on the OTC Bulletin Board. Over-the-counter markets are generally considered to be less efficient than, and not as broad as, a
stock exchange. There may be a limited market for our stock now that it is quoted on the OTC Bulletin Board, trading in our stock
may become more difficult and our share price could decrease. Specifically, you may not be able to resell your shares of common
stock at or above the price you paid for such shares or at all.
In addition, our ability to raise additional
capital may be impaired because of the less liquid nature of the over-the-counter markets. While we cannot guarantee that we would
be able to complete an equity financing on acceptable terms, or at all, we believe that dilution from any equity financing while
our shares are quoted on an over-the-counter market would likely be substantially greater than if we were to complete a financing
while our common stock is traded on a national securities exchange. Further, we are unable to use short-form registration statements
on Form S-3 for the registration of our securities, which could impair our ability to raise additional capital as needed.
Our common stock is also subject to penny
stock rules, which impose additional sales practice requirements on broker-dealers who sell our common stock. The SEC generally
defines “penny stock” as an equity security that has a market price of less than $5.00 per share, subject to certain
exceptions. The ability of broker-dealers to sell our common stock and the ability of our stockholders to sell their shares in
the secondary market will be limited and, as a result, the market liquidity for our common stock will likely be adversely affected.
We cannot assure you that trading in our securities will not be subject to these or other regulations in the future.
The report of our independent registered
public accounting firm contains explanatory language that substantial doubt exists about our ability to continue as a going concern.
The report of our independent registered
public accounting firm on our financial statements for the year ended December 31, 2014 contains explanatory language that
substantial doubt exists about our ability to continue as a going concern, without raising additional capital. As described in
our annual report, we estimate that our existing capital resources, including the money received from G-treeBNT under the January
2015 Joint Venture and License Agreements will be adequate to fund our operations into the second quarter of 2016. This estimate
could change and we may need additional capital in less than 12 months if we are able to undertake additional efforts to support
our objectives. Therefore, we continue to seek other sources of capital, but if we are unable to obtain sufficient financing
to support and complete these activities, then we would, in all likelihood, experience severe liquidity problems and may have to
curtail our operations. If we curtail our operations, we may be placed into bankruptcy or undergo liquidation, the result of which
will adversely affect the value of our common shares.
Risks Related to
Our Business and Operations
Our planned Phase 2 clinical trial
of RGN-352 was placed on clinical hold by the FDA in March 2011 and we are unsure when, if ever, we will be able to resume this
trial.
In the second half of 2010, we implemented
the development plans for our phase 2 clinical trial to evaluate RGN-352 in patients who have suffered an acute myocardial infarction,
or AMI. We had planned to begin enrolling patients near the end of the first quarter of 2011. However, in March 2011, we were notified
by the FDA that the trial was placed on clinical hold as a result of our contract manufacturer’s alleged failure to comply
with current Good Manufacturing Practice (“cGMP”) regulations. The FDA has prohibited us from using any of the active
drug or placebo manufactured by this manufacturer in human trials, which will require us to identify a cGMP-compliant manufacturer
and to have new material produced in the event that we seek to resume this trial. We have also learned that the contract manufacturer
has closed its manufacturing facility and has filed for bankruptcy protection. Significant preparatory time and procedures will
be required before any new suitable manufacturer would be able to manufacture RGN-352 for the AMI trial. Since we are unable to
estimate the length of time that the trial will be on clinical hold, we have elected to cease activities on this trial until the
FDA clinical hold is resolved and the requisite funding might be secured. Consequently, there can be no assurance that we will
be able to timely initiate trial activities or complete this trial, if at all.
All of our drug candidates are based
on a single compound.
Our current primary business focus is the
development of Tß4, and its analogues, derivatives and fragments, for the regeneration and accelerated repair of damaged
tissue from non-healing dermal and corneal wounds, cardiac injury, central/peripheral nervous system diseases and other conditions,
as well as an improvement in various functions, such as, but not limited to, cardiac and neurological. Unlike many pharmaceutical
companies that have a number of unique chemical entities in development, we are dependent on a single molecule, formulated for
different routes of administration and different clinical indications, for our potential commercial success. As a result, any common
safety or efficacy concerns for Tß4-based products that cross formulations would have a much greater impact on our business
prospects than if our product pipeline were more diversified.
We may never be able to commercialize
our product candidates.
Although Tß4 has shown biological
activity in in vitro studies and in vivo animal models and while we observed clinical activity and efficacious outcomes
in our recent RGN-259 Phase 2a trial and earlier Phase 2 dermal trials, we cannot assure you that our product candidates will exhibit
activity or importance in humans in large-scale trials. Our drug candidates are still in research and development, and we do not
expect them to be commercially available for the foreseeable future, if at all. Only a small number of research and development
programs ultimately result in commercially successful drugs. Potential products that appear to be promising at early stages of
development may not reach the market for a number of reasons. These include the possibility that the potential products may:
| · | be found ineffective or cause harmful
side effects during preclinical studies or clinical trials; |
| · | fail to receive necessary regulatory approvals; |
| · | be precluded from commercialization by
proprietary rights of third parties; |
| · | be difficult to manufacture on a large
scale; or |
| · | be uneconomical or otherwise fail to achieve
market acceptance. |
If any of these potential problems occurs,
we may never successfully market Tß4-based products.
We are subject to intense government
regulation, and we may not receive regulatory approvals for our drug candidates.
Our product candidates will require regulatory
approvals prior to sale. In particular, therapeutic agents are subject to stringent approval processes, prior to commercial marketing,
by the FDA and by comparable agencies in most foreign countries. The process of obtaining FDA and corresponding foreign approvals
is costly and time-consuming, and we cannot assure you that such approvals will be granted. Also, the regulations we are subject
to change frequently and such changes could cause delays in the development of our product candidates.
Three of our drug candidates are currently
in the clinical development stage, and we cannot be certain that we or our collaborators will successfully complete the clinical
trials necessary to receive regulatory product approvals. The regulatory approval process is lengthy, unpredictable and expensive.
To obtain regulatory approvals in the United States, we or a collaborator must ultimately demonstrate to the satisfaction of the
FDA that our product candidates are sufficiently safe and effective for their proposed administration to humans. Many factors,
known and unknown, can adversely impact clinical trials and the ability to evaluate a product candidate’s safety and efficacy,
including:
| · | the FDA or other health regulatory authorities,
or institutional review boards, or IRBs, do not approve a clinical trial protocol or place a clinical trial on hold; |
| · | suitable patients do not enroll in a clinical
trial in sufficient numbers or at the expected rate, for reasons such as the size of the patient population, the proximity of patients
to clinical sites, the eligibility criteria for the trial, the perceptions of investigators and patients regarding safety, and
the availability of other treatment options; |
| · | clinical trial data is adversely affected
by trial conduct or patient withdrawal prior to completion of the trial; |
| · | there may be competition with ongoing
clinical trials and scheduling conflicts with participating clinicians; |
| · | patients experience serious adverse events,
including adverse side effects of our drug candidates, for a variety of reasons that may or may not be related to our product candidates,
including the advanced stage of their disease and other medical problems; |
| · | patients in the placebo or untreated control
group exhibit greater than expected improvements or fewer than expected adverse events; |
| · | third-party clinical investigators do
not perform the clinical trials on the anticipated schedule or consistent with the clinical trial protocol and good clinical practices,
or other third-party organizations do not perform data collection and analysis in a timely or accurate manner; |
| · | service providers, collaborators or co-sponsors
do not adequately perform their obligations in relation to the clinical trial or cause the trial to be delayed or terminated; |
| · | we are unable to obtain a sufficient supply
of manufactured clinical trial materials; |
| · | regulatory inspections of manufacturing
facilities, which may, among other things, require us or a co-sponsor to undertake corrective action or suspend the clinical trials,
such as the clinical hold with respect to our Phase 2 clinical trial of RGN-352; |
| · | the interim results of the clinical trial
are inconclusive or negative; |
| · | the clinical trial, although approved
and completed, generates data that is not considered by the FDA or others to be clinically relevant or sufficient to demonstrate
safety and efficacy; and |
| · | changes in governmental regulations or
administrative actions affect the conduct of the clinical trial or the interpretation of its results. |
There can be no assurance that our clinical
trials will in fact demonstrate, to the satisfaction of the FDA and others, that our product candidates are sufficiently safe or
effective. The FDA or we may also restrict or suspend our clinical trials at any time if it is believed that subjects participating
in the trials are being exposed to unacceptable health risks.
Clinical trials for product candidates
such as ours are often conducted with patients who have more advanced forms of a particular condition or other unrelated conditions.
For example, in clinical trials for our product candidate RGN-137, we have studied patients who are not only suffering from chronic
epidermal wounds but who are also older and much more likely to have other serious adverse conditions. During the course of treatment
with our product candidates, patients could die or suffer other adverse events for reasons that may or may not be related to the
drug candidate being tested. Further, and as a consequence that all of our drug candidates are based on Tß4, crossover risk
exists such that a patient in one trial may be adversely impacted by one drug candidate, and that adverse event may have implications
for our other trials and other drug candidates. However, even if unrelated to our product candidates, such adverse events can nevertheless
negatively impact our clinical trials, and our business prospects would suffer.
These factors, many of which may be outside
of our control, may have a negative impact on our business by making it difficult to advance product candidates or by reducing
or eliminating their potential or perceived value. As a consequence, we may need to perform more or larger clinical trials than
planned. Further, if we are forced to contribute greater financial and clinical resources to a study, valuable resources will be
diverted from other areas of our business. If we fail to complete or if we experience material delays in completing our clinical
trials as currently planned, or we otherwise fail to commence or complete, or experience delays in, any of our other present or
planned clinical trials, including as a result of the actions of third parties upon which we rely for these functions, our ability
to conduct our business as currently planned could materially suffer.
We may not successfully establish
and maintain development and testing relationships with third-party service providers and collaborators, which could adversely
affect our ability to develop our product candidates.
We have only limited resources, experience
with and capacity to conduct requisite testing and clinical trials of our drug candidates. As a result, we rely and expect to continue
to rely on third-party service providers and collaborators, including corporate partners, licensors and contract research organizations,
or CROs, to perform a number of activities relating to the development of our drug candidates, including the design and conduct
of clinical trials, and potentially the obtaining of regulatory approvals. For example, we currently rely on several third-party
contractors to manufacture and formulate Tß4 into the product candidates used in our clinical trials, develop assays to assess
Tß4’s effectiveness in complex biological systems, recruit clinical investigators and sites to participate in our trials,
manage the clinical trial process and collect, evaluate and report clinical results.
We may not be able to maintain or expand
our current arrangements with these third parties or maintain such relationships on favorable terms. Our agreements with these
third parties may also contain provisions that restrict our ability to develop and test our product candidates or that give third
parties rights to control aspects of our product development and clinical programs. In addition, conflicts may arise with our collaborators,
such as conflicts concerning the interpretation of clinical data, the achievement of milestones, the interpretation of financial
provisions or the ownership of intellectual property developed during the collaboration. If any conflicts arise with our existing
or future collaborators, they may act in their self-interest, which may be adverse to our best interests. Any failure to maintain
our collaborative agreements and any conflicts with our collaborators could delay or prevent us from developing our product candidates.
We and our collaborators may fail to develop products covered by our present and future collaborations if, among other things:
| · | we do not achieve our objectives under
our collaboration agreements; |
| · | we or our collaborators are unable to
obtain patent protection for the products or proprietary technologies we develop in our collaborations; |
| · | we are unable to manage multiple simultaneous
product development collaborations; |
| · | our collaborators become competitors of
ours or enter into agreements with our competitors; |
| · | we or our collaborators encounter regulatory
hurdles that prevent commercialization of our product candidates; or |
| · | we develop products and processes or enter
into additional collaborations that conflict with the business objectives of our other collaborators. |
We also have less control over the timing
and other aspects of our clinical trials than if we conducted the monitoring and supervision entirely on our own. Third parties
may not perform their responsibilities for our clinical trials on our anticipated schedule or consistent with a clinical trial
protocol or applicable regulations. We also rely on clinical research organizations to perform much of our data management and
analysis. They may not provide these services as required or in a timely manner. If any of these parties do not meet deadlines
or follow proper procedures, including procedures required by law, the preclinical studies and clinical trials may take longer
than expected, may be delayed or may be terminated, which would have a materially negative impact on our product development efforts.
If we were forced to find a replacement entity to perform any of our preclinical studies or clinical trials, we may not be able
to find a suitable entity on favorable terms or at all. Even if we were able to find a replacement, resulting delays in the tests
or trials may result in significant additional expenditures and delays in obtaining regulatory approval for drug candidates, which
could have a material adverse impact on our results of operations and business prospects.
G-treeBNT Co., Ltd. has limited drug
development experience.
In March 2014 we completed two licensing
agreements for the development and commercialization of RGN-259 and RGN-137 in certain territories, with G-treeBNT, headquartered
outside of Seoul, Korea. In January 2015 we entered into a Joint Venture Agreement with G-tree-BNT and entered into a license agreement
with the Joint Venture, pursuant to which granted to the Joint Venture the right to develop and exclusively commercialize RGN-259
in the United States. Although we will share control of the Joint Venture with G-tree BNT, G-treeBNT will have greater control
of over the Joint Venture than we will, meaning that G-treeBNT will have significant control over the commercialization of RGN-259.
Historically, G-treeBNT’s business
focus has been in the IT software industry in Korea with strong IP positions addressing specific software tools and apps such as
optimized multimedia software for smart phones. G-treeBNT made a strategic decision in November 2013 to expand into the biopharmaceutical
business through selected strategic alliances with biopharmaceutical companies in the US and EU. The collaboration with RegeneRx
is the first strategic investment in this initiative. While G-treeBNT has hired executives and staff with significant pharmaceutical
experience, the company has no internal drug development experience. As a result, G-treeBNT may face more and different challenges
in the development of these product candidates than would more established pharmaceutical companies.
We are subject to intense competition
from companies with greater resources and more mature products, which may result in our competitors developing or commercializing
products before or more successfully than we do.
We are engaged in a business that is highly
competitive. Research and development activities for the development of drugs to treat indications within our focus are being sponsored
or conducted by private and public research institutions and by major pharmaceutical companies located in the United States and
a number of foreign countries. Most of these companies and institutions have financial and human resources that are substantially
greater than our own and they have extensive experience in conducting research and development activities and clinical trials and
in obtaining the regulatory approvals necessary to market pharmaceutical products that we do not have. As a result, they may develop
competing products more rapidly that are safer, more effective, or have fewer side effects, or are less expensive, or they may
develop and commercialize products that render our product candidates non-competitive or obsolete.
With respect to our product candidate RGN-259,
there are also numerous ophthalmic companies developing drugs for corneal wound healing and other front-of-the-eye diseases and
injuries. Amniotic membranes have been successfully used to treat corneal wounds in certain cases, as have topical steroids and
antibacterial agents.
We have initially targeted our product
candidate RGN-352 for cardiovascular indications. Most large pharmaceutical companies and many smaller biomedical companies are
vigorously pursuing the development of therapeutics to treat patients after heart attacks and for other cardiovascular indications.
With respect to our product candidate RGN-137
for wound healing, Johnson & Johnson has previously marketed Regranex™ for this purpose in patients with diabetic foot
ulcers. Other companies, such as Novartis, are developing and marketing artificial skins, which we believe could also compete with
RGN-137. Moreover, wound healing is a large and highly fragmented marketplace attracting many companies, large and small, to develop
products for treating acute and chronic wounds, including, for example, honey-based ointments, hyperbaric oxygen therapy, and low
frequency cavitational ultrasound.
Even if approved for marketing, our
technologies and product candidates are unproven and they may fail to gain market acceptance.
Our product candidates, all of which are
based on the molecule Tß4, are new and unproven and there is no guarantee that health care providers or patients will be
interested in our product candidates, even if they are approved for use. If any of our product candidates are approved by the FDA,
our success will depend in part on our ability to demonstrate sufficient clinical benefits, reliability, safety, and cost effectiveness
of our product candidates relative to other approaches, as well as on our ability to continue to develop our product candidates
to respond to competitive and technological changes. If the market does not accept our product candidates, when and if we are able
to commercialize them, then we may never become profitable. Factors that could delay, inhibit or prevent market acceptance of our
product candidates may include:
| · | the timing and receipt of marketing approvals; |
| · | the safety and efficacy of the products; |
| · | the emergence of equivalent or superior
products; |
| · | the cost-effectiveness of the products;
and |
It is difficult to predict the future growth
of our business, if any, and the size of the market for our product candidates because the markets are continually evolving. There
can be no assurance that our product candidates will prove superior to products that may currently be available or may become available
in the future or that our research and development activities will result in any commercially profitable products.
We have no marketing experience,
sales force or distribution capabilities. If our product candidates are approved, and we are unable to recruit key personnel to
perform these functions, we may not be able to commercialize them successfully.
Although we do not currently have any marketable
products, our ability to produce revenues ultimately depends on our ability to sell our product candidates if and when they are
approved by the FDA and other regulatory authorities. We currently have no experience in marketing or selling pharmaceutical products,
and we do not have a marketing and sales staff or distribution capabilities. Developing a marketing and sales force is also time-consuming
and could delay the launch of new products or expansion of existing product sales. In addition, we will compete with many companies
that currently have extensive and well-funded marketing and sales operations. If we fail to establish successful marketing and
sales capabilities or fail to enter into successful marketing arrangements with third parties, our ability to generate revenues
will suffer.
If we enter markets outside the United
States our business will be subject to political, economic, legal and social risks in those markets, which could adversely affect
our business.
There are significant regulatory and legal
barriers to entering markets outside the United States that we must overcome if we seek regulatory approval to market our product
candidates in countries other than the United States. We would be subject to the burden of complying with a wide variety of national
and local laws, including multiple and possibly overlapping and conflicting laws. We also may experience difficulties adapting
to new cultures, business customs and legal systems. Any sales and operations outside the United States would be subject to political,
economic and social uncertainties including, among others:
| · | changes and limits in import and export
controls; |
| · | increases in custom duties and tariffs; |
| · | changes in currency exchange rates; |
| · | economic and political instability; |
| · | changes in government regulations and
laws; |
| · | absence in some jurisdictions of effective
laws to protect our intellectual property rights; and |
| · | currency transfer and other restrictions
and regulations that may limit our ability to sell certain product candidates or repatriate profits to the United States. |
Any changes related to these and other
factors could adversely affect our business if and to the extent we enter markets outside the United States. Additionally, we have
entered into license agreements with Sigma-Tau Spa, Lee’s Pharmaceutical Limited and G-treeBNT for the development of certain
of our product candidates in international markets. As a result, these development activities will be subject to compliance in
all respects with local laws and regulations and may be subject to many of the risks described above.
Governmental and third-party payors
may subject any product candidates we develop to sales and pharmaceutical pricing controls that could limit our product revenues
and delay profitability.
The successful commercialization of our
product candidates, if they are approved by the FDA, will likely depend on our ability to obtain reimbursement for the cost of
the product and treatment. Government authorities, private health insurers and other organizations, such as health maintenance
organizations, are increasingly seeking to lower the prices charged for medical products and services. Also, the trend toward managed
health care in the United States, the growth of healthcare maintenance organizations, and recently enacted legislation reforming
healthcare and proposals to reform government insurance programs could have a significant influence on the purchase of healthcare
services and products, resulting in lower prices and reducing demand for our product candidates. The cost containment measures
that healthcare providers are instituting and any healthcare reform could reduce our ability to sell our product candidates and
may have a material adverse effect on our operations. We cannot assure you that reimbursement in the United States or foreign countries
will be available for any of our product candidates, and that any reimbursement granted will be maintained, or that limits on reimbursement
available from third-party payors will not reduce the demand for, or the price of, our product candidates. The lack or inadequacy
of third-party reimbursements for our product candidates would decrease the potential profitability of our operations. We cannot
forecast what additional legislation or regulation relating to the healthcare industry or third-party coverage and reimbursement
may be enacted in the future, or what effect the legislation or regulation would have on our business.
We have no manufacturing or formulation
capabilities and are dependent upon third-party suppliers to provide us with our product candidates. If these suppliers do not
manufacture our product candidates in sufficient quantities, at acceptable quality levels and at acceptable cost, or if we are
unable to identify suitable replacement suppliers if needed, our clinical development efforts could be delayed, prevented or impaired.
We do not own or operate manufacturing
facilities and have little experience in manufacturing pharmaceutical products. We currently rely, and expect to continue to rely,
primarily on peptide manufacturers to supply us with Tß4 for further formulation into our product candidates. We have historically
engaged three separate smaller drug formulation contractors for the formulation of clinical grade product candidates, one for each
of our three product candidates in clinical development, although, as described in this report, the contractor we engaged for RGN-352
has filed for bankruptcy and closed its manufacturing facility, and our clinical trial involving RGN-352 has been placed on clinical
hold. We currently do not have an alternative source of supply for either Tß4 or the individual drug candidates. If these
suppliers, together or individually, are not able to supply us with either Tß4 or individual product candidates on a timely
basis, in sufficient quantities, at acceptable levels of quality and at a competitive price, or if we are unable to identify a
replacement manufacturer to perform these functions on acceptable terms as needed, our development programs could be seriously
jeopardized.
The clinical hold on our RGN-352 trial
will require us to have new material manufactured by a cGMP-compliant manufacturer in the event that we seek to resume this trial.
Significant preparatory time and procedures will be required before any new manufacturer would be able to manufacture RGN-352 for
the AMI trial, due to the time required for revalidation of processes and assays related to such production that were already in
place with the original manufacturer. Since we are unable to estimate the length of time that the trial will be on clinical hold,
we have elected to cease activities on this trial until the FDA clinical hold is resolved and the requisite funding might be secured.
Other risks of relying solely on single
suppliers for each of our product candidates include:
| · | the possibility that our other manufacturers,
and any new manufacturer that we may identify for RGN-352, may not be able to ensure quality and compliance with regulations relating
to the manufacture of pharmaceuticals; |
| · | their manufacturing capacity may not be
sufficient or available to produce the required quantities of our product candidates based on our planned clinical development
schedule, if at all; |
| · | they may not have access to the capital
necessary to expand their manufacturing facilities in response to our needs; |
| · | commissioning replacement suppliers would
be difficult and time-consuming; |
| · | individual suppliers may have used substantial
proprietary know-how relating to the manufacture of our product candidates and, in the event we must find a replacement or supplemental
supplier, our ability to transfer this know-how to the new supplier could be an expensive and/or time-consuming process; |
| · | an individual supplier may experience
events, such as a fire or natural disaster, that force it to stop or curtail production for an extended period; |
| · | an individual supplier could encounter
significant increases in labor, capital or other costs that would make it difficult for them to produce our products cost-effectively;
or |
| · | an individual supplier may not be able
to obtain the raw materials or validated drug containers in sufficient quantities, at acceptable costs or in sufficient time to
complete the manufacture, formulation and delivery of our product candidates. |
Our suppliers may use hazardous and
biological materials in their businesses. Any claims relating to improper handling, storage or disposal of these materials could
be time-consuming and costly to us, and we are not insured against such claims.
Our product candidates and processes involve
the controlled storage, use and disposal by our suppliers of certain hazardous and biological materials and waste products. We
and our suppliers and other collaborators are subject to federal, state and local regulations governing the use, manufacture, storage,
handling and disposal of materials and waste products. Even if we and these suppliers and collaborators comply with the standards
prescribed by law and regulation, the risk of accidental contamination or injury from hazardous materials cannot be completely
eliminated. In the event of an accident, we could be held liable for any damages that result, and we do not carry insurance for
this type of claim. We may also incur significant costs to comply with current or future environmental laws and regulations.
We face the risk of product liability
claims, which could adversely affect our business and financial condition.
We may be subject to product liability
claims as a result of our testing, manufacturing, and marketing of drugs. In addition, the use of our product candidates, when
and if developed and sold, will expose us to the risk of product liability claims. Product liability may result from harm to patients
using our product candidates, such as a complication that was either not communicated as a potential side effect or was more extreme
than anticipated. We require all patients enrolled in our clinical trials to sign consents, which explain various risks involved
with participating in the trial. However, patient consents provide only a limited level of protection, and it may be alleged that
the consent did not address or did not adequately address a risk that the patient suffered. Additionally, we will generally be
required to indemnify our clinical product manufacturers, clinical trial centers, medical professionals and other parties conducting
related activities in connection with losses they may incur through their involvement in the clinical trials.
Our ability to reduce our liability exposure
for human clinical trials and commercial sales, if any, of Tß4 is dependent in part on our ability to obtain sufficient product
liability insurance or to collaborate with third parties that have adequate insurance. Although we intend to obtain and maintain
product liability insurance coverage if we gain approval to market any of our product candidates, we cannot guarantee that product
liability insurance will continue to be available to us on acceptable terms, or at all, or that its coverage will be sufficient
to cover all claims against us. A product liability claim, even one without merit or for which we have substantial coverage, could
result in significant legal defense costs, thereby potentially exposing us to expenses significantly in excess of our revenues,
as well as harm to our reputation and distraction of our management.
If any of our key employees discontinue
their services with us, our efforts to develop our business may be delayed.
We are highly dependent on the principal
members of our management team. The loss of our chairman and chief scientific advisor, Allan Goldstein, or chief executive officer,
J.J. Finkelstein could prevent or significantly delay the achievement of our goals. We cannot assure you that Dr. Goldstein or
Mr. Finkelstein, or any other key employees or consultants, will not elect to terminate their employment or consulting arrangements.
In addition, we do not maintain a key man life insurance policy with respect to any of our management personnel. In the future,
we anticipate that we will also need to add additional management and other personnel. Competition for qualified personnel in our
industry is intense, and our success will depend in part on our ability to attract and retain highly skilled personnel. We cannot
assure you that our efforts to attract or retain such personnel will be successful.
Mauro Bove, a member of our Board,
was also a director and officer of entities affiliated with Sigma-Tau and is a director of Lee’s Pharmaceuticals, relationships
which could give rise to a conflict of interest for Mr. Bove.
Mauro Bove is a member of our Board of
Directors, and, until March 31, 2014, was also a director and officer of entities affiliated with Sigma-Tau, which collectively
make up our largest stockholder group. At this time Mr. Bove remains engaged with Sigma-Tau as a consultant. Sigma-Tau has provided
us with significant funding, may continue doing so in the future, and is also our strategic partner in Europe with respect to the
development of certain of our drug candidates. We have issued shares of common stock, convertible promissory notes and common stock
warrants to Sigma-Tau and its affiliates in several private placement financing transactions, including as recently as September
2013. We have licensed certain rights to our product candidates generally for the treatment of dermal and internal wounds to Sigma-Tau.
Under the license agreement, upon the completion of a Phase 2 clinical trial of either of these product candidates that yields
positive results in terms of clinical efficacy and safety, Sigma-Tau is obligated to either make a $5 million milestone payment
to us or to initiate and fund a pivotal Phase 3 clinical trial of the product candidate. In 2009, we completed two Phase 2 clinical
trials of RGN-137, but these trials were not sufficient to trigger the milestone obligation. There can be no assurance that we
will ever receive this payment or be able to initiate a pivotal Phase 3 clinical trial of RGN-137 that would be funded by Sigma-Tau.
As a result of Mr. Bove’s relationship with Sigma-Tau, there could be a conflict of interest between Sigma-Tau and our
other stockholders with respect to these and other agreements and circumstances that may require the exercise of the Board’s
discretion with respect to Sigma-Tau. Any decision in the best interests of Sigma-Tau may not be in the best interest of our other
stockholders.
Additionally, Mr. Bove is a non-executive
director of Lee’s Pharmaceuticals, in which affiliates of Sigma-Tau have a significant equity interest. In July 2012, we
entered into a license agreement for TB4 in any pharmaceutical form, including our RGN-259, RGN-352 and RGN-137 product candidates
for development in China, Hong Kong, Macau and Taiwan. There can be no assurance that we will ever receive any further payments
from Lee’s under the agreement. As a result of Mr. Bove’s relationship with Lee’s and Sigma-Tau, Mr. Bove
may have interests that are different from our other stockholders in connection with these and other agreements and circumstances
that may require the exercise of the Board’s discretion with respect to Lee’s or Sigma-Tau. These conflicts could result
in decisions that are not in the best interest of our other stockholders.
Risks Related To
Our Intellectual Property
We are partially reliant on our license
from the National Institutes of Health for the rights to Tß4, and any loss of these rights could adversely affect our business.
We have received an exclusive worldwide
license to intellectual property discovered at the National Institutes of Health, or NIH, pertaining to the use of Tß4 in
wound healing and tissue repair. The intellectual property rights from this license, along with independent patent applications
we have filed, as well as patents and patent applications under licenses we acquired, form the basis for our current commercial
development focus with Tß4. The NIH license terminates upon the last to expire of the patent applications that are filed,
or any patents that may issue from such applications, in connection with the license. This license requires us to pay a minimum
annual royalty to the NIH, regardless of the success of our product development efforts, plus certain other royalties upon the
sale of products created by the intellectual property granted under the license. In 2013 we amended certain provisions of the exclusive
license; we were permitted to credit amounts paid to prosecute or maintain the licensed patent rights during the 2013 calendar
year against the 2013 minimum annual royalty of $25,000. Beginning in 2014 the minimum annual royalty is $2,000. While to date
we believe that we have complied with all requirements to maintain the license, the loss of this license could have an adverse
effect on our business and business prospects.
We may not be able to maintain broad
patent protection for our product candidates, which could limit the commercial potential of our product candidates.
Our success will depend in part on our
ability to obtain, defend and enforce patents, both in the United States and abroad. We have attempted to create a substantial
intellectual property portfolio, submitting patent applications for various compositions of matter, methods of use and fragments
and derivatives of Tß4. As described elsewhere in this report, we currently do not have adequate financial resources to fund
our ongoing business activities substantially beyond 12 months without additional funding. As a result of our current financial
condition, we continuously evaluate our issued patents and patent applications and may decide to limit their therapeutic and/or
geographic coverage in an effort to enhance our ability to focus on certain medical conditions and countries within our financial
constraints. As a result, we may not be able to protect our intellectual property rights in indications and/or territories that
we otherwise would, and, therefore, our ability to commercialize Tß4, if at all, could be substantially limited, which could
have a material adverse impact on our future results of operations.
If we are not able to maintain adequate
patent protection for our product candidates, we may be unable to prevent our competitors from using our technology or technology
that we license.
Our success will depend in substantial
part on our ability to obtain, defend and enforce patents, maintain trade secrets and operate without infringing upon the proprietary
rights of others, both in the United States and abroad. Pursuant to an exclusive worldwide license from the NIH, we have exclusive
rights to use Tß4 in the treatment of non-healing wounds. While patents covering our use of Tß4 have issued in some
countries, we cannot guarantee whether or when corresponding patents will be issued, or the scope of any patents that may be issued,
in other countries. We have attempted to create a substantial intellectual property portfolio, submitting patent applications for
various compositions of matter, methods of use and fragments and derivatives of Tß4. We have also in-licensed other intellectual
property rights from third parties that could be subject to the same risks as our own patents. If any of these patent applications
do not issue, or do not issue in certain countries, or are not enforceable, the ability to commercialize Tß4 in various medical
indications could be substantially limited or eliminated.
In addition, the patent positions of the
products being developed by us and our collaborators involve complex legal and factual uncertainties. As a result, we cannot assure
you that any patent applications filed by us, or by others under which we have rights, will result in patents being issued in the
United States or foreign countries. In addition, there can be no assurance that any patents will be issued from any pending or
future patent applications of ours or our collaborators, that the scope of any patent protection will be sufficient to provide
us with competitive advantages, that any patents obtained by us or our collaborators will be held valid if subsequently challenged
or that others will not claim rights in or ownership of the patents and other proprietary rights we or our collaborators may hold.
Unauthorized parties may try to copy aspects of our product candidates and technologies or obtain and use information we consider
proprietary. Policing the unauthorized use of our proprietary rights is difficult. We cannot guarantee that no harm or threat will
be made to our or our collaborators’ intellectual property. In addition, changes in, or different interpretations of, patent
laws in the United States and other countries may also adversely affect the scope of our patent protection and our competitive
situation.
Due to the significant time lag between
the filing of patent applications and the publication of such patents, we cannot be certain that our licensors were the first to
file the patent applications we license or, even if they were the first to file, also were the first to invent, particularly with
regards to patent rights in the United States. In addition, a number of pharmaceutical and biotechnology companies and research
and academic institutions have developed technologies, filed patent applications or received patents on various technologies that
may be related to our product candidates. Some of these technologies, applications or patents may conflict with our or our licensors’
technologies or patent applications. A conflict could limit the scope of the patents, if any, that we or our licensors may be able
to obtain or result in denial of our or our licensors’ patent applications. If patents that cover our activities are issued
to other companies, we may not be able to develop or obtain alternative technology.
Additionally, there is certain subject
matter that is patentable in the United States but not generally patentable outside of the United States. Differences in what constitutes
patentable subject matter in various countries may limit the protection we can obtain outside of the United States. For example,
methods of treating humans are not patentable in many countries outside of the United States. These and other issues may prevent
us from obtaining patent protection outside of the United States, which would have a material adverse effect on our business, financial
condition and results of operations.
Changes to U.S. patent laws could
materially reduce any value our patent portfolio may have.
The value of our patents depends in part
on their duration. A shorter period of patent protection could lessen the value of our rights under any patents that may be obtained
and may decrease revenues derived from its patents. For example, the U.S. patent laws were previously amended to change the term
of patent protection from 17 years following patent issuance to 20 years from the earliest effective filing date of the
application. Because the time from filing to issuance of biotechnology applications may be more than three years depending on the
subject matter, a 20-year patent term from the filing date may result in substantially shorter patent protection. Future changes
to patent laws could shorten our period of patent exclusivity and may decrease the revenues that we might derive from the patents
and the value of our patent portfolio.
We may not have adequate protection
for our unpatented proprietary information, which could adversely affect our competitive position.
In addition to our patents, we also rely
on trade secrets, know-how, continuing technological innovations and licensing opportunities to develop and maintain our competitive
position. However, others may independently develop substantially equivalent proprietary information and techniques or otherwise
gain access to our trade secrets or disclose our technology. To protect our trade secrets, we may enter into confidentiality agreements
with employees, consultants and potential collaborators. However, we may not have such agreements in place with all such parties
and, where we do, these agreements may not provide meaningful protection of our trade secrets or adequate remedies in the event
of unauthorized use or disclosure of such information. Also, our trade secrets or know-how may become known through other means
or be independently discovered by our competitors. Any of these events could prevent us from developing or commercializing our
product candidates.
We may be subject to claims that
we or our employees have wrongfully used or disclosed alleged trade secrets of former employers.
As is commonplace in the biotechnology
industry, we employ now, and may hire in the future, individuals who were previously employed at other biotechnology or pharmaceutical
companies, including competitors or potential competitors. Although there are no claims currently pending against us, we may be
subject to claims that we or certain employees have inadvertently or otherwise used or disclosed trade secrets or other proprietary
information of former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending
against these claims, litigation could result in substantial costs and would be a significant distraction to management.
Risks Related To
Our Securities
Our common stock price is volatile,
our stock is highly illiquid, and any investment in our securities could decline substantially in value.
For the period from January 1, 2014
through August 12, 2015 the closing price of our common stock has ranged from $0.08 to $0.58, with an average daily trading volume
of approximately 95,000 shares. In light of our small size and limited resources, as well as the uncertainties and risks that
can affect our business and industry, our stock price is expected to continue to be highly volatile and can be subject to substantial
drops, with or even in the absence of news affecting our business. The following factors, in addition to the other risk factors
described in this report, and the potentially low volume of trades in our common stock since it is not listed on a national securities
exchange, may have a significant impact on the market price of our common stock, some of which are beyond our control:
| · | results of pre-clinical studies and clinical
trials; |
| · | commercial success of approved products; |
| · | technological innovations by us or competitors; |
| · | changes in laws and government regulations
both in the U.S. and overseas; |
| · | changes in key personnel at our company; |
| · | developments concerning proprietary rights,
including patents and litigation matters; |
| · | public perception relating to the commercial
value or safety of any of our product candidates; |
| · | other issuances of our common stock, or
securities convertible into or exercisable for our common stock, causing dilution; |
| · | anticipated or unanticipated changes in
our financial performance; |
| · | general trends related to the biopharmaceutical
and biotechnological industries; and |
| · | general conditions in the stock market. |
The stock market in general has recently
experienced relatively large price and volume fluctuations. In particular, the market prices of securities of smaller biotechnology
companies have experienced dramatic fluctuations that often have been unrelated or disproportionate to the operating results of
these companies. Continued market fluctuations could result in extreme volatility in the price of our common stock, which could
cause a decline in its value. You should also be aware that price volatility may be worse if the trading volume of the common stock
remains limited or declines.
Our principal stockholders have significant
voting power and may take actions that may not be in the best interests of our other stockholders.
Our officers, directors and principal stockholders
together control approximately 52% of our outstanding common stock. Included in this group is Sigma-Tau and its affiliates, which
together hold outstanding shares representing approximately 30% of our outstanding common stock and G-treeBNT which owns approximately
19% of our outstanding common stock. These stockholders also hold options, warrants, convertible promissory notes and stock purchase
rights that provide them with the right to acquire significantly more shares of common stock. Accordingly, if these stockholders
acted together they could control the outcome of all stockholder votes. This concentration of ownership may have the effect of
delaying or preventing a change in control and might adversely affect the market price of our common stock, and therefore may not
be in the best interest of our other stockholders.
If securities or industry analysts
do not publish research or reports or publish unfavorable research about our business, the price of our common stock and other
securities and their trading volume could decline.
The trading market for our common stock
and other securities will depend in part on the research and reports that securities or industry analysts publish about us or our
business. We do not currently have and may never obtain research coverage by securities and industry analysts. If securities or
industry analysts do not commence or maintain coverage of us, the trading price for our common stock and other securities would
be negatively affected. In the event we obtain securities or industry analyst coverage, if one or more of the analysts who covers
us downgrades our securities, the price of our securities would likely decline. If one or more of these analysts ceases to cover
us or fails to publish regular reports on us, interest in the purchase of our securities could decrease, which could cause the
price of our common stock and other securities and their trading volume to decline.
The exercise of options and warrants, conversion of convertible
promissory notes, and other issuances of shares of common stock or securities convertible into common stock will dilute your interest.
As of June 30, 2015, there were outstanding
options to purchase an aggregate of 7,096,211 shares of our common stock under our 2000 and 2010 incentive equity plans at exercise
prices ranging from $0.14 per share to $2.68 per share and outstanding warrants to purchase 1,807,407 shares of our common stock
at a weighted average exercise price of $0.32 per share. In addition to the outstanding options and warrants we have also issued
five series of convertible promissory notes which are presently convertible into an aggregate of 13,683,334 shares of our common
stock. In October 2012, we sold convertible promissory notes totaling $300,000 that are convertible into 2,000,000 shares of common
stock at a conversion price of $0.15 per share. In October 2014 the maturity date of these notes was extended for an additional
three years. In 2013, we sold three additional series of convertible promissory notes, which notes totaled $646,000 and are initially
convertible into 10,766,667 shares of common stock at a conversion price of $0.06 per share. In January 2014, we sold a fifth series
of convertible promissory notes, which notes totaled $55,000 and are initially convertible into 916,667 shares of common stock
at a conversion price of $0.06 per share. The notes issued in 2013 and January 2014 contain down round provisions under which the
conversion prices of these notes could be decreased as a result of future equity offerings below the conversion price of the notes.
The exercise of options and warrants or note conversions at prices below the market price of our common stock could adversely affect
the price of shares of our common stock. Additional dilution may result from the issuance of shares of our capital stock in connection
with collaborations or manufacturing arrangements or in connection with other financing efforts.
Any issuance of our common stock that is
not made solely to then-existing stockholders proportionate to their interests, such as in the case of a stock dividend or stock
split, will result in dilution to each stockholder by reducing his, her or its percentage ownership of the total outstanding shares.
Moreover, if we issue options or warrants to purchase our common stock in the future and those options or warrants are exercised
or we issue restricted stock, stockholders may experience further dilution. Holders of shares of our common stock have no preemptive
rights that entitle them to purchase their pro rata share of any offering of shares of any class or series.
In addition, most of the outstanding warrants
to purchase shares of our common stock have an exercise price above the current market price for our common stock. As a result,
these warrants may not be exercised prior to their expiration, in which case we would not realize any proceeds from their exercise.
Our certificate of incorporation
and Delaware law contain provisions that could discourage or prevent a takeover or other change in control, even if such a transaction
would be beneficial to our stockholders, which could affect our stock price adversely and prevent attempts by our stockholders
to replace or remove our current management.
Our certificate of incorporation provides
our Board with the power to issue shares of preferred stock without stockholder approval. In addition, we are subject to the anti-takeover
provisions of Section 203 of the Delaware General Corporation Law. Subject to specified exceptions, this section provides
that a corporation may not engage in any business combination with any interested stockholder, as defined in that statute, during
the three-year period following the time that such stockholder becomes an interested stockholder. This provision could also have
the effect of delaying or preventing a change of control of our company. The foregoing factors could reduce the price that investors
or an acquirer might be willing to pay in the future for shares of our common stock.
We may become involved in securities
class action litigation that could divert management’s attention and harm our business and our insurance coverage may not
be sufficient to cover all costs and damages.
The stock
market has from time to time experienced significant price and volume fluctuations that have affected the market prices for the
common stock of pharmaceutical and biotechnology companies. These broad market fluctuations may cause the market price of our common
stock to decline. In the past, following periods of volatility in the market price of a particular company’s securities,
securities class action litigation has often been brought against that company. We may become involved in this type of litigation
in the future. Litigation often is expensive and diverts management’s attention and resources, which could hurt our business,
operating results and financial condition.
| Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
On May 4, 2015, we
issued 30,000 shares of our common stock, valued at approximately $16,500 to ProActive Capital Resources Group LLC in consideration
for investor relations services. This issuance was exempt from registration under Section 4(2) of the Securities Act of 1933, as
amended, on the basis that the transactions did not involve a public offering.
On May 11, 2015, we issued 249,671 shares
of our common stock to Lincoln Park Capital, LLC upon the cashless exercise of a warrant. This issuance was exempt from registration
under Section 4(2) of the Securities Act of 1933, as amended, on the basis that the transactions did not involve a public offering.
| Item 3. | Defaults Upon Senior Securities |
None.
| Item 4. | Mine Safety Disclosures |
Not applicable.
None.
Exhibit No. |
|
Description of Exhibit |
|
Reference* |
31.1 |
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Certification of Principal Executive Officer and Principal Financial Officer pursuant to Rules 13a-14 and 15d-14 promulgated
under the Securities Exchange Act of 1934 |
|
Filed herewith |
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32.1 |
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Certification of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 |
|
Filed herewith** |
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101.INS |
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XBRL Instance Document |
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Filed
herewith |
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101.SCH |
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XBRL Taxonomy Extension Schema Document |
|
Filed
herewith |
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101.CAL |
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XBRL Taxonomy Extension Calculation Linkbase Document |
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Filed
herewith |
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101.DEF |
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XBRL Taxonomy Extension Definition Linkbase Document |
|
Filed
herewith |
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101.LAB |
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XBRL Taxonomy Extension Label Linkbase Document |
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Filed
herewith |
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101.PRE |
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XBRL Taxonomy Extension Presentation Linkbase Document |
|
Filed
herewith |
| * | Except where noted, the exhibits referred to in this column have heretofore been filed with the Securities and Exchange Commission
as exhibits to the documents indicated and are hereby incorporated by reference thereto. The Registration Statements referred to
are Registration Statements of the Company. |
| ** | This certification is being furnished solely to accompany this quarterly report pursuant to 18 U.S.C. Section 1350, is
not being filed for purposes of Section 18 of the Securities Exchange Act of 1934 and is not to be incorporated by reference
into any filing of the registrant, whether made before or after the date hereof, regardless of any general incorporation language
in such filing. |
Signatures
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
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RegeneRx
Biopharmaceuticals, Inc. |
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(Registrant) |
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Date: |
August 14, 2015 |
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/s/
J.J. Finkelstein |
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J.J.
Finkelstein |
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President and Chief Executive Officer |
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(On Behalf of the Registrant) |
EXHIBIT 31.1
CERTIFICATION
I, J.J. Finkelstein, certify that:
| 1. | I have reviewed this quarterly report on Form 10-Q of RegeneRx Biopharmaceuticals, Inc.; |
| 2. | Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material
fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading
with respect to the period covered by this quarterly report; |
| 3. | Based on my knowledge, the condensed financial statements, and other financial information included in this quarterly report,
fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of,
and for, the periods presented in this quarterly report; |
| 4. | The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting
(as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
| (a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the issuer, including its consolidated subsidiaries, is made known
to us by others within those entities, particularly during the period in which this report is being prepared; |
| (b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed
under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of
condensed financial statements for external purposes in accordance with generally accepted accounting principles; |
| (c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on
such evaluation; |
| (d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during
the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report)
that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial
reporting; and |
| 5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control
over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors
(or persons performing the equivalent functions): |
| (a) | All significant deficiencies and material weaknesses in the design or operation of internal control
over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize
and report financial information; and |
| (b) | Any fraud, whether or not material, that involves management or other employees who have a significant
role in the registrant’s internal control over financial reporting. |
Date: |
August 14, 2015 |
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/s/J.J. Finkelstein |
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J.J. Finkelstein |
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President and Chief Executive Officer |
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(Principal Executive Officer, Principal Financial Officer, and Principal Accounting
Officer) |
EXHIBIT 32.1
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report
on Form 10-Q of RegeneRx Biopharmaceuticals, Inc. (the “Company”) for the period ended June 30, 2015 (the “Report”),
I, J.J. Finkelstein, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002, that:
| (1) | The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange
Act of 1934 (15 U.S.C. 78m or 78o(d)); and |
| (2) | The information contained in the Report fairly presents, in all material respects, the financial
condition and result of operations of the Company as of and for the periods presented in the Report. |
This certification accompanies this Report
to which it relates, shall not be deemed “filed” with the Securities and Exchange Commission and is not to be incorporated
by reference into any filing of the Company under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934,
as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained
in such filing.
Date: |
August 14, 2015 |
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/s/J.J. Finkelstein |
|
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J.J. Finkelstein |
|
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President and Chief Executive Officer |
|
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|
(Principal
Executive Officer, Principal Financial Officer and Principal Accounting Officer) |
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