ITEM 1 – FINANCIAL STATEMENTS
Condensed Consolidated Interim Financial Statements
(Unaudited)
APTOSE BIOSCIENCES INC.
For the three months ended March 31, 2020 and 2019
APTOSE BIOSCIENCES INC.
Condensed Consolidated Interim Statements of Financial
Position
(Expressed in thousands of US dollars)
(unaudited)
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
59,754
|
|
|
$
|
79,842
|
|
Investments
|
|
|
30,229
|
|
|
|
17,758
|
|
Prepaid expenses
|
|
|
886
|
|
|
|
1,025
|
|
Other current assets
|
|
|
117
|
|
|
|
141
|
|
Total current assets
|
|
|
90,986
|
|
|
|
98,766
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
309
|
|
|
|
334
|
|
Right-of-use assets, operating leases
|
|
|
1,262
|
|
|
|
1,376
|
|
Total non-current assets
|
|
|
1,571
|
|
|
|
1,710
|
|
Total assets
|
|
$
|
92,557
|
|
|
$
|
100,476
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,017
|
|
|
$
|
1,960
|
|
Accrued liabilities
|
|
|
1,884
|
|
|
|
3,058
|
|
Current portion of lease liability, operating leases
|
|
|
525
|
|
|
|
521
|
|
Total current liabilities
|
|
|
4,426
|
|
|
|
5,539
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Lease liability, operating leases
|
|
|
894
|
|
|
|
1,011
|
|
Total liabilities
|
|
|
5,320
|
|
|
|
6,550
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Share capital:
|
|
|
|
|
|
|
|
|
Common shares, no par value, unlimited authorized shares, 76,269,806 and 76,108,031 shares issued and outstanding at March 31, 2020 and December 31, 2019, respectively
|
|
|
366,252
|
|
|
|
365,490
|
|
Additional paid-in capital
|
|
|
38,724
|
|
|
|
34,649
|
|
Accumulated other comprehensive loss
|
|
|
(4,298
|
)
|
|
|
(4,298
|
)
|
Deficit
|
|
|
(313,441
|
)
|
|
|
(301,915
|
)
|
Total shareholders’ equity
|
|
|
87,237
|
|
|
|
93,926
|
|
Total liabilities and shareholders’ equity
|
|
$
|
92,557
|
|
|
$
|
100,476
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated interim financial statements
(unaudited).
Subsequent events (note 12)
APTOSE BIOSCIENCES INC.
Condensed Consolidated Interim Statement of Loss and Comprehensive Loss
(Expressed in thousands of US dollars, except for per common share data)
(unaudited)
|
|
Three months ended
March 31, 2020
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
5,934
|
|
|
|
3,340
|
|
General and administrative
|
|
|
5,900
|
|
|
|
2,260
|
|
Operating expenses
|
|
|
11,834
|
|
|
|
5,600
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
323
|
|
|
|
92
|
|
Foreign exchange gains/( losses)
|
|
|
(15
|
)
|
|
|
2
|
|
Total other income
|
|
|
308
|
|
|
|
94
|
|
Net loss
|
|
|
(11,526
|
)
|
|
|
(5,506
|
)
|
|
|
|
|
|
|
|
|
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss) on securities available-for-sale
|
|
|
-
|
|
|
|
9
|
|
Total comprehensive loss
|
|
$
|
(11,526
|
)
|
|
$
|
(5,497
|
)
|
Basic and diluted loss per common share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.14
|
)
|
Weighted
average number of common shares outstanding used in the calculation of (in thousands)
Basic and diluted loss per common share
|
|
|
76,227
|
|
|
|
39,846
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated interim financial statements
(unaudited)
APTOSE BIOSCIENCES INC.
Condensed Consolidated Interim Statements of Changes in Shareholders’
Equity
(Expressed in thousands of US dollars)
(unaudited)
|
|
Common
Shares
|
|
|
|
|
Accumulated
other
|
|
|
|
|
|
|
|
|
Shares
(thousands)
|
|
|
|
Amount
|
|
|
|
Additional
paid-in capital
|
|
|
|
comprehensive
loss
|
|
|
|
Deficit
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
76,108
|
|
|
$
|
365,490
|
|
|
$
|
34,649
|
|
|
$
|
(4,298
|
)
|
|
$
|
(301,915
|
)
|
|
$
|
93,926
|
|
Common shares issued upon exercise of stock options
|
|
|
162
|
|
|
|
762
|
|
|
|
(326
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
436
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
4,401
|
|
|
|
-
|
|
|
|
-
|
|
|
|
4,401
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(11,526
|
)
|
|
$
|
(11,526
|
)
|
Balance, March 31, 2020
|
|
|
76,270
|
|
|
$
|
366,252
|
|
|
|
38,724
|
|
|
$
|
(4,298
|
)
|
|
$
|
(313,441
|
)
|
|
$
|
87,237
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
38,162
|
|
|
$
|
261,072
|
|
|
$
|
32,963
|
|
|
$
|
(4,316
|
)
|
|
$
|
(275,638
|
)
|
|
$
|
14,081
|
|
Common shares issued under the 2018 ATM
|
|
|
77
|
|
|
|
178
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
178
|
|
Common shares issued pursuant to 2018 share purchase agreement
|
|
|
3,260
|
|
|
|
6,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
6,000
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
662
|
|
|
|
-
|
|
|
|
-
|
|
|
|
662
|
|
Other comprehensive gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9
|
|
|
|
-
|
|
|
|
9
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(5,506
|
)
|
|
|
(5,506
|
)
|
Balance, March 31, 2019
|
|
|
41,499
|
|
|
$
|
267,250
|
|
|
$
|
33,625
|
|
|
$
|
(4,307
|
)
|
|
$
|
(281,144
|
)
|
|
$
|
15,424
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
See accompanying notes to condensed consolidated interim financial statements
(unaudited)
APTOSE BIOSCIENCES INC.
Condensed Consolidated Interim Statements of Cash Flows
(Expressed in thousands of US dollars)
(unaudited)
|
|
Three months ended
March 31, 2020
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
Cash flows from/(used in) operating activities:
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(11,526
|
)
|
|
$
|
(5,506
|
)
|
Items not involving cash:
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
4,401
|
|
|
|
662
|
|
Depreciation and amortization
|
|
|
41
|
|
|
|
29
|
|
Amortization of right-of-use assets
|
|
|
115
|
|
|
|
124
|
|
Interest on lease liabilities
|
|
|
18
|
|
|
|
24
|
|
Unrealized foreign exchange (gain)/loss
|
|
|
(15
|
)
|
|
|
(2
|
)
|
Accrued interest on investments
|
|
|
(60
|
)
|
|
|
-
|
|
Change in operating working capital:
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
139
|
|
|
|
107
|
|
Other assets
|
|
|
24
|
|
|
|
6
|
|
Operating lease payments
|
|
|
(131
|
)
|
|
|
(99
|
)
|
Accounts payable
|
|
|
57
|
|
|
|
(145
|
)
|
Accrued liabilities
|
|
|
(1,174
|
)
|
|
|
(74
|
)
|
Cash used in operating activities
|
|
|
(8,111
|
)
|
|
|
(4,874
|
)
|
|
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
|
|
|
Issuance of common shares under exercise of stock options
|
|
|
436
|
|
|
|
-
|
|
Issuance of common shares under 2018 share purchase agreement
|
|
|
-
|
|
|
|
6,000
|
|
Issuance of common shares under the 2018 ATM, net of broker commission
|
|
|
-
|
|
|
|
178
|
|
Cash provided by financing activities
|
|
|
436
|
|
|
|
6,178
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in) investing activities:
|
|
|
|
|
|
|
|
|
Acquisition of investments, net
|
|
|
(12,411
|
)
|
|
|
-
|
|
Purchase of property and equipment
|
|
|
(16
|
)
|
|
|
(24
|
)
|
Cash used in investing activities
|
|
|
(12,427
|
)
|
|
|
(24
|
)
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents held
|
|
|
14
|
|
|
|
2
|
|
|
|
|
|
|
|
|
|
|
Increase (decrease) in cash and cash equivalents
|
|
|
(20,088
|
)
|
|
|
1,282
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
79,842
|
|
|
|
15,299
|
|
Cash and cash equivalents, end of period
|
|
$
|
59,754
|
|
|
$
|
16,581
|
|
See accompanying notes to condensed consolidated interim financial statements
(unaudited)
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
Aptose Biosciences Inc. (“Aptose”
or the “Company”) is a clinical-stage biotechnology company committed to discovering and developing personalized therapies
addressing unmet medical needs in oncology. The Company’s executive office is located in San Diego, California and its corporate
office is located in Toronto, Canada.
Aptose has two clinical-stage
programs and a third program that is discovery-stage and partnered with another company. CG026806 (“CG-806”), Aptose’s
mutation-agnostic FMS-like tyrosine kinase 3 (FLT3 / Bruton’s tyrosine kinase (BTK) inhibitor, is currently enrolling patients
in a Phase 1a/b, multicenter, open label, dose-escalation study with expansions to assess the safety, tolerability, PK, and preliminary
efficacy of CG-806 in patients with chronic lymphocytic leukemia (CLL/SLL) or non-Hodgkin lymphomas (NHL). Aptose plans to seek
allowance from the FDA to move into patient populations that include relapsed or refractory acute myeloid leukemia (AML) and myelodysplastic
syndromes (MDS) in a separate Phase 1 trial. APTO-253, Aptose’s second program, is a small molecule MYC inhibitor and is
currently enrolling patients in a Phase 1b clinical trial for the treatment of patients with R/R blood cancers, including AML and
high-risk Myelodysplastic Syndrome.
We are advancing first-in-class
targeted agents to treat life-threatening cancers that, in most cases, are not elective for patients and require immediate treatment.
However, COVID-19 has caused global economic and social disruptions that could adversely affect our ongoing and planned research
and development of our clinical-stage programs including but not limited to drug manufacturing campaigns, clinical trial activities
including enrollment of patients in our ongoing and planned clinical trials, collection and analysis of patient data and eventually,
and the reporting of results from our trials.
Since our inception, we have
financed our operations and technology acquisitions primarily from equity financing, proceeds from the exercise of warrants and
stock options, and interest income on funds held for future investment. Our uses of cash for operating activities have primarily
consisted of salaries and wages for our employees, facility and facility-related costs for our offices and laboratories, fees paid
in connection with preclinical and clinical studies, drug manufacturing costs, laboratory supplies and materials, and professional
fees.
We do not expect to generate
positive cash flow from operations for the foreseeable future due to the early stage of our clinical trials. It is expected that
negative cash flow will continue until such time, if ever, that we receive regulatory approval to commercialize any of our products
under development and/or royalty or milestone revenue from any such products exceeds expenses.
We believe that our cash, cash
equivalents and investments on hand at March 31, 2020 will be sufficient to finance our operations for at least 12 months from
the issuance date of these financial statements. We have based these estimates on assumptions and plans which may change
and which could impact the magnitude and/or timing of operating expenses and our cash runway. These estimates include the rate
of enrolment and timing and release of the results of our clinical trials, and our reliance on our manufacturers.
We expect that we will need to
raise additional capital or incur indebtedness to continue to fund our operations in the future. Our ability to raise additional
funds could be affected by adverse market conditions, the status of our product pipeline and various other factors and we may be
unable to raise capital when needed, or on terms favorable to us, and COVID-19 may negatively affect our ability to raise additional
capital. If necessary funds are not available, we may have to delay, reduce the scope of, or eliminate some of our development
programs, potentially delaying the time to market for any of our product candidates.
|
2.
|
Significant accounting policies
|
|
(a)
|
Basis of consolidation:
|
These condensed
consolidated interim financial statements include the accounts of the Company and its subsidiaries. All intercompany transactions,
balances, revenue and expenses are eliminated on consolidation.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
|
(b)
|
Basis of presentation:
|
The accompanying
unaudited condensed consolidated interim financial statements have been prepared in conformity with generally accepted accounting
principles in the United States, or GAAP, for the interim financial information and the rules and regulations of the Securities
and Exchange Commission, or SEC, related to quarterly reports on Form 10-Q. Accordingly, they do not include all of the information
and disclosures required by GAAP for annual audited financial statements and should be read in conjunction with the Company's audited
consolidated financial statements and notes thereto included in the Company's Annual Report on Form 10-K, or Annual Report, filed
with the SEC on March 10, 2020. In the opinion of management, these condensed consolidated interim financial statements include
all adjustments (consisting of normal recurring adjustments) necessary for a fair statement of the financial position, results
of operations and cash flows for the periods presented. The results of operations for the interim periods shown in this report
are not necessarily indicative of the results that may be expected for any future period, including the full year.
|
(c)
|
Significant accounting policies, estimates and judgments:
|
During the three months
ended March 31, 2020, there have been no changes to our significant accounting policies as described in our
Annual Report on Form 10-K for the fiscal year ended December 31, 2019.
The preparation
of the condensed consolidated interim financial statements requires management to make judgments, estimates and assumptions that
affect the application of accounting policies and reported amounts of assets and liabilities at the date of the consolidated financial
statements and reported amounts of revenue and expenses during the reporting period. Actual outcomes could differ from those estimates.
The condensed consolidated interim financial statements include estimates, which, by their nature, are uncertain. Significant accounting
policies and estimates made by management are the assumptions used in determining the valuation of share-based compensation.
The impacts
of such estimates are pervasive throughout the condensed consolidated interim financial statements and may require accounting adjustments
based on future occurrences.
The estimates
and underlying assumptions are reviewed on a regular basis. Revisions to accounting estimates are recognized in the period in which
the estimate is revised and in any future periods affected.
The functional and presentation
currency of the Company is the US dollar.
|
(e)
|
Concentration of risk:
|
The Company
is subject to credit risk from the Company’s cash and cash equivalents and investments. The carrying amount of the financial
assets represents the maximum credit exposure. The Company manages credit risk associated with its cash and cash equivalents and
investments by maintaining minimum standards of R1-low or A-low investments and the Company invests only in highly rated corporations
which are capable of prompt liquidation.
|
3.
|
Cash and cash equivalents:
|
Cash and cash equivalents consists
of cash of $25.147 million (December 31, 2019 - $1.640 million), deposits in high interest savings accounts and other term
deposits with maturities less than 90 days totaling of $34.607 million (December 31, 2019 - $78.202 million).
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Year ended
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets, beginning of period
|
|
$
|
1,837
|
|
|
$
|
1,570
|
|
Additions to right-of-use assets
|
|
|
–
|
|
|
|
267
|
|
Right-of-use assets, end of period
|
|
|
1,837
|
|
|
|
1,837
|
|
Accumulated amortization
|
|
|
(575
|
)
|
|
|
(461
|
)
|
Right-of use assets, NBV
|
|
$
|
1,262
|
|
|
$
|
1,376
|
|
|
|
|
|
|
|
|
|
|
Investments
consisted of the following as of March 31, 2020 and December 31, 2019:
|
|
March 31, 2020
|
|
|
|
|
|
|
Cost
|
|
|
|
Unrealized
gain
|
|
|
|
Market
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates, issued by a Canadian financial institution
|
|
$
|
9,055
|
|
|
|
–
|
|
|
|
9,055
|
|
Commercial notes
|
|
|
9,475
|
|
|
|
7
|
|
|
|
9,482
|
|
Canadian provincial promissory notes
|
|
|
11,681
|
|
|
|
11
|
|
|
|
11,692
|
|
|
|
$
|
30,211
|
|
|
|
18
|
|
|
|
30,229
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
Cost
|
|
|
|
Unrealized
gain
|
|
|
|
Market
value
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guaranteed investment certificates, issued by a Canadian financial institution
|
|
$
|
12,008
|
|
|
|
18
|
|
|
|
12,026
|
|
Commercial notes
|
|
|
3,736
|
|
|
|
–
|
|
|
|
3,736
|
|
Canadian provincial promissory note
|
|
|
1,996
|
|
|
|
–
|
|
|
|
1,996
|
|
|
|
$
|
17,740
|
|
|
|
18
|
|
|
|
17,758
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6.
|
Fair value measurements and financial instruments:
|
The fair value hierarchy establishes
three levels to classify the inputs to valuation techniques used to measure fair value.
Level 1 - inputs are quoted
prices (unadjusted) in active markets for identical assets or liabilities;
Level 2 - inputs are quoted
prices in markets that are not active, quoted prices for similar assets or liabilities in active markets, inputs other than quoted
prices that are observable for the asset or liability, or inputs that are derived principally from or corroborated by observable
market data or other means; and
Level 3 - inputs are unobservable
(supported by little or no market activity).
The fair value hierarchy gives
the highest priority to Level 1 inputs and the lowest priority to Level 3 inputs.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
The following table presents
the fair value of the Company’s financial instruments for the periods presented:
|
|
|
March 31,
2020
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High interest savings account
|
|
$
|
1,321
|
|
|
$
|
–
|
|
|
$
|
1,321
|
|
|
|
–
|
|
Commercial notes
|
|
|
18,873
|
|
|
|
–
|
|
|
|
18,873
|
|
|
|
–
|
|
Canadian provincial promissory notes
|
|
|
35,230
|
|
|
|
–
|
|
|
|
35,230
|
|
|
|
–
|
|
Guaranteed investment certificates, issued by a Canadian financial institution
|
|
|
9,412
|
|
|
|
–
|
|
|
|
9,412
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
64,836
|
|
|
$
|
–
|
|
|
$
|
64,836
|
|
|
$
|
–
|
|
|
|
|
December 31,
2019
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High interest savings account
|
|
$
|
2,989
|
|
|
$
|
–
|
|
|
$
|
2,989
|
|
|
$
|
–
|
|
Commercial notes
|
|
|
6,235
|
|
|
|
–
|
|
|
|
6,235
|
|
|
|
–
|
|
Canadian provincial promissory notes
|
|
|
5,493
|
|
|
|
–
|
|
|
|
5,493
|
|
|
|
–
|
|
Guaranteed investment certificates, issued by a Canadian financial institution
|
|
|
81,243
|
|
|
|
–
|
|
|
|
81,243
|
|
|
|
–
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
$
|
95,960
|
|
|
$
|
–
|
|
|
$
|
95,960
|
|
|
$
|
–
|
|
Accrued
liabilities as of March 31, 2020 and December 31, 2019 consisted of the following:
|
|
|
March 31,
|
|
|
|
December 31
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Accrued personnel related costs
|
|
$
|
860
|
|
|
$
|
1,739
|
|
Accrued research and development expenses
|
|
|
834
|
|
|
|
1,062
|
|
Other accrued expenses
|
|
|
190
|
|
|
|
257
|
|
|
|
$
|
1,884
|
|
|
$
|
3,058
|
|
Aptose
leases office space and lab space in San Diego, California. The lease for the office space expires on March 31, 2023 and can be
extended for an additional 5 year period. The lease for our lab space expires on February 28, 2022. We lease office space in Toronto,
Ontario, Canada and the lease for this location expires on June 30, 2023 with an option to renew for another 5-year period. The
Company has not included any extension periods in calculating its right-to-use assets and lease liabilities. The Company also enters
into leases for small office equipment.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
Minimum payments, undiscounted,
under our operating leases are as follows:
Years ending December 31,
|
|
|
2020
|
|
$
|
402
|
|
2021
|
|
|
545
|
|
2022
|
|
|
463
|
|
2023
|
|
|
119
|
|
Thereafter
|
|
|
–
|
|
|
|
$
|
1,529
|
|
To
calculate the lease liability, the lease payments in the table above were discounted over the remaining term of the leases using
the Company’s incremental borrowing rate as at January 1, 2019 for existing leases at the time of adopting the Topic 842,
and for new leases after the date adoption, as at the date of the execution date of the new lease. The following table presents
the weighted average remaining term of the leases and the weighted average discount rate:
|
|
|
March 31, 2020
|
|
|
|
December 31, 2019
|
|
Weighted-average remaining term – operating leases (in years)
|
|
|
3.0
|
|
|
|
3.3
|
|
Weighted-average discount rate – operating leases
|
|
|
5.43
|
%
|
|
|
5.43
|
%
|
|
|
|
|
|
|
|
|
|
Lease liability, current portion
|
|
|
525
|
|
|
|
521
|
|
Lease liability, long term portion
|
|
|
894
|
|
|
|
1,011
|
|
Lease liability, total
|
|
|
1,419
|
|
|
|
1,532
|
|
|
|
|
|
|
|
|
|
|
Right-of-use
assets obtained in exchange for operating lease liabilities are as follows:
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Right-of-use assets recorded upon adoption of Topic 842, January 1, 2019
|
|
$
|
–
|
|
|
$
|
1,570
|
|
Right-of-use assets obtained in exchange for new operating lease liabilities in the period
|
|
$
|
–
|
|
|
$
|
234
|
|
|
|
|
|
|
|
|
|
|
Operating
lease costs and operating cash flows from our operating leases are as follows:
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
133
|
|
|
$
|
148
|
|
|
|
|
|
|
|
|
|
|
Operating cash flows from operating leases
|
|
$
|
131
|
|
|
$
|
99
|
|
|
|
|
|
|
|
|
|
|
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
The
Company has authorized share capital of an unlimited number of common voting shares.
|
(i)
|
2018 Share Purchase agreement
|
On May 30, 2018, the Company
entered into the 2018 Aspire Purchase Agreement, which provided that, upon the terms and subject to the conditions and limitations
set forth therein, Aspire Capital is committed to purchase up to an aggregate of $20 million of Common Shares over approximately
30 months. Pursuant to the terms of this agreement, on June 8, 2018, the Company issued 170,261 Common Shares (“Commitment
Shares”) to Aspire Capital in consideration for entering into the 2018 Aspire Purchase Agreement for a total cost of $600
thousand. During the three months ended March 31, 2019, the Company issued 3,259,955 common shares under the 2018 Aspire Purchase
Agreement at an average price of $1.84 per share for gross and net proceeds of $6 million. On a cumulative basis to March 31, 2019,
the Company has raised a total of approximately $7.9 million gross and net proceeds under the Aspire Purchase Agreement.
|
(ii)
|
2018 At-The-Market (“ATM”) Facility
|
On March 27, 2018, the Company
entered into an “At-The-Market” Facility (“ATM”) equity distribution agreement with Cantor Fitzgerald acting
as sole agent. Under the terms of this facility, the Company may, from time to time, sell shares of our common stock having an
aggregate offering value of up to $30 million through Cantor Fitzgerald on the Nasdaq Capital Market. During the three months ended
March 31, 2019, the Company issued 77,349 shares under this ATM equity facility at an average price of $2.37 for gross proceeds
of $183 thousand ($178 thousand net of share issue costs). Costs associated with the proceeds consisted of a 3% cash commission.
On a cumulative basis to March 31, 2019, the Company has raised a total of $11.2 million gross proceeds ($10.9 million net of share
issue costs) under the ATM Facility. The facility was terminated on May 24, 2019
Loss per common share is calculated
using the weighted average number of common shares outstanding and is presented in the table below:
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(11,526
|
)
|
|
$
|
(5,506
|
)
|
Weighted-average common shares – basic and diluted
|
|
|
76,227
|
|
|
|
39,846
|
|
Net loss per share – basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.14
|
)
|
The effect of any potential
exercise of the Company’s stock options outstanding during the three month periods ended March 31, 2020 and March 31, 2019
has been excluded from the calculation of diluted loss per common share as it would be anti-dilutive.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
|
10.
|
Stock-based compensation:
|
Under the Company’s stock
option plan, options, rights and other entitlements may be granted to directors, officers, employees and consultants of the Company
to purchase up to a maximum of 17.5% of the total number of outstanding common shares, estimated at 13.3 million options, rights
and other entitlements as at March 31, 2020. Options are granted at the fair market value of the common shares on the closing trading
price of the Company’s stock on the day prior to the grant if the grant is made during the trading day or the closing trading
price on the day of grant if the grant is issued after markets have closed. Options vest at various rates (immediate to four years)
and have a term of 10 years.
Stock option transactions for
the three months ended March 31, 2020 and March 31, 2019, are summarized as follows:
Option numbers are in (000’s)
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Options
|
|
|
Weighted average
exercise price
|
|
Weighted average
remaining
contractual
life (years)
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
5,941
|
|
|
$
|
2.84
|
|
|
|
|
|
Granted
|
|
|
6,109
|
|
|
|
6.84
|
|
|
|
|
|
Exercised
|
|
|
(162
|
)
|
|
|
2.71
|
|
|
|
|
|
Forfeited
|
|
|
(30
|
)
|
|
|
2.17
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
11,858
|
|
|
|
4.84
|
|
|
|
8.6
|
|
Exercisable, end of the period
|
|
|
3,990
|
|
|
|
2.96
|
|
|
|
6.8
|
|
Vested and expected to vest, end of period
|
|
|
10,678
|
|
|
|
4.73
|
|
|
|
8.5
|
|
Option numbers are in (000’s)
|
|
|
|
|
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
Options
|
|
|
Weighted average
exercise price
|
|
Weighted average
remaining
contractual
life (years)
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
4,489
|
|
|
$
|
3.11
|
|
|
|
|
|
Granted
|
|
|
1,414
|
|
|
|
1.91
|
|
|
|
|
|
Forfeited
|
|
|
(119
|
)
|
|
|
2.67
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
5,784
|
|
|
|
2.86
|
|
|
|
8.1
|
|
Exercisable, end of the period
|
|
|
3,237
|
|
|
|
3.33
|
|
|
|
7.2
|
|
Vested and expected to vest, end of period
|
|
|
5,400
|
|
|
|
2.90
|
|
|
|
8.0
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of March 31, 2020, there was
$22.24 million of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized
over an estimated weighted-average period of 1.80 years.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
The following table presents
the weighted average assumptions that were used in the Black-Scholes option pricing model to determine the fair value of stock
options granted during the period, and the resultant weighted average fair values:
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.3
|
%
|
|
|
2.41
|
%
|
Expected dividend yield
|
|
|
–
|
|
|
|
–
|
|
Expected volatility
|
|
|
85.8
|
%
|
|
|
84.0
|
%
|
Expected life of options (in years)
|
|
|
5
|
|
|
|
5
|
|
Grant date fair value
|
|
$
|
4.60
|
|
|
$
|
1.29
|
|
The Company uses historical data
to estimate the expected dividend yield and expected volatility of its common shares in determining the fair value of stock options.
The expected life of the options represents the estimated length of time the options are expected to remain outstanding.
The following table presents
the vesting terms of options granted in the period:
Option numbers are in (000’s)
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
Number of options
|
|
|
|
Number of options
|
|
|
|
|
|
|
|
|
|
|
Cliff vesting after one year anniversary
|
|
|
300
|
|
|
|
335
|
|
3 year vesting (50%-25%-25%)
|
|
|
862
|
|
|
|
–
|
|
4 year vesting (50%-16 2/3%-16 2/3%-16 2/3%)
|
|
|
4,947
|
|
|
|
1,079
|
|
Total stock options granted in the period
|
|
|
6,109
|
|
|
|
1,414
|
|
|
(b)
|
Restricted share units
|
The Company has a stock incentive
plan (SIP) pursuant to which the Board may grant stock-based awards comprised of restricted stock units or dividend equivalents
to employees, officers, consultants, independent contractors, advisors and non-employee directors of the Company. Each restricted
unit is automatically redeemed for one common share of the Company upon vesting. The following table presents the activity under
the SIP plan for the three months ended March 31, 2020 and 2019 and the units outstanding.
|
|
|
Three months ended,
March 31, 2020
|
|
|
|
Three months ended,
March 31, 2019
|
|
|
|
|
Number
(in thousands)
|
|
|
|
Weighted
average grant
date fair value
|
|
|
|
Number
(in thousands)
|
|
|
|
Weighted
average grant
date fair value
|
|
Outstanding, beginning of period
|
|
|
40
|
|
|
$
|
2.00
|
|
|
|
–
|
|
|
$
|
–
|
|
Granted
|
|
|
645
|
|
|
|
7.32
|
|
|
|
–
|
|
|
|
–
|
|
Outstanding, end of period
|
|
|
685
|
|
|
$
|
7.01
|
|
|
|
–
|
|
|
$
|
–
|
|
On March 10,
2020, the Company granted 645,000 restricted share units (RSUs) having a vesting term of three months. The grant date fair value
of the RSUs was determined as the closing value of the common shares of the Company on the Nasdaq Stock Market on the date prior
to the date of grant.
APTOSE BIOSCIENCES INC.
|
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
|
Three months ended March 31, 2020 and 2019
|
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
|
(c)
|
Share-based payment expense
|
The Company recorded share-based
payment expense related to stock options and RSUs as follows:
|
|
|
Three months ended
March 31, 2020
|
|
|
|
Three months ended
March 31, 2019
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
800
|
|
|
$
|
118
|
|
General and administrative
|
|
|
3,601
|
|
|
|
544
|
|
Total
|
|
$
|
4,401
|
|
|
$
|
662
|
|
|
11.
|
Related party transactions:
|
The Company uses Moores Cancer
Center at the University of California San Diego (UCSD) to provide pharmacology lab services to the Company. Dr. Stephen Howell
is a member of our Scientific Advisory Board and former Acting Chief Medical Officer of Aptose, up to January 1, 2020, and is also
a Professor of Medicine at UCSD and oversees the laboratory work. The work is completed under the terms of research services agreements
executed in March 2015 and has been extended annually. These transactions are in the normal course of business and are measured
at the amount of consideration established and agreed to by the related parties.
During the comparative period
ended March 31, 2019, while Dr. Howell was Acting Chief Medical Officer, the Company recorded $62 thousand in research and development
expenses related to the agreement.
|
(a)
|
Subsequent to the quarter end, the Company issued 3,913 common shares upon the exercise of stock
options, with an average exercise price of $1.52.
|
ITEM 2 - MANAGEMENT’S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Quarterly Report on Form 10-Q contains
certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E
of the Securities Exchange Act of 1934, as amended, and is subject to the safe harbor created by those sections. For more information,
see “Cautionary Note Regarding Forward-Looking Statements.” When reviewing the discussion below, you should keep in
mind the substantial risks and uncertainties that impact our business. In particular, we encourage you to review the risks and
uncertainties described in “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2019, as
updated and supplemented in Part II, Item 1A in this Quarterly Report on Form 10-Q. These risks and uncertainties could cause actual
results to differ materially from those projected or implied by our forward-looking statements contained in this report. These
forward-looking statements are made as of the date of this management’s discussion and analysis, and we do not intend, and
do not assume any obligation, to update these forward-looking statements, except as required by law.
The following discussion should be read in
conjunction with our condensed consolidated interim financial statements and accompanying notes contained in this Quarterly Report
on Form 10-Q and our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended
December 31, 2019.
All amounts are expressed in United States dollars unless otherwise
stated.
OVERVIEW
Aptose Biosciences Inc. (“we”, “our”, “us”,
“Aptose” or the “Company”) is a science-driven biotechnology company advancing first-in-class targeted
agents to treat life-threatening cancers, such as acute myeloid leukemia (“AML”), high-risk myelodysplastic syndromes
(“MDS”), chronic lymphocytic leukemia (“CLL”) and other hematologic malignancies. Based on insights into
the genetic and epigenetic profiles of certain cancers and patient populations, Aptose is building a pipeline of novel oncology
therapies directed at dysregulated processes and signaling pathways. Aptose is developing targeted medicines for precision treatment
of these diseases to optimize efficacy and quality of life by minimizing the side effects associated with conventional therapies.
We currently have in development two molecules: CG026806 (“CG-806”) and APTO-253, both being evaluated for safety,
tolerability, pharmacokinetics and signals of efficacy in Phase I clinical trials. Each molecule is described below.
CG-806 is an orally administered, highly potent first-in-class FLT3/BTK
kinase inhibitor that targets defined clusters of kinases that are operative in hematologic malignancies. This mutationally agnostic
small molecule anticancer agent is currently being evaluated in a Phase Ia/b study for the treatment of patients having B-cell
malignancies including CLL, small lymphocytic lymphoma (“SLL”) and certain non-Hodgkin’s lymphomas (“NHL”)
that are resistant/refractory/intolerant to other therapies. Aptose is also planning a Phase I study for the development of
CG-806 for the treatment of patients with relapsed/refractory acute myeloid leukemia (“R/R AML”), including the emerging
populations resistant to FMS-like tyrosine kinase 3 (“FLT3”) inhibitors.
APTO-253 is a first-in-class small molecule therapeutic agent that
inhibits expression of the MYC oncogene without causing, to date, general myelosuppression of the bone marrow. The MYC oncogene
is overexpressed across many hematologic cancers, including AML and certain B cell malignancies. MYC acts as a transcription factor
that regulates cell growth, proliferation, differentiation and apoptosis, and overexpression of MYC amplifies new sets of genes
to promote survival of cancer cells. APTO-253 suppresses expression of the MYC oncogene in AML cells and depletes those cells
of the MYC oncoprotein, leading to apoptotic cell death. APTO-253 is currently being evaluated in a Phase Ib study for the treatment
of patients with relapsed/refractory AML and high-risk MDS. APTO-253 may serve as a safe and effective MYC inhibitor for AML/MDS
patients that combines well with other agents and does not significantly impact the normal bone marrow.
PROGRAM UPDATES
CG-806
Indication and Clinical Trials:
CG-806 is being developed with the intent to deliver the agent as an oral therapeutic
and to develop it for relapsed and refractory (R/R) AML/MDS and for a spectrum of B cell malignancies (including but not limited
to CLL, SLL and NHL).
On March 25, 2019, we announced that the U.S Food and Drug Administration
(“FDA”) granted Aptose Investigational New Drug (“IND”) allowance to initiate its Phase I clinical trial
for CG-806. The Phase I clinical trial is a multicenter, open label, dose-escalation study with additional optional expansion cohorts
to assess the safety, tolerability, pharmacokinetics and pharmacodynamic effects, and preliminary efficacy of CG-806 in patients
with CLL, SLL or NHL. In this study, CG-806 is administered in gelatin capsules twice daily (“BID”) during a 28-day
cycle.
As of the date of this report, we have initiated twenty-one clinical
sites for the Phase Ia/b trial in patients with CLL/SLL or NHL which include specialty regional cancer care centers as well as
large hospitals and key institutions. As of the date of this report, we have completed enrollment of patients on the first, second,
and third dose levels, and are currently dosing patients on the fourth dose level. Under an FDA-approved accelerated titration
protocol, only one patient was required at each of the first two dose levels, followed by three patients at each dose level thereafter.
One patient with CLL (expressing the phenotype of SLL) at the first dose level received 150mg BID during a 28-day cycle and continued
that dose level through 10 cycles, after which the patient was dose increased to the third dose level and is now receiving 450mg
BID. One patient with CLL was enrolled at the second dose level and received 300mg BID during a 28-day cycle. This patient completed
four cycles before discontinuing during the fifth cycle. In this CLL patient, we observed pharmacologic inhibition of phospho-BTK
in peripheral blood mononuclear cells (100% inhibition four hours following administration of the first dose) and inhibition of
target phospho-proteins (phospho-BTK, -SYK, -ERK, and -PDGFRα) in a plasma inhibitory activity (PIA) assay, an increase
in the peripheral blood absolute lymphocyte count (or lymphocytosis) classically ascribed as a response to inhibition of BTK,
and no treatment related adverse events. Aptose has now completed the 28-day cycle with three patients at the third dose level
of 450mg BID. At dose level three, no drug limiting toxicities were observed, and plasma samples from the patients are under analysis
for pharmacokinetic and biomarker characterization. Aptose now has initiated patient dosing at the fourth dose level (600mg BID)
of CG-806. Our Clinical Safety Review Committee (“CSRC”) will review relevant data following completion of the first
28-day cycle of three patients at the fourth dose level, after which the CSRC may approve escalation to the fifth dose level (750mg
BID) as appropriate.
Aptose also plans to advance CG-806 into the AML/MDS patient population, with an initial
focus on AML, in a separate Phase I trial. Currently, we are finalizing our efforts to seek allowance from the FDA to proceed
into a study in patients with AML. The FDA has granted orphan drug designation to CG-806 for the treatment of patients with AML.
Orphan drug designation is granted by the FDA to encourage companies to develop therapies for the treatment of diseases that affect
fewer than 200,000 individuals in the United States. Orphan drug status provides research and development tax credits, an opportunity
to obtain grant funding, exemption from FDA application fees and other benefits. The orphan drug designation also provides us
with seven additional years of marketing exclusivity in this indication.
Manufacturing:
During fiscal years 2017 and 2018, we created a scalable chemical
synthetic route for the manufacture of CG-806 drug substance and have scaled the manufacture of API (active pharmaceutical ingredient,
or drug substance) to multi-kg levels, we completed the manufacture of a multi-kg batch of API under Good Manufacturing Product
(“GMP”) conditions as our API supply for our first-in-human clinical trials, and we manufactured under GMP conditions
two dosage strengths of capsules to serve as our clinical supply in those human studies. During fiscal 2019, we completed successful
manufacture of multiple batches of API and drug product, and planned numerous GMP production campaigns to supply the ongoing trial
and planned trials into the future. To date we have been able to manufacture API and capsules to support clinical supplies under
GMP conditions. We are continuing our manufacturing campaigns in the current fiscal period and have commenced scale-up and tech
transfer activities to support additional manufacturing capacity for the ongoing and planned clinical trials of CG-806. Additional
research and development funds are being utilized to support exploratory formulation studies in an ongoing effort to craft a superior
formulation for later stage development of CG-806.
APTO-253
Phase Ib Trial
APTO-253, a small molecule inhibitor of MYC gene expression, is
being evaluated in a Phase Ib clinical trial in patients with R/R hematologic malignancies, particularly R/R-AML and high-risk
MDS. The Phase Ib, multicenter, open-label, dose-escalation clinical trial of APTO-253 is designed to assess the safety, tolerability,
pharmacokinetics and pharmacodynamic responses and efficacy of APTO-253 as a single agent and determine the recommended Phase II
dose. APTO-253 is being administered once weekly, over a 28-day cycle. The dose escalation stage of the study could potentially
enroll up to 20 patients with R/R-AML or high-risk MDS. The study is designed to then transition, as appropriate, to single-agent
expansion cohorts in R/R-AML and/or high-risk MDS.
As of the date of this report, we have fourteen active sites recruiting
patients in the dose escalation stage of the trial. The first patient, having AML, was dosed with 20mg/m2 and successfully
completed the 28-day cycle. As only one patient was required at the first dose level, we then placed an MDS patient on the second
dose level of 40mg/m2, and that patient successfully completed the 28-day cycle. We then successfully fulfilled the
third cohort with three patients completing the 28-day cycle at a dose level of 66mg/m2. Following review of relevant
data and approval by our Clinical Safety Review Committee, we began enrolling patients into the fourth cohort at a dose level of
100mg/m2 and we continued to dose and enroll patients at this dose level. At the first three dose levels, we observed
meaningful reductions in MYC expression in peripheral blood mononuclear cells (PBMCs) from patients with the new formulation of
APTO-253.
Manufacturing:
We are continuing to manufacture additional drug substance and drug
product for use in the ongoing trial.
We are exploring additional drug delivery methods for APTO-253 and
plan to initiate additional non-clinical studies for solid tumor and hematologic cancer development. As preparing, submitting,
and advancing applications for regulatory approval, developing drugs and drug product and clinical trials are sometimes complex,
costly, and time-consuming processes, an estimate of the future costs is not reasonable at this time.
Impact of COVID-19 on our Research Programs:
We are advancing first-in-class targeted agents to treat life-threatening
cancers that, in most cases, are not elective for patients and require immediate treatment. However, COVID-19 has caused global
economic and social disruptions that could adversely affect our ongoing or planned research and development and clinical trial
activities including enrollment of patients in our ongoing clinical trials, collection and analysis of patient data and eventually,
the reporting of top-line results from our trials.
Our team proactively addressed these new challenges swiftly and appropriately, implementing
safeguards and procedures to ensure both the safety of our employees and stakeholders, and accommodate the potential challenges
due to COVID-19. Aptose was early in directing its employees to work-from-home and provided the tools to minimize productivity
disruptions. Our Clinical Operations team reached out to active and future clinical sites to determine their needs and challenges
and assist where possible, including virtual monitoring of patients which reduces patients’ visits. We also have contacted
our drug manufacturers to identify any potential supply chain disruptions and are adjusting accordingly. During the early part
of the first quarter of 2020, we began to carefully monitor the potential impact of COVID-19, and on a regular basis, we communicated
with investigators at our clinical sites to gain an evolving understanding of competing COVID-19 related activities and clinical
trial related activities.
In the beginning of April, we learned that some of our larger clinical
sites that are impacted by COVID-19 may either postpone or face delays in the enrollment of patients on all on-going clinical
trials due to a number of factors, including the re-allocation of resources and to avoid clinical trial patients being exposed
to COVID-19. Such measures taken at the clinical sites could lead to a slowdown in the enrollment of patients on our trials at
these sites. To minimize the impact of COVID-19, we focused efforts on our other larger clinical sites and regional cancer care
sites that are not/less impacted by COVID-19 to recruit patients into the fourth cohort. As of the date of this report, and while
it is difficult to estimate the duration and impact of COVID-19 on the larger sites, we have not experienced and do not foresee
material delays to the enrollment of patients or timelines for the CG-806 Phase Ia/b trial due to the variety of clinical sites
that we have actively recruited for this trial. APTO-253 is administered intravenously (“IV”) which requires the need
for hospital / clinical site resources to assist and monitor patients during each infusion and based on the current conditions
caused by COVID-19, future enrollment of patients on this trial is likely to be negatively impacted.
Based on the current environment due to COVID-19 and the additional
caution applied to the granting of new clinical trial initiations by the FDA, there is no assurance we will be granted allowance
to initiate the planned Phase I trial in AML in the near future. Furthermore, should the FDA approve the phase I study in AML,
we may experience delays with initiating the clinical trial due to challenges introduced by COVID-19 including but not limited
to organizing site initiation visits remotely.
As of the date of this report, we have not experienced material
delays in the manufacturing of CG-806 or APTO-253 related to COVID-19. Should our manufacturers be required to shut down their
facilities due to COVID-19 for an extended period of time, our trials may be negatively impacted.
LIQUIDITY AND CAPITAL RESOURCES
We are an early stage development company and we currently do not
earn any revenues from our drug candidates. The continuation of our research and development activities and the commercialization
of the targeted therapeutic products are dependent upon our ability to successfully finance and complete our research and development
programs through a combination of equity financing and payments from strategic partners.
Sources of liquidity:
The following table presents our cash and cash equivalents, investments
and working capital as at March 31, 2020 and December 31, 2019.
(in thousands)
|
|
Balances at
March 31,
2020
|
|
Balances at
December 31,
2019
|
Cash and cash equivalents
|
|
$
|
59,754
|
|
|
$
|
79,842
|
|
Investments
|
|
|
30,229
|
|
|
|
17,758
|
|
Total
|
|
$
|
89,983
|
|
|
$
|
97,600
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
86,560
|
|
|
$
|
93,227
|
|
Working capital represents primarily cash, cash equivalents, investments
and other current assets less current liabilities.
We believe that our cash, cash equivalents and investments on hand
at March 31, 2020 will be sufficient to finance our operations for at least 12 months from the issuance date of these financial
statements. Our cash needs for the next twelve months include estimates of the number of patients and rate of enrollment of our
clinical trials, the amount of drug product that we will require to support our clinical trials, and our general corporate overhead
costs to support our operations, and our reliance on our manufacturers. We have based these estimates on assumptions and plans
which may change and which could impact the magnitude and/or timing of operating expenses and our cash runway.
Since our inception, we have financed our operations and technology
acquisitions primarily from equity financing, proceeds from the exercise of warrants and stock options, and interest income on
funds held for future investment.
During the year ended December 31, 2019, the Company completed two
confidentially marketed public offering (CMPO) through the issuance of 30,043,750 common shares for gross proceeds of $95.45 million
(approximately $88.18 million net of share issue costs). The Company also raised capital pursuant to two separate share purchase
agreements with Aspire Capital Fund, LLC (“Aspire Capital”) through the issuance of 7,302,433 common shares for gross
and net proceeds of $14.4 million.
We do not expect that COVID-19 will have a significant impact our
liquidity and capital resources and we are not incurring significant additional costs to support our ongoing operations during
this time. We have not entered into long term manufacturing contracts and should there be a delay in our trials we have flexibility
to reduce future planned manufacturing campaigns.
We expect that we will need to raise additional capital or incur
indebtedness to continue to fund our operations in the future. In December 2019, we filed a short form base shelf prospectus (the
“Base Shelf”) that qualifies for the distribution of up to $200,000,000 of common shares, warrants, or units comprising
any combination of common shares and warrants (“Securities”). The Base Shelf was declared effective by the SEC on January
9, 2020 and expires on January 9, 2023.
Our ability to raise additional funds could be affected by adverse
market conditions, the status of our product pipeline, possible delays in enrollment in our trial related to COVID-19, and various
other factors and we may be unable to raise capital when needed, or on terms favorable to us. If necessary funds are not available,
we may have to delay, reduce the scope of, or eliminate some of our development programs, potentially delaying the time to market
for any of our product candidates.
Cash flows:
The following table presents a summary of our cash flows for the
three month periods ended March 31, 2020 and 2019:
|
|
Three months ended,
|
(in thousands)
|
|
March 31, 2020
|
|
March 31, 2019
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(8,111
|
)
|
|
$
|
(4,874
|
)
|
Investing activities
|
|
|
(12,427
|
)
|
|
|
(24
|
)
|
Financing activities
|
|
|
436
|
|
|
|
6,178
|
|
Effect of exchange rates changes on cash and cash equivalents
|
|
|
14
|
|
|
|
2
|
|
Net increase in cash and cash equivalents
|
|
$
|
(20,088
|
)
|
|
$
|
1,282
|
|
Cash used in operating activities:
Our cash used in operating activities for the three months ended
March 31, 2020 and 2019 was approximately $8.1 million and $4.9 million, respectively. Our uses of cash for operating activities
for both periods primarily consisted of salaries and wages for our employees, facility and facility-related costs for our offices
and laboratories, fees paid in connection with preclinical and clinical studies, drug manufacturing costs, laboratory supplies
and materials, and professional fees.
We do not expect to generate positive cash flow from operations
for the foreseeable future due to additional research and development costs, including costs related to drug discovery, preclinical
testing, clinical trials, and manufacturing, as well as operating expenses associated with supporting these activities, and potential
milestone payments to our collaborators. It is expected that negative cash flow will continue until such time, if ever, that we
receive regulatory approval to commercialize any of our products under development and/or royalty or milestone revenue from any
such products exceeds expenses.
Cash flow from investing activities:
Our cash used in investing activities for the three months ended
March 31, 2020 was $12.4 million, and consisted of net purchases of investments of $12.4 million and purchases of property
and equipment of $16 thousand. Our cash used in investing activities in the three month period ended March 31, 2019 was $24
thousand, and consisted purchases of property and equipment.
The composition and mix of cash, cash equivalents and investments
is based on our evaluation of conditions in financial markets and our near-term liquidity needs. We have exposure to credit risk,
liquidity risk and market risk related to our investments. The Company manages credit risk associated with its cash and cash equivalents
and investments by maintaining minimum standards of R1-low or A-low investments. The Company invests only in highly rated financial
instruments which are capable of prompt liquidation. The Company manages its liquidity risk by continuously monitoring forecasts
and actual cash flows. The Company is subject to interest rate risk on its cash and cash equivalents and investments. The Company
does not believe that the results of operations or cash flows would be affected to any significant degree by a sudden change in
market interest rates relative to interest rates on the investments, owing to the relative short-term nature of the investments.
Cash flow from financing activities:
Our cash flow from financing activities for the three months ended
March 31, 2020 and 2019 was approximately $436 thousand and $6.2 million, respectively. During the three month period ended March
31, 2020, we raised net proceeds of approximately $436 thousand from the issuance of shares pursuant to the exercise of stock options.
During the three months ended March 31, 2019 we raised net proceeds of approximately $6.0 million from the 2018 Purchase Agreement
(as defined below) and approximately $178 thousand from the issuance of common shares pursuant to the 2018 ATM Facility (as defined
below).
On May 30, 2018, we entered into a Common Share Purchase Agreement
(the “2018 Purchase Agreement”) with Aspire Capital to sell up to $20.0 million of common shares to Aspire Capital.
Under the terms of the 2018 Purchase Agreement, we issued 170,261 common shares at a value of $3.524 per share to Aspire Capital
as consideration for Aspire Capital entering into the 2018 Purchase Agreement. During the three months ended March 31, 2019, the
Company issued 3,259,955 common shares under the 2018 Aspire Purchase Agreement at an average price of $1.84 per share for gross
and net proceeds of $6 million. On a cumulative basis to March 31, 2019, the Company has raised a total of approximately $7.9 million
gross and net proceeds under the Aspire Purchase Agreement.
On March 27, 2018, we entered into an at-the-market equity facility
(the “2018 ATM Facility”) with Cantor Fitzgerald & Co (“Cantor Fitzgerald”), acting as sole agent.
Under the terms of this facility, we could, from time to time, sell common shares having an aggregate offering value of up to $30
million through Cantor Fitzgerald. We determined, at our sole discretion, the timing and number of shares to be sold under the
2018 ATM Facility. During the three month period ended March 31, 2019, we issued 77,349 common shares under the 2018 ATM Facility
at an average price of $2.37 for gross proceeds of approximately $183 thousand ($178 thousand net of share issue costs). On a cumulative
basis to March 31, 2019, the Company has raised a total of $11.2 million gross proceeds ($10.9 million net of share issue costs)
under the ATM Facility. The facility was terminated on May 24, 2019.
Contractual Obligations
There were no material changes to our contractual obligations and
commitments described under Item 7 – Management’s Discussion and Analysis of Financial Condition and Results of Operations
in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019, which can be found on EDGAR at www.sec.gov/edgar.shtml
and on SEDAR at www.sedar.com.
RESULTS OF OPERATIONS
A summary of the results of operations for the three-month periods
ended March 31, 2020 and 2019 is presented below:
|
|
Three months ended March 31,
|
(in thousands)
|
|
2020
|
|
2019
|
|
|
|
|
|
Revenues
|
|
$
|
–
|
|
|
$
|
–
|
|
Research and development expenses
|
|
|
5,934
|
|
|
|
3,340
|
|
General and administrative expenses
|
|
|
5,900
|
|
|
|
2,260
|
|
Total other income
|
|
|
308
|
|
|
|
94
|
|
Net loss
|
|
|
(11,526
|
)
|
|
|
(5,506
|
)
|
Other comprehensive gain/( loss)
|
|
|
–
|
|
|
|
9
|
|
Total comprehensive loss
|
|
|
(11,526
|
)
|
|
|
(5,497
|
)
|
Basic and diluted loss per common share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.14
|
)
|
The net loss for the three-month period ended March 31, 2020 increased
by $6.0 million to $11.5 million as compared with $5.5 million for the comparable period in 2019 primarily as a result of an increase
of $3.7 million in stock-based compensation in the current period, a combined increased in program costs and related labor costs
of approximately $1.9 million on our CG-806 and APTO-253 development programs, and higher cash-based general and administrative
expenses of $569 thousand. These expenses were partially offset by higher net finance income of $308 thousand in the current period,
which increased by $214 thousand compared to the comparative period, mostly as a result of higher interest earned on larger balances
of cash equivalents and investments held during the three-month period ended March 31, 2020.
Research and Development
The research and development expenses for the three-month periods
ended March 31, 2020 and 2019 were as follows:
|
|
Three months ended March 31,
|
(in thousands)
|
|
2020
|
|
2019
|
|
|
|
|
|
Program costs – CG-806
|
|
$
|
2,945
|
|
|
$
|
1,386
|
|
Program costs – APTO-253
|
|
|
879
|
|
|
|
1,128
|
|
Personnel expenses
|
|
|
1,303
|
|
|
|
699
|
|
Stock-based compensation
|
|
|
800
|
|
|
|
118
|
|
Depreciation of equipment
|
|
|
7
|
|
|
|
9
|
|
|
|
|
5,934
|
|
|
|
3,340
|
|
Research and development expenses for the three-month period ended
March 31, 2020 were $5.9 million as compared with $3.3 million for the comparative period in 2019, an increase of approximately
$2.6 million. Changes to the components of our research and development expenses presented in the table above were primarily as
a result of the following events:
|
·
|
In the three-month period ended March 31, 2020, program costs for our CG-806 program consisted
mostly of manufacturing costs, including costs to scale up manufacturing and research costs associated with optimizing the formulation,
and clinical trial costs. In the three-month period ended March 31, 2019, program costs for our CG-806 program consisted mostly
of costs to complete the preclinical studies and prepare regulatory filings in support of an IND filing and the manufacturing of
drug product for the Phase I clinical trial.
|
|
·
|
In the three-month period ended March 31, 2020, program costs for our APTO-253 program consisted
mostly of costs related to the Phase Ib clinical trial, and manufacturing costs for a second GMP. In the comparative period in
2019, the Company completed production of a GMP batch of drug product, and initiated necessary studies to present to the FDA in
support of removing the clinical hold.
|
|
·
|
An increase in personnel expenses mostly related to seven new positions, including a Chief Medical
Officer, hired since the second quarter of 2019 to support two Phase I clinical trials.
|
|
·
|
Stock-based compensation increased by approximately $682 thousand in the three months ended March
31, 2020, compared with the three months ended March 31, 2019 mostly related to an increase in the number of options granted in
the current period and a higher grant date fair value of options. In the current period, 1,322,500 stock options were granted to
employees working in research and development with an average grant date fair value of $4.40. In the comparative period, 390,050
stock options were granted to employees in research and development with a grant date fair value of $1.29.
|
General and Administrative
The general and administrative expenses for the three-month periods
ending March 31, 2020 and 2019 were as follows:
|
|
Three months ended March 31,
|
(in thousands)
|
|
2020
|
|
2019
|
|
|
|
|
|
General and administrative, excluding items below
|
|
$
|
2,265
|
|
|
$
|
1,696
|
|
Stock-based compensation
|
|
|
3,601
|
|
|
|
544
|
|
Depreciation of equipment
|
|
|
34
|
|
|
|
20
|
|
|
|
$
|
5,900
|
|
|
$
|
2,260
|
|
General and administrative expenses for the three-month period ended
March 31, 2020 were $5.9 million as compared with $2.3 million for the comparative period, an increase of approximately $3.6 million.
The increase was primarily as a result of the following:
|
·
|
General and administrative expenses, other than stock-based compensation and depreciation of equipment,
increased by approximately $569 thousand in the three months ended March 31, 2020, primarily as a result of higher personnel related
costs mostly related to two additional hires, including a Chief Business Officer, in the second quarter of 2019, higher insurance
and professional and regulatory costs, and higher office administrative costs.
|
|
·
|
Stock-based compensation increased by approximately $3.1 million in the three months ended March
31, 2020, compared with the three months ended March 31, 2019 mostly related to an increase in the number of options granted in
the current period, and a higher grant date fair value of options. In the current period, 4,786,334 stock options were granted
to directors, executive offices and general and administrative employees with an average grant date fair value of $4.66 and we
issued 645,000 restricted stock units (RSUs) with an average grant date fair value of $7.32. In the comparative period, 1,024,000
stock options were granted to directors, executive officers and general and administrative employees with a grant date fair value
of $1.29.
|
OFF-BALANCE SHEET ARRANGEMENTS
As at March 31, 2020, we were not party to any off-balance sheet
arrangements.
CRITICAL ACCOUNTING POLICIES
Critical Accounting Policies and Estimates
We periodically review our financial reporting and disclosure practices
and accounting policies to ensure that they provide accurate and transparent information relative to the current economic and business
environment. As part of this process, we have reviewed our selection, application and communication of critical accounting policies
and financial disclosures. Management has discussed the development and selection of the critical accounting policies with the
Audit Committee of the Board of Directors and the Audit Committee has reviewed the disclosure relating to critical accounting policies
in this Management’s Discussion and Analysis.
Significant accounting judgments and estimates
A “critical accounting policy” is one which is both
important to the portrayal of our financial condition and results and requires management’s most difficult, subjective or
complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. For
additional information, please see the discussion of our significant accounting policies in Note 2 to the Financial Statements
included in our Annual Report for the fiscal year ended December 31, 2019 on Form 10-K filed with the United States Securities
Exchange Commission (the “SEC”) on March 10, 2020. There were no material changes to our critical accounting policies
and estimates during the three months ended March 31, 2020.
Management’s assessment of our ability to continue as a going
concern involves making a judgment, at a particular point in time, about inherently uncertain future outcomes and events or conditions.
Please see the “Liquidity and Capital Resources” section in this Quarterly Report on Form 10-Q for a discussion of
the factors considered by management in arriving at its assessment.
Other important accounting policies and estimates made by management
are the valuation of contingent liabilities, the valuation of tax accounts, and the assumptions used in determining the valuation
of share-based compensation.
Updated share information
As at May 5, 2020, we had 76,273,719 common shares issued and outstanding.
In addition, there were 12,539,055 common shares issuable upon the exercise of outstanding stock options and upon the vesting of
restricted share units.
Cautionary Note Regarding
Forward-Looking Statements
This Report contains forward-looking statements within the meaning of the United States
Private Securities Litigation Reform Act of 1995 and “forward-looking information” within the meaning of applicable
Canadian securities law, which we collectively refer to as “forward-looking statements”. Such forward-looking statements
reflect our current beliefs and are based on information currently available to us. In some cases, forward-looking statements can
be identified by terminology such as “may”, “would”, “could”, “will”, “should”,
“expect”, “plan”, “intend”, “anticipate”, “believe”, “estimate”,
“predict”, “potential”, “continue” or the negative of these terms or other similar expressions
concerning matters that are not historical facts.
Many factors could cause our actual results, performance or achievements to be materially
different from any future results, performance, or achievements that may be expressed or implied by such forward-looking statements,
including, among others:
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events outside of our control, such as natural disasters, wars or health crises such as the COVID-19 pandemic, which result in uncertainty and adverse effects on our business;
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our lack of product revenues and net losses and a history of operating losses;
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our early stage of development, particularly the inherent risks and uncertainties associated with (i) developing new drug candidates generally, (ii) demonstrating the safety and efficacy of these drug candidates in clinical studies in humans, and (iii) obtaining regulatory approval to commercialize these drug candidates;
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our need to raise substantial additional capital in the future and our potential inability to raise such funds when needed and on acceptable terms, particularly in light of restrictions and increasing costs of capital related to the COVID-19 pandemic;
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delays to clinical studies and regulatory approvals of our drug candidates, including delays resulting from the COVID-19 pandemic, which may increase our costs and could substantially harm our business; difficulties in enrolling patients for clinical trials which may lead to delays or cancellations of our clinical trials;
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the marketplace’s refusal to accept our products or product candidates due to intense competition and technological change in our industries, and our inability to compete successfully against other companies in our industries and achieve profitability;
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our inability to protect our intellectual property rights and to not infringe on the intellectual property rights of third parties; limits on commercialization of our products because of intellectual property rights owned or controlled by third parties;
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potential exposure to litigation, including product liability and other claims, and the potential need to take action against other parties; and
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extensive government regulation of our industry and our inability to comply with applicable regulations and standards;
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More detailed information about risk factors and their underlying assumptions are included
in our Annual Report on Form 10-K for the year ended December 31, 2019, under Item 1A. Risk Factors, as they are updated and supplemented
in this Report. Except as required under applicable securities legislation, we undertake no obligation to publicly update
or revise forward-looking statements, whether as a result of new information, future events or otherwise.