Item
1 – Financial Statements
Condensed Consolidated Interim Financial
Statements
(Unaudited)
APTOSE
BIOSCIENCES INC.
For the three and nine months ended September
30, 2020 and 2019
APTOSE BIOSCIENCES INC.
Condensed Consolidated Interim Statements of Financial Position
(Expressed in thousands of US dollars)
(unaudited)
|
|
|
September 30,
2020
|
|
|
|
December 31,
2019
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
99,727
|
|
|
$
|
79,842
|
|
Investments
|
|
|
32,997
|
|
|
|
17,758
|
|
Prepaid expenses
|
|
|
1,106
|
|
|
|
1,025
|
|
Other current assets
|
|
|
115
|
|
|
|
141
|
|
Total current assets
|
|
|
133,945
|
|
|
|
98,766
|
|
|
|
|
|
|
|
|
|
|
Non-current assets:
|
|
|
|
|
|
|
|
|
Property and equipment
|
|
|
272
|
|
|
|
334
|
|
Right-of-use assets, operating leases
|
|
|
1,041
|
|
|
|
1,376
|
|
Total non-current assets
|
|
|
1,313
|
|
|
|
1,710
|
|
|
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
135,258
|
|
|
$
|
100,476
|
|
|
|
|
|
|
|
|
|
|
Liabilities and Shareholders’ Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
1,529
|
|
|
$
|
1,960
|
|
Accrued liabilities
|
|
|
3,378
|
|
|
|
3,058
|
|
Current portion of lease liability, operating leases
|
|
|
537
|
|
|
|
521
|
|
Total current liabilities
|
|
|
5,444
|
|
|
|
5,539
|
|
|
|
|
|
|
|
|
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Lease liability, operating leases
|
|
|
658
|
|
|
|
1,011
|
|
Total liabilities
|
|
|
6,102
|
|
|
|
6,550
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Share capital:
|
|
|
|
|
|
|
|
|
Common shares, no par value, unlimited authorized shares, 88,861,737 and 76,108,031 shares issued and outstanding at September 30, 2020 and December 31, 2019, respectively
|
|
|
429,457
|
|
|
|
365,490
|
|
Additional paid-in capital
|
|
|
46,454
|
|
|
|
34,649
|
|
Accumulated other comprehensive loss
|
|
|
(4,315
|
)
|
|
|
(4,298
|
)
|
Deficit
|
|
|
(342,440
|
)
|
|
|
(301,915
|
)
|
Total shareholders’ equity
|
|
|
129,156
|
|
|
|
93,926
|
|
|
|
|
|
|
|
|
|
|
Total liabilities and shareholders’ equity
|
|
$
|
135,258
|
|
|
$
|
100,476
|
|
See accompanying notes to condensed consolidated
interim financial statements (unaudited).
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 September 30
|
|
Nine months ended September 30
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
7,519
|
|
|
|
4,751
|
|
|
|
20,319
|
|
|
|
11,582
|
|
General and administrative
|
|
|
5,775
|
|
|
|
2,276
|
|
|
|
20,690
|
|
|
|
7,391
|
|
Operating expenses
|
|
|
13,294
|
|
|
|
7,027
|
|
|
|
41,009
|
|
|
|
18,973
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest income
|
|
|
46
|
|
|
|
187
|
|
|
|
485
|
|
|
|
407
|
|
Foreign exchange losses
|
|
|
(1
|
)
|
|
|
(4
|
)
|
|
|
(1
|
)
|
|
|
(2
|
)
|
Total other income
|
|
|
45
|
|
|
|
183
|
|
|
|
484
|
|
|
|
405
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(13,249
|
)
|
|
|
(6,844
|
)
|
|
$
|
(40,525
|
)
|
|
$
|
(18,568
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other comprehensive gain/(loss):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unrealized gain/(loss) on securities available-for-sale
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(17
|
)
|
|
|
13
|
|
Total comprehensive loss
|
|
$
|
(13,251
|
)
|
|
|
(6,849
|
)
|
|
$
|
(40,542
|
)
|
|
$
|
(18,555
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.39
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of common shares outstanding used in the calculation of basic and diluted loss per common share (in thousands)
|
|
|
85,860
|
|
|
|
55,454
|
|
|
|
79,477
|
|
|
|
47,315
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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, except
for per common share data)
(unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accumulated
|
|
|
|
|
|
|
|
|
|
|
|
|
Common Shares
|
|
|
|
Additional
|
|
|
|
other
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
|
|
|
|
|
|
|
|
paid-in
|
|
|
|
comprehensive
|
|
|
|
|
|
|
|
|
|
|
|
|
(thousands)
|
|
|
|
Amount
|
|
|
|
capital
|
|
|
|
loss
|
|
|
|
Deficit
|
|
|
|
Total
|
|
Balance, December 31, 2019
|
|
|
76,108
|
|
|
|
365,490
|
|
|
|
34,649
|
|
|
|
(4,298
|
)
|
|
|
(301,915
|
)
|
|
|
93,926
|
|
Common shares issued pursuant to the public offering
|
|
|
11,854
|
|
|
|
58,234
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
58,234
|
|
Common shares issued upon exercise of stock options
|
|
|
215
|
|
|
|
932
|
|
|
|
(401
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
531
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
17,007
|
|
|
|
-
|
|
|
|
-
|
|
|
|
17,007
|
|
Common shares issued upon redemption of restricted share units
|
|
|
685
|
|
|
|
4,801
|
|
|
|
(4,801
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Other comprehensive loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(17
|
)
|
|
|
-
|
|
|
|
(17
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(40,525
|
)
|
|
|
(40,525
|
)
|
Balance, September 30, 2020
|
|
|
88,862
|
|
|
$
|
429,457
|
|
|
$
|
46,454
|
|
|
$
|
(4,315
|
)
|
|
$
|
(342,440
|
)
|
|
$
|
129,156
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
38,162
|
|
|
|
261,072
|
|
|
|
32,963
|
|
|
|
(4,316
|
)
|
|
|
(275,638
|
)
|
|
|
14,081
|
|
Common shares issued pursuant to the public offering
|
|
|
11,500
|
|
|
|
19,594
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
19,594
|
|
Common shares issued pursuant to 2019 share purchase agreement
|
|
|
171
|
|
|
|
360
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
360
|
|
Common shares issued under the 2018 ATM
|
|
|
77
|
|
|
|
178
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
178
|
|
Common shares issued pursuant to 2018 share purchase agreement
|
|
|
5,502
|
|
|
|
10,000
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Common shares issued upon exercise of stock options
|
|
|
34
|
|
|
|
60
|
|
|
|
(24
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
36
|
|
Common shares issued upon redemption of restricted share units
|
|
|
40
|
|
|
|
80
|
|
|
|
(80
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
Stock-based compensation
|
|
|
-
|
|
|
|
-
|
|
|
|
1,734
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,734
|
|
Other comprehensive gain
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
13
|
|
|
|
-
|
|
|
|
13
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(18,568
|
)
|
|
|
(18,568
|
)
|
Balance, September 30, 2019
|
|
|
55,486
|
|
|
$
|
291,344
|
|
|
$
|
34,593
|
|
|
$
|
(4,303
|
)
|
|
$
|
(294,206
|
)
|
|
$
|
27,428
|
|
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 September 30
|
|
Nine months ended September 30
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in) operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss for the period
|
|
$
|
(13,249
|
)
|
|
$
|
(6,844
|
)
|
|
$
|
(40,525
|
)
|
|
$
|
(18,568
|
)
|
Items not involving cash:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock-based compensation
|
|
|
4,905
|
|
|
|
504
|
|
|
|
17,007
|
|
|
|
1,734
|
|
Shares issued to Aspire Capital as commitment fees
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
360
|
|
Depreciation and amortization
|
|
|
37
|
|
|
|
33
|
|
|
|
115
|
|
|
|
115
|
|
Amortization of right-of-use assets
|
|
|
116
|
|
|
|
115
|
|
|
|
345
|
|
|
|
346
|
|
Interest on lease liabilities
|
|
|
17
|
|
|
|
22
|
|
|
|
54
|
|
|
|
69
|
|
Unrealized foreign exchange gain
|
|
|
-
|
|
|
|
5
|
|
|
|
9
|
|
|
|
2
|
|
Accrued interest on investments
|
|
|
9
|
|
|
|
(58
|
)
|
|
|
22
|
|
|
|
(77
|
)
|
Change in non-cash operating working capital:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prepaid expenses
|
|
|
(83
|
)
|
|
|
437
|
|
|
|
(81
|
)
|
|
|
361
|
|
Other current assets
|
|
|
2
|
|
|
|
59
|
|
|
|
26
|
|
|
|
(8
|
)
|
Operating lease payments
|
|
|
(136
|
)
|
|
|
(126
|
)
|
|
|
(401
|
)
|
|
|
(345
|
)
|
Account payable
|
|
|
(374
|
)
|
|
|
(66
|
)
|
|
|
(431
|
)
|
|
|
(141
|
)
|
Accrued liabilities
|
|
|
486
|
|
|
|
735
|
|
|
|
320
|
|
|
|
825
|
|
Cash used in operating activities
|
|
|
(8,270
|
)
|
|
|
(5,184
|
)
|
|
|
(23,540
|
)
|
|
|
(15,327
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in) financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Issuance of common shares pursuant to Public Offering, net of broker commission and agent legal fees
|
|
|
58,234
|
|
|
|
-
|
|
|
|
58,234
|
|
|
|
19,736
|
|
Issuance of common shares under 2018 Share Purchase Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
10,000
|
|
Issuance of common shares under the 2018 ATM, net of broker commission
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
178
|
|
Cost of offerings
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(142
|
)
|
Issuance of common shares upon exercise of stock options
|
|
|
49
|
|
|
|
17
|
|
|
|
531
|
|
|
|
36
|
|
Cash provided by financing activities
|
|
|
58,283
|
|
|
|
17
|
|
|
|
58,765
|
|
|
|
29,808
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from/(used in) investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Maturity (acquisition) of investments, net
|
|
|
(4,398
|
)
|
|
|
(1,000
|
)
|
|
|
(15,278
|
)
|
|
|
(9,000
|
)
|
Purchase of property and equipment
|
|
|
-
|
|
|
|
(42
|
)
|
|
|
(53
|
)
|
|
|
(92
|
)
|
Cash used in investing activities
|
|
|
(4,398
|
)
|
|
|
(1,042
|
)
|
|
|
(15,331
|
)
|
|
|
(9,092
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect of exchange rate fluctuations on cash and cash equivalents held
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(9
|
)
|
|
|
(2
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Increase/decrease in cash and cash equivalents
|
|
|
45,615
|
|
|
|
(6,212
|
)
|
|
|
19,885
|
|
|
|
5,387
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents, beginning of period
|
|
|
54,112
|
|
|
|
26,898
|
|
|
|
79,842
|
|
|
|
15,299
|
|
Cash and cash equivalents, end of period
|
|
$
|
99,727
|
|
|
$
|
20,686
|
|
|
$
|
99,727
|
|
|
$
|
20,686
|
|
See accompanying notes to condensed consolidated
interim financial statements (unaudited)
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 offices are located in San Diego, California and its
head office is located in Toronto, Canada.
Aptose has two clinical-stage
programs and a second program that is discovery-stage and partnered with another company. CG026806 (“CG-806”), Aptose’s
pan-FMS-like tyrosine kinase 3 / pan-Bruton’s tyrosine kinase inhibitor, is currently enrolling patients in a Phase 1, 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 was granted IND allowance from the
U.S Food and Drug Administration (FDA) to initiate a separate Phase 1 trial in patients with relapse or refractory acute myeloid
leukemia (AML) in June 2020. 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,
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 September 30, 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.
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.
|
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.
|
(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.
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 2020 and 2019
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
(c)
|
Significant accounting policies, estimates and judgments:
|
During the three and
nine months ended September 30, 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 and the estimates
related to prepaid and accrued research and development costs.
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 instruments that are issued by highly rated Canadian
corporations which are capable of prompt liquidation.
|
3.
|
Cash and cash equivalents:
|
Cash and cash equivalents consists
of cash of $3.362 million (December 31, 2019 - $1.640 million), deposits in high interest savings accounts and other term
deposits with original maturities less than 90 days totaling $96.365 million (December 31, 2019 - $78.202 million).
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 2020 and 2019
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
4.
|
Right-of-use assets, operating leases:
|
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
Year ended
December 31, 2019
|
|
|
|
|
|
|
Right-of-use assets, beginning of period
|
|
$
|
1,837
|
|
|
|
1,570
|
|
Additions to right-of-use assets
|
|
|
10
|
|
|
|
267
|
|
Right-of-use assets, end of period
|
|
|
1,847
|
|
|
|
1,837
|
|
Accumulated amortization
|
|
|
(806
|
)
|
|
|
(461
|
)
|
Right-of use assets, NBV
|
|
|
1,041
|
|
|
|
1,376
|
|
|
|
|
|
|
|
|
|
|
Investments
consisted of the following as of September 30, 2020 and December 31, 2019:
|
|
September 30, 2020
|
|
|
|
Cost
|
|
|
|
Unrealized gain
|
|
|
|
Market value
|
|
|
|
|
|
|
|
|
Commercial notes
|
|
$
|
8,999
|
|
|
|
1
|
|
|
|
9,000
|
|
United States Treasury Bills
|
|
|
23,997
|
|
|
|
-
|
|
|
|
23,997
|
|
|
|
$
|
32,996
|
|
|
|
1
|
|
|
|
32,997
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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 and nine months ended September 30, 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:
|
|
|
|
|
|
|
|
|
|
|
|
September 30, 2020
|
|
|
|
Level 1
|
|
|
|
Level 2
|
|
|
|
Level 3
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
High interest savings account
|
|
$
|
96,365
|
|
|
$
|
-
|
|
|
$
|
96,365
|
|
|
|
-
|
|
Commercial notes
|
|
|
9,000
|
|
|
|
-
|
|
|
|
9,000
|
|
|
|
-
|
|
United States Treasury Bill
|
|
|
23,997
|
|
|
|
-
|
|
|
|
23,997
|
|
|
|
-
|
|
|
|
$
|
129,362
|
|
|
$
|
-
|
|
|
$
|
129,362
|
|
|
$
|
-
|
|
|
|
|
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 September 30, 2020 and December 31, 2019 consisted of the following:
|
|
|
September 30,
|
|
|
|
December 31,
|
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
Accrued personnel related costs
|
|
$
|
1,674
|
|
|
$
|
1,739
|
|
Accrued research and development costs
|
|
|
1,526
|
|
|
|
1,062
|
|
Other accrued costs
|
|
|
178
|
|
|
|
257
|
|
|
|
$
|
3,378
|
|
|
$
|
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. 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 and nine months ended September 30, 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
|
|
$
|
136
|
|
2021
|
|
|
552
|
|
2022
|
|
|
464
|
|
2023
|
|
|
119
|
|
Thereafter
|
|
|
-
|
|
|
|
$
|
1,271
|
|
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:
|
|
|
September 30, 2020
|
|
|
|
December 31, 2019
|
|
Weighted-average remaining term – operating leases (in years)
|
|
|
2.4
|
|
|
|
3.3
|
|
Weighted-average discount rate – operating leases
|
|
|
5.40
|
%
|
|
|
5.43
|
%
|
|
|
|
|
|
|
|
|
|
Lease liability, current portion
|
|
|
537
|
|
|
|
521
|
|
Lease liability, long term portion
|
|
|
658
|
|
|
|
1,011
|
|
Lease liability, total
|
|
|
1,195
|
|
|
|
1,532
|
|
|
|
|
|
|
|
|
|
|
Right-of-use
assets obtained in exchange for operating lease liabilities are as follows:
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
Nine months ended
September 30, 2019
|
|
|
|
|
|
|
Right-of-use assets recorded upon adoption of Topic 842, beginning of period
|
|
$
|
-
|
|
|
$
|
|
$1,570
|
Right-of-use assets obtained in exchange for new operating lease liabilities in the period
|
|
$
|
10
|
|
|
$
|
|
$267
|
|
|
|
|
|
|
|
|
|
Operating
lease costs and operating cash flows from our operating leases are as follows:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Operating lease cost
|
|
$
|
132
|
|
|
$
|
142
|
|
|
$
|
399
|
|
|
$
|
431
|
|
Operating cash flows - operating leases
|
|
$
|
136
|
|
|
$
|
126
|
|
|
$
|
401
|
|
|
$
|
345
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 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)
|
July/August 2020 Confidentially Marketed Public Offering (CMPO)
|
On July 20, 2020 and August
10, 2020, the Company completed a confidentially marketed public offering through the issuance of 11,854,472 common shares at a
price of $5.25 per share for gross proceeds of $62.236 million (approximately $58.234 million net of share issue costs). Costs
associated with the proceeds consisted of a 6% cash commissions and share issue costs, which consisted of agent commission, legal
and professional fees and listing fees.
|
(ii)
|
June 2019 Confidentially Marketed Public Offering (CMPO)
|
On June 3, 2019, the Company
completed a confidentially marketed public offering through the issuance of 11,500,000 common shares at a price of $1.85 per share
for gross proceeds of $21.275 million (approximately $19.594 million net of share issue costs). Costs associated with the proceeds
consisted of a 7% cash commissions and share issue costs, which consisted of agent commission, legal and professional fees and
listing fees.
|
(iii)
|
2019 Share Purchase agreement
|
On May 7, 2019, the Company
entered into the 2019 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 May 13, 2019, the Company issued 171,428 Common Shares (“Commitment
Shares”) to Aspire Capital in consideration for entering into the 2019 Aspire Purchase Agreement for a total cost of $360
thousand. The Aspire share purchase agreement was terminated on December 16, 2019. As at September 30, 2019, the Company had not
issued any shares under the 2019 Aspire Purchase Agreement, other than the Commitment Shares.
|
(iv)
|
2018 Share Purchase agreement
|
On May 30, 2018, the Company
entered into the 2018 Aspire Purchase Agreement, which provides 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 period from January 1, 2019 up to May 24, 2019, the date the 2018 Aspire Purchase Agreement was terminated,
the Company issued 5,502,433 common shares under the agreement at an average price of $1.82 per share for gross and net proceeds
of $10 million. On a cumulative basis up to May 24, 2019, the Company raised a total of approximately $11.9 million gross and net
proceeds under the 2018 Aspire Purchase Agreement. As of May 24, 2019, the Company has issued 6,409,980, the maximum number of
shares issuable under this facility without shareholder approval.
|
(v)
|
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 nine months ended
September 30, 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 September 30, 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 Company terminated this agreement on May 24, 2019.
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 2020 and 2019
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
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
September 30,
|
|
Nine months ended
September 30,
|
(in thousands)
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(13,249
|
)
|
|
$
|
(6,844
|
)
|
|
$
|
(40,525
|
)
|
|
$
|
(18,568
|
)
|
Weighted-average common shares – basic and diluted
|
|
|
85,860
|
|
|
|
55,454
|
|
|
|
79,477
|
|
|
|
47,315
|
|
Net loss per share – basic and diluted
|
|
$
|
(0.15
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.51
|
)
|
|
$
|
(0.39
|
)
|
The effect of any potential
exercise of the Company’s stock options outstanding during the three and nine month periods ended September 30, 2020 and
September 30, 2019 has been excluded from the calculation of diluted loss per common share as it would be anti-dilutive.
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 15.6 million options, rights
and other entitlements as at September 30, 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 nine months ended September 30, 2020 and September 30, 2019, are summarized as follows:
Option numbers are in (000’s)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
|
|
Options
|
|
|
|
Weighted average
exercise price
|
|
|
|
Weighted average remaining
contractual
life (years)
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
5,941
|
|
|
$
|
2.84
|
|
|
|
|
|
Granted
|
|
|
6,352
|
|
|
|
6.82
|
|
|
|
|
|
Exercised
|
|
|
(215
|
)
|
|
|
2.49
|
|
|
|
|
|
Forfeited
|
|
|
(71
|
)
|
|
|
2.87
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
12,007
|
|
|
|
4.93
|
|
|
|
8.2
|
|
Exercisable, end of the period
|
|
|
4,310
|
|
|
|
2.99
|
|
|
|
6.5
|
|
Vested and expected to vest, end of period
|
|
|
10,853
|
|
|
|
4.82
|
|
|
|
8.1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 2020 and 2019
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
Option numbers are in (000’s)
|
|
|
|
|
|
|
|
|
|
|
Nine months ended
September 30, 2019
|
|
|
|
|
|
Options
|
|
|
|
Weighted average
exercise price
|
|
|
|
Weighted average remaining
contractual
life (years)
|
|
|
|
|
|
|
|
|
Outstanding, beginning of period
|
|
|
4,489
|
|
|
$
|
3.11
|
|
|
|
|
|
Granted
|
|
|
2,018
|
|
|
|
1.97
|
|
|
|
|
|
Exercised
|
|
|
(34
|
)
|
|
|
1.11
|
|
|
|
|
|
Forfeited
|
|
|
(322
|
)
|
|
|
2.36
|
|
|
|
|
|
Expired
|
|
|
(47
|
)
|
|
|
4.33
|
|
|
|
|
|
Outstanding, end of the period
|
|
|
6,104
|
|
|
|
2.81
|
|
|
|
7.8
|
|
Exercisable, end of the period
|
|
|
3,340
|
|
|
|
3.34
|
|
|
|
6.8
|
|
Vested and expected to vest, end of period
|
|
|
5,689
|
|
|
|
2.86
|
|
|
|
7.7
|
|
As of September 30, 2020, there
was $14.1 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 1.7 years.
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:
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
Nine months ended
September 30, 2019
|
|
|
|
|
|
|
Risk-free interest rate
|
|
|
1.27
|
%
|
|
|
2.21
|
%
|
Expected dividend yield
|
|
|
-
|
|
|
|
-
|
|
Expected volatility
|
|
|
85.9
|
%
|
|
|
83.9
|
%
|
Expected life of options (in years)
|
|
|
5
|
|
|
|
5
|
|
Grant date fair value
|
|
$
|
4.59
|
|
|
$
|
1.32
|
|
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)
|
|
|
Nine months ended
September 30, 2020
|
|
|
|
Nine months ended
September 30, 2019
|
|
|
|
|
Number of options
|
|
|
|
Number of options
|
|
|
|
|
|
|
Cliff vesting after one year anniversary
|
|
|
300
|
|
|
|
335
|
|
3 year vesting (50%-25%-25%)
|
|
|
862
|
|
|
|
160
|
|
4 year vesting (50%-16 2/3%-16 2/3%-16 2/3%)
|
|
|
5,190
|
|
|
|
1,523
|
|
Total stock options granted in the period
|
|
|
6,352
|
|
|
|
2,018
|
|
APTOSE BIOSCIENCES INC.
Notes to Condensed Consolidated Interim Financial Statements (unaudited)
Three and nine months ended September 30, 2020 and 2019
(Tabular amounts in thousands of United States dollars, except as otherwise noted)
|
(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 nine months ended September 30, 2020 and 2019 the units outstanding.
|
|
Nine months ended,
September 30, 2020
|
|
Nine months ended,
September 30, 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
|
|
|
|
80
|
|
|
|
2.0
|
|
Vested
|
|
|
(685
|
)
|
|
|
7.01
|
|
|
|
(40
|
)
|
|
|
2.0
|
|
Outstanding, end of period
|
|
|
-
|
|
|
$
|
-
|
|
|
|
40
|
|
|
$
|
2.0
|
|
On March 10,
2020, the Company granted 645,000 restricted share units (RSUs) with a vesting term of three months. On May 5, 2020, the vesting
term on the RSUs was extended from three months to four months. On July 10, 2020, all of these restricted share units were vested
and were redeemed for 645,000 common shares.
On June 3, 2019, the Company
granted 80,000 restricted share units (RSUs), 40,000 of which have a vesting term of three months and the balance have a vesting
term of one year. On May 5, 2020, the vesting term on the balance was extended from one year to one year and one month. On July
2, 2020, the remaining of these restricted share units were vested and were redeemed for 40,000 common shares.
The grant date fair value of
the March 10, 2020 and June 3, 2019 RSUs were 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.
|
(c)
|
Share-based payment expense
|
The Company recorded share-based
payment expense related to stock options and RSUs as follows:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
$
|
1,051
|
|
|
$
|
34
|
|
|
$
|
2,784
|
|
|
$
|
309
|
|
General and administrative
|
|
|
3,854
|
|
|
|
470
|
|
|
|
14,223
|
|
|
|
1,425
|
|
|
|
$
|
4,905
|
|
|
$
|
504
|
|
|
$
|
17,007
|
|
|
$
|
1,734
|
|
|
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 September 30, 2019, while Dr. Howell was Acting Chief Medical Officer, the Company recorded $154 thousand in research and
development expenses related to the agreement.
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 1 clinical trials. Each molecule is described below.
CG-806 is an orally administered, highly potent first-in-class FMS-like
tyrosine kinase 3 (“FLT3”)/Bruton’s tyrosine kinase (“BTK”) inhibitor that selectively 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 1a/b study for the treatment of patients having B-cell malignancies including classic CLL,
small lymphocytic lymphoma (“SLL”) and certain non-Hodgkin’s lymphomas (“NHL”) that are resistant/refractory/intolerant
to other therapies. In addition, Aptose recently received IND allowance and has initiated patient dosing in a Phase 1a/b study
to develop CG-806 for the treatment of patients with relapsed/refractory acute myeloid leukemia (“R/R AML”), including
the emerging populations resistant to FLT3 inhibitors. In this trial of patients with R/R AML, the CG-806 starting dose of 450
mg BID was selected because the plasma from B-cell cancer patients at that dose completely inhibited phospho-FLT3, suggesting that
this starting dose might be active in the AML patient population. It is important to note that CG-806 now is undergoing formal
clinical development in both lymphoid and myeloid hematologic malignancies.
APTO-253 is a first-in-class small molecule therapeutic agent that
clinically 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, as well as certain solid
tumor indications. 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 1b study for the treatment of patients with R/R 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 for the treatment of R/R AML and for the treatment of 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 1a/b clinical trial
for CG-806. The 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 thirty clinical
sites for the Phase 1a/b trial in patients with CLL/SLL or NHL which include specialty regional cancer care centers as well as
large hospitals and key academic institutions. As of the date of this report, we have completed the first, second, third and fourth
dose levels (150 mg, 300 mg, 450 mg and 600 mg BID, respectively). Cohort 5 (750mg) enrollment is ongoing. 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. Intra-patient dose escalation is allowed if the higher dose is safe in three or more patients, and
additional patients may be enrolled at dose levels previously declared safe. To date, we have reported that among enrolled patients
with an array of B-cell malignancies, three classic CLL patients have received CG-806 and all three demonstrated inhibition of
phospho-BTK and “on-target” lymphocytosis, indicating target engagement and pharmacologic activity of CG-806. As CG-806
moves from low/intermediate dose levels and into the higher dose levels, it is hoped that an optimal dose can be selected that
demonstrates formal clinical responses without excessive toxicity.
Aptose is also advancing CG-806 into myeloid malignancies, with
an initial focus on AML, in a separate Phase 1a/b trial. On June 29, 2020, the Company announced that it had received allowance
from the FDA to proceed into a study in R/R AML with a starting dose of 450 mg BID, and subsequently on October 19, 2020, announced
that it had initiated dosing of the first patient with AML. As of the date of this report we have initiated five clinical sites
for the Phase 1a/b trial.
The 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 R/R AML. In this study, CG-806 is administered in gelatin capsules BID during
a 28-day cycle. Our strategy was to identify a starting dose of CG-806 that we believe could be therapeutically active in critically
ill patients with R/R AML. In our ongoing Phase 1a/b study in patients with CLL and other B-cell malignancies, 450 mg BID CG-806
delivered plasma levels that completely inhibited phospho-FLT3 in a plasma inhibitory activity (PIA) reporter cell assay, suggesting
that the 450 mg BID dose may be active in patients with AML. Aptose plans to dose escalate beyond the 450 mg BID dose level, provided
the 450 mg BID dose level is safe and well tolerated in R/R AML patients. Based on strong preclinical evidence of CG-806’s
activity against AML – including demonstration of mutation-agnostic and genotype-agnostic potency, particularly compared
against other FLT3 inhibitors, and its ability to safely cure AML in murine leukemia models – we believe CG-806 may offer
hope to the fragile and difficult-to-treat AML patient population.
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 2020 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.
Data presentations:
On April 27, 2020, we presented the early clinical data on CG-806
at the AACR Virtual Annual Meeting I (April 27-28) in lieu of the live oral presentation originally planned. A video summary of
Abstract # 9967 - Early clinical findings from a Phase 1a/b dose escalation trial to evaluate the safety and tolerability of
CG-806 in patients with relapsed or refractory CLL/SLL or non-Hodgkin’s lymphomas described the first-in-human tests
of CG-806 which are being carried out in a Phase 1a/b clinical study in patients with significant unmet needs including patients
with relapsed or refractory CLL, SLL or NHL who had been failed by or been intolerant to two lines of established therapy. We noted
that the second patient, treated at the 300 mg BID dose level, represented a classic CLL patient that developed a brisk lymphocytosis
(evidence of BTK target engagement and evidence of pharmacologic activity), and that enrollment was continuing.
On June 12, 2020, we presented new clinical data on CG-806 in a
poster presentation at the 25th Congress of the EHA. The poster, Early Clinical Findings from a Phase 1 a/b Dose Escalation
Trial to Evaluate the Safety and Tolerability of CG-806 in Patients with Relapsed or Refractory CLL/SLL or Non-Hodgkin’s
Lymphomas (EHA2020 Abstract# EP711), reviewed CG-806 data for eight patients (as of the data cut-off date on May 5, 2020) with
relapsed or refractory CLL,SLL or NHL in the first in-human Phase 1a/b, open-label, single arm, multicenter dose-escalation clinical
study. Data from the ongoing trial demonstrated CG-806 was well-tolerated in patients treated at 150 mg, 300 mg, 450 mg BID over
multiple cycles, with no dose-limiting toxicities or serious adverse events observed, supporting continued dose escalation. CG-806
treatment achieved human steady state PK levels known to be effective in murine tumor models and led to complete inhibition of
phospho-BTK and multiple CLL survival pathways. CG-806 treatment also led to lymphocytosis in both classic CLL patients entering
study with elevated lymphocyte counts and led to complete inhibition of phospho-FLT3, suggesting that dose levels evaluated in
this study may be therapeutic in patients with AML.
On June 22, 2020, we presented new preclinical data on CG-806 in
a poster presentation at the AACR Virtual Annual II 2020. The poster, CG-806, a First-in-Class FLT3/BTK Inhibitor, and Venetoclax
Synergize to Inhibit Cell Proliferation and to Induce Apoptosis and Aggressive B-cell Lymphomas, illustrated how CG-806 simultaneously
inhibits the driver BCR pathway and PI3K/AKT, NFᴋB and MAPK-mediated rescue pathways to kill aggressive double-hit and double-expressor
B-cell lymphoma cells. Overall, the presented work provided additional mechanistic evidence to support the clinical development
of CG-806 as a single agent or in combination with venetoclax in patients with aggressive B-cell lymphomas harboring unfavorable
BCL2/MYC/BCL6 translocations and / or overexpression.
APTO-253
Phase 1b Trial
APTO-253, a small molecule inhibitor of MYC gene expression, is
being evaluated by Aptose in a Phase 1b clinical trial in patients with R/R hematologic malignancies, particularly R/R AML and
high-risk MDS. The Phase 1b, 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 2 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 multiple active sites recruiting
patients in the dose escalation stage of the trial. As of the date of this report, we have completed enrollment and treatment of
patients on the first, second, third and fourth dose levels (20, 40, 66, and 100 mg/m2, respectively). 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. Aptose is currently enrolling and treating patients in the fifth dose level (150 mg/m2)
of APTO-253. During the second quarter of 2020, the FDA allowed an amendment for Aptose to initiate more aggressive dose escalations
with APTO-253, provided the tolerability profile remains favorable. The first four dosing cohorts have enrolled a mix of patients
with AML and MDS. To date, we have observed meaningful reductions in MYC expression in peripheral blood mononuclear cells (PBMCs)
from treated patients with AML and MDS, demonstrating MYC target engagement and mechanistic proof of concept in different indications.
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 2020, 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. While it is difficult to estimate the
duration and impact of COVID-19 on the larger clinical sites and regional cancer care sites, as of the date of this report, we
have not experienced and do not foresee material delays to the enrollment of patients or timelines for the CG-806 Phase 1a/b B-cell
malignancy trial due to the variety of clinical sites that we have actively recruited for this trial. APTO-253, which is administered
intravenously, 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.
While as of the date of this report we have not experienced any
material delays in initiating our CG-806 Phase 1 clinical study in AML due to COVID-19, we are conducting site initiation visits
remotely which could result in delays in site activations and negatively impact this trial. Additionally, COVID-19 could negatively
impact patient enrollment if our clinical sites are unable to enroll patients due to either a lack of administrative resources
at their sites or decisions made at the clinical sites to limit patient exposure to COVID-19.
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 September 30, 2020 and December 31, 2019.
(in thousands)
|
|
Balances at
September
30,
2020
|
|
Balances at
December 31,
2019
|
Cash and cash equivalents
|
|
$
|
99,727
|
|
|
$
|
79,842
|
|
Investments
|
|
|
32,997
|
|
|
|
17,758
|
|
Total
|
|
$
|
132,724
|
|
|
$
|
97,600
|
|
|
|
|
|
|
|
|
|
|
Working capital
|
|
$
|
128,501
|
|
|
$
|
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 September 30, 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.
On July 20, 2020 and August 10, 2020, the Company completed a confidentially
marketed public offering (“CMPO”), with Piper Sandler & Co. as the representative of the underwriters, through
the issuance of, in the aggregate, 11,854,472 common shares for gross proceeds of $62.2 million (approximately $58.2 million net
of share issue costs).
On May 5, 2020, the Company entered into an “At-The-Market”
Facility equity distribution agreement with Piper Sandler & Co. and Canaccord Genuity LLC acting as co-agents (the “2020
ATM”). Under the terms of this facility, the Company may, from time to time, sell common shares having an aggregate offering
value of up to $75 million through Piper Sandler and Canaccord Genuity on the Nasdaq Capital Market. During the nine month period
ended September 30, 2020, the Company did not issue any shares under this 2020 ATM.
During the year ended December 31, 2019, the Company completed two
CMPOs, with RBC Capital Markets, LLC and Canaccord Genuity LLC, as representatives of the underwriters, and Piper Jaffray &
Co., as the representative of the underwriters, respectively, through the issuance of, in the aggregate, 30,043,750 common shares
for aggregate 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 an aggregate of 7,302,433 common shares for aggregate gross proceeds of $14.4 million . We do not expect that
COVID-19 will have a significant impact on 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 allows us to distribute, upon the filing of prospectus supplements, up to $200,000,000 of common
shares, warrants, or units comprising any combination of common shares and warrants. 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 the necessary funds are not available,
we may need 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 and nine-month periods ended September 30, 2020 and 2019:
|
|
Three months ended,
|
|
Nine months ended,
|
(in thousands)
|
|
September 30,
2020
|
|
September 30,
2019
|
|
September 30,
2020
|
|
September 30,
2019
|
|
|
|
|
|
|
|
|
|
Net cash provided by (used in):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating activities
|
|
$
|
(8,270
|
)
|
|
$
|
(5,184
|
)
|
|
$
|
(23,540
|
)
|
|
$
|
(15,327
|
)
|
Investing activities
|
|
|
(4,398
|
)
|
|
|
(1,042
|
)
|
|
|
(15,331
|
)
|
|
|
(9,092
|
)
|
Financing activities
|
|
|
58,283
|
|
|
|
17
|
|
|
|
58,765
|
|
|
|
29,808
|
|
Effect of exchange rates changes on cash and cash equivalents
|
|
|
-
|
|
|
|
(3
|
)
|
|
|
(9
|
)
|
|
|
(2
|
)
|
Net (decrease)/increase in cash and cash equivalents
|
|
$
|
45,615
|
|
|
$
|
(6,212
|
)
|
|
$
|
19,885
|
|
|
$
|
5,387
|
|
Cash used in operating activities:
Our cash used in operating activities for the three months ended
September 30, 2020 and 2019 was approximately $8.3 million and $5.2 million, respectively. Our cash used in operating activities
for the nine months ended September 30, 2020 and 2019 was approximately $23.5 million and $15.3 million, respectively. Net
cash used in operating activities was higher in the three and nine-month periods ended September 30, 2020 as compared with the
three and nine-month periods ended September 30, 2019 resulting mostly from higher net loss in the current periods. See “Results
of Operations”. 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 office administrative costs.
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
September 30, 2020 was $4.4 million, and consisted of net purchases of investments of $4.4 million. Our cash used in investing
activities in the three-month period ended September 30, 2019 was $1.0 million, and consisted of net purchases of investments
of $1.0 million and property and equipment of $42 thousand.
Our cash used in investing activities in the nine-month period ended
September 30, 2020 was $15.3 million, and consisted of net purchases of investments of $15.3 million and purchases of property
and equipment of $53 thousand. Our cash used in investing activities in the nine-month period ended September 30, 2019 was approximately $9.1
million, and consisted of net purchases of investments of $9.0 million and property and equipment of $92 thousand.
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
September 30, 2020 was $58.3 million, and consisted of 11,854,472 shares issued pursuant to the CMPO in July and August 2020 for
net proceeds of approximately $58.2 million and proceeds of approximately $49 thousand from the exercise of stock options. Our
cash flow from financing activities in the three-month period ended September 30, 2019 was $17 thousand, and consisted of proceeds
of approximately $17 thousand from the exercise of stock options.
Our cash flow from financing activities for the nine months ended
September 30, 2020 was approximately $58.8 million, consisted mostly of the CMPO we completed in July and August 2020 as described
above and of proceeds from the exercise of stock options of $531 thousand. Net cash provided by financing activities in the nine-month
period ended September 30, 2019 reflects mostly the 11,500,000 common shares issued pursuant to the CMPO we completed in June 2019
with RBC Capital Markets, LLC and Canaccord Genuity LLC, as representatives of the underwriters, for net proceeds of approximately
$19.6 million, 5,502,433 shares issued to Aspire Capital pursuant to the 2018 Aspire Purchase Agreement, as described below, for
net proceeds of approximately $10 million, and 77,349 shares issued pursuant to the 2018 ATM Facility with Cantor Fitzgerald, as
described below, for net proceeds of approximately $178 thousand.
At-The-Market Facilities
On May 5, 2020, the Company entered into an ATM equity distribution
agreement with Piper Sandler & Co. and Canaccord Genuity LLC acting as co-agents. Under the terms of this facility, the Company
may, from time to time, sell common shares having an aggregate offering value of up to $75 million through Piper Sandler and Canaccord
Genuity on the Nasdaq Capital Market. During the nine months ended September 30, 2020, the Company did not issue any shares under
this ATM equity facility.
On March 27, 2018, the Company entered into an ATM equity distribution
agreement with Cantor Fitzgerald acting as sole agent (the “2018 ATM Facility”). Under the terms of this facility,
the Company was allowed, from time to time, to sell common shares having an aggregate offering value of up to $30 million through
Cantor Fitzgerald on the Nasdaq Capital Market. During the nine months ended September 30, 2019, the Company issued 77,349 shares
under the 2018 ATM Facility at an average price of $2.37 for gross proceeds of $183 thousand ($178 thousand net of share issue
costs). On a cumulative basis to September 30, 2019, the Company had raised a total of $11.2 million gross proceeds ($10.9 million
net of share issue costs) under the 2018 ATM Facility. The Company terminated this agreement on May 24, 2019.
Common Share Purchase Agreements
On May 30, 2018, the Company entered into a Common Share Purchase
Agreement to sell up to $20.0 million of common shares to Aspire Capital over approximately 30 months (the “2018 Aspire Purchase
Agreement”). Pursuant to the terms of this agreement, on June 8, 2018, the Company issued 170,261 common shares to Aspire
Capital in consideration for entering into the 2018 Aspire Purchase Agreement for a total cost of $600 thousand. During the nine
months ended September 30, 2019, the Company issued 5,502,433 common shares to Aspire Capital pursuant to the 2018 Aspire Purchase
Agreement at an average price of $1.82 per share for gross and net proceeds of $10 million. On a cumulative basis, the Company
raised a total of approximately $11.9 million gross and net proceeds under the 2018 Aspire Purchase Agreement. As of May 7, 2019
the Company had issued 6,409,980 common shares, the maximum number of shares issuable under this facility without shareholder approval,
and the 2018 Aspire Purchase Agreement was accordingly terminated.
On May 7, 2019, the Company entered into the 2019 Aspire Purchase
Agreement, which provided that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital
was 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 May 13, 2019, the Company issued 171,428 Common Shares (“Commitment Shares”) to Aspire Capital
in consideration for entering into the 2019 Aspire Purchase Agreement for a total cost of $360 thousand. During the period from
October 1, 2019 up to December 16, 2019, the date the 2019 Aspire Purchase Agreement was terminated, the Company issued 1,800,000
common shares under the agreement at an average price of $2.43 per share for gross and net proceeds of $4.4 million.
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 and nine-month
periods ended September 30, 2020 and 2019 is presented below:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(in thousands)
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
|
$
|
-
|
|
Research and development expenses
|
|
|
7,519
|
|
|
|
4,751
|
|
|
|
20,319
|
|
|
|
11,582
|
|
General and administrative expenses
|
|
|
5,775
|
|
|
|
2,276
|
|
|
|
20,690
|
|
|
|
7,391
|
|
Net finance income
|
|
|
45
|
|
|
|
183
|
|
|
|
484
|
|
|
|
405
|
|
Net loss
|
|
|
(13,249
|
)
|
|
|
(6,844
|
)
|
|
|
(40,525
|
)
|
|
|
(18,568
|
)
|
Other comprehensive gain/(loss)
|
|
|
(2
|
)
|
|
|
(5
|
)
|
|
|
(17
|
)
|
|
|
13
|
|
Total comprehensive loss
|
|
$
|
(13,251
|
)
|
|
$
|
(6,849
|
)
|
|
$
|
(40,542
|
)
|
|
$
|
(18,555
|
)
|
Basic and diluted loss per common share
|
|
$
|
(0.15
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.51
|
)
|
|
|
$($0.39)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The net loss for the three-month period ended September 30, 2020
increased by $6.4 million to $13.2 million as compared with $6.8 million for the comparable period in 2019, primarily as a result
of an increase of $4.4 million in stock-based compensation in the current period, a combined increase in costs for our CG-806 development
program and related labor costs of approximately $2.5 million and offset by lower costs of approximately $721 thousand on our APTO-253
program. There was also an increase in cash-based general and administrative expenses of $108 thousand and a decrease in net finance
income of $138 thousand in the current period compared to the comparative period, mostly as a result of lower yields on investments
held during the three-month period ended September 30, 2020.
The net loss for the nine-month period ended September 30, 2020
increased by $22.0 million to $40.5 million as compared with $18.6 million for the comparable period in 2019, primarily as a result
of an increase of $15.3 million in stock-based compensation in the current period, a combined increase in program costs and related
labor costs of approximately $7.1 million on our CG-806 development program and higher cash-based general and administrative expenses
of approximately $492 thousand. These expenses were partially offset by lower costs of $836 thousand on our APTO-253 development
programs.
Research and Development
The research and development expenses for the three-month and nine-month
periods ended September 30, 2020 and 2019 were as follows:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(in thousands)
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Program costs – CG-806
|
|
|
4,300
|
|
|
$
|
2,223
|
|
|
|
11,000
|
|
|
$
|
5,287
|
|
Program costs – APTO-253
|
|
|
725
|
|
|
|
1,446
|
|
|
|
2,460
|
|
|
|
3,296
|
|
Personnel related expenses
|
|
|
1,440
|
|
|
|
1,042
|
|
|
|
4,060
|
|
|
|
2,666
|
|
Stock-based compensation
|
|
|
1,051
|
|
|
|
34
|
|
|
|
2,784
|
|
|
|
309
|
|
Depreciation of equipment
|
|
|
3
|
|
|
|
6
|
|
|
|
15
|
|
|
|
24
|
|
|
|
$
|
7,519
|
|
|
$
|
4,751
|
|
|
$
|
20,319
|
|
|
$
|
11,582
|
|
Research and development expenses increased by $2.8 million to $7.5
million for the three-month period ended September 30, 2020 as compared with $4.8 million for the comparative period in 2019. Changes
to the components of our research and development expenses presented in the table above are primarily as a result of the following
events:
|
·
|
Program costs for CG-806 increased by approximately $2.1 million, mostly as a result of higher
manufacturing costs, including costs to scale up manufacturing and research costs associated with optimizing the formulation, higher
costs associated with the CG-806 Phase 1a/b trial and the costs associated the CG-806 AML trial.
|
|
·
|
Program costs for APTO-253 decreased by approximately $721 thousand, mostly as a result of lower
manufacturing costs and lower clinical trial costs related to the APTO-253 Phase 1b trial.
|
|
·
|
Personnel-related expenses increased by $398 thousand, mostly related to new positions hired since
the second quarter of 2019 to support the CG-806 Phase 1a/b and APTO-253 Phase 1b clinical trials and the CG-806 AML Phase 1 clinical
trial.
|
|
·
|
Stock-based compensation increased by approximately $1.0 million in the three months ended September
30, 2020, compared with the three months ended September 30, 2019, mostly related to an increase in the number of options granted
during the nine months ended September 30, 2020 and a higher grant date fair value of options as compared with the nine months
ended September 30, 2019, and a higher rate of forfeitures in the comparative period.
|
Research and development expenses increased by $8.7 million to $20.3
million for the nine-month period ended September 30, 2020 as compared with $11.6 million for the comparative period in 2019 for
the same reasons as described above for the three-month period ended September 30, 2020.
|
·
|
Program costs for CG-806 increased by approximately $5.7 million, mostly as a result of higher
manufacturing costs, including costs to scale up manufacturing and research costs associated with optimizing the formulation, higher
costs associated with the CG-806 Phase 1a/b trial and the costs associated with the CG-806 AML trial.
|
|
·
|
Program costs for APTO-253 decreased by approximately $836 thousand, mostly as a result of lower
manufacturing costs and lower clinical trial costs related to the APTO-253 Phase 1b trial.
|
|
·
|
Personnel-related expenses increased by $1.4 million, mostly related to new positions hired since
the second quarter of 2019 to support the CG-806 Phase 1a/b and APTO-253 Phase 1b clinical trials and the CG-806 AML Phase 1 clinical
trial.
|
|
·
|
Stock-based compensation increased by approximately $2.5 million in the three months ended September
30, 2020, compared with the three months ended September 30, 2019, mostly related to an increase in the number of options granted
during the nine months ended September 30, 2020 and a higher grant date fair value of options as compared with the nine months
ended September 30, 2019, and a higher rate of forfeitures in the comparative period in 2019.
|
General and Administrative
The general and administrative expenses for the three-month and
nine-month periods ending September 30, 2020 and 2019 were as follows:
|
|
Three months ended
September 30,
|
|
Nine months ended
September 30,
|
(in thousands)
|
|
|
2020
|
|
|
|
2019
|
|
|
|
2020
|
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
General and administrative, excluding items below:
|
|
$
|
1,888
|
|
|
$
|
1,780
|
|
|
$
|
6,367
|
|
|
$
|
5,875
|
|
Stock-based compensation
|
|
|
3,854
|
|
|
|
470
|
|
|
|
14,223
|
|
|
|
1,425
|
|
Depreciation of equipment
|
|
|
33
|
|
|
|
26
|
|
|
|
100
|
|
|
|
91
|
|
|
|
|
5,775
|
|
|
$
|
2,276
|
|
|
|
20,690
|
|
|
$
|
7,391
|
|
General and administrative expenses for the three-month period ended
September 30, 2020 were $5.8 million as compared with $2.3 million for the comparative period in 2019, an increase of approximately
$3.5 million. The increase was primarily as a result of the following:
|
·
|
General and administrative expenses, other than share-based compensation and depreciation of equipment,
increased by approximately $108 thousand in the three months ended September 30, 2020, primarily as a result of higher personnel
related costs, higher insurance costs and higher office administrative costs offset by lower professional fees and lower travel
expenses.
|
|
·
|
Stock-based compensation increased by approximately $3.4 million in the three months ended September
30, 2020, compared with the three months ended September 30, 2019, mostly related to an increase in the number of options granted
during the nine-month period ended September 30, 2020, and a higher grant date fair value of options as compared with September
30, 2019.
|
General and administrative expenses for the nine-month period ended
September 30, 2020 were $20.7 million as compared with $7.4 million for the comparative period in 2019, an increase of approximately
$13.3 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 $492 thousand in the nine months ended September 30, 2020 primarily as a result of higher personnel
related costs, higher insurance costs and higher office administrative costs and offset by lower financing costs and lower travel
expenses.
|
|
·
|
Stock-based compensation increased by approximately $12.8 million in the nine months ended September
30, 2020, compared with the nine months ended September 30, 2019 mostly related to an increase in the number of restricted share
units and options granted during the nine-month period ended September 30, 2020, and a higher grant date fair value of options
as compared with September 30, 2019.
|
COVID-19 did not have a significant impact on our results of operations
for the quarter ended September 30, 2020. We have not experienced and do not foresee material delays to the enrollment of patients
or timelines for the CG-806 Phase 1a/b trial due to the variety of clinical sites that we have actively recruited for this trial.
Similarly, we do not expect our enrollment of the CG-806 AML trial to be negatively impacted by COVID-19 as we plan to use a variety
of clinical sites for this trial as well. APTO-253, which is administered intravenously, 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. 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.
OFF-BALANCE SHEET ARRANGEMENTS
As at September 30, 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 nine months ended September 30, 2020 other than that we have determined that due to an increase in the
amount and values of our research contracts, we now consider our estimates related to prepaid and accrued research and development
(R&D) activities as significant estimates. Research and development (R&D) costs are expensed as incurred. R&D
costs consist primarily of salaries and benefits, stock-based compensation, manufacturing, contract services, clinical trials,
intangibles, and research related overhead. Non-refundable advance payments for goods and services that will be used in future
research are recorded in prepaid and other assets and are expensed when the services are performed.
We record expenses for research and development activities based
on our estimates of services received and efforts expended pursuant to contracts with vendors that conduct research and development
on our behalf. The financial terms vary from contract to contract and may result in uneven payment flows as compared with services
performed or products delivered. As a result, we are required to estimate research and development expenses incurred during the
period, which impacts the amount of accrued expenses and prepaid balances related to such costs as of each balance sheet date.
We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress
or stage of completion of the services and the agreed-upon fee to be paid for such services. We make significant judgments and
estimates in determining the accrued balance in each reporting period. As actual costs become known, we adjust our accrued estimates.
Although we do not expect our estimates to be materially different
from amounts actually incurred, if our estimates of the status and timing of services performed differ from the actual status and
timing of services performed, it could result in us reporting amounts that are too high or too low in any particular period. To
date, there have been no material differences between our estimates of such expenses and the amounts actually incurred.
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.
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.
Updated share information
As at November 10, 2020, we had 88,861,737 common shares issued
and outstanding. In addition, there were 11,996,011 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:
|
·
|
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;
|
|
·
|
our lack of product revenues and net losses and a history of operating losses;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
·
|
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;
|
|
|
·
|
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;
|
|
·
|
potential exposure to litigation, including product liability and other claims, and the potential need to take action against other parties; and
|
|
·
|
extensive government regulation of our industry and our inability to comply with applicable regulations and standards;
|
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.