Highlights Include FDA Approval of Phase 2
On-Ambulance Clinical Trial for Treatment of Stroke and Appointment
of New Chief Financial Officer
Diffusion Pharmaceuticals Inc. (Nasdaq: DFFN), a
cutting-edge biotechnology company developing new treatments for
life-threatening medical conditions by improving the body’s ability
to bring oxygen to the areas where it’s needed most, today reported
financial results for the three months ended September 30, 2018 and
provided a business update.
The third quarter and recent weeks featured a
number of developments, including approval from the U.S. Food and
Drug Administration (FDA) to enroll patients in an ambulance-based
Phase 2 clinical trial testing the Company’s lead drug candidate,
Trans Sodium Crocinate (TSC), for the treatment of acute stroke.
The trial, named PHAST-TSC (Pre-Hospital Administration of Stroke
Therapy-TSC), will involve 23 hospitals across urban, suburban, and
rural areas in Los Angeles and Central Virginia, working closely
with approximately 150 emergency medical transport groups and will
be led by researchers at the University of Virginia (UVA) and the
University of California Los Angeles (UCLA). TSC, which will be
administered while the stroke victim is still in the ambulance, may
offer new hope for these patients by increasing the amount of
oxygen directed to affected tissue, potentially reducing cell death
and improving patient outcomes. Results for the trial will
potentially be available in just under two years, subject to
receiving necessary funding.
The Company is also currently enrolling patients
in its Phase 3 INTACT (INvestigation of TSC Against Cancerous
Tumors) program, using TSC to target inoperable glioblastoma
multiforme (GBM) brain cancer. Phase 2 of the INTACT program had
previously seen a nearly four-fold improvement in overall survival
for the subset of inoperable patients treated with TSC over the
control group of GBM patients at two years.
During the third quarter, the Company also
appointed William “Bill” Hornung – an executive with 20 years of
experience, including with small, innovative, publicly-traded
companies with origins in university research communities – to the
position of Chief Financial Officer. Mr. Hornung previously served
as the Company’s Chief Business Officer. The Company ended the
quarter with $23.6 million in total assets, including cash and cash
equivalents of $11.0 million.
“At Diffusion, we’re building a world-class team
of scientists, researchers, and business leaders dedicated to
advancing the fight against life-threatening medical conditions in
the United States and around the world,” said
David Kalergis, Chairman and CEO of Diffusion.
“While the past quarter has been an exciting time for the Company,
we believe that the future is full of even more potential and
promise as we continue our scientific efforts and pursue strategic
partnerships. We’re also looking forward to beginning our FDA
approved Phase 2 on-ambulance trial for the treatment of stroke and
continuing our advanced efforts to treat patients with GBM brain
cancer.”
“Over the past quarter, Diffusion has maintained
our commitment to prudent fiscal management while dedicating
resources to advancing our research priorities,” said Bill
Hornung, Chief Financial Officer of Diffusion. “We believe
that due to our existing assets, strong patent protection program,
recent regulatory approvals, and continued thought leadership
within the business and scientific communities, the Company is well
positioned for future success.”
Financial Results for the Three Months
Ended September 30, 2018
We had cash and cash equivalents of $11.0
million as of September 30, 2018. The Company believes its cash and
cash equivalents at September 30, 2018 are sufficient to fund
operations through September 2019. We recognized $1.2 million in
research and development expenses during the three months ended
September 30, 2018 compared to $1.8 million during the three months
ended September 30, 2017. The decrease in research and development
expense was attributable to a $0.3 million decrease in expense
related to our Phase 3 GMB trial and a decrease in manufacturing
expense of $0.4 million, offset by a $0.1 million increase in
salary and wages expense. The decrease in GBM expense was
attributable to the fact that the current 8 patient dose escalation
phase of the trial is less costly than the startup and
implementation costs that were incurred during the three months
ended September 30, 2017.
General and administrative expenses were $1.6
million during the three months ended September 30, 2018 compared
to $1.6 million during the three months ended September 30,
2017. Although overall general and administrative expenses
remained flat, there was a $0.2 million decrease in professional
fees, offset by an increase in salary and wages expense of $0.2
million.
We recognized a non-cash goodwill impairment
charge of $4.2 million during the three months ended September 30,
2018 as a result of a decrease in our market capitalization during
the prior three months. There was no such charge during the three
months ended September 30, 2017.
About Diffusion Pharmaceuticals
Inc.
Diffusion Pharmaceuticals Inc. is an innovative
biotechnology company developing new treatments that improve the
body’s ability to bring oxygen to the areas where it’s needed most
—offering new hope for the treatment of life-threatening medical
conditions.
Diffusion’s lead drug, Trans Sodium Crocinate
(TSC), was originally developed in conjunction with the Office of
Naval Research, which was seeking a way to treat hemorrhagic shock
caused by massive blood loss on the battlefield.
Evolutions in research have led to Diffusion’s
focus today: Fueling Life by taking on some of medicine’s most
intractable and difficult-to-treat diseases, including stroke and
GBM brain cancer. In each of these diseases, hypoxia – when
essential tissue in your body is deprived of oxygen – has proved to
be a significant obstacle for medical providers and the target for
TSC’s novel mechanism.
In 2018, the Company began enrolling patients in
its Phase 3 INTACT program, using TSC to target inoperable GBM
brain cancer. Its on-ambulance Phase 2 acute stroke protocol was
granted FDA clearance to proceed in September 2018.
Additional pre-clinical data supports the potential use of TSC as a
treatment for other conditions where hypoxia plays a major role,
such as myocardial infarction, respiratory diseases such as COPD,
peripheral artery disease, and neurodegenerative conditions such as
Alzheimer’s and Parkinson’s.
In addition, RES-529, the Company’s
PI3K/AKT/mTOR pathway inhibitor that dissociates the mTORC1 and
mTORC2 complexes, is in the preclinical testing phase for GBM.
Diffusion is headquartered in Charlottesville,
Virginia—an emerging hub of advancement in the life science and
biopharmaceutical industries and is led by CEO David Kalergis, a
30-year industry veteran and company co-founder.
Forward-Looking Statements
To the extent any statements made in this news
release deal with information that is not historical, these are
forward-looking statements under the Private Securities Litigation
Reform Act of 1995. Such statements include, but are not limited
to, statements about the company's plans, objectives,
expectations and intentions with respect to future operations
and products, the potential of the company's technology and product
candidates, the anticipated timing of future clinical trials, and
other statements that are not historical in nature, particularly
those that utilize terminology such as "would," "will," "plans,"
"possibility," "potential," "future," "expects," "anticipates,"
"believes," "intends," "continue," "expects," other words of
similar meaning, derivations of such words and the use of future
dates. Forward-looking statements by their nature address matters
that are, to different degrees, uncertain. Uncertainties and risks
may cause the company's actual results to be materially different
than those expressed in or implied by such forward-looking
statements. Particular uncertainties and risks include: general
business and economic conditions; the company's need for and
ability to obtain additional financing or partnering arrangement;
the difficulty of developing pharmaceutical products, obtaining
regulatory and other approvals and achieving market acceptance; and
the various risk factors (many of which are beyond Diffusion’s
control) as described under the heading “Risk Factors” in
Diffusion’s filings with the United States Securities and Exchange
Commission. All forward-looking statements in this news release
speak only as of the date of this news release and are based on
management's current beliefs and expectations. Diffusion undertakes
no obligation to update or revise any forward-looking statement,
whether as a result of new information, future events or
otherwise.
Diffusion Pharmaceuticals
Inc.Condensed Consolidated Balance
Sheets(unaudited)
|
|
September 30,2018 |
|
December 31,2017 |
Assets |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash
equivalents |
|
$ |
11,018,441 |
|
|
$ |
8,896,468 |
|
Prepaid
expenses, deposits and other current assets |
|
551,337 |
|
|
769,946 |
|
Total
current assets |
|
11,569,778 |
|
|
9,666,414 |
|
Property and equipment,
net |
|
379,202 |
|
|
460,652 |
|
Intangible asset |
|
8,639,000 |
|
|
8,639,000 |
|
Goodwill |
|
2,743,208 |
|
|
6,929,258 |
|
Other assets |
|
263,480 |
|
|
450,491 |
|
Total
assets |
|
$ |
23,594,668 |
|
|
$ |
26,145,815 |
|
Liabilities,
Convertible Preferred Stock and Stockholders’ Equity |
|
|
|
|
Current
liabilities: |
|
|
|
|
Current
portion of convertible debt |
|
$ |
— |
|
|
$ |
550,000 |
|
Accounts
payable |
|
129,057 |
|
|
511,956 |
|
Accrued
expenses and other current liabilities |
|
816,620 |
|
|
1,628,851 |
|
Total
current liabilities |
|
945,677 |
|
|
2,690,807 |
|
Deferred income
taxes |
|
1,741,253 |
|
|
2,223,678 |
|
Other liabilities |
|
— |
|
|
1,386 |
|
Total
liabilities |
|
2,686,930 |
|
|
4,915,871 |
|
Commitments and
Contingencies |
|
|
|
|
Convertible preferred
stock, $0.001 par value: |
|
|
|
|
Series A
- No shares and 13,750,000 shares authorized at September 30, 2018
and December 31, 2017, respectively. No shares and 12,376,329
shares issued at September 30, 2018 and December 31, 2017,
respectively. No shares and 8,306,278 shares outstanding at
September 30, 2018 and December 31, 2017, respectively. |
|
— |
|
|
— |
|
Total
convertible preferred stock |
|
— |
|
|
— |
|
Stockholders’
Equity: |
|
|
|
|
Common
stock, $0.001 par value: |
|
|
|
|
1,000,000,000 shares authorized; 50,572,001 and 14,519,629 shares
issued and outstanding at September 30, 2018 and December 31, 2017,
respectively. |
|
50,571 |
|
|
14,520 |
|
Additional paid-in capital |
|
95,210,928 |
|
|
82,770,313 |
|
Accumulated deficit |
|
(74,353,761 |
) |
|
(61,554,889 |
) |
Total
stockholders' equity |
|
20,907,738 |
|
|
21,229,944 |
|
Total liabilities,
convertible preferred stock and stockholders' equity |
|
$ |
23,594,668 |
|
|
$ |
26,145,815 |
|
|
|
Diffusion Pharmaceuticals
Inc.Condensed Consolidated Statements of
Operations(unaudited)
|
|
Three Months EndedSeptember 30, |
|
Nine Months EndedSeptember 30, |
|
|
2018 |
|
2017 |
|
2018 |
|
2017 |
Operating
expenses: |
|
|
|
|
|
|
|
|
Research and
development |
|
$ |
1,169,810 |
|
|
$ |
1,759,305 |
|
|
$ |
4,386,491 |
|
|
$ |
3,946,420 |
|
General
and administrative |
|
1,589,621 |
|
|
1,559,399 |
|
|
4,748,090 |
|
|
4,908,424 |
|
Goodwill
impairment |
|
4,186,050 |
|
|
— |
|
|
4,186,050 |
|
|
— |
|
Depreciation |
|
26,723 |
|
|
27,374 |
|
|
81,450 |
|
|
39,767 |
|
Loss from
operations |
|
6,972,204 |
|
|
3,346,078 |
|
|
13,402,081 |
|
|
8,894,611 |
|
Other expense
(income): |
|
|
|
|
|
|
|
|
Interest
(income) expense, net |
|
(37,981 |
) |
|
(1,318 |
) |
|
(120,784 |
) |
|
73,290 |
|
Change in
fair value of warrant liability |
|
— |
|
|
(8,441,616 |
) |
|
— |
|
|
(18,909,792 |
) |
Warrant
related expenses |
|
— |
|
|
— |
|
|
— |
|
|
10,225,846 |
|
Other
financing expenses |
|
— |
|
|
— |
|
|
— |
|
|
2,870,226 |
|
(Loss) income from
operations before income tax benefit |
|
(6,934,223 |
) |
|
5,096,856 |
|
|
(13,281,297 |
) |
|
(3,154,181 |
) |
Income
tax benefit |
|
(214,493 |
) |
|
— |
|
|
(482,425 |
) |
|
— |
|
Net (loss) income |
|
$ |
(6,719,730 |
) |
|
$ |
5,096,856 |
|
|
$ |
(12,798,872 |
) |
|
$ |
(3,154,181 |
) |
Series A cumulative
preferred dividends |
|
— |
|
|
(366,641 |
) |
|
(85,993 |
) |
|
(912,946 |
) |
Undistributed earnings
to participating securities |
|
— |
|
|
(1,838,354 |
) |
|
— |
|
|
— |
|
Deemed dividend related
to the make-whole provision for the conversion of Series A
convertible preferred stock into common stock |
|
— |
|
|
— |
|
|
(8,167,895 |
) |
|
— |
|
Net (loss) income
attributable to common stockholders |
|
$ |
(6,719,730 |
) |
|
$ |
2,891,861 |
|
|
$ |
(21,052,760 |
) |
|
$ |
(4,067,127 |
) |
Per share
information: |
|
|
|
|
|
|
|
|
Net (loss) income per
share of common stock, basic |
|
$ |
(0.13 |
) |
|
$ |
0.21 |
|
|
$ |
(0.44 |
) |
|
$ |
(0.35 |
) |
Net (loss) income per
share of common stock, diluted |
|
$ |
(0.13 |
) |
|
$ |
0.20 |
|
|
$ |
(0.44 |
) |
|
$ |
(1.83 |
) |
Weighted average shares
outstanding, basic |
|
50,572,001 |
|
|
13,937,869 |
|
|
47,777,757 |
|
|
11,709,128 |
|
Weighted average shares
outstanding, diluted |
|
50,572,001 |
|
|
14,714,853 |
|
|
47,777,757 |
|
|
12,525,707 |
|
|
|
Media
Contact:
Rob CorradiPen Public Affairs rob@penpublicaffairs.com(410)
212-5483
Investor Relations Contact: Kim Sutton
GolodetzLHA Investor Relations kgolodetz@lhai.com(212) 838-3777
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