See accompanying notes to the unaudited condensed financial statements.
See accompanying notes to the unaudited condensed financial statements.
See accompanying notes to the unaudited condensed financial statements.
See accompanying notes to the unaudited condensed financial statements.
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
Note 1 - Description of Business and Basis of Presentation
Unless the context requires otherwise, references to “Genprex,” the “Company,” “we,” “us” or “our” in this Quarterly Report on Form 10-Q refer to Genprex, Inc. We are a clinical stage gene therapy company pioneering the development of gene-based therapies for large patient populations with unmet medical needs. Our oncology platform utilizes our non-viral ONCOPREX® Nanoparticle Delivery System. Using this system, plasmids containing tumor suppressor genes, which are deleted early in the development of cancer, are encapsulated within lipid nanoparticles and administered intravenously to the patient to re-express the deleted tumor suppressor genes. Our diabetes technology is designed to work in Type 1 diabetes by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. In Type 2 diabetes, our technology is believed to work by replenishing and rejuvenating the beta cells that make insulin.
Oncology Platform
Our lead oncology drug candidate, REQORSA® Immunogene Therapy (generic name: quaratusugene ozeplasmid), previously referred to as GPX-001, uses the ONCOPREX Nanoparticle Delivery System to express the TUSC2 tumor suppressor gene and is initially being developed in combination with prominent cancer drugs to treat Non-Small Cell Lung Cancer (“NSCLC”) and Small Cell Lung Cancer (“SCLC”). The active agent in REQORSA is a plasmid that expresses the TUSC2 tumor suppressor gene. REQORSA has a multimodal mechanism of action whereby it interrupts cell signaling pathways that cause replication and proliferation of cancer cells, re-establishes pathways for apoptosis (programmed cell death) in cancer cells, and modulates the immune response against cancer cells. In preclinical studies, REQORSA has been shown to be complementary with targeted drugs and immunotherapies. We believe REQORSA’s unique attributes position REQORSA to provide treatment for patients with NSCLC, SCLC, and possibly other cancers, and that it can improve on current therapies.
Acclaim – 1: The Acclaim-1 study is a Phase 1/2 clinical trial that has three portions - a Phase 1 dose escalation portion, a Phase 2 expansion portion, and a Phase 2 randomized portion. We have completed patient enrollment in the Phase 1 dose escalation portion of Acclaim-1. Acclaim-1 uses a combination of REQORSA and AstraZeneca's Tagrisso® in patients with late-stage NSCLC that has activating epidermal growth factor receptor (“EGFR”) mutations and progression after treatment with Tagrisso. We expect the Acclaim-1 Safety Review Committee (“Acclaim-1 SRC”) to meet and review safety data from the 0.12 mg/kg dose group after the required safety follow-up period has taken place, and to then make recommendations on the dose to be used in the Phase 2 portion of the trial. The next portion of the Acclaim-1 trial will be the Phase 2 expansion portion, in which patients with progression after Tagrisso and patients with progression after Tagrisso and chemotherapy will be entered into two separate expansion groups. In preparation for the Phase 2 expansion portion of the trial, we are in the process of adding additional clinical sites and in May 2023 amended the protocol to clarify the control arm treatments in the Phase 2 randomized portion of the trial. The Food and Drug Administration (“FDA”) has granted Fast Track Designation for the Acclaim-1 treatment combination of REQORSA and Tagrisso in NSCLC patients who have progressed after Tagrisso treatment.
Acclaim – 2: The Acclaim-2 study is a Phase 1/2 clinical trial that has three portions - a Phase 1 dose escalation portion, a Phase 2 expansion portion, and a Phase 2 randomized portion. We currently are enrolling and treating patients in the Phase 1 dose escalation portion of Acclaim-2. The Acclaim-2 trial uses a combination of REQORSA and Merck & Co.’s Keytruda® in patients with late-stage NSCLC whose disease has progressed after treatment with Keytruda. Patients are currently being treated at the 0.06 mg/kg dose level in the first cohort of patients and, subject to the Acclaim-2 Safety Review Committee approval, will be treated at successive dose levels of 0.09 mg/kg and 0.12 mg/kg. In March 2023, we amended the Acclaim-2 protocol to include additional treatments in the control group with the goal of accelerating enrollment in the randomized portion of the study. We expect enrollment in the dose escalation portion of the study to be completed by the end of 2023. We will then evaluate patients in the Phase 2 expansion portion of the study at the maximum tolerated dose ("MTD") or recommended Phase 2 dose ("RP2D"). The FDA has granted Fast Track Designation for the Acclaim-2 treatment combination of REQORSA and Keytruda in NSCLC patients who have progressed after Keytruda treatment.
Acclaim – 3: The Acclaim-3 study has two portions - a Phase 1 dose escalation portion and a Phase 2 expansion portion. In November 2022, we filed with the FDA our protocol for our Phase 1/2 Acclaim-3 clinical trial using a combination of REQORSA and Genentech, Inc.’s Tecentriq® as maintenance therapy in patients with extensive stage small cell lung cancer (“ES-SCLC”) who did not develop tumor progression after receiving Tecentriq and chemotherapy as initial standard treatment. We expect to dose the first patient in Acclaim-3 by the end of the third quarter of 2023. Patients will be treated with REQORSA and Tecentriq until disease progression or unacceptable toxicity is experienced.
In April 2023, at the 2023 Annual Meeting of the American Association of Cancer Researchers (AACR 2023), we presented data that we believe further validates our ONCOPREX Nanoparticle Delivery System platform. These positive pre-clinical data were reported from our University of Texas MD Anderson Cancer Center ("MD Anderson") collaborators and documented the successful delivery of a second tumor suppressor gene, the NPRL2 tumor suppressor gene. The studies used the ONCOPREX Nanoparticle Delivery System to express the NPRL2 gene in anti-PD1 resistant, metastatic human NSCLCs in humanized mouse models. We believe these studies of NPRL2 provide solid data that the ONCOPREX Nanoparticle Delivery System is a platform that can be used with multiple tumor suppressor genes.
The TUSC2 gene is one of a series of tumor suppressor genes on the short arm of Chromosome 3. The therapeutic use of TUSC2 is covered by our exclusive worldwide licenses from MD Anderson. NPRL2 is another tumor suppressor gene also located on the short arm of Chromosome 3 and we have filed for patent protection for its therapeutic use. We believe that our ONCOPREX Nanoparticle Delivery System may allow for delivery of a number of other cancer-fighting genes, alone or in combination with other cancer therapies, to combat multiple types of cancer. In August 2022, we entered into a three-year sponsored research agreement with MD Anderson to support further pre-clinical studies of TUSC2 and NPRL2.
Diabetes Gene Therapy
In diabetes, we have exclusively licensed from the University of Pittsburgh of the Commonwealth System of Higher Education (“University of Pittsburgh”) multiple technologies relating to the development of a gene therapy product for each of Type 1 and Type 2 diabetes. The same general novel approach is used in each of Type 1 and Type 2 whereby an adeno-associated virus (“AAV”) vector containing the Pdx1 and MafA genes is administered directly into the pancreatic duct. In humans, this can be done with a routine endoscopy procedure. Our diabetes product candidates are currently being evaluated and optimized in preclinical animal studies at the University of Pittsburgh. GPX-002 is being developed for the treatment of Type 1 diabetes and GPX-003 is being developed for the treatment of Type 2 diabetes. GPX-002 is designed to work by transforming alpha cells in the pancreas into functional beta-like cells, which can produce insulin but are distinct enough from beta cells to evade the body’s immune system. GPX-003 is believed to work by replenishing and rejuvenating the beta cells that make insulin. We expect to finalize our constructs and meet with the FDA before the end of 2023 to obtain their guidance on the toxicology studies that we plan to conduct. In August 2022, we entered into a one-year sponsored research agreement with the University of Pittsburgh for the use of GPX-003 in a non-human primate (“NHP”) model of Type 2 diabetes. We are in the process of extending this agreement and expect pre-clinical data to be reported at a medical meeting in 2024. In February 2023, our research collaborators at the University of Pittsburgh presented preclinical data in a NHP model of Type 1 diabetes highlighting the therapeutic potential of GPX-002 at the 16th International Conference on Advanced Technologies & Treatments for Diabetes (ATTD 2023) in Berlin, Germany. The study results showed the treated animals had statistically significant decreased insulin requirements, increased c-peptide levels, and improved glucose tolerance compared to baseline.
Capital Requirements, Liquidity and Going Concern Considerations
Our unaudited condensed financial statements are prepared in accordance with generally accepted accounting principles in the United States ("U.S. GAAP") applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, as shown in the accompanying unaudited condensed financial statements, we have sustained substantial losses from operations since inception and have no current source of revenue. In addition, we have used, rather than provided, cash in our operations. We expect to continue to incur significant expenditures to further clinical trials for the commercial development of our product candidates.
Management recognizes that we must obtain additional capital resources to successfully commercialize our product candidates. To date, we have received funding in the form of equity and debt, and we plan to seek additional funding in the future. However, no assurances can be given that we will be successful in raising additional capital. If we are not able to timely and successfully raise additional capital, the timing of our clinical trials, financial condition and results of operations may be materially and adversely affected. These unaudited condensed financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts and classification of liabilities.
Note 2 - Summary of Significant Accounting Policies
Our unaudited condensed financial statements have been prepared in accordance with U.S. GAAP, and the requirements of the United States ("U.S.") Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by U.S. GAAP can be condensed or omitted. Accordingly, they do not include all of the information and footnotes normally included in financial statements prepared in conformity with U.S. GAAP. The December 31, 2022 condensed balance sheet was derived from the December 31, 2022 audited financial statements. They should be read in conjunction with the financial statements and notes thereto included in our 2022 Annual Report on Form 10-K, filed with the SEC on March 31, 2023 (the “Form 10-K”).
The accompanying condensed financial statements are unaudited and include all adjustments (consisting of normal recurring adjustments) that management considers necessary for a fair presentation of our condensed financial position and results of operations for the interim periods presented. The results of operations for the interim periods are not necessarily indicative of the results that may be expected for the entire year.
A summary of our significant accounting policies consistently applied in the preparation of the accompanying unaudited condensed financial statements follows.
Use of Estimates
The preparation of our unaudited condensed financial statements in conformity with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the unaudited condensed financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates.
Cash and Cash Equivalents
We consider all highly liquid short-term investments with an initial maturity of three months or less to be cash equivalents. Any amounts of cash in financial institutions which exceed FDIC insured limits expose us to cash concentration risk. We have cash equivalents in a money market account and had $17,839,772 and $20,679,538 in excess of FDIC insured limits of $250,000 at March 31, 2023 and December 31, 2022, respectively.
Net Loss Per Share
Basic net loss per share is calculated by dividing the net loss by the weighted-average number of shares of common stock outstanding for the period, without consideration for potential dilutive shares of common stock, which includes common stock equivalents consisting of (i) options and warrants to purchase shares of common stock, and (ii) unvested restricted stock units to purchase shares of common stock granted by our board of directors but which have not been exercised totaling 19,318,924.
Fair Value of Financial Instruments
The carrying amounts reported in the balance sheet for cash, money-market savings account, accounts receivable, and accounts payables approximate fair value because of the immediate or short-term maturity of these financial instruments.
Property and Equipment
Furniture and equipment are stated at cost less accumulated depreciation. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred and major renovations or improvements are capitalized.
Research and Development Costs
Research and development expenditures consist of costs incurred to conduct research, develop engineering materials for further study, and develop clinical strategies for current and future programs. These costs include payments to collaborative research partners, manufacturing partners and consultants, and clinical strategy partners, wages and associated employee benefits, facilities, and overhead costs. These expenditures relate to our preclinical and Phase 1/2 clinical trials and are expensed as incurred. Materials produced to be used in clinical research are capitalized and included in research and development supplies and are expensed as they are used for testing or clinical activities, or have spoiled.
Research and development supplies purchased and capitalized for future use were $2,615,396 and $2,864,937 at March 31, 2023 and December 31, 2022, respectively.
Intellectual Property
Intellectual property consists of legal and related costs associated with patents and other proprietary technology and rights developed, acquired, licensed by, or maintained by us that we believe contribute to a probable economic benefit toward such patents and activities. These costs incurred in connection with obtaining and maintaining intellectual property protection, such as patent applications and patent maintenance, are capitalized. Intellectual property is stated at cost, to be amortized on a straight-line basis over the estimated useful lives of the assets.
Accounting for Stock-Based Compensation
We use the fair value-based method of accounting for stock-based compensation for options granted to employees, independent consultants and contractors. We measure options granted at fair value determined as of the grant date and recognize the expense over the periods in which the related services are rendered based on the terms and conditions of the award. Generally, where the award only has a service condition, the requisite service period is the same as the vesting period.
Long-Lived Assets
We review long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of our intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. We recognize an impairment loss if the carrying value of the asset exceeds the discounted expected future cash flows. During the three months ended March 31, 2023, and the year ended December 31, 2022, there were no deemed impairments of our long-lived assets.
Recent Accounting Developments
Accounting pronouncements issued but not effective until after March 31, 2023, are not expected to have a significant effect on our financial condition, results of operations, or cash flows.
Note 3 - Intellectual Property
We own or have exclusive license agreements on 15 granted patents and 24 pending patent applications worldwide for technologies developed in-house or by researchers at the National Cancer Institute, MD Anderson, the University of Texas Southwestern Medical Center, and the University of Pittsburgh. These patents comprise various therapeutic, diagnostic, technical and processing claims. These license rights will be amortized on a straight-line basis over the estimated period of useful lives of the underlying patents or the license agreements.
University of Pittsburgh
On February 11, 2020, we entered into an exclusive license agreement with the University of Pittsburgh for patented gene therapy technologies relating to the potential treatment of Type 1 and Type 2 diabetes. This license was first amended on August 17, 2022, to extend the milestone related to the filing of a new investigational drug ("IND") application. This license was amended again on November 3, 2022, to include a new licensed glucagon promoter technology related to Type 1 diabetes and set FDA and clinical milestones related to the glucagon technology (See Note 7 – Commitments and Contingences – Commitments – University of Pittsburgh).
On November 22, 2022, we entered into an exclusive license agreement with the University of Pittsburgh relating to the transformation of macrophages enabling them to reduce autoimmunity activity in Type 1 diabetes.
On December 29, 2022, we entered into an exclusive license agreement with the University of Pittsburgh relating to the use of an insulin promoter in combination with our existing gene therapy, including the Pdx1 and MafA transcription factors, as a potential treatment for Type 2 diabetes.
The University of Texas MD Anderson Cancer Center
On May 4, 2020, we entered into an exclusive worldwide license agreement with The Board of Regents of the University of Texas System on behalf of MD Anderson relating to a portfolio of patent applications and related technology for the treatment of cancer using our lead drug candidate and immunotherapies.
Note 4 - Equity
Registered Direct Offering
On March 1, 2023, we completed a registered direct offering, in which we sold to an accredited healthcare-focused institutional investor an aggregate of 3,809,524 shares of our common stock and warrants to purchase up to 3,809,524 shares of our common stock, at a combined offering price of $1.05 per share of common stock and accompanying warrant. The warrants are exercisable immediately upon issuance, expire 5 years from the date of issuance and have an exercise price of $1.10 per share. We received net proceeds of approximately $3.6 million after commissions and estimated expenses, excluding any proceeds that may be received in the future from any exercise of the warrants.
At-The-Market Offering
On November 18, 2022, we entered into an Equity Distribution Agreement (the "Sales Agreement") with JMP Securities LLC ("JMP Securities") pursuant to which we may sell from time to time, at our option, shares of our common stock through JMP Securities, as sales agent (the "ATM Facility"), up to an aggregate offering price of $50 million. Sales of the shares pursuant to the ATM Facility were previously made under our previously filed and currently effective Registration Statement on Form S-3 (Reg. No. 333-239134), and future ATM Facility sales may be made, once declared effective, under our Registration Statement on Form S-3 (Reg. No. 333-271386). Additionally, under the terms of the Sales Agreement, the shares may be sold at market prices, at negotiated prices or at prices related to the prevailing market price. We will pay JMP Securities a commission of 3.0% of the gross proceeds from the sale of the shares. During the year ended December 31, 2022, we sold 3,886 shares of common stock for aggregate net proceeds of $4,532 under the ATM Facility. During the three months ended March 31, 2023, we sold 53,592 shares of common stock for aggregate net proceeds of $78,355 under the ATM Facility.
Stock Issuances
During the three months ended March 31, 2023, we issued 5,000 shares of common stock for services provided to us valued at $7,950 to the Chairman of our Scientific Advisory Board.
During the year ended December 31, 2022, we issued (i) 20,000 shares of common stock for services provided to us valued at $42,000 to the Chairman of our Scientific Advisory Board, (ii) 13,643 shares of common stock upon the exercise of warrants on a cashless basis, (iii) 116,973 shares of common stock upon the exercise of options by an executive, and (iv) 76,752 shares of common stock for services provided to us, valued at $99,010, to consultants.
Preferred Stock
We are authorized to issue 10,000,000 shares of preferred stock with a par value of $0.001 per share, none of which are outstanding at March 31, 2023.
Common Stock
We are authorized to issue 200,000,000 shares of common stock with a par value of $0.001 per share, all of which are voting common stock. There were 51,974,078 shares of our common stock outstanding at March 31, 2023.
Common Stock Purchase Warrants
Common stock purchase warrant activity for the period and year ended March 31, 2023, and December 31, 2022, respectively, is as follows:
| | Number of | | | Weighted Average | |
| | Warrants | | | Exercise Price | |
Outstanding at December 31, 2022 | | | 2,147,778 | | | $ | 4.32 | |
Warrants issued | | | 3,839,524 | | | | 1.10 | |
Warrants cancelled or expired | | | 38,400 | | | | 6.25 | |
Outstanding at March 31, 2023 | | | 5,948,902 | | | $ | 2.23 | |
Vested or expected to vest at March 31, 2023 | | | 3,827,024 | | | | 1.10 | |
Exercisable at March 31, 2023 | | | 5,690,569 | | | $ | 2.23 | |
During the three-month period ended March 31, 2023, we issued (i) a warrant to purchase up to 30,000 shares of common stock to a service provider at an exercise price of $1.65 per share, the fair market value of a share of common stock on the date of issuance, and (ii) a warrant to purchase up to 3,809,524 shares of common stock to the accredited healthcare-focused institutional investor in connection with the registered direct offering at an exercise price of $1.10 per share. During the three-month period ended March 31, 2023, we recorded share-based compensation of $2,330,318 associated with the vesting and issuance of warrants. The following assumptions were used in calculation of fair market value of warrants via Black-Scholes-Merton pricing models for the three months ended March 31, 2023:
Expected term (in years): | | 2.5 – 3.0 |
Risk-free rate: | | 4.99% – 5.06% |
Volatility: | | 83.14% |
Dividend yield: | | 0% |
In the year ended December 31, 2022, we issued (i) a warrant to purchase up to 50,000 shares of common stock to a service provider at an exercise price of $1.38 per share, the fair market value of a share of common stock on the date of issuance, (ii) a warrant to purchase up to 50,000 shares of common stock to a service provider at an exercise price of $1.49 per share, the fair market value of a share of common stock on the date of issuance, (iii) a warrant, previously accounted for as a warrant issuable to a consultant in consideration of services provided in connection with our IPO, to purchase up to 3,000 shares of common stock at an exercise price of $5.00 per share, the fair market value of a share of common stock at the time of our IPO, and (iv) 13,643 shares of common stock to a placement agent associated with a registered direct offering in November 2019 upon the exercise of warrants on a cashless basis. During the year ended December 31, 2022, we recorded share-based compensation of $55,612 associated with the vesting of warrants. We expect to record $90,689 of share-based compensation for time-based vesting over the next year and another $300,000 of share-based compensation based on performance-based vesting.
12
2018 Equity Incentive Plan
Our board of directors and stockholders have approved and adopted our 2018 Equity Incentive Plan (“2018 Plan”), which became effective on the completion of our IPO on April 3, 2018. The 2018 Plan provides for the grant of incentive stock options that are intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended (“ISOs”), nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit ("RSU") awards, performance-based stock awards and performance-based cash awards. ISOs may be granted only to employees. All other awards may be granted to employees, including officers, and to our non-employee directors and consultants.
A total of 4,160,000 shares of common stock were initially available under the 2018 Plan, plus a number of shares of common stock (not to exceed 2,628,749 shares) subject to outstanding awards under our 2009 Equity Incentive Plan (the “2009 Plan”) as of the IPO that expire, are forfeited or otherwise terminate or that are used to cover the exercise price or applicable tax withholdings. No further grants will be made under the 2009 Plan.
In addition, the number of shares of common stock reserved for issuance under the 2018 Plan automatically increases on January 1 of each year, since January 1, 2019, by 5% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by our Board or a committee appointed to administer the 2018 Plan.
On January 1, 2022 and 2023, the number of shares of common stock reserved for issuance under the 2018 Plan was increased by an aggregate of 2,393,735 and 2,405,298 shares, respectively. As of March 31, 2023, a total of 891,375 shares of common stock remain available for issuance under the 2018 Plan.
2018 Employee Stock Purchase Plan
Our board of directors and stockholders approved and adopted our 2018 Employee Stock Purchase Plan (“ESPP”), which became effective on April 3, 2018. The ESPP has not yet been utilized as a benefit available to our employees. The ESPP authorizes the issuance of 208,050 shares of our common stock pursuant to purchase rights that may be granted to our eligible employees. The number of shares of common stock reserved for issuance under the ESPP is automatically increased on January 1 of each calendar year, beginning on January 1, 2019, by 2% of the total number of shares of our common stock outstanding on December 31 of the preceding calendar year, or a lesser number of shares determined by the administrator of the ESPP. The administrator of the ESPP determined not to increase the number of shares reserved for issuance under the ESPP on January 1, 2023.
Stock Options
As of March 31, 2023, we had outstanding stock options to purchase 11,456,827 shares of common stock that have been granted to various executives, employees, directors, and independent contractors. These options vest immediately or over periods ranging from 12 to 48 months, are exercisable for a period of up to ten years, enable the holders to purchase shares of our common stock at exercise prices ranging from $0.30 to $9.80 per share and have per-share fair values ranging from $0.24 to $7.93, based on Black-Scholes-Merton pricing models. The following assumptions were used in calculation of fair market value of options via Black-Scholes-Merton pricing models for the three months ended March 31, 2023:
Expected term (in years): | | 6.0 |
Risk-free rate: | | 4.67% – 4.71% |
Volatility: | | 83.14% |
Dividend yield: | | 0% |
During the three-month period ended March 31, 2023, we granted stock options to purchase an aggregate of 82,500 shares of our common stock with exercise prices ranging from $1.30 to $1.51 per share to employees.
In the year ended December 31, 2022, we (i) granted stock options to purchase an aggregate of 2,983,666 shares of our common stock with exercise prices ranging from $1.27 to $3.50 per share to board members, executives, employees and consultants, (ii) cancelled options to purchase 66,667 shares of common stock at exercise prices ranging from $2.00 to $3.66 per share in connection with the termination of certain employees, and (iii) issued 116,973 shares of our common stock upon the exercise of options held by an executive with an exercise price of $0.02 per share.
The weighted average remaining contractual term for the outstanding options at
March 31, 2023 and
December 31, 2022 is
6.86 and
7.08 years, respectively.
Stock option activity for the three months ended March 31, 2023, and year ended December 31, 2022 is as follows:
| | Number of | | | Weighted Average | |
| | Shares | | | Exercise Price | |
Outstanding at December 31, 2022 | | | 11,374,327 | | | $ | 3.08 | |
Options granted | | | 82,500 | | | | 1.43 | |
Outstanding at March 31, 2023 | | | 11,456,827 | | | $ | 3.07 | |
Vested or expected to vest at March 31, 2023 | | | 1,288,281 | | | | 3.09 | |
Exercisable at March 31, 2023 | | | 8,139,636 | | | $ | 3.24 | |
Restricted Stock Units
A summary of the RSU activity under the 2018 Plan during the three months ended March 31, 2023 is presented below. These amounts include RSUs granted to employees.
| | Number of | | | Weighted Average | |
| | Shares | | | Grant Date Fair Value | |
Outstanding at December 31, 2022 | | | — | | | | — | |
Restricted stock units granted | | | 1,913,195 | | | | 1.65 | |
Restricted stock units forfeited or cancelled | | | — | | | | — | |
Outstanding at March 31, 2023 | | | 1,913,195 | | | $ | 1.65 | |
Vested or expected to vest at March 31, 2023 | | | — | | | | — | |
Share-Based Compensation
For the three months ended March 31, 2023, our total share-based compensation was approximately $1.3 million, nearly all of which represents the vesting of options issued to executives, employees, and service providers. As of March 31, 2023, our total compensation cost related to non-vested time-based stock option awards and warrants granted to executives, employees, board members, and service providers and not yet recognized was approximately $8.8 million. We expect to record this stock-based compensation expense over the next three years using a graded vesting method. As of March 31, 2023, the weighted average term over which these expenses are expected to be recognized is 1.70 years.
As of March 31, 2023, there are no performance-based stock option awards outstanding and one performance-based warrant outstanding issued to a service provider. Our total compensation cost related to the non-vested performance-based warrant not yet recognized was approximately $300,000. The entirety of this warrant may be recognized and recorded upon the achievement of certain clinical milestones.
Note 5 - 401(k) Savings Plan
In 2022, we established a defined-contribution savings plan under Section 401(k) of the Internal Revenue Code ("401(k) Plan") and established an employer matching program for participants in the 401(k) Plan. The 401(k) Plan covers all employees who meet defined minimum age and service requirements, and allows participants to defer a portion of their annual compensation on a pre-tax basis. We incurred $63,048 of expense for matching contributions to the 401(k) Plan during the three months ended March 31, 2023.
Note 6 - Related Party Transactions
Introgen Research Institute
Introgen Research Institute (“IRI”) is a Texas-based technology company formed by Rodney Varner, our President, Chief Executive Officer and Chairman of the Board and IRI's sole officer. IRI is owned by trusts of which Mr. Varner's descendants are the sole beneficiaries. In April 2009, prior to Mr. Varner becoming an officer and director of our Company in August 2012, we entered into an Assignment and Collaboration Agreement with IRI, providing us with the exclusive right to commercialize a portfolio of intellectual property. This agreement was amended in 2011 to include additional sublicensing of additional intellectual property made available to IRI from MD Anderson (See Note 7 – Commitments and Contingences – Commitments – MD Anderson Cancer Center).
Note 7 - Commitments and Contingencies
Commitments
MD Anderson Cancer Center
In July 2018, we entered into a two-year sponsored research agreement with MD Anderson to sponsor preclinical studies focused on the combination of REQORSA with an immunotherapy with a projected total cost of approximately $2 million. This agreement was extended beyond the original expiration date, expiring in May 2022 after giving effect to such extension. In August 2022, we entered into a three-year sponsored research agreement with MD Anderson to sponsor preclinical studies focused on REQORSA and NPRL2 in oncology to resensitize NSCLC and SCLC to targeted therapies and immunotherapies with a projected total cost of approximately $2.9 million. As of March 31, 2023, we have incurred and paid approximately $480,000 toward this agreement.
In 2011, we agreed to assume certain contractual and other obligations of IRI in consideration for the sublicense rights, expertise, and assistance associated with certain technologies and intellectual property originally licensed to another party under the 1994 License Agreement with MD Anderson (“Original MD Anderson License Agreement”). These technologies and intellectual property were later sublicensed to IRI (the “IRI Sublicense”). We also agreed to pay royalties of 1% on sales of certain licensed products for a period of 21 years following the termination of the later of the Original MD Anderson License Agreement and the IRI Sublicense. We assumed patent prosecution costs and an annual minimum royalty of $20,000 payable to the National Institutes of Health.
On March 3, 2021, we entered into an amendment (the “MD License Amendment”) to the Patent and Technology License Agreement dated May 4, 2020, with MD Anderson. The MD License Amendment grants us a worldwide, exclusive, sublicensable license to an additional portfolio of six patents and one patent application and related technology for methods for treating cancer by administration of a TUSC2 therapy in conjunction with EGFR inhibitors or other anti-cancer therapies in patients predicted to be responsive to TUSC2 therapy. Pursuant to the MD License Amendment, we agreed to (i) pay annual maintenance fees ranging from the mid five figures to the low six figures, (ii) total milestone payments of $6,150,000, (iii) a one-time fee in the mid five figures and (iv) certain patent related expenses. As of March 31, 2023, we have incurred and paid approximately $300,000 toward this agreement.
National Institutes of Health
We have a royalty obligation to the National Institutes of Health ("NIH") to be paid upon our receipt of FDA approval using NIH technology. The $240,000 contingent obligation which increases annually by $20,000 and is $340,000 as of December 31, 2022, and March 31, 2023, and will be recognized when we obtain regulatory approval (the event that triggers the payment obligation).
University of Pittsburgh
Pursuant to an exclusive license agreement dated February 11, 2020 by and between us and the University of Pittsburgh, amended on August 17, 2022, and amended again on November 3, 2022, we agreed to pay (i) an initial licensing fee of $25,000, (ii) annual maintenance fees of $25,000 for the first three years and $40,000 for each subsequent year following the first anniversary of the agreement, (iii) royalties ranging from 1.5% to 3% of net sales of licensed technologies, (iv) an annual minimal royalty payment of $250,000 per year beginning in the year of the first commercial sale of licensed technology, (v) a share of non-royalty sublicense income of 20%, and (vi) an aggregate of $3,975,000 in milestone payments related to the usage of a glucagon promoter and gene therapy technologies to potentially treat Type 1 diabetes. Unless earlier terminated pursuant to its terms, the agreement expires upon the later of (i) 20 years after the first commercial sale of the licensed technology thereunder and (ii) expiration of the last valid claim under the patent rights. As of March 31, 2023, we have incurred and paid approximately $110,000 toward this agreement.
Pursuant to an exclusive license agreement dated November 22, 2022 by and between us and the University of Pittsburgh, we agreed to pay (i) an initial licensing fee of $25,000, (ii) annual maintenance fees of $25,000 for the first three years and $40,000 for each subsequent year following the first anniversary of the agreement, (iii) royalties ranging from 1.5% to 3% of net sales of licensed technologies, (iv) an annual minimal royalty payment of $250,000 per year beginning in the year of the first commercial sale of licensed technology, (v) a share of non-royalty sublicense income of 20%, and (vi) an aggregate of $3,975,000 in milestone payments related to the usage of a macrophage technology and gene therapy technologies to potentially treat Type 1 diabetes. Unless earlier terminated pursuant to its terms, the agreement expires upon the later of (i) 20 years after the first commercial sale of the licensed technology thereunder and (ii) expiration of the last valid claim under the patent rights. As of March 31, 2023, we have incurred and paid approximately $25,000 toward this agreement.
Pursuant to an exclusive license agreement dated December 29, 2022 by and between us and the University of Pittsburgh, we agreed to pay (i) an initial licensing fee of $25,000, (ii) annual maintenance fees of $25,000 for the first three years and $40,000 for each subsequent year following the first anniversary of the agreement, (iii) royalties ranging from 1.5% to 3% of net sales of licensed technologies, (iv) an annual minimal royalty payment of $250,000 per year beginning in the year of the first commercial sale of licensed technology, (v) a share of non-royalty sublicense income of 20%, and (vi) an aggregate of $3,975,000 in milestone payments related to the usage of an insulin promoter and gene therapy technologies to potentially treat Type 2 diabetes. Unless earlier terminated pursuant to its terms, the agreement expires upon the later of (i) 20 years after the first commercial sale of the licensed technology thereunder and (ii) expiration of the last valid claim under the patent rights. As of March 31, 2023, we have incurred and paid approximately $25,000 toward this agreement.
Contract Development and Manufacturing Organization
We entered into a three-year development services agreement in July 2022, amended in each of January 2023 and March 2023, with a contract development and manufacturing organization to manufacture good manufacturing practices ("GMP") grade materials for use in our clinical trials with a projected total cost of approximately $4.5 million, of which approximately $1.3 million has been incurred as of March 31, 2023.
Contingencies
From time to time, we may become subject to threatened and/or asserted claims arising in the ordinary course of our business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material impact on our financial condition, results of operations or liquidity.
Note 8 - Significant Events
The COVID-19 pandemic continues to have a major impact in the U.S. and around the world. The availability of vaccines holds promise for the future, though new variants of the virus and potential waning immunity from vaccines may result in continued impact from this pandemic in the future, which could adversely impact our operations. Through March 31, 2021, we had not experienced any material impact on its financial results or operations as a result of the COVID-19 pandemic. Beginning in June 2021, we experienced delays in engaging clinical sites as a result of a backlog of clinical trial protocols requiring review created by an accumulation of clinical trial protocols. We also have experienced disruptions in our supply chain regarding our manufacturing and testing operations. We continue to closely monitor the impact of the COVID-19 pandemic on its business and workforce.
Note 9 - Subsequent Events
Share Issuance
On April 1, 2023, we issued 5,000 shares of our common stock to the Chairman of our Scientific Advisory Board in consideration for services.
Option Issuances
On April 3, 2023, and May 15, 2023, we issued grants of stock options under the 2018 Equity Incentive Plan to purchase a total of 47,500 shares of common stock to new employees at the fair market value of the common stock on the date of issuance.
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