MRKR Marker Therapeutics Inc

This quarterly report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we “believe”, “expect”, “anticipate”, “plan”, “target”, “intend” and similar expressions should be considered forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of important factors, including factors discussed in this section and elsewhere in this quarterly report on Form 10-Q, and the risks discussed in our other filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as the date hereof. We assume no obligation to update these forward-looking statements to reflect events or circumstance that arise after the date hereof.

As used in this quarterly report: (i) the terms “we”, “us”, “our”, “Marker” and the “Company” mean Marker Therapeutics, Inc. and its wholly owned subsidiaries, Marker Cell Therapy, Inc. and GeneMax Pharmaceuticals Inc. which wholly owns GeneMax Pharmaceuticals Canada Inc., unless the context otherwise requires; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.

The following should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes for the three months ended March 31, 2019 included in this quarterly report, as well as our Annual Report on Form 10-K for the year ended December 31, 2018 filed on March 15, 2019.

Company Overview

We are a clinical-stage immuno-oncology company specializing in the development and commercialization of novel cell-based immunotherapies and innovative peptide-based vaccines for the treatment of hematological malignancies and solid tumor indications. Our MultiTAA T cell technology is based on the selective expansion of non-engineered, tumor-specific T cells that recognize tumor associated antigens (“TAA” i.e. tumor targets) and kill tumor cells expressing those targets. Once infused into patients, this population of T cells recognizes multiple tumor targets to produce broad spectrum anti-tumor activity. Because we do not genetically engineer our T cells, when compared to current engineered chimeric antigen receptor (“CAR”) and T cell receptor (“TCR”)-based approaches, our products are significantly less expensive to manufacture and appear to be markedly less toxic, and yet are associated with meaningful clinical benefit. As a result, we believe our portfolio of T cell therapies has a compelling therapeutic product profile, as compared to current gene-modified CAR and TCR-based therapies. In addition, our Folate Receptor Alpha program (TPIV200) for breast and ovarian cancers and our HER2/neu program (TPIV100/110) are in Phase II clinical trials. In parallel, we are developing a proprietary nucleic acid-based antigen expression technology named PolyStart™ to improve the ability of the immune system to recognize and destroy diseased cells.

Immuno-oncology, which utilizes a patient’s own immune system to combat cancer, is one of the most actively pursued areas of research by biotechnology and pharmaceutical companies today. Interest and excitement about immunotherapy are driven by compelling efficacy data in cancers with historically bleak outcomes, and the potential to achieve a cure or functional cure for some patients. Harnessing the power of the immune system is an important component of fighting cancerous cells in the body. Our MultiTAA T cell therapy platform identifies and selects effectively all T cells that are specific for any peptide from the antigens that we target (e.g., WT1, MAGE-A4, PRAME, Survivin, NY-ESO-1, and SSX2). Our in-vitro manufacturing process promotes proliferation of very rare cancer-killing T cells and augments their anti-tumor properties to provide benefit to patients following their infusion. By using the multi-antigen targeted approach, our proprietary technology can kill heterogeneous tumor cell populations more effectively than single-antigen targeted approaches, thereby reducing the likelihood of tumor escape and potentially increasing the durability of a patient’s response to therapy.

We believe that our therapy presents a promising innovation in immuno-oncology. Our therapy has been developed through our collaboration with the Cell and Gene Therapy Center at Baylor College of Medicine (“BCM”) founded by Malcolm K. Brenner, M.D., Ph.D., a recognized pioneer in immuno-oncology. Our cell therapy founders include Drs. Malcolm Brenner M.D., Ph.D., Ann Leen, Ph.D., Juan Vera, M.D., Helen Heslop, M.D., DSc (Hon) and Cliona Rooney, Ph.D., who all have significant experience in this field. Dr. James P. Allison, Dr. Malcom K. Brenner, Dr. Helen E. Heslop, Dr. Cliona M. Rooney and Dr. Padmanee Sharma serve on our Scientific Advisory Board.

Recent Developments

Relocation of Company Headquarters. On February 15, 2019, the Company announced it had relocated the Company’s headquarters from Jacksonville, Florida to Houston Texas.

New Laboratory Facility . In connection with the relocation of the corporate headquarters, the Company also announced it had entered into an agreement with Johnson & Johnson Innovation - JLABS for the use of a dedicated portion of an existing laboratory located at the Texas Medical Center in Houston for the purpose of conducting laboratory research and other laboratory related activities. JLABS at TMC, established by Johnson & Johnson Innovation, provides research and development stage entities with access to a turnkey infrastructure that includes singular benchtops, modular wet lab units, office space and specialized laboratory equipment.

ASBMT presentation . From February 20-24, 2019, the Company presented oral and poster presentations at the Transplantation & Cellular Therapy (“TCT”) Meetings of the American Society for Blood and Marrow Transplantation and the Center for International Blood and Marrow Transplant Research (“ASBMT” and “CIBMTR”). The meetings took place in Houston, Texas.

Products and Technology in Development  

The following chart sets forth our products and technologies under development.

Our MultiTAA T Cell Products

We are advancing two MultiTAA T cell products through clinical development:

While the blood source and the antigens for stimulation differ between the LAPP and the MAPP products, the manufacturing process for each product is otherwise identical.

While single-antigen specific therapy can eliminate all the tumor cells expressing the targeted antigen, the residual tumor cells that do not express that antigen may survive and expand. In addition, tumor cells may also downregulate or mutate the targeted antigen, thus becoming invisible to the T cell therapy. Both phenomena create a transformed tumor that is impervious to that therapy. This process is referred to as antigen-negative tumor escape.

Our solution to the problem of tumor heterogeneity was to develop T cell products that simultaneously attack multiple tumor-expressed antigens and thereby enable more complete initial tumor targeting, thus minimizing the subsequent opportunity for the cancer to engage escape mechanisms. Of note, data suggest that this strategy may be responsible for recruitment and activation of unique cancer-killing cells from the patient’s own immune repertoire to participate in cancer eradication, further minimizing the possibility for tumor cell escape.

Our proprietary MultiTAA T cell platform may have meaningful advantages over current CAR and TCR-engineered cell therapy approaches. Compared to current gene-modified T cell therapies, our programs are characterized by the following:

• Potential clinical benefit, without the need for lymphodepletion before infusion: In BCM’s Phase I lymphoma study, there were complete responses (“CRs”) in 50 – 60% of its evaluable patients. We believe it is significant that no patient with a CR has subsequently relapsed with disease, whereas typically 30% or more of patients with CR in reported CAR-T studies relapse within one year. In patient results to date, observed therapeutic responses appear to be highly durable, with some patients being relapse-free beyond five years.

• Non-gene-modified : Unlike CAR and TCR-based approaches, our therapy does not require genetic modification of T cells, a costly and complex process that significantly complicates the manufacturing of a patient product. We believe our therapy can be manufactured at a fraction of the cost of a gene-modified T cell product, with substantially reduced complexity of manufacturing.

• Low incidence rate of adverse events : In 78 patients treated to date, there has been only one grade III adverse reaction considered possibly related to the therapy. This appears to compare favorably with published CD19 CAR-T studies, wherein up to 95% of patients had associated grade III or higher adverse events during treatment. We believe that it is notable that there have been no cases of cytokine-release syndrome (“CRS”), or related serious adverse events (“SAEs”) in patients treated with MAPP or LAPP therapy to date.

• Capable of addressing a broad repertoire of cancer cells : While CAR-T and TCR therapies generally target a single epitope, our manufacturing process selects for T cells that are specific for multiple peptides derived from several targeted antigens. Deep gene sequencing of our products shows that a typical patient dose usually consists of approximately 4,000 unique T cell clonotypes targeting up to five different tumor-associated antigens. The five antigen targets can be recognized by a very wide range of T cells, facilitating robust killing of targeted cancer cells.

• Appears to drive endogenous immune responses : We see evidence of “epitope spreading” in the treated patients, meaning that our therapy is potentially inducing an enhanced response by the patient’s own T cells (specific for an expanded set of tumor-associated antigens beyond those targeted by the infused product). Correlative analyses show expansion of endogenous T cells, other than those present in the infused product, in the months following infusion. This phenomenon, also known as “antigen spreading,” is potentially important in generating a durable response for a patient, because it enables the killing of tumors that do not express any of the antigens initially targeted by the product.

Clinical Update on Multi-Antigen Targeted (MultiTAA) T Cell Therapies

Acute Myeloid Leukemia

We reported a clinical update from a Phase 1 clinical trial in post-transplant AML in oral and poster presentations at the American Society of Hematology (“ASH”) meeting in December 2018 and the American Society for Blood and Marrow Transplantation (“ASBMT”) and the Center for International Blood & Marrow Transplant Research (“CIBMTR”) meeting in February 2019. Results from the BCM-sponsored study showed that the treatment is safe and well-tolerated and has the potential to mediate a meaningful anti-tumor effect, as well as in vivo expansion of T cells. Among the highlights from the study, 11 out of 13 patients dosed with MultiTAA T cells as a maintenance therapy after receiving allogeneic stem cell transplant remain alive, ranging from six weeks to 2.5 years post-infusion. Nine of these patients have never relapsed after MultiTAA therapy and continue to remain in complete remission (CR). Patients with active disease, overall survival ranged from four and 21 months as compared to 4.5 months in historical results after standard of care.

We will pursue post-transplant AML as the lead indication of our T cell therapy program. Based on findings from various dose cohorts in the Phase 1 BCM-sponsored trial, we have made a strategic decision to focus on post-transplant AML, and plan to initiate pre-IND discussions with the U.S. FDA in the second quarter of 2019, with an IND submission for the Company-sponsored Phase II study in the third quarter. The multicenter study will evaluate clinical efficacy of MultiTAA specific T cells in patients with AML or myelodysplastic syndromes (“MDS”) in both the adjuvant and active disease setting, following an allogeneic hematopoietic stem cell transplant (HSCT). The dose administered will be the maximum tolerated dose from the BCM-sponsored Phase 1 trial. In the adjuvant setting, patients will be randomized 2:1 to either MultiTAA therapy at approximately 90 days post-transplant versus standard of care observation, while the active disease patients will receive MultiTAA T cells as part of a single-arm group.

Solid Tumors

The Phase Ib/IIa open label, unblinded study, which protocol is available on clinicaltrials.gov under the trial name TACTOPS, is a three-arm study. In the first arm of the trial, patients are those who are chemo-responsive, or patients who do not progress using standard-of-care chemotherapy. If those patients are not progressing after three rounds of chemotherapy, they would be eligible to receive our cells in six doses in alternation with their chemotherapy doses. The second arm of the trial includes patients who are chemo-refractory, or patients who have progressed after the use of GemCis chemotherapy. The third arm of the trial is for patients who have surgically resectable tumors. The surgically resectable patients will receive a dose of T cells prior to surgical resection. Once the tumor has been removed, we will be able to assess the excised tumor material for T-cell infiltration, epitope spreading and other important elements, and following such assessment, those patients would be eligible to receive a second dose of T cells after surgical resection. Of the 13 patients, seven of those patients were in Arm A, the chemo-responsive arm; two patients have been in Arm B, the chemo-refractory arm; and the remaining four patients are in Arm C, the surgically resectable arm.

Clinical trial enrollment has increased. As of the beginning of March, the trial had enrolled 30 patients, manufactured product for 23 patients was available and 13 of those patients had been dosed. We anticipate providing our first update in the MultiTAA cell therapy solid tumor program with an update in pancreatic cancer in the third quarter of 2019.

In addition to the above, the following are updates on other indications in our MultiTAA T cell therapies:

Lymphoma

T cell therapy is being evaluated at BCM in a Phase I trial in Lymphoma that has treated 15 patients with active disease (“lymphoma active group”), of which all 15 patients had completed a follow-up period beyond 3 months post-infusion, and 17 patients in remission (“lymphoma adjuvant group”). We reported the following in January 2019:

Acute Lymphoblastic Leukemia (“ALL”)

T cell therapy is being evaluated at BCM in a Phase I clinical trial for patients with ALL. As of February 2019, 18 patients have been treated. We reported the following clinical update in ALL at the ASBMT and CIBMTR meeting in February 2019:

Multiple Myeloma

T cell therapy is being evaluated at BCM in a Phase Ib/IIa trial for patients with Multiple Myeloma. One arm of this trial assessed patients who received T cells more than 90 days after an autologous stem cell transplant (“ASCT”), while a second arm assessed patients who received T cells within 90 days of ASCT. We have not seen a meaningful difference in response rates or durability between the two arms and intend to standardize future trials based upon a protocol wherein patients will receive MAPP T cells immediately post ASCT. To date, 10 patients have been treated. We reported the following in January 2019 on the ten patients with active disease who have been treated, including:

Our Folate Receptor Products

Folate Receptor alpha (“FRa”) is overexpressed in over 80% of breast cancers and in addition, over 90% of ovarian cancers, for which the only treatment options are surgery, radiation therapy and chemotherapy, creating a very important and urgent clinical need for a new therapeutic strategy. Time to recurrence is relatively short for ovarian cancer and survival prognosis is extremely poor after recurrence. In the United States alone, there are approximately 30,000 ovarian cancer patients and 40,000 triple-negative breast cancer patients newly diagnosed every year. The FRa vaccine (now called TPIV200) intended to treat these conditions is composed of a mixture of five Fra-derived immunogenic peptides adjuvanted with low-dose granulocyte-macrophage colony-stimulating factor (“GM-CSF”).

GMP Manufacturing Scale Up of TPIV200 and Production to Supply Additional Phase II Clinical Trials

We have developed a commercial-quality lyophilized formulation of the TPIV200 peptides in a single vial for reconstitution and injection. Multi-gram peptide production scale-up has been successfully concluded, and so has the GMP manufacturing of a recent clinical lot of the TPIV200 peptides. The supply will be used in the company’s ongoing Phase II study in platinum-sensitive ovarian cancer, as well as the 280-patient Phase II study sponsored by the Mayo Foundation and funded by the U.S. Department of Defense (“DoD”) for treating triple-negative breast cancer. We also made various improvements to the vaccine manufacturing process, resulting in what we believe to be a superior formulation of the vaccine that is more amenable to large-scale manufacturing and commercialization. Thus, Good Manufacturing Practice (“GMP”) manufacturing development for the Phase II trials has been completed.

Phase I Human Clinical Trial – Folate Receptor Alpha Breast and Ovarian Cancers – Mayo Foundation

On July 27, 2015, we exercised our option agreement with Mayo Foundation with the signing of a worldwide exclusive license agreement to commercialize the proprietary FRa vaccine technology for all cancer indications. As part of this agreement, the IND for the Folate Receptor alpha Phase I trial was transferred from Mayo Foundation to the Company for Phase II clinical trials as our lead peptide vaccine product.

The results from the initial 21-patient Phase I clinical trial for the FRa vaccine have now been reported. Twenty-one patients with breast or ovarian cancer, who had undergone standard surgery and adjuvant treatment, were treated with one cycle of cyclophosphamide. Following this, patients were vaccinated intradermally with TPIV200 on day one of a 28-day cycle for a maximum of six vaccination cycles. On March 15, 2018, we announced the publication of the clinical data from this trial. The results show that over 90% of patients developed robust and durable antigen-specific immune responses against FRa without regard for HLA type, which aligns with the intended mechanism of action of the vaccine. TPIV200 vaccine was safe and well-tolerated; 20 out of 21 evaluable patients showed positive immune responses, providing a strong rationale for progressing to Phase II trials. Further, the data showed that 16 out of 16 patients in the observation stage showed persistent immune responses (Source: published online 15Mar2018; DOI: 10.1158/1078-0432.CCR-17-2499).

Phase II Development of TPIV200 for Triple-negative Breast Cancer

Triple-negative breast cancer (“TNBC”) is one of the most difficult cancers to treat and represents a clear unmet medical need. On September 15, 2015, we announced that our collaborators at the Mayo Foundation had been awarded a grant of $13.3 million from the DoD. This grant led by Dr. Keith Knutson of the Mayo Clinic in Jacksonville, Florida covers the costs for a 280-patient Phase II clinical trial of the FRa vaccine in patients with TNBC. We are working closely with the Mayo Foundation on this clinical trial by providing clinical and manufacturing expertise, as well as providing GMP vaccine formulations under contract. This Phase II study of TPIV200 in the treatment of triple-negative breast cancer began enrolling patients in late 2017 and enrollment continues. Details regarding this trial can be found at www.clinicaltrials.gov under identifier numbers NCT03012100 and RU011501I.

On June 21, 2016, we announced the initiation of a randomized four-arm Phase II trial of TNBC that is sponsored and conducted by the Company (FRV-002), enrolling women with stage I-III disease who have completed initial surgery and chemo/radiation therapy. This open-label, 80-patient clinical trial is designed to evaluate dosing regimens, pre-treatment, efficacy, and immune responses. The study is evaluating two doses of TPIV200 (a high dose and a low dose), each of which will be tested both with and without cyclophosphamide prior to vaccination. Key data from the trial are expected to be included in a future Biologics License Application submission to the FDA for marketing clearance. We completed enrollment in late 2017 and are now treating and following the patients. An independent Data Safety Monitoring Board (“DSMB”) reviews the safety in this ongoing Phase II study; no safety issues have been identified to date. Details regarding this trial can be found at www.clinicaltrials.gov under the identifier number NCT02593227.

Phase II Development of TPIV200 for Ovarian Cancer

On December 9, 2015, we announced that we received Orphan Drug Designation from the U.S. Food & Drug Administration’s Office of Orphan Products Development (“OOPD”) for our cancer vaccine TPIV200 in the treatment of ovarian cancer. The TPIV200 ovarian cancer clinical program will now receive benefits including tax credits on clinical research and seven-year market exclusivity upon receiving marketing approval. TPIV200 is a multi-epitope peptide vaccine that targets Folate Receptor alpha which is overexpressed in multiple cancers including over 90% of ovarian cancers. On February 3, 2016, we announced that the U.S. FDA designated the investigation of the multiple-epitope TPIV200 vaccine for maintenance therapy in subjects with platinum-sensitive advanced ovarian cancer who achieved stable disease or partial response following completion of standard-of-care chemotherapy, as a Fast Track Development Program.

On April 21, 2016, we announced our participation in an ovarian cancer study sponsored by Memorial Sloan Kettering Cancer Center (“MSKCC”) in New York City in collaboration with AstraZeneca Pharmaceuticals in ovarian cancer patients who are not responsive to platinum, a commonly used chemotherapy for ovarian cancer. This study, an open-label Phase II study of TPIV200 in 40 patients is designed to look at the effects of combination therapy with AstraZeneca’s checkpoint inhibitor durvalumab (anti-PD-L1). Interim results from the first 27 patients were presented at the AACR-Rivkin Symposium in September 2018; safety of the combination was established in these heavily-pretreated patients and a subset of patients exhibited durable disease stabilization. ORR and PFS with combination treatment was not superior from the expected efficacy of single-agent PD-1/PD-L1 blockade. However, post-immunotherapy follow-up was suggestive of improved clinical benefit from standard therapies, as the majority of patients post-progression went on to receive subsequent standard therapy with durable clinical benefit, creating a rationale for exploration of these agents in combination with chemotherapy. Although we have no business relationship with AstraZeneca, we are paying for one-half of the costs of the clinical study, in addition to providing our TPIV200 for the study. Details regarding this trial can be found at www.clinicaltrials.gov under identifier numbers NCT02764333.

On January 10, 2017, we announced the initiation of a Company-sponsored Phase II study in platinum-sensitive ovarian cancer patients (FRV-004). This multi-center, double-blind efficacy study is designed to evaluate TPIV200 compared to GM-CSF alone in a randomized, placebo-controlled fashion during the first maintenance period after primary surgery and chemotherapy. We have opened multiple clinical sites and enrollment of the 120 patients has been completed ahead of schedule. The 120 ^th subject was given the study drug on December 10, 2018. Safety is reviewed by an independent DSMB quarterly and an interim efficacy analysis is planned in 2019, once 55 patients have progressed. Details regarding this trial can be found at www.clinicaltrials.gov under the identifier number NCT02978222.

TPIV 100/110 – HER2/neu peptides with GM-CSF

Human epidermal growth factor receptor 2 (“HER2/neu”) amplification/overexpression results in an effective therapeutic target in breast and gastric cancer. Over-expressed HER2 is detected predominantly in malignancies of epithelial origin, such as breast, gastric, esophageal, colorectal, salivary gland, pancreatic, epithelial ovarian, endometrial, and bladder carcinomas, as well as gallbladder and extrahepatic cholangiocarcinomas. HER2 is over-expressed in approximately 25% of breast cancers and its expression is associated with unfavorable pathologic features and aggressive disease if not treated with targeted therapies, relative to other forms of breast cancer. While the outcome of patients with HER2 positive breast cancer has significantly improved in the past few decades with an advent of anti-HER2 therapies, a substantial number of resected patients subsequently develop metastatic disease. The continued prevalence of these cancers represents a high unmet medical need, justifying the targeted development of immunotherapeutic strategies.

We have added a major histocompatibility complex (“MHC”) class I-restricted peptide, also licensed from the Mayo Foundation on April 16, 2012, to the four MHC class II-restricted peptides present in TPIV100, resulting in TPIV 110 after the five peptides are mixed with GM-CSF. Management believes that the combination of MHC class I and class II-restricted HER2/neu antigens, gives the Company the leading HER2/neu vaccine platform. We have amended the IND to incorporate the fifth peptide and will use TPIV110 in subsequent studies with the goal of producing an even more robust vaccine activating both CD4 ⁺ (helper) and CD8 ⁺ (killer) T cells.  

Transition of the HER2/neu Vaccine

On June 7, 2016, we announced that the Company had exercised its option agreement with Mayo Foundation and signed a worldwide license agreement to the proprietary HER2/neu vaccine technology. The license gives the Company the right to develop and commercialize the technology in any cancer indication in which the Her2/neu antigen is overexpressed. As part of this agreement, the IND for the HER2/neu Phase I Trial was transferred from Mayo Foundation to the Company for Phase II clinical trials as TPIV100, our second vaccine product.

Phase I Human Clinical Trial – HER2/neu ⁺ Breast Cancer – Mayo Foundation

A Phase I study using a vaccine containing four MHC class II-restricted HER2/neu peptides in combination with GM-CSF (now called TPIV100) was initiated in 2012 at the Mayo Clinic and the primary readout was completed in 2015. Final safety analysis on all the patients treated showed that the vaccine was safe in that context. In addition, 19 out of 20 evaluable patients showed robust T-cell immune responses to the antigens in the vaccine, providing a case for advancement to Phase II. Data from the study were presented at the San Antonio Breast Cancer Symposium on December 10, 2015. An additional secondary endpoint incorporated into this Phase I Trial was a two-year follow-on recording the time to disease recurrence in the participating breast cancer patients. Details regarding this trial can be found at www.clinicaltrials.gov under the identifier number NCT01632332.

On March 14, 2017, we announced that our partners at the Mayo Clinic received a $3.8 million grant from the DoD to conduct a Phase Ib study of the HER2-targeted vaccine candidate (TPIV100) in an early form of breast cancer called ductal carcinoma in situ (“DCIS”). This is the second Company vaccine to be tested in a fully-funded study sponsored by the Mayo Foundation. We are working closely with the Mayo Foundation on this clinical trial by providing clinical and manufacturing expertise, as well as providing GMP vaccine formulations under contract. If the study is successful, our HER2/neu vaccine may eventually augment or even replace standard surgery and chemotherapy, and potentially could become part of a routine immunization schedule for preventing breast cancer in healthy women. The study is expected to enroll 40 – 45 women with DCIS and commenced such enrollment during the first quarter of 2019.

Phase II Development of the HER2/neu TPIV100 Vaccine

On October 10, 2018, we announced that the Mayo Clinic had been awarded a grant of $11 million from the DoD. This grant is intended to cover the costs of a large randomized, double-blind Phase II study of the Company’s HER2/neu-targeted breast cancer vaccine, TPIV100. 190 patients will be randomized, in a 2:1 fashion, to receive TPIV100 plus maintenance ado-trastuzumab emtansine (T-DM1) or maintenance T-DM1with placebo plus GM-CSF. We are working closely with Mayo Foundation on this clinical trial by providing clinical and manufacturing expertise, as well as providing GMP vaccine formulations under contract. The study will ask whether the administration of vaccine during T-DM1 maintenance therapy in patients with residual disease post-neoadjuvant chemotherapy effectively blocks disease recurrence and the development of metastatic breast cancer. By prevention of recurrence and metastasis, the expectation is that mortality associated with breast cancer will be decreased.

Products and Technology – Pre-clinical

Polystart

In addition to the clinical developments, our T cell therapies and peptide vaccine technology can be coupled with our PolyStart™ nucleic acid-based platform, which is designed to make T cell therapies and vaccines significantly more effective by producing four times the required peptides for the immune systems to recognize and act on.  

Results of Operations

In this discussion of the Company’s results of operations and financial condition, amounts, other than per-share amounts, have been rounded to the nearest thousand dollars.

Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018

We recorded a net loss of $5.3 million or ($0.12) basic and diluted per share during the three months ended March 31, 2019 compared to a net loss of $3.2 million or ($0.30) basic and diluted per share during the three months ended March 31, 2018. The change in net loss period over period was due to the following changes:

Operating Expenses

Operating expenses incurred during the three months ended March 31, 2019 were $5.6 million compared to $3.2 million in the prior period. Significant changes in operating expenses are outlined as follows:

Other Expense

Change in fair value of warrant liabilities

The change in fair value of warrant liabilities for the three months ended March 31, 2019 was $9,000 as compared to ($1,000) for the three months ended March 31, 2018. This increase by $9,000 during the three months ended March 31, 2019 is reflected by a corresponding increase in other expense in the condensed consolidated statement of operations.

Interest income

Interest income was approximately $0.3 million for the quarter ended March 31, 2019 and was attributable to interest income relating to a significant portion of the net proceeds received from our equity financing in October 2018 which are held in U.S. Treasury notes and U.S. government agency-backed securities with maturities of less than three months.

Liquidity and Capital Resources

We have not generated any revenues since inception other than revenue from grants we received. We have financed our operations primarily through public and private offerings of our stock and debt including warrants and the exercises thereof.

The following table sets forth our cash and working capital as of March 31, 2019 and December 31, 2018:

Operating Activities

During the three months ended March 31, 2019 and 2018, net cash outflows from operations were $3.9 million and $2.3 million, respectively.

Net cash used in operating activities for the three months ended March 31, 2019 was comprised of a net loss of $5.3 million, which included share-based compensation expense of $1,526,000, non-cash depreciation expense of $11,000, an increase in change in fair value of warrant liabilities of $9,000 and an increase in amortization on right-of-use assets of $44,000. Net cash used in operating activities also included the effect of changes in asset and liability accounts, including a decrease in prepaids of $75,000, a decrease in accounts payable and accrued liabilities of $28,000, a decrease in interest receivable of $4,000 and a decrease in lease liabilities of $45,000.

Net cash used in operating activities for the three months ended March 31, 2018 was comprised of a net loss of $3.2 million, which included share-based compensation expense of $136,000 and a decrease in change in fair value of warrant liabilities of $1,000. Net cash used in operating activities also included the effect of changes in asset and liability accounts, including a decrease in prepaids of $78,000 and an increase in accounts payable and accrued liabilities of $793,000.

Investing Activities

During the three months ended March 31, 2019, we purchased $0.2 million in property and equipment.

Financing Activities

We received approximately $63,000 and $18,000 cash proceeds from exercises of common stock warrants and options during the three months ended March 31, 2019 and 2018, respectively.

Financings

Our major sources of funding have been proceeds from various public and private offerings of our equity securities from option and warrant exercises, and from interest income.

May 2018 Private Placement Transaction Common Stock Purchase Agreement

On May 18, 2018, we closed on the sale of 1,300,000 shares of common stock for $2.40 per share pursuant to a Common Stock Purchase Agreement with an existing accredited investor in a private placement under Rule 506 of Regulation D pursuant to the terms of a Common Stock Purchase Agreement. Aggregate gross proceeds were approximately $3.1 million.

May 2018 Exercise of Warrants Held by Existing Institutional Investors

Also on May 18, 2018, we and certain existing institutional investors, who are holders of various warrants to purchase shares of Company common stock, closed on Warrant Exercise Agreements in which we agreed to reduce the exercise price for a portion of the investors’ previously purchased Series C, Series D, Series E and Series F warrants from $6.00, $9.00, $15.00 and $7.20, respectively per share to $2.50 per share, provided that the investors exercise such warrants for cash immediately, which they did, for 782,506 shares and aggregate proceeds of approximately $2.0 million.

October 2018 Private Placement Transaction

On October 17, 2018, concurrent with the completion of the Merger, we issued to certain accredited investors in a private placement transaction an aggregate of 17,500,000 shares of its common stock, and warrants to purchase 13,437,500 shares of common stock at an exercise price of $5.00 per share with a five-year term, for aggregate proceeds of $70.0 million pursuant to the terms of the Securities Purchase Agreements, dated June 8, 2018, by and among us and certain accredited investors.

Exercise of Stock Warrants

During the three months ended March 31, 2019, certain outstanding warrants were exercised by a warrant holder providing aggregate proceeds to the Company of approximately $5,400 and resulted in the issuance of 1,799 shares of common stock.

Exercise of Stock Options

In January 2019, 11,980 shares of common stock were issued pursuant to stock option exercises at an exercise price equal to $4.82 per share.

Future Capital Requirements

As of March 31, 2019, we had working capital of $55.1 million, compared to working capital of $59.2 million as of December 31, 2018.

Our primary uses of capital are, and we expect will continue to be, compensation and related expenses, third-party clinical and research and development services, laboratory and related supplies, clinical costs, legal and other regulatory expenses, facility costs and general overhead costs.

The successful development of any of our product candidates is highly uncertain. As such, at this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the development of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from the sale of product candidates. This is due to the numerous risks and uncertainties associated with developing medical treatments, including, but not limited to, the uncertainty of:

A change in the outcome of any of these variables with respect to the development of any of our product candidates would significantly change the costs and timing associated with the development of our product candidates.

Because all of our product candidates are in the early stages of clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.

We plan to continue to fund our operations and capital funding needs through equity and/or debt financing. We may also consider new collaborations or selectively partner our technology. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our existing stockholders. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms unfavorable to us. Any of these actions could harm our business, results of operations and future prospects.

Critical Accounting Policies

The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The critical accounting estimates that affect the consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes of financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.