UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

Or

 

¨      TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission file number: 001-36020

 

Onconova Therapeutics, Inc.

(Exact name of registrant as specified in its charter)

 

Delaware   22-3627252
(State or other jurisdiction of   (I.R.S. Employer
incorporation or organization)   Identification No.)

 

375 Pheasant Run, Newtown, PA   18940
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code: (267) 759-3680

 

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.           x      Yes           o       No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).             x    Yes           o     No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer      o   Accelerated filer      o
     
Non-accelerated filer    x   Smaller reporting company    x
     
    Emerging growth company     o

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.         o

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    o  Yes     x  No

 

The number of outstanding shares of the registrant’s Common Stock, par value $0.01 per share, as of November 5, 2020 was 184,948,267.

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class   Trading Symbol(s)   Name of each exchange on which registered
Common Stock, par value $.01 per share   ONTX   The Nasdaq Stock Market LLC
Common Stock Warrants   ONTXW   The Nasdaq Stock Market LLC

 

 

 

 

 

ONCONOVA THERAPEUTICS, INC.

 

TABLE OF CONTENTS FOR QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTER ENDED SEPTEMBER 30, 2020

 

  Page
PART I — FINANCIAL INFORMATION  
   
Item 1. Financial Statements (Unaudited)  
Condensed Consolidated Balance Sheets 2
Condensed Consolidated Statements of Operations 3
Condensed Consolidated Statements of Comprehensive Loss 4
Consolidated Statement of Stockholders’ Equity (Deficit) 5
Condensed Consolidated Statements of Cash Flows 6
Notes to Condensed Consolidated Financial Statements 7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 24
Item 3. Quantitative and Qualitative Disclosures About Market Risk 37
Item 4. Controls and Procedures 38
   
PART II — OTHER INFORMATION  
   
Item 1. Legal Proceedings 39
Item 1A. Risk Factors 39
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 42
Item 3. Defaults Upon Senior Securities 42
Item 4. Mine Safety Disclosures 42
Item 5. Other Information 42
Item 6. Exhibits 43
SIGNATURES 45

 

1

 

 

PART I — FINANCIAL INFORMATION

 

Item 1. Financial Statements

 

Onconova Therapeutics, Inc.

Condensed Consolidated Balance Sheets

 

    September 30,     December 31,  
    2020     2019  
      (unaudited)          
Assets                
Current assets:                
    Cash and cash equivalents   $ 24,198,000     $ 22,726,000  
    Receivables     46,000       98,000  
    Prepaid expenses and other current assets     757,000       650,000  
        Total current assets     25,001,000       23,474,000  
Property and equipment, net     56,000       50,000  
Other non-current assets     150,000       150,000  
Total assets   $ 25,207,000     $ 23,674,000  
                 
Liabilities and stockholders' equity                
Current liabilities:                
    Accounts payable   $ 5,725,000     $ 4,271,000  
    Accrued expenses and other current liabilities     3,339,000       3,795,000  
    Deferred revenue     226,000       226,000  
        Total current liabilities     9,290,000       8,292,000  
Warrant liability     176,000       113,000  
Deferred revenue, non-current     3,526,000       3,695,000  
Total liabilities     12,992,000       12,100,000  
                 
Commitments and contingencies                
                 
Stockholders'  equity:                
    Preferred stock, $0.01 par value, 5,000,000 authorized at September 30, 2020 and December 31, 2019, none issued and outstanding at September 30, 2020 and December 31, 2019     -       -  
    Common stock, $0.01 par value, 250,000,000 authorized at September 30, 2020 and December 31, 2019, 184,548,267 and 111,167,352 shares issued and outstanding at September 30, 2020 and December 31, 2019     1,845,000       1,112,000  
    Additional paid in capital     432,499,000       413,879,000  
    Accumulated other comprehensive loss     (2,000 )     (18,000 )
    Accumulated deficit     (422,127,000 )     (403,399,000 )
Total stockholders'  equity     12,215,000       11,574,000  
                 
 Total liabilities and stockholders'  equity   $ 25,207,000     $ 23,674,000  

 

See accompanying notes to condensed consolidated financial statements.

 

2

 

 

Onconova Therapeutics, Inc.

Condensed Consolidated Statements of Operations (unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2020     2019     2020     2019  
Revenue   $ 66,000     $ 63,000     $ 174,000     $ 2,153,000  
Operating expenses:                                
    General and administrative     2,147,000       1,640,000       6,548,000       6,634,000  
    Research and development     4,193,000       3,521,000       12,364,000       11,490,000  
        Total operating expenses     6,340,000       5,161,000       18,912,000       18,124,000  
Loss from operations     (6,274,000 )     (5,098,000 )     (18,738,000 )     (15,971,000 )
                                 
Change in fair value of warrant liability     56,000       476,000       (63,000 )     80,000  
Other (loss) income, net     (23,000 )     27,000       73,000       135,000  
Net loss   $ (6,241,000 )   $ (4,595,000 )   $ (18,728,000 )   $ (15,756,000 )
Net loss per share, basic and diluted   $ (0.03 )   $ (0.75 )   $ (0.11 )   $ (2.63 )
Basic and diluted weighted average shares outstanding     180,877,623       6,141,933       170,297,531       5,994,423  

 

See accompanying notes to condensed consolidated financial statements.

 

3

 

 

Onconova Therapeutics, Inc.

Condensed Consolidated Statements of Comprehensive Loss (unaudited)

 

    Three Months Ended September 30,     Nine Months Ended September 30,  
    2020     2019     2020     2019  
Net loss   $ (6,241,000 )   $ (4,595,000 )   $ (18,728,000 )   $ (15,756,000 )
Other comprehensive loss, before tax:                                
    Foreign currency translation adjustments, net     15,000       (13,000 )     16,000       (15,000 )
Other comprehensive income (loss), net of tax     15,000       (13,000 )     16,000       (15,000 )
Comprehensive loss   $ (6,226,000 )   $ (4,608,000 )   $ (18,712,000 )   $ (15,771,000 )

 

See accompanying notes to condensed consolidated financial statements.

 

4

 

 

Onconova Therapeutics, Inc.

Consolidated Statement of Stockholders’ Equity (Deficit) (unaudited)

  

    Three Month Periods Ended September 30, 2020 and 2019  
                            Accumulated        
                Additional           other        
    Common Stock     Paid in     Accumulated     comprehensive        
    Shares     Amount     Capital     deficit     income (loss)     Total  
Balance at June 30, 2020     174,177,448     $ 1,742,000     $ 429,794,000     $ (415,886,000 )   $ (17,000 )   $ 15,633,000  
                                                 
Net loss     -       -       -       (6,241,000 )     -       (6,241,000 )
Other comprehensive income     -       -       -       -       15,000       15,000  
Stock-based compensation     -       -       90,000       -       -       90,000  
Issuance of common stock upon exercise of warrants     10,370,819       103,000       2,615,000       -       -       2,718,000  
Balance at September 30, 2020     184,548,267     $ 1,845,000     $ 432,499,000     $ (422,127,000 )   $ (2,000 )   $ 12,215,000  
                                                 
Balance at June 30, 2019     5,998,524     $ 60,000     $ 388,465,000     $ (393,057,000 )   $ (14,000 )   $ (4,546,000 )
                                                 
Net loss     -       -       -       (4,595,000 )     -       (4,595,000 )
Other comprehensive loss     -       -       -       -       (13,000 )     (13,000 )
Stock-based compensation     -       -       145,000       -       -       145,000  
Issuance of common stock, net     2,198,938       22,000       2,946,000       -       -       2,968,000  
Balance at September 30, 2019     8,197,462     $ 82,000     $ 391,556,000     $ (397,652,000 )   $ (27,000 )   $ (6,041,000 )

 

    Nine Month Periods Ended September 30, 2020 and 2019  
                            Accumulated        
                Additional           other        
    Common Stock     Paid in     Accumulated     comprehensive        
    Shares     Amount     Capital     deficit     income (loss)     Total  
Balance at December 31, 2019     111,167,352     $ 1,112,000     $ 413,879,000     $ (403,399,000 )   $ (18,000 )   $ 11,574,000  
                                                 
Net loss     -       -       -       (18,728,000 )     -       (18,728,000 )
Other comprehensive income     -       -       -       -       16,000       16,000  
Stock-based compensation     -       -       275,000       -       -       275,000  
Issuance of common stock, net     27,662,518       276,000       8,786,000       -       -       9,062,000  
Issuance of common stock upon exercise of warrants     44,468,397       444,000       9,571,000       -       -       10,015,000  
Issuance of common stock upon exercise of pre-funded warrants     1,250,000       13,000       (12,000 )     -       -       1,000  
Balance at September 30, 2020     184,548,267     $ 1,845,000     $ 432,499,000     $ (422,127,000 )   $ (2,000 )   $ 12,215,000  
                                                 
Balance at December 31, 2018     5,674,220     $ 57,000     $ 387,238,000     $ (381,896,000 )   $ (12,000 )   $ 5,387,000  
                                                 
Net loss     -       -       -       (15,756,000 )     -       (15,756,000 )
Other comprehensive loss     -       -       -       -       (15,000 )     (15,000 )
Stock-based compensation     -       -       950,000       -       -       950,000  
Issuance of common stock, net     2,302,458       23,000       3,337,000       -       -       3,360,000  
Issuance of common stock upon exercise of warrants     220,784       2,000       31,000       -       -       33,000  
Balance at September 30, 2019     8,197,462     $ 82,000     $ 391,556,000     $ (397,652,000 )   $ (27,000 )   $ (6,041,000 )

 

See accompanying notes to condensed consolidated financial statements.

 

5

 

 

Onconova Therapeutics, Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

 

    Nine Months ended September 30,  
    2020     2019  
Operating activities:                
Net loss   $ (18,728,000 )   $ (15,756,000 )
Adjustment to reconcile net loss to net cash used in operating activities:                
     Depreciation and amortization     9,000       11,000  
     Change in fair value of warrant liabilities     63,000       (80,000 )
     Stock compensation expense     275,000       950,000  
     Changes in assets and liabilities:                
          Receivables     52,000       12,000  
          Prepaid expenses and other current assets     (107,000 )     (198,000 )
          Accounts payable     1,454,000       485,000  
          Accrued expenses and other current liabilities     (456,000 )     (725,000 )
          Deferred revenue     (169,000 )     (170,000 )
Net cash used in operating activities     (17,607,000 )     (15,471,000 )
                 
Investing activities:                
Payments for purchase of property and equipment     (15,000 )     (56,000 )
Net cash used in investing activities     (15,000 )     (56,000 )
                 
Financing activities:                
Proceeds from the sale of common stock and warrants, net of costs     9,062,000       3,360,000  
Proceeds from the exercise of warrants     10,016,000       33,000  
Net cash provided by financing activities     19,078,000       3,393,000  
Effect of foreign currency translation on cash     16,000       (15,000 )
Net increase (decrease) in cash and cash equivalents     1,472,000       (12,149,000 )
Cash and cash equivalents at beginning of period     22,726,000       16,970,000  
Cash and cash equivalents at end of period   $ 24,198,000     $ 4,821,000  

 

See accompanying notes to condensed consolidated financial statements.

 

6

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

1. Nature of Business

  

The Company

 

Onconova Therapeutics, Inc. (the "Company") was incorporated in the State of Delaware on December 22, 1998 and commenced operations on January 1, 1999. The Company's headquarters are located in Newtown, Pennsylvania. The Company is a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule product candidates primarily to treat cancer. The Company has proprietary targeted cancer agents designed to work against specific cellular pathways that are important to cancer cells. In August 2020, the Company terminated its Phase 3 INSPIRE trial after the primary endpoint failed to demonstrate an improvement in survival compared to a control arm. The Company is currently evaluating other compounds in its pipeline and potential compound in-licensing opportunities. The Company believes that the product candidates in its pipeline have the potential to be efficacious in a variety of cancers. The Company currently has the following two clinical-stage programs: 1. ON 123300 in solid tumors; and 2. oral rigosertib alone or in combination with PD-1 inhibitors for treatment of KRAS-mutated solid tumors. During 2012, Onconova Europe GmbH was established as a wholly owned subsidiary of the Company for the purpose of further developing business in Europe.

 

The Company has entered into several license and collaboration agreements. In 2011, the Company entered into a license agreement, as subsequently amended, with SymBio Pharmaceuticals Limited ("SymBio"), which grants SymBio certain rights to commercialize rigosertib in Japan and Korea. In December 2017, the Company entered into a license and collaboration agreement with HanX for the further development, registration and commercialization of ON 123300 in greater China. ON 123300 is a preclinical compound which the Company believes has the potential to overcome the limitations of current generation CDK 4/6 inhibitors. Under the terms of the agreement, the Company received an upfront payment, and will receive regulatory and commercial milestone payments, as well as royalties on Chinese sales. The key feature of the collaboration is that HanX provides all funding required for Chinese IND enabling studies performed for Chinese Food and Drug Administration IND approval. The Company and HanX also intended for these studies to comply with the FDA standards. Accordingly, such studies may be used by the Company for an IND filing with the FDA. The Chinese IND was approved in January 2020. The Company anticipates filing a US IND related to ON 123300 by the end of 2020. The Company maintains global rights outside of China. On March 2, 2018, the Company entered into a License, Development and Commercialization Agreement (the “Pint License Agreement”) with Pint International SA (which, together with its affiliate Pint Pharma GmbH, are collectively referred to as "Pint"). Under the terms of the agreement, the Company granted Pint an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to develop and commercialize any pharmaceutical product containing rigosertib in all uses of rigosertib in certain Latin American countries. In May 2019, the Company entered into a License and Collaboration Agreement (the "HanX License Agreement") with HanX Biopharmaceuticals, Inc. ("HanX"). Under the terms of the HanX License Agreement, the Company granted HanX an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to develop and commercialize any pharmaceutical product (the "HanX Product") containing rigosertib in all uses of rigosertib or the HanX Product in human therapeutic uses in the People's Republic of China, Hong Kong, Macau and Taiwan (the "HanX Territory"). In connection with the HanX License Agreement, the Company also entered into a Securities Purchase Agreement with each of HanX and Abundant New Investments Ltd. ("Abundant"), an affiliate of HanX (each, a "Securities Purchase Agreement" and together, the "Securities Purchase Agreements"). HanX did not fulfill its obligations under the HanX License Agreement and in January 2020, in accordance with the terms of the HanX License Agreement, the HanX License Agreement was deemed to be void ab initio. Upon this termination, the rights to HanX Product in the HanX Territory reverted to the Company in accordance with the terms of the HanX License Agreement. In addition, the Securities Purchase Agreements terminated automatically effective upon the termination of the HanX License Agreement in accordance with the Securities Purchase Agreements. In November 2019, the Company entered into a Distribution, License and Supply Agreement (the "Knight License Agreement") with Knight Therapeutics Inc. ("Knight"). Under the terms of the Knight License Agreement, the Company granted Knight (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to develop and manufacture any product (the "Knight Licensed Product") containing rigosertib for Canada (and Israel, should Knight exercise its option as set forth in the Knight License Agreement) (the "Knight Territory") and in human uses (the "Field"), and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to commercialize the Knight Licensed Product in the Knight Territory and in the Field. Knight has also agreed to obtain from the Company all of its requirements of the Knight Licensed Products for the Knight Territory, and the Company has agreed to supply Knight with all of its requirements of the Knight Licensed Products. In December 2019, the Company entered into a Distribution, License and Supply Agreement (the "STA License Agreement") with Specialised Therapeutics Asia Pte. Ltd. ("STA"). Under the terms of the STA License Agreement, the Company granted STA (i) a non-exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to develop and manufacture any product (the "STA Licensed Product") containing rigosertib for Australia and New Zealand (the "STA Territory") and in human uses (the "Field"), and (ii) an exclusive, royalty-bearing license, with the right to sublicense, under certain Company patent rights and know-how, to commercialize the STA Licensed Product in the STA Territory and in the Field. STA has also agreed to obtain from the Company all of its requirements of the STA Licensed Products for the STA Territory, and the Company has agreed to supply STA with all of its requirements of the STA Licensed Products.

 

7

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements

(Unaudited)

 

Liquidity

 

The Company has incurred recurring operating losses since inception. For the nine months ended September 30, 2020, the Company incurred a net loss of $18,728,000 and as of September 30, 2020 the Company had generated an accumulated deficit of $422,127,000. The Company anticipates operating losses to continue for the foreseeable future due to, among other things, costs related to research, development of its product candidates and its preclinical programs, strategic alliances and its administrative organization. At September 30, 2020, the Company had cash and cash equivalents of $24,198,000. Following the unsuccessful conclusion of the INSPIRE trial, the Company has taken steps to reduce its cash expenditures. In September 2020, six employees, representing 26% of staff, were terminated. These employees were primarily associated with the NDA preparation for the use of rigosertib in higher risk MDS. On October 30, 2020, the Company notified its landlord of its intention to not renew its office space lease which expires in February 2021. The Company is evaluating less expensive space alternatives, including having some or all employees work remotely. The Company will require substantial additional financing to fund its ongoing clinical trials and operations, and to continue to execute its strategy.

 

On September 25, 2019 the Company closed on an offering of common stock to certain investors. The Company issued 2,198,938 shares of common stock and amended warrants for the purchase of 2,198,938 shares of common stock. The investors, who were also holders of the Company's preferred stock warrants issued in February 2018 and/or May 2018, received a warrant amendment under which a certain number of such investors' preferred stock warrants received a reduction in exercise price and an extension of term. Net proceeds from the sale of common stock and the amendment of preferred stock warrants were approximately $3.3 million. In November 2019, the Company closed on an offering of units of common stock and warrants. The Company issued 30,250,000 shares of common stock, pre-funded warrants to purchase 24,750,000 shares of common stock, and common stock warrants to purchase 55,000,000 shares of common stock. Net proceeds were approximately $9.7 million. On December 10, 2019, the Company closed on an offering of units of common stock and warrants. The Company issued 14,326,648 shares of common stock and common stock warrants to purchase 7,163,324 shares of common stock. Net proceeds were approximately $4.4 million. On December 19, 2019, the Company also closed on an offering of units of common stock and warrants. The Company issued 13,878,864 shares of common stock and common stock warrants to purchase 6,939,432 shares of common stock. Net proceeds were approximately $4.4 million. During 2019, pre-funded warrants were exercised for 23,720,784 shares of common stock and net proceeds were $35,000. Also during 2019, common warrants were exercised for 21,014,378 shares of common stock and net proceeds were approximately $4.9 million.

 

On January 3, 2020, the Company closed on an offering of common stock. The Company issued 27,662,518 shares of common stock and net proceeds were approximately $9.0 million. In addition, during the nine months ended September 30, 2020; 45,718,397 warrants were exercised, resulting in proceeds of $10.0 million.

 

The Company has and may continue to delay, scale-back, or eliminate certain of its research and development activities and other aspects of its operations until such time as the Company is successful in securing additional funding. The Company is exploring various dilutive and non-dilutive sources of funding, including equity financings, strategic alliances, business development and other sources. The future success of the Company is dependent upon its ability to obtain additional funding. There can be no assurance, however, that the Company will be successful in obtaining such funding in sufficient amounts, on terms acceptable to the Company, or at all. The Company currently anticipates that current cash and cash equivalents will be sufficient to meet its anticipated cash requirements into the first quarter of 2022.

 

8

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

COVID-19

 

While the Company is not aware of a material impact from the novel coronavirus disease ("COVID-19") pandemic through September 30, 2020, the full extent to which COVID-19 will directly or indirectly impact the Company’s business, results of operations and financial condition, including expenses and manufacturing, clinical trials and research and development costs, depends on future developments that are highly uncertain at this time.

 

2. Summary of Significant Accounting Policies

 

Basis of Presentation

 

The condensed consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (“GAAP”) for interim financial information. Certain information and footnotes normally included in financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). The financial statements include the consolidated accounts of the Company and its wholly-owned subsidiary, Onconova Europe GmbH. All significant intercompany transactions have been eliminated.

 

Unaudited Interim Financial Information

 

The accompanying condensed consolidated balance sheet as of September 30, 2020, the condensed consolidated statements of operations and comprehensive loss for the three and nine months ended September 30, 2020 and 2019, the consolidated statements of stockholders’ equity (deficit) for the three and nine months ended September 30, 2020 and 2019 and the condensed consolidated statements of cash flows for the nine months ended September 30, 2020 and 2019 are unaudited. The interim unaudited condensed consolidated financial statements have been prepared on the same basis as the annual audited consolidated financial statements and, in the opinion of management, reflect all adjustments, which include only normal recurring adjustments, necessary for the fair statement of the Company’s financial position as of September 30, 2020, the results of its operations for the three and nine months ended September 30, 2020 and 2019, and its cash flows for the nine months ended September 30, 2020 and 2019. The financial data and other information disclosed in these notes related to the three and nine months ended September 30, 2020 and 2019 are unaudited. The results for the three and nine months ended September 30, 2020 are not necessarily indicative of results to be expected for the year ending December 31, 2020, any other interim periods, or any future year or period.  These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the notes thereto for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K filed with the SEC on March 27, 2020.

 

 

Segment Information

 

Operating segments are defined as components of an enterprise about which separate discrete information is available for evaluation by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. The Company views its operations and manages its business in one segment, which is the identification and development of oncology therapeutics.

 

9

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

2. Summary of Significant Accounting Policies (Continued)

 

Significant Accounting Policies

 

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2019 included in the Company’s annual report on Form 10-K filed with the SEC on March 27, 2020. Since the date of such financial statements, there have been no changes to the Company’s significant accounting policies.

 

Fair Value Measurements

 

The carrying amounts reported in the accompanying consolidated financial statements for cash and cash equivalents, accounts payable, and accrued liabilities approximate their respective fair values because of the short-term nature of these accounts. The fair value of the warrant liability is discussed in Note 7, “Fair Value Measurements.”

 

10

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

2. Summary of Significant Accounting Policies (Continued)

 

Recent Accounting Pronouncements 

 

In August 2018, the FASB issued guidance which changes the disclosure requirements for fair value measurement. The guidance amends the disclosure requirements in ASC Topic 820 by adding, changing, or removing certain disclosures. The guidance is effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance effective January 1, 2020. There was no impact to the Company’s financial position, results of operations or financial statement disclosures as a result of the adoption.

 

In November 2018, the FASB issued guidance, which clarifies the interaction between ASC Topic 808, Collaborative Arrangements , and ASC Topic 606, Revenue from Contracts with Customers . The guidance, among other items, clarifies that certain transactions between collaborative participants should be accounted for as revenue under Topic 606 when the collaborative arrangement participant is a customer in the context of a unit of account. The guidance is effective for fiscal years beginning after December 15, 2019. The Company adopted this guidance effective January 1, 2020. There was no impact to the Company’s financial position and results of operations as a result of the adoption.

 

In June 2016, the FASB issued new guidance on the accounting for credit losses on financial instruments. The guidance was amended in November 2019. The new guidance introduces an expected loss model for estimating credit losses, replacing the incurred loss model. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses (and subsequent recoveries). The guidance is effective for fiscal years beginning after December 15, 2022, and interim periods within those years, for companies deemed to be smaller reporting companies as of November 15, 2019, with early adoption permitted. The Company is evaluating the impact of the adoption of the standard on its consolidated financial statements.

 

11

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

3.  Revenue

 

The Company’s revenue during the three and nine months ended September 30, 2020 and 2019 was from its license and collaboration agreements with SymBio and HanX.

 

     Three Months Ended September 30,      Nine Months Ended September 30,  
    2020     2019     2020     2019  
Symbio                                
Upfront license fee recognition over time   $ 56,000     $ 57,000     $ 169,000     $ 170,000  
Supplies and other     10,000       6,000       5,000       18,000  
                                 
HanX - rigosertib                                
Upfront license payment     -       -       -       1,965,000  
                                 
    $ 66,000     $ 63,000     $ 174,000     $ 2,153,000  

 

Deferred revenue is as follows:      
    Symbio  
    Upfront Payment  
Deferred balance at December 31, 2019   $ 3,921,000  
Recognition to revenue     169,000  
         
Deferred balance at September 30, 2020   $ 3,752,000  

 

12

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

4. Net Loss Per Share of Common Stock

 

The following potentially dilutive securities outstanding at September 30, 2020 and 2019 have been excluded from the computation of diluted weighted average shares outstanding, as they would be antidilutive (reflects the number of common shares as if the dilutive securities had been converted to common stock):

 

    September 30,  
    2020     2019  
Warrants     11,491,370       5,614,307  
Stock options     1,003,990       409,788  
      12,495,360       6,024,095  

 

5. Warrants

 

Common Stock warrants are accounted for in accordance with applicable accounting guidance provided in ASC Topic 815, Derivatives and Hedging — Contracts in Entity’s Own Equity (ASC Topic 815), as either derivative liabilities or as equity instruments depending on the specific terms of the warrant agreement. Some of the Company’s warrants are classified as liabilities because in certain circumstances they could require cash settlement.

 

Warrants outstanding and warrant activity (reflects the number of common shares as if the warrants were converted to common stock) for the nine months ended September 30, 2020 is as follows:

 

                  Balance                 Balance  
        Exercise     Expiration   December 31,     Warrants     Warrants     September 30,  
Description   Classification   Price     Date   2019     Issued     Exercised     2020  
Non-tradable warrants   Liability   $ 172.50     July 2021     6,456       -       -       6,456  
Tradable warrants   Liability   $ 73.80     July 2021     212,801       -       -       212,801  
Non-tradable pre-funded warrants   Equity   $ 0.15     July 2023     394       -       -       394  
Non-tradable warrants   Equity   $ 1.60     December 2022     392,834       -       -       392,834  
Non-tradable warrants   Equity   $ 14.10     March 2021     5,000       -       -       5,000  
Non-tradable warrants   Equity   $ 21.15     March 2021     8,333       -       -       8,333  
Non-tradable warrants   Equity   $ 7.7895     June 2021     15,000       -       -       15,000  
Non-tradable pre-funded warrants   Equity   $ 0.15     none     52,834       -       -       52,834  
Non-tradable warrants   Equity   $ 1.600     December 2022     1,806,104       -       -       1,806,104  
Non-tradable pre-funded warrants   Equity   $ 0.15     none     74,617       -       -       74,617  
Non-tradable warrants   Equity   $ 2.00     September 2023     109,585       -       -       109,585  
Non-tradable pre-funded warrants   Equity   $ 0.0001     none     1,250,000       -       (1,250,000 )     -  
Non-tradable warrants   Equity   $ 0.20     November 2024     41,037,000       -       (33,499,500 )     7,537,500  
Non-tradable warrants   Equity   $ 0.250     November 2024     2,521,875       -       (2,521,875 )     -  
Non-tradable warrants   Equity   $ 0.287     December 2024     3,581,662       -       (3,581,662 )     -  
Non-tradable warrants   Equity   $ 0.43625     December 2024     716,332       -       (462,034 )     254,298  
Non-tradable warrants   Equity   $ 0.298     December 2024     3,469,716       -       (3,469,716 )     -  
Non-tradable warrants   Equity   $ 0.45030     December 2024     693,943       -               693,943  
Non-tradable warrants   Equity   $ 0.45190     December 2023     -       1,383,126       (933,610 )     449,516  
                                                 
                      55,954,486       1,383,126       (45,718,397 )     11,619,215  

 

13

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

6. Balance Sheet Detail

 

Prepaid expenses and other current assets:

 

    September 30,     December 31,  
    2020     2019  
Research and development   $ 190,000     $ 321,000  
Manufacturing     94,000       25,000  
Insurance     276,000       164,000  
Other     197,000       140,000  
    $ 757,000     $ 650,000  

 

Property and equipment: 

 

    September 30,     December 31,  
    2020     2019  
Property and equipment   $ 2,298,000     $ 2,283,000  
Accumulated depreciation     (2,242,000 )     (2,233,000 )
    $ 56,000     $ 50,000  

 

Accrued expenses and other current liabilities 

 

    September 30,     December 31,  
    2020     2019  
Research and development   $ 1,917,000     $ 2,016,000  
Employee compensation     1,227,000       1,537,000  
Professional fees     195,000       242,000  
    $ 3,339,000     $ 3,795,000  

 

14

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

7. Fair Value Measurements

 

Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.

 

The Company utilizes a valuation hierarchy for disclosure of the inputs to the valuations used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows. Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 2 inputs are quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument. Level 3 inputs are unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value. A financial asset or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement.

 

On January 5, 2016, the Company entered into a securities purchase agreement (the “Securities Purchase Agreement”) with an institutional investor providing for the issuance and sale by the Company of 12,912 shares of Common Stock, at a purchase price of $142.50 per share and warrants to purchase up to 6,456 shares of Common Stock (the “Warrants”) for aggregate gross proceeds of $1,840,000. The Company has classified the warrants as a liability (see Note 5). The estimated fair value using the Black-Scholes pricing model was approximately $0 at September 30, 2020 and December 31, 2019.

 

On July 29, 2016 the Company closed on a Rights Offering, issuing 239,986 shares of Common Stock, 212,801 Tradable Warrants and 43,760 Pre-Funded Warrants. The Tradable Warrants are exercisable for a period of five years for one share of Common Stock at an exercise price of $73.80 per share. After the one-year anniversary of issuance, the Company may redeem the Tradable Warrants for $0.001 per Tradable Warrant if the volume weighted average price of its Common Stock is above $184.50 for each of 10 consecutive trading days. The Company has classified the Tradable Warrants as a liability (see Note 5). The Tradable Warrants have been listed on the Nasdaq Capital Market since issuance and the Company regularly monitors the trading activity. The Company has determined that an active and orderly market for the Tradable Warrants has developed and that the Nasdaq Capital Market price is the best indicator of fair value of the warrant liability. The quoted market price was used to determine the fair value at December 31, 2019 and September 30, 2020.

 

The Company estimated the fair value of the non-tradable warrant liability at September 30, 2020, using the Black-Scholes option pricing model with the following weighted-average assumptions:

 

Risk-free interest rate     0.12 %
Expected volatility     121.82 %
Expected term     0.77 years  
Expected dividend yield     0 %

 

Expected volatility is based on the historical volatility of the Company’s Common Stock since its IPO in July 2013.

 

15

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

7. Fair Value Measurements (Continued)

 

The following fair value hierarchy table presents information about the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2020 and December 31, 2019:

 

    Fair Value Measurement as of:  
    September 30, 2020     December 31, 2019  
    Level 1     Level 2     Level 3     Balance     Level 1     Level 2     Level 3     Balance  
Tradable warrants liability   $ 176,000     $ -     $ -     $ 176,000     $ 113,000     $ -     $ -     $ 113,000  
Non-tradable warrants liability     -       -       -       -       -       -       -       -  
Total   $ 176,000     $ -     $ -     $ 176,000     $ 113,000     $ -     $ -     $ 113,000  

 

There were no transfers between Level 1 and Level 2 in any of the periods reported.

 

16

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

8.  Stock-Based Compensation

 

 The 2007 Equity Compensation Plan as amended (the “2007 Plan”), amended, restated and renamed the Company’s 1999 Stock Based Compensation Plan (the “1999 Plan”), which provided for the granting of incentive and nonqualified stock options and restricted stock to its employees, directors and consultants at the discretion of the board of directors.

 

The 2013 Equity Compensation Plan (the “2013 Plan”), amended, restated and renamed the 2007 Plan. Under the 2013 Plan, the Company may grant incentive stock options, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, deferred share awards, performance awards and other equity-based awards to employees, directors and consultants. The Company initially reserved 40,718 shares of Common Stock for issuance, subject to adjustment as set forth in the 2013 Plan. The 2013 Plan included an evergreen provision, pursuant to which the maximum aggregate number of shares that may be issued under the 2013 Plan is increased on the first day of each fiscal year by the lesser of (a) a number of shares equal to four percent (4%) of the issued and outstanding Common Stock of the Company, without duplication, (b) 13,333 shares and (c) such lesser number as determined by the Company’s board of directors, subject to specified limitations.

 

The 2018 Omnibus Incentive Compensation Plan (the “2018 Plan”) was unanimously approved by the Company’s Board of Directors on May 24, 2018 and was approved by the Company’s stockholders on June 27, 2018. The 2018 Plan replaces the 2013 Plan. Upon stockholders’ approval of the 2018 Plan, no further awards will be made under the 2013 Plan. Awards granted under the 2013 Plan will continue in effect in accordance with the terms of the applicable award agreement and the terms of the 2013 Plan in effect when the awards were granted.

 

Under the 2018 Plan, the Company may grant incentive stock options, non-qualified stock options, stock awards, stock units, stock appreciation rights and other stock-based awards to employees, non-employee directors and consultants, and advisors. The maximum aggregate number of shares of the Company’s common stock that may be issued under the 2018 Plan is 402,354, which is equal to the sum of (i) 400,000 shares of the Company’s common stock, plus (ii) 2,354 shares, which is the number of shares of the Company common stock reserved for issuance under the 2013 Plan that remained available as of the effective date of the 2018 Plan. In addition, the number of shares of common stock subject to outstanding awards under the 2013 Plan that terminate, expire, or are cancelled, forfeited, exchanged, or surrendered without having been exercised, vested, or paid in shares under the 2013 Plan after the effective date of the 2018 Plan will be available for issuance under the 2018 Plan.

 

The 2018 Plan was amended following unanimous approval of the Company’s Board of Directors on April 24, 2019 and was approved by the Company’s shareholders on June 17, 2019.  The amended 2018 Plan (the “Amended Plan”) allowed for an additional 589,500 shares of the Company’s common stock that may be issued under the Amended Plan with respect to awards made on and after June 17, 2019.  At September 30, 2020, there were 50,194 shares available for future issuance.

 

Stock-based compensation expense includes stock options granted to employees and non-employees and has been reported in the Company’s statements of operations and comprehensive loss in either research and development expenses or general and administrative expenses depending on the function performed by the optionee. No net tax benefits related to the stock-based compensation costs have been recognized since the Company’s inception. The Company recognized stock-based compensation expense as follows for the three and nine months ended September 30, 2020 and 2019:

 

    Three Months ended
September 30,
    Nine Months ended
September 30,
 
    2020     2019     2020     2019  
General and administrative   $ 51,000     $ 64,000     $ 142,000     $ 670,000  
Research and development     39,000       81,000       133,000       280,000  
    $ 90,000     $ 145,000     $ 275,000     $ 950,000  

 

17

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

8.  Stock-Based Compensation (Continued)

 

A summary of stock option activity for the nine months ended September 30, 2020 is as follows:

 

              Options Outstanding  
     

Shares

Available

for Grant

     

Number of

Shares

     

Weighted-

Average

Exercise

Price

     

Weighted

Average

Remaining

Contractual

Term (in years)

     

Aggregate

Intrinsic

Value

 
Balance, December 31, 2019     59,731       994,453     $ 27.37       9.32     $  
Authorized                                    
Granted     (68,250 )     68,250     $ 0.366       9.54          
Exercised               $                  
Forfeitures     58,713       (58,713 )   $ 37.50       8.88          
Balance, September 30, 2020     50,194       1,003,990     $ 24.96       8.62     $  
Vested or expected to vest, September 30, 2020             975,720     $ 75.93       7.53     $  
Exercisable at September 30, 2020             321,146     $ 75.93       7.53     $  

 

Information with respect to stock options outstanding and exercisable at September 30, 2020 is as follows:

 

Exercise Price   Shares     Exercisable  
$0.29 - $0.31     625,500        
$3.39 – $3.72     45,539       45,539  
$4.34 – $7.05     267,889       211,639  
$16.35 – $97.50     47,888       46,808  
$222.00 - $225.00     1,871       1,871  
$348.00 – $597.00     4,801       4,800  
$651.00 – $1,129.50     3,431       3,418  
$1,992.00 - $2,268.00     6,736       6,736  
$4,156.50 - $4,371.00     335       335  
      1,003,990       321,146  

  

The Company uses the Black-Scholes option-pricing model to estimate the fair value of stock options at the grant date. The Black-Scholes model requires the Company to make certain estimates and assumptions, including estimating the fair value of the Company’s Common Stock, assumptions related to the expected price volatility of the Common Stock, the period during which the options will be outstanding, the rate of return on risk-free investments and the expected dividend yield for the Company’s stock.

 

As of September 30, 2020, there was $433,000 of unrecognized compensation expense related to the unvested stock options issued from April 24, 2013 through September 30, 2020, which is expected to be recognized over a weighted-average period of approximately 1.92 years. 

 

18

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

8.  Stock-Based Compensation (Continued)

 

The weighted-average assumptions underlying the Black-Scholes calculation of grant date fair value include the following:

 

    Nine Months ended September 30,  
    2020     2019  
Risk-free interest rate     0.44 %     2.27 %
Expected volatility     106.38 %     83.68 %
Expected term      6.00 years        6.25 years  
Expected dividend yield     0 %     0 %
Weighted average grant date fair value   $ 0.25     $ 12.60  
                 

 

The weighted-average valuation assumptions were determined as follows:

 

· Risk-free interest rate: The Company based the risk-free interest rate on the interest rate payable on U.S. Treasury securities in effect at the time of grant for a period that is commensurate with the assumed expected option term.

 

· Expected term of options: Due to its lack of sufficient historical data, the Company estimates the expected life of its employee stock options using the “simplified” method, as prescribed in Staff Accounting Bulletin (SAB) No. 107, whereby the expected life equals the arithmetic average of the vesting term and the original contractual term of the option.

 

· Expected stock price volatility:  Expected volatility is based on the historical volatility of the Company’s Common Stock since its IPO in July 2013.

 

· Expected annual dividend yield: The Company has never paid, and does not expect to pay, dividends in the foreseeable future.  Accordingly, the Company assumed an expected dividend yield of 0.0%.

 

· Estimated forfeiture rate: The Company’s estimated annual forfeiture rate on stock option grants was 4.14% in 2020 and 2019, based on the historical forfeiture experience.

  

Grants of PSUs and SARs

 

On July 9, 2020, the compensation committee of the board of directors and the board approved a cash bonus program of cash-settled stock appreciation right (“SAR”) awards and cash-settled performance stock unit (“PSU”) awards to the Company’s employees. An aggregate of SAR awards with respect to 3,850,700 shares of common stock and PSU awards with respect to 1,863,300 shares of common stock were granted to the Company’s employees. The SAR awards will be settled in cash, vest 33% on the first anniversary of the date of grant, and the remaining 67% monthly over the next 24 months, have a per-share base amount of $0.56, which was the closing sales price of a share of the Company’s common stock on the grant date, and are in all cases subject to the terms and conditions of the Company’s form of SAR award agreement. The PSU awards vest 50% upon the submission of a new drug application (“NDA”) to the U.S. FDA for rigosertib in higher-risk myelodysplastic syndromes (“HR-MDS”) and 50% upon U.S. FDA approval of rigosertib for HR-MDS. The PSU awards have a maximum value of $1.44 per share. The maximum price per share is the per-share value based on the Company’s market capitalization at $250 million and the Company’s outstanding shares of common stock, which was 174,177,448 shares on July 9, 2020. In all cases, the PSU awards are subject to the terms and conditions of the Company’s form of PSU award agreement.

 

In addition, on July 9, 2020, based on the recommendation of the compensation committee, the board approved a change in the non-employee director compensation policy that would provide for an annual SAR award with respect to 125,000 shares of common stock for each of the Company’s non-employee directors. No other changes to the non-employee director compensation policy were approved and, on July 9, 2020, the Board approved the initial 125,000 SAR award to each of the non-employee directors, totaling 875,000 SARs. The SAR awards vest on the first anniversary of grant subject to the director’s continued service and will be settled in cash, have a per-share base amount of $0.56, and are in all cases subject to the terms and conditions of the Company’s form of SAR award agreement.

 

19

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

8.  Stock-Based Compensation (Continued)

 

 

Each SAR subject to an SAR award represents the right to a cash payment equal to the excess, if any, of (i) the fair market value of each underlying share of the Company’s common stock, determined on the date of exercise of the SAR minus (ii) the base amount. Pursuant to the terms of the SAR awards, in no event may the cash payment for each SAR exceed $0.88, which is the maximum price per share of $1.44, minus the base amount of $0.56, subject to adjustment in accordance with the terms of the Stock Appreciation Right Award Agreement. The maximum price per share is the per-share value based on the Company’s market capitalization at $250 million and the Company’s outstanding shares of common stock, which was 174,177,448 shares on July 9, 2020.

 

The SAR and PSU awards are classified as liability awards and are remeasured at fair value each reporting period until they are settled. The fair value of the SAR and PSU awards were estimated using the Black-Scholes option pricing model. As of September 30, 2020, the total expense and liability recognized related to the vested SAR awards was de-minimus. The performance conditions related to the PSU awards are not probable of achievement, and accordingly, no compensation expense has been recognized to date for these awards.

 

At September 30, 2020, there was $111,000 unrecognized compensation costs related to the unvested SARs. These costs are expected to be recognized over a period of approximately three years.

 

9. Research Agreements

 

The Company has entered into various licensing and right-to-sublicense agreements with educational institutions for the exclusive use of patents and patent applications, as well as any patents that may develop from research being conducted by such educational institutions in the field of anticancer therapy, genes and proteins. Results from this research have been licensed to the Company pursuant to these agreements. Under one of these agreements with Temple University (“Temple”), the Company is required to make annual maintenance payments to Temple and royalty payments based upon a percentage of sales generated from any products covered by the licensed patents, with minimum specified royalty payments. As no sales had been generated through September 30, 2020 under the licensed patents, the Company has not incurred any royalty expenses related to this agreement. In addition, the Company is required to pay Temple a percentage of any sublicensing fees received by the Company.

 

20

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

10. License and Collaboration Agreement

 

HanX Rigosertib Agreement (terminated)

 

 

On May 10, 2019, the Company entered into a License and Collaboration Agreement (the "HanX License Agreement") with HanX and two Securities Purchase Agreements (the "HanX Securities Purchase Agreements"), one with HanX and the other with an affiliate of HanX.

 

Under the terms of the HanX License Agreement, the Company granted HanX an exclusive, royalty-bearing license, with the right to sublicense, to study and commercialize rigosertib in greater China (the "HanX Territory," including the People's Republic of China, Hong Kong, Macau and Taiwan).

 

In exchange for these rights, the agreement required HanX to make upfront payments to the Company totaling $4 million, including a $2.0 million upfront fee and an investment totaling $2.0 million to purchase shares of the Company at a premium to market. HanX was also required to dedicate $2.0 million in local currency, to be placed in escrow, for clinical development expenses in the HanX Territory. In addition, the agreement provided for potential payments to the Company for regulatory, development and sales-based milestone payments up to $45.5 million and tiered royalties up to double digits on net sales in in the HanX Territory. The Company would supply rigosertib for sale in the HanX Territory.

 

The HanX License Agreement also contained certain provisions for termination by either party in the event of breach of the HanX License Agreement by the other party, subject to a cure period, or bankruptcy of the other party.

 

Under the terms of the HanX Securities Purchase Agreement, HanX and its affiliate agreed to make upfront equity investments in the Company at a specified premium to the Company's share price. The common stock purchased by HanX and its affiliates is subject to certain lock-up restrictions and HanX and its affiliates are entitled to certain registration and participation rights.

 

The Company assessed the HanX License Agreement for revenue recognition in accordance with ASC 606 and determined that there are two distinct performance obligations: the license and the supply of rigosertib for sale in the HanX Territory. The Company concluded that control of the license had been transferred to HanX during the three months ended June 30, 2019 and recognized license revenue of $1.7 million, which is net of applicable taxes withheld by the Chinese government, related to the $2.0 million upfront fee. The Company believes a portion of the tax being withheld by the Chinese government may be recoverable at a later date and could be recognized as license revenue if and when recovered by the Company. The $1.7 million was recorded as a receivable at June 30, 2019 and the payment was received in August 2019.

 

Pursuant to the HanX Securities Purchase Agreements, closing of one of the upfront equity investments occurred on May 15, 2019 when an affiliate of HanX purchased 103,520 shares of common stock for $0.5 million. The total amount of the premium was $0.1 million and this amount was recognized as license revenue during the three months ended June 30, 2019. The remaining upfront equity investments represent equity-classified forward contracts for the purchase of the Company's equity at a pre-determined price. The premium of the future equity purchase from HanX as of the contract date of $0.2 million was recognized as license revenue during the three months ended June 30, 2019 and was included in other current assets, pending receipt of payment.

 

On July 9, 2019, the Company extended the deadline for payments under the HanX License Agreement and the HanX Securities Purchase Agreements. On August 8, 2019 the Company received the non-refundable license fee from HanX. On August 14, 2019, the Company further extended the deadline of HanX's remaining upfront payments relating to its equity investment in the Company while HanX continued to seek Chinese regulatory approval for such equity investment. In December 2019, the Company reassessed the likelihood of receiving the $0.2 million premium on the equity investment previously recorded as revenue. The Company reversed the $0.2 million revenue in December 2019.

 

On January 16, 2020, the Company determined HanX did not fulfill its obligations under the License Agreement and, in accordance with the terms of the License Agreement, the License Agreement was deemed to be void ab initio. Upon this termination, the rights to Product in the Territory reverted to the Company in accordance with the terms of the License Agreement. In addition, the Securities Purchase Agreements terminated automatically effective upon the termination of the License Agreement in accordance with the Securities Purchase Agreements.

 

21

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited) 

 

11. Related-Party Transactions

 

The Company entered into a research agreement, as subsequently amended, with the Mount Sinai School of Medicine (“Mount Sinai”), with which a former member of its board of directors and a stockholder is affiliated. The agreement expired in June 2020 and was not renewed. The board member left the Company’s board in August 2020. Mount Sinai performed research on behalf of the Company on the terms set forth in the agreements. Mount Sinai, in collaboration with the Company, will prepare applications for patents generated from the research. Results from all projects will belong exclusively to Mount Sinai, but the Company will have an exclusive option to license any inventions, resulting therefrom. Payments to Mount Sinai under this research agreement for the three months ended September 30, 2020 and 2019 were $0 and $88,000, respectively, and for the nine months ended September 30, 2020 and 2019 were $201,000 and $263,000, respectively. At September 30, 2020 and December 31, 2019, the Company had $77,000 and $150,000, respectively, payable to Mount Sinai under this agreement.

 

The Company entered into a consulting agreement with a member of its board of directors, which was cancelled in June 2020. The board member left the Company’s board in August 2020. The former board member provided consulting services to the Company on the terms set forth in the agreement. Payments to this former board member for the three months ended September 30, 2020 and 2019 were $0 and $33,000, respectively, and for the nine months ended September 30, 2020 and 2019 were $66,000 and $99,000, respectively. At September 30, 2020 and December 31, 2019, the Company had $0 and $33,000, respectively, payable under this agreement.

 

22

 

 

Onconova Therapeutics, Inc.

Notes to Condensed Consolidated Financial Statements (Continued)

(Unaudited)

 

12. Securities Registrations and Sales Agreements

 

January 2020 Offering

 

On December 31, 2019, the Company entered into definitive securities purchase agreements with institutional investors for the issuance and sale in a registered direct offering of 27,662,518 shares of the Company's common stock at an offering price of $0.3615 per share.

 

Pursuant to a December 2019 engagement letter with H. C. Wainwright & Co., HCW agreed to serve as exclusive placement agent for the offering. In connection with the offering, the Company paid HCW an aggregate cash fee equal to 7.0% of the gross proceeds in the offering, management fee equal to 1.0% of the gross proceeds raised in the offering, $85,000 for non-accountable expenses; and $10,000 for clearing fees. The Company also issued to HCW or its designees placement agent warrants to purchase up to 1,383,126 shares of common stock at an exercise price of $0.4519 per share. The placement agent warrants are immediately exercisable and will expire on December 31, 2023.

 

The net proceeds to the Company from the offering, after deducting HCW's placement agent fees and expenses and other estimated offering expenses payable by the Company were approximately $9.0 million and were received in January 2020.

 

The offering was pursuant to a prospectus dated December 28, 2017, and a prospectus supplement dated as of December 31, 2019 to be filed in connection with a takedown from the Company's shelf registration statement on Form S-3 (File No. 333-221684). The offering closed on January 3, 2020.

 

23

 

 

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations should be read in conjunction with interim unaudited condensed consolidated financial statements contained in Part I, Item 1 of this quarterly report, and the audited consolidated financial statements and notes thereto for the year ended December 31, 2019 and the related Management’s Discussion and Analysis of Financial Condition and Results of Operations, both of which are contained in our annual report on Form 10-K filed with the SEC on March 27, 2020. As used in this report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company” or “Onconova” refer to Onconova Therapeutics, Inc. and its consolidated subsidiaries.

 

Cautionary Note Regarding Forward-Looking Statements

 

This quarterly report on Form 10-Q includes forward-looking statements. We may, in some cases, use terms such as “believes,” “estimates,” “anticipates,” “expects,” “plans,” “intends,” “may,” “could,” “might,” “will,” “should,” “approximately” or other words that convey uncertainty of future events or outcomes to identify these forward-looking statements. Forward-looking statements appear in a number of places throughout this report and include statements regarding our intentions, beliefs, projections, outlook, analyses or current expectations concerning, among other things, our ongoing and planned preclinical development and clinical trials, the timing of and our ability to make regulatory filings and obtain and maintain regulatory approvals for our product candidates, protection of our intellectual property portfolio, the degree of clinical utility of our products, particularly in specific patient populations, our ability to develop commercial and manufacturing functions, expectations regarding clinical trial data, our results of operations, cash needs, financial condition, liquidity, collaborations, partnerships, prospects, growth and strategies, the industry in which we operate and the trends that may affect the industry or us.

 

By their nature, forward-looking statements involve risks and uncertainties because they relate to events, competitive dynamics and industry change, and depend on the economic circumstances that may or may not occur in the future or may occur on longer or shorter timelines than anticipated. Although we believe that we have a reasonable basis for each forward-looking statement contained in this report, we caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this report. In addition, even if our results of operations, financial condition and liquidity, and events in the industry in which we operate are consistent with the forward-looking statements contained in this report, they may not be predictive of results or developments in future periods.

 

Actual results could differ materially from our forward-looking statements due to a number of factors, including risks related to:

 

· our need for additional financing for our research and development, trials and other operations, and our ability to obtain sufficient funds on acceptable terms when needed, and our plans and future needs to scale back operations if adequate financing is not obtained;

 

· our ability to continue as a going concern;

 

· our estimates regarding expenses, future revenues, capital requirements and needs for additional financing;

 

· the success and timing of our preclinical studies and clinical trials, including site initiation and patient enrollment, and regulatory approval of protocols for future clinical trials;

 

· our ability to enter into, maintain and perform collaboration agreements with other pharmaceutical companies, for funding and commercialization of our clinical product candidates or preclinical compounds, and our ability to achieve certain milestones under those agreements;

 

· the difficulties in obtaining and maintaining regulatory approval of our product candidates, and the labeling under any approval we may obtain;

 

· our plans and ability to develop, manufacture and commercialize our product candidates;

 

· our failure to recruit or retain key scientific or management personnel or to retain our executive officers;

 

· the size and growth of the potential markets for our product candidates and our ability to serve those markets;

 

24

 

 

· regulatory developments in the United States and foreign countries;

 

· the rate and degree of market acceptance of any of our product candidates;

 

· obtaining and maintaining intellectual property protection for our product candidates and our proprietary technology;

 

· the successful development of our commercialization capabilities, including sales and marketing capabilities;

 

· recently enacted and future legislation and regulation regarding the healthcare system;

 

· the success of competing therapies and products that are or become available;

 

· our ability to maintain the listing of our securities on a national securities exchange;

 

· the potential for third party disputes and litigation;

 

· the performance of third parties, including contract research organizations (“CROs”) and third-party manufacturers; and

 

· the impact of the novel coronavirus disease, COVID-19, to the global economy and capital markets, and to our business and our financial results.

 

25

 

 

Any forward-looking statements that we make in this report speak only as of the date of such statement, and we undertake no obligation to update such statements to reflect events or circumstances after the date of this report or to reflect the occurrence of unanticipated events. Comparisons of results for current and any prior periods are not intended to express any future trends or indications of future performance, unless expressed as such, and should only be viewed as historical data.

 

You should also read carefully the factors described in the “Risk Factors” in our most recent annual report on Form 10-K and quarterly reports on Form 10-Q, to better understand significant risks and uncertainties inherent in our business and underlying any forward-looking statements. As a result of these factors, actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements in this report and you should not place undue reliance on any forward-looking statements.

 

Overview

 

We are a clinical-stage biopharmaceutical company focused on discovering and developing novel small molecule product candidates primarily to treat cancer. We have proprietary targeted agents designed to inhibit cellular pathways important to cancer cells. In August 2020, our Phase 3 INSPIRE trial concluded after the primary endpoint failed to demonstrate an improvement in survival. We are currently evaluating other compounds in our pipeline and potential compounds for in-licensing opportunities. We believe that the product candidates in our pipeline have the potential to be efficacious in a variety of cancers with unmet medical need. We have the following two clinical-stage programs: 1. ON 123300 in solid tumors; and 2. oral rigosertib alone or in combination with PD-1 inhibitors for treatment of KRAS-mutated solid tumors.

 

Our recent efforts have been primarily focused on our product candidate, rigosertib, for patients with myelodysplastic syndromes ("MDS"). Rigosertib has been tested in an intravenous formulation as a single agent for patients with relapsed/refractory higher-risk MDS (“HR-MDS”), and an oral formulation as a single agent in lower risk MDS or in combination with azacitidine for patients with newly diagnosed or refractory HR-MDS.

 

In December 2015, we enrolled the first patient into our INSPIRE trial, a randomized controlled Phase 3 clinical trial of intravenous rigosertib ("rigosertib IV") in a population of patients with HR-MDS after failure of hypomethylating agent ("HMA") therapy. The primary endpoint of INSPIRE was improvement in overall survival. We completed enrollment of the required 360 randomized patients in March 2020, and in July 2020, the required number of survival events was reached.

 

On August 24, 2020, we announced topline results from the INSPIRE trial, which assessed the efficacy and safety of IV rigosertib in HR-MDS patients. The trial did not meet its primary endpoint of improved survival for patients randomized to IV rigosertib compared to the control arm .

 

The primary endpoint of the trial was overall survival, comparing IV rigosertib plus best supportive care to physician's choice (“PC”) plus best supportive care in patients who had progressed on, failed to respond to, or relapsed after previous treatment with an HMA within nine cycles over the course of one year after initiation of HMA treatment. A pre-specified analysis in the very high risk (“VHR-MDS”) patient subgroup was also conducted. Results of INSPIRE demonstrated that in the intent-to-treat analysis patients randomized to IV rigosertib resulted in overall survival of 6.4 months, versus 6.3 months for PC (Hazard ratio 1.13, 95% Confidence interval 0.88-1.46; p=0.33) in the HR-MDS population. Overall survival in the pre-specified VHR-MDS subgroup of patients was identical in the two study arms (5.2 months) (Hazard ratio 1.12, 95% Confidence interval 0.83-1.51; p=0.47). Safety analysis indicates that IV rigosertib was generally well tolerated, with reported adverse events similar to those observed in previous clinical studies with IV rigosertib in MDS. Serious adverse events (“SAEs”) were uncommon, with a similar profile of SAEs in both study arms.

 

Currently, we are conducting genomics profiling of samples from patients enrolled in the INSPIRE trial. These data may provide new insights into the prognosis of HR MDS with mutations of the RAS pathway and importantly into the future treatment of RAS-mutated diseases such as inherited Rasopathies and Ras-mutated cancers.

 

Based on the results of the INSPIRE trial and the previously conducted ONTIME Phase 3 trial, we currently do not plan to further pursue intravenous rigosertib for treating HR-MDS. We plan to continue to focus on the other programs in our pipeline, including oral rigosertib in KRAS mutated cancers and our novel CDK4/6 + ARK5 multi kinase inhibitor ON 123300. We will direct our efforts to these programs and are also reviewing potential in-licensing opportunities.

 

Our net losses were $18.7 million and $15.8 million for the nine months ended September 30, 2020 and 2019, respectively. As of September 30, 2020, we had an accumulated deficit of $422.1 million. We expect to incur significant expenses and operating losses for the foreseeable future as we continue the development and clinical trials of, and seek regulatory approval for, our product candidates, even if milestones under our license and collaboration agreements may be met. As of September 30, 2020, we had $24.2 million in cash and cash equivalents. 

 

26

 

 

We believe that our cash and cash equivalents of $24.2 million, at September 30, 2020, will be sufficient to fund our operations and ongoing trials into the first quarter of 2022. We do not have a recurring source of revenue to fund our operations and will need to raise additional funds to continue to develop and apply for regulatory approval for our drug candidates.

 

We are exploring various sources of funding for development and applying for regulatory approval of our research compounds as well as for our ongoing operations. If we raise additional funds through strategic collaborations and alliances or licensing arrangements with third parties, which may include existing collaboration partners, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms that are not favorable to us. There can be no assurance, however, that we will be successful in obtaining such financing in sufficient amounts, on terms acceptable to us, or at all.  In addition, there can be no assurance that we will obtain approvals necessary to market our product candidates or achieve profitability or sustainable, positive cash flow. If we are unable to successfully raise sufficient additional capital, through future financings or through strategic and collaborative arrangements, we will not have sufficient cash to fund our ongoing trials and operations.

  

27

 

  

Product Candidates / Compounds

 

ON 123300 - Cyclin Dependent Kinases (CDK) 4/6 and ARK5 Inhibitor

 

We believe based on data from preclinical studies, that ON 123300 has the potential to overcome the limitations of the current generation of approved cyclin dependent kinase (CDK 4/6) inhibitors. Pursuant to a license agreement with Temple University dated January 1, 1999 as amended March 21, 2013, we licensed compounds including ON 123300 from Temple University. ON 123300 monolactate (ON 123300) is a novel multi kinase inhibitor that targets both CDK4/6 as well as ARK5 (NUAK1). ARK5 regulates AKT dependent cell survival and migration (perhaps involved with metastases) through inhibition of cellular metabolism. The combination of CDK and ARK5 inhibitors in the same molecular entity is proposed to have a differentiated multi-kinase effect on cancer cells by simultaneously inhibiting both cell cycle (cytostatic) and cellular metabolism (cytotoxic) pathways through CDK and ARK5, respectively. We and our partner HanX Biopharmaceuticals recently have initiated clinical studies to begin evaluating whether these findings from preclinical studies may translate to clinical activity or clinical benefits in cancer patients.

 

The effectiveness of first-generation non-selective CDK inhibitors (Selicilib/roscovitine and Alvocidib/flavopiridol) in early trials was limited due to toxicities (Blachly 2013). Second-generation compounds (palbociclib, ribociclib and abemaciclib) specifically inhibit CDK4 and 6, thereby inhibiting retinoblastoma (RB) protein phosphorylation. The second generation CDK4/6 inhibitors have substantially improved clinical outcomes for patients with hormonal-receptor (HR) positive metastatic breast cancer (Hortobagyi 2018, Sledge 2017, Finn 2016). Several CDK4/6 inhibitors have recently been approved and are now standard of care in combination with hormonal therapy for patients with HR-positive, HER2-negative metastatic breast cancer.

 

In December 2017, we entered into a license and collaboration agreement with HanX Biopharmaceuticals, a company focused on development of novel oncology products, for the further development, registration and commercialization in China of ON 123300. Under the terms of the agreement, we received an upfront payment, and will receive regulatory and commercial milestone payments, as well as royalties on any future Chinese sales if the drug is approved. The key feature of the 2017 collaboration was that HanX provided all funding required for the Chinese IND thereby enabling the studies necessary in order to seek IND approval by the Chinese Food and Drug Administration (Chinese FDA). In the fourth quarter of 2019, HanX filed an IND with the Chinese FDA which was approved on January 6, 2020. We and HanX also intended for these studies underlying the Chinese IND approval, to meet the US FDA standards for IND approval. Accordingly, such studies may be used by us for an IND filing with the US FDA. In September 2020, a Phase 1 Study with ON123300 in cancer patients was initiated in China. We maintain global rights to the study and study data outside of China.

 

Our IND submission to the US FDA is planned by the end of 2020 with enrollment into a first in human (FIH) study anticipated for the first quarter of 2021. The study will assess the safety, tolerability and pharmacokinetics of ON 123300 administered orally at increasing doses starting at 40 mg daily for consecutive 28-day cycles in patients (n=36) with relapsed/refractory advanced cancer, including but not limited to, patients with breast cancer that is resistant to approved second generation CDK 4/6 inhibitors as well as patients diagnosed with advanced Non-Hodgkin’s lymphoma. In partnership with HanX, a complimentary Phase 1 study for patients with advanced relapsed/refractory cancer has been initiated in China at two sites and the first patient was enrolled on September 15, 2020. Collectively, these two Phase 1 studies are expected to provide data regarding the safety profile of ON 123300 and preliminary efficacy signals in patients with advanced cancer.

 

Positive preclinical data was announced at the American Association for Cancer Research (AACR) annual meeting, which took place April 1-5, 2017 in Washington, DC, for ON 123300, a first-in-class dual inhibitor of CDK4/6 + ARK5. We believe our CDK inhibitor is differentiated from other agents in the market or in development due to its dual inhibition of CDK4/6 and ARK5.

 

Retinoblastoma (Rb) protein is a master regulator of cell division and is critical to several cellular processes including senescence, self-renewal, replication and apoptosis (Engel, 2015). It is believed that inactivation of Rb by CDKs leads to malignant cell formation and occurs in the pathogenesis of most cancers. In a preclinical Retinoblastoma (Rb) positive xenograft model for breast cancer, ON 123300 activity was shown to be similar to palbociclib (Pfizer's Ibrance ®. Moreover, based on the same preclinical model, ON 123300 may have the potential advantage of reduced neutropenia when compared to palbociclib. Whereas both compounds resulted in decreased RBC and platelet counts in this preclinical model system, palbociclib was found to have a more prominent and statistically significant (P< 0.05) inhibitory effect on neutrophil counts when compared to ON 123300. These results would need to be replicated in the human model.

 

28

 

  

In certain in vitro models, the kinase inhibitory profile of ON 123300 had the highest activity against CDK4, CDK6, ARK5, FGFR1, PDGFRß and PI3K-δ, all of which are associated with the growth, survival and metastasis of human tumor cells (Reddy, 2014). In an in vitro investigation of ON 123300 against a broad spectrum of human tumor cell lines, ON 123300 displayed potent antiproliferative activity, with 50% growth inhibitory concentrations (GI50) ranging from 0.02 µM to 1.5 µM. In these in vitro models, ON 123300 exhibited a broad range of activity against a wide spectrum of cell lines of both hematological origin (lymphoma, leukemia and myeloma) as well as solid tumors derived from multiple organ sites. Studies on drug-resistant human tumor cell lines suggested that ON 123300 is not a multidrug resistance gene (mdr1) substrate and may be active against drug-resistant tumor cell lines (IBv.1 2020; Reddy, 2014). The activity of ON 123300 does not appear to be affected by the overexpression of MDR-1 and induced apoptosis in both ibrutinib-sensitive and ibrutinib-resistant patient derived cells (Divakar, 2016). The ability of ON 123300 to inhibit the CDK4/6/RB1 pathway has also been shown in pre-clinical testing of mantle cell lymphoma (Divakar, 2016), multiple myeloma (Perumal, 2016) and colorectal cancer (IBv.1 2020).

 

In vitro studies compared the growth inhibitory activity of ON 123300 and palbociclib in breast cancer cell lines with mutated or deleted RB, which demonstrated resistance to palbociclib but retained sensitivity towards ON 123300 (IBv.1 2020). Further analyses using mantle cell lymphoma cells indicated that ON 123300 was able to induce cell death via induction of apoptosis by inhibiting the AKT/PI3K pathway while palbociclib treatment was only able to induce cell cycle arrest due to the inhibition of CDK4/6 (Divakar, 2016). ON 123300 treatment was associated with the presence of several apoptotic markers (PARP, caspase 3, caspase 7 and caspase 9) and ON 123300 (but not palbociclib) led to the generation of apoptotic cells. Overall, apoptosis following ON 123300 exposure has been observed in the following cell lines: breast cancer (IBv.1 2020, Reddy, 2014), mantle cell lymphoma (Divakar, 2016), multiple myeloma (Perumal, 2016) and colorectal cancer (IBv.1 2020).

 

In addition to CDK4/6 and PI3 Kinase, ON 123300 may inhibit ARK5 (NUAK1) (IC50 of 4.95 nM) (IBv.1 2020, Reddy, 2014) while palbociclib does not. ARK5 is a member of the AMP-activated protein kinase (AMPK) family and is thought to function as a key regulator of cellular energy homeo-stasis (Liu, 2012) and is important in a number of cancer cell survival pathways. Overexpression of ARK5 is associated with poor prognosis in hepatocellular carcinoma (Cui, 2013), ovarian cancers (Phippen, 2016) and glioblastoma (Lu, 2013). ARK5 is involved in the increased invasiveness, migration and metastatic potential of breast cancer cells (Chang, 2012), colorectal cancer (Kusakai, 2004), gastric cancer (Chen, 2017), and multiple myeloma (Suzuki et al., 2005). ON 123300 inhibits ARK5 resulting in down regulation of the mTOR/MYC/RB1 pathways leading to cell cycle arrest and apoptosis.

 

Because ARK5 activity is now recognized as crucial in promoting cancer cell migration and invasion (Kusaki, 2004) the effect of ON 123300 treatment may have an impact on cell migration and wound healing. In certain in vitro models, ON 123300 was able to inhibit the percent migration of U87 cells in a concentration-dependent manner. The time and concentrations that were tested did not result in cell death but did inhibit cell division at the higher concentrations (IBv.1 2020). The ability of ON 123300 to inhibit cell migration was compared to palbociclib using a wound healing model. Triple negative cancer cell migration was inhibited for 72 hours in the presence of ON 123300 but not in the presence of palbociclib (IBv.1 2020).

 

The pathogenesis and progression of breast cancer is linked to C-Myc expression which is subsequently dependent on ARK5 activity. The inhibition of ARK5 has been shown to be lethal in MYC overexpressing tumors (Liu, 2012) and targeting ARK5 in the inhibitory profile of ON 123300 has the potential to overcome the emergence of resistance to CDK4/6 inhibitors due to the loss of retinoblastoma function and C-Myc overexpression. Preclinical studies with tumor cell lines suggest that several malignancies including HR-positive breast cancer, colorectal carcinoma, hepatocellular carcinoma, mantle cell lymphoma and multiple myeloma, may be clinically responsive to ON 123300 exposure (Reddy, 2014, Divakar, 2016, Perumal, 2016). Furthermore, ON 123300 has been tested in five murine xenograft models (breast cancer including triple negative disease, colorectal, mantle cell lymphoma and multiple myeloma) and was found to have on-target activity and be non-toxic to the animals (Reddy, 2014; Divakar, 2016; Perumal, 2016; and IBv.1 2020).

 

Cancer cells can lose RB function through mutation and become resistant or insensitive to palbociclib. The mechanism of action of these second generation agents is primarily cytostatic and not cytotoxic. Generally, these second generation agents have not been shown to be suitable for single agent therapy and must be used in combination with hormonal therapy due to limitations of the cytostatic mechanism. In addition, the rate of disease progression that occurs, especially in patients with visceral disease (Hortobagyi 2018), may benefit from the novel dual inhibitory effects of ON 123300.

 

Unfortunately, mechanisms of acquired resistance are emerging with the approved CDK4/6 inhibitors leading to progression in patients with breast cancer (Spring, 2019; Knudsen, 2020). Therefore, the unmet medical need supports development of the next (third) generation CDK4/6 inhibitors in advanced HR+/HER- breast cancer. The dual inhibitory effect of ON 123300 may provide a therapeutic strategy to optimize efficacy of CDK 4/6 inhibition and reduce emergence of resistance.

 

29

 

  

ON 123300 has the most favorable IC50 value in comparison to the approved CDK4/6 inhibitors (palbociclib, ribociclib, and abemaciclib) and highest single agent cytotoxicity (Perumal, 2016, Divakar, 2016).

 

Based on data from continuous dosing studies in rats and monkeys the safety profile of ON 123300 is anticipated to be similar to the approved CDK4/6 inhibitors with myelosuppression and gastrointestinal toxicity being most common. Management of these adverse events will follow that used for the approved CDK 4/6 inhibitors. We believe that the proposed mechanism of action of ON 123300, the unmet medical need of the advanced cancers potentially targeted by ON 123300 and the anticipated safety profile of ON 123300, support conducting a first in human Phase 1 study as rational next step.

 

Clinical development of ON 123300 for both breast cancer as well as other solid tumors in clinical trials is warranted based on the preclinical in vitro studies as well as the xenograft models. Onconova plans to begin testing the hypothesis that ON 123300 will demonstrate improved activity and/or safety in patients with advanced life-threatening malignancies compared to compounds that target only CDK4/6.

  

Oral Rigosertib and PD-1 Combination in KRAS-Mutated Cancers

 

  We are currently supporting investigator-initiated studies that are exploring the use of rigosertib for other cancers (KRAS mutated non-small cell lung cancer (NSCLC) and metastatic melanoma) driven by mutated Ras genes, including a Phase 1 study of rigosertib in combination with a PD-1 inhibitor for patients with progressive K-Ras mutated NSCLC. The investigator of that Phase 1 study opened an IND application with the US FDA and has received local IRB approval. The study has enrolled its first five patients to date. The objectives of this study are to identify the recommended Phase 2 dose (RP2D) for future studies and characterize the safety profile of the combination treatment. Results are expected in 2021. A preclinical study is also currently investigating rigosertib in clear cell renal carcinoma (ccRCC).An investigator-initiated Phase 1b/2 study with rigosertib monotherapy in advanced squamous cell carcinoma associated with recessive dystrophic epidermolysis bullosa (RDEB-SCC) has been opened.

  

30

 

  

Rare Disease Program in "RASopathies"

 

Based on the mechanism of action data published in the journal Cell in 2016, we have initiated a collaborative development program focusing on a group of rare diseases with a well-defined molecular basis in expression or defects involving the Ras effector pathways. Since RASopathies are rare congenital diseases affecting young children, we embarked on a multifaceted collaborative program involving patient advocacy, government and academic organizations. RASopathies are usually caused by germline mutations in genes that alter the RAS subfamily and mitogen-activated protein kinases (MAPK) that control signal transduction and are among the most common genetic syndromes. Together, this group of diseases can impact more than 1 in 1,000 individuals, according to RASopathies.Net.

 

In January 2018, we entered into a Cooperative Research and Development Agreement (CRADA) with the National Cancer Institute (NCI), which is part of the National Institutes of Health (NIH). Under the terms of the CRADA, the NCI initiated and conducted preclinical laboratory studies on rigosertib in pediatric cancer associated RASopathies. As part of the CRADA, we provided rigosertib and initial funding towards the non-clinical studies. The NCI has conducted studies in preclinical studies of with cell lines from two pediatric solid tumors (rhabdomyosarcoma and neuroblastoma), including xenograft models. For both tumor cell lines, in vitro rigosertib exposure was associated with reduced cell viability associated with destabilization of microtubules, mitotic arrest and apoptosis. In a rhabdomyosarcoma xenograft model, rigosertib treatment had a delayed time to tumor progression and prolonged survival in the animals treated with rigosertib.

 

Studies using leukemia cells from the rare childhood RASopathy, known as Juvenile Myelomonocytic Leukemia (JMML), have been conducted. In preliminary in vitro studies performed at Notable Labs, JMML cell killing was observed following rigosertib exposure. Murine xenograft studies performed at the University of California, San Francisco and funded through the Leukemia Lymphoma Society, evaluated rigosertib in this Ras-mutated disease. The results from these pre-clinical studies were equivocal. Further studies with JMML and rigosertib are under consideration.

 

31

 

  

COVID-19 Disease

 

In July 2020, based on initial in vitro data suggesting that rigosertib inhibited the replication of SARS-CoV-2 and rigosertib alone induces the dysregulation of RIG-I like receptor signaling (anti-viral defense pathway) and T cell exhaustion signaling in BW-90 cells (Silverman, Blood, Abstract # 4231, 2019), we submitted applications with the National Institute of Allergy and Infectious Disease (NIAID) and a separate application to the Biomedical Advanced Research and Development Authority (BARDA), with the goal of obtaining funding from the National Institutes of Health (NIH) to conduct human studies with rigosertib in COVID-19 patients. Based on the reported mechanism of action which modulates the RAS/RAF/MEK/ERK pathway involved in proliferative signaling, we believe rigosertib may play an important role in inhibiting COVID-19 replication in human cells and specifically lung tissue, which is a primary source of serious disease. We await responses to these submissions. Subsequently, other laboratories have studied rigosertib in COVID-19 models but were unable to replicate the results of the initial study. These preclinical studies are continuing in additional laboratories. We do not plan to begin clinical trials of rigosertib in patients with COVID-19, unless we receive funding.

 

As of now, some of our programs such as the development of briciclib and recilisib have been discontinued. Some of the studies on our compounds ON 123300 and rigosertib remain ongoing and conclusions and next steps will evolve as more data becomes available.

 

32

 

 

Critical Accounting Policies and Significant Judgments and Estimates

 

This management’s discussion and analysis of our financial condition and results of operations is based on our interim unaudited consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements. On an ongoing basis, we evaluate our estimates and judgments, including those related to accrued expenses, revenue recognition, deferred revenue and stock-based compensation. We base our estimates on historical experience, known trends and events and various other factors that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.  We believe there have been no significant changes in our critical accounting policies as discussed in our annual report on Form 10-K filed with the SEC on March 27, 2020.

 

The full extent to which COVID-19 will directly or indirectly impact our business, results of operations and financial condition, including expenses and manufacturing, clinical trials and research and development costs, depends on future developments that are highly uncertain at this time.

  

33

 

 

Results of Operations

 

Comparison of the Three Months Ended September 30, 2020 and 2019

  

    Three Months Ended September 30,        
    2020     2019     Change  
Revenue   $ 66,000     $ 63,000     $ 3,000  
Operating expenses:                        
    General and administrative     2,147,000       1,640,000       (507,000 )
    Research and development     4,193,000       3,521,000       (672,000 )
       Total operating expenses     6,340,000       5,161,000       (1,179,000 )
Loss from operations     (6,274,000 )     (5,098,000 )     (1,176,000 )
Change in fair value of warrant liability     56,000       476,000       -  
Other (loss) income, net     (23,000 )     27,000       (50,000 )
Net loss   $ (6,241,000 )   $ (4,595,000 )   $ (1,226,000 )

  

Revenue

 

Revenues increased by $3,000, or 5%, for the three months ended September 30, 2020 when compared to the same period in 2019 because of slightly higher clinical supply revenue from SymBio in the 2020 period.

 

General and administrative expenses

 

General and administrative expenses increased by $0.5 million, or 31%, to $2.1 million for the three months ended September 30, 2020 from $1.6 million for the three months ended September 30, 2019. The increase was attributable to $0.3 million of commercialization preparation expenses and $0.2 million higher insurance costs in the 2020 period.

 

Research and development expenses

 

Research and development expenses increased by $0.7 million, or 19%, to $4.2 million for the three months ended September 30, 2020 from $3.5 million for the three months ended September 30, 2019. This increase was caused primarily by $0.7 million higher consulting expenses for regulatory consultants working on our new drug application (“NDA”) preparations and $0.2 million manufacturing costs related to clinical supply for ON123300, our pre-IND product candidate. These increases were partially offset by $0.2 million lower expenses for our oral rigosertib combination program and INSPIRE.

 

Change in fair value of warrant liability

 

The fair value of the warrant liability increased $56,000 for the three months ended September 30, 2020, compared to an increase of $476,000 for the three months ended September 30, 2019. This change was caused by a decrease in the 2020 period of the fair market value of the warrants issued in our rights offering in 2016.

 

Other income (expense), net

 

Other income (expense), net, was $23,000 of expense for the three months ended September 30, 2020 and $27,000 of income for the three months ended September 30, 2019.  The change of $50,000 was due to $35,000 higher foreign exchange expense and $15,000 lower interest income in the 2020 period.

 

34

 

 

Comparison of the Nine Months Ended September 30, 2020 and 2019

 

    Nine Months Ended September 30,        
    2020     2019     Change  
Revenue   $ 174,000     $ 2,153,000     $ (1,979,000 )
Operating expenses:                        
    General and administrative     6,548,000       6,634,000       86,000  
    Research and development     12,364,000       11,490,000       (874,000 )
       Total operating expenses     18,912,000       18,124,000       (788,000 )
Loss from operations     (18,738,000 )     (15,971,000 )     (2,767,000 )
Gain on dissolution of GBO     -       -       -  
Change in fair value of warrant liability     (63,000 )     80,000       (143,000 )
Other income, net     73,000       135,000       (62,000 )
Net loss   $ (18,728,000 )   $ (15,756,000 )   $ (2,972,000 )

 

Revenue

 

Revenues decreased by $2.0 million, or 92%, for the nine months ended September 30, 2020 when compared to the same period in 2019 because of revenue recognized from the HanX rigosertib license agreement in the 2019 period

 

General and administrative expenses

 

General and administrative expenses decreased by $0.1 million, or 1%, to $6.5 million for the nine months ended September 30, 2020 from $6.6 million for the nine months ended September 30, 2019. The decrease was attributable to severance and stock option vesting acceleration expenses of $1.7 million related to personnel reductions during the 2019 period. This decrease was partially offset by $0.9 million higher legal, consulting, and investor relations fees related to our annual general meeting of stockholders and our reconvened annual general meeting of stockholders and $0.7 million of commercialization preparation expenses.

 

Research and development expenses

 

Research and development expenses increased by $0.9 million, or 8%, to $12.4 million for the nine months ended September 30, 2020 from $11.5 million for the nine months ended September 30, 2019. This increase was caused primarily by $1.4 million higher consulting expenses for regulatory consultants working on our new drug application (“NDA”) preparations, and by $0.8 million higher manufacturing costs related to our clinical supply for INSPIRE and for our ON123300 pre-IND product candidate. These increases were partially offset by $0.7 million lower clinical expenses on the combination program and INSPIRE, and $0.6 million lower personnel costs and stock compensation expense in the 2020 period following the reduction in force completed in the first quarter of 2019.

 

Change in fair value of warrant liability

 

The fair value of the warrant liability decreased $63,000 for the nine months ended September 30, 2020, compared to an increase of $80,000 for the nine months ended September 30, 2019. This change was caused by the decrease, during the 2020 period, in the fair market value of the warrants issued in our rights offering in 2016.

 

Other income (expense), net

 

Other income, net, was $73,000 for the three months ended September 30, 2020, and $135,000 for the nine months ended September 30, 2019, due primarily to $40,000 higher foreign exchange expense and $21,000 lower interest income in the 2020 period due to higher interest income and lower foreign exchange loss in the 2019 period.

 

35

 

 

Liquidity and Capital Resources

 

Since our inception, we have incurred net losses and experienced negative cash flows from our operations. We incurred net losses of $18.7 million and $15.8 million for the nine months ended September 30, 2020 and 2019, respectively.  Our operating activities used $17.6 million and $15.5 million of net cash during the nine months ended September 30, 2020 and 2019, respectively. At September 30, 2020, we had an accumulated deficit of $422.1 million, working capital of $15.7 million, and cash and cash equivalents of $24.2 million. We believe that our cash and cash equivalents as of September 30, 2020, will be sufficient to fund our operations and ongoing trials into the first quarter of 2022.

 

Cash Flows

 

The following table summarizes our cash flows for the nine months ended September 30, 2020 and 2019:

  

    Nine Months ended September 30,  
    2020     2019  
Net cash (used in) provided by:                
Operating activities   $ (17,607,000 )   $ (15,471,000 )
Investing activities     (15,000 )     (56,000 )
Financing activities     19,078,000       3,393,000  
Effect of foreign currency translation     16,000       (15,000 )
Net increase (decrease) in cash and cash equivalents   $ 1,472,000     $ (12,149,000 )

 

Net cash used in operating activities

 

Net cash used in operating activities was $17.6 million for the nine months ended September 30, 2020 and consisted primarily of a net loss of $18.7 million, including a decrease in the fair value of warrant liability of $0.1 million, and $0.3 million of both noncash stock-based compensation and depreciation expense. Changes in operating assets and liabilities resulted in a net increase in cash of $0.8 million. Significant changes in operating assets and liabilities included an increase in accounts payable and accrued liabilities of $1.0 million due to timing of invoices and payments to our vendors, partially offset by an increase in prepaid expenses and other current assets of $0.1 million, and a decrease in deferred revenue of $0.2 million due to recognition of the unamortized portion of the upfront payment under our collaboration agreement with SymBio.

 

Net cash used in operating activities was $15.5 million for the nine months ended September 30, 2019 and consisted primarily of a net loss of $15.8 million, including a decrease in fair value of warrant liability of $0.1 million, and $1.0 million of both noncash stock-based compensation and depreciation expense. Changes in operating assets and liabilities resulted in a net decrease in cash of $0.6 million. Significant changes in operating assets and liabilities included an increase in prepaid expenses and other current assets of $0.2 million, a decrease in accounts payable and accrued liabilities of $0.2 million due to timing of invoices and payments to our vendors, and a decrease in deferred revenue of $0.2 million due to recognition of the unamortized portion of the upfront payment under our collaboration agreement with SymBio.

 

Net cash used in investing activities

 

Net cash used in investing activities was $15,000 and $56,000 related to purchases of computer equipment during the nine months ended September 30, 2020, respectively.

 

Net cash provided by financing activities

 

Net cash provided by financing activities was $19.1 million for the nine months ended September 30, 2020 resulting from proceeds received from the sales of common stock and warrants and the exercise of warrants. There was $3.4 million of net cash provided by financing activities for the nine months ended September 30, 2019, $3.0 million as a result of the proceeds received from the sales of common stock and warrants and the exercise of warrants, and $0.4 million related to the issuance of stock in connection with the HanX rigosertib license transaction.

 

36

 

 

Operating and Capital Expenditure Requirements

 

We believe that our cash and cash equivalents of $24.2 million, at September 30, 2020, will be sufficient to fund our operations and ongoing trials into the first quarter of 2022. Following the unsuccessful conclusion of the INSPIRE trial, we have taken steps to reduce our cash expenditures. In September 2020, six employees, representing 26% of our staff, were terminated. These employees were primarily associated with the NDA preparation for the use of rigosertib in MDS. On October 30, 2020, we notified our landlord of our intention to not renew our office space lease which expires in February 2021. We are evaluating less expensive space alternatives, including having some or all employees work remotely.

 

On April 24, 2020, we filed a registration statement on Form S-3 to register $150.0 million of securities. We are exploring various dilutive and non-dilutive sources of funding, including equity and debt financings, strategic alliances, business development and other sources. If we are unable to obtain additional funding, we may not be able to continue as a going concern and may be forced to curtail all of our activities and, ultimately, potentially cease operations. If we are unable to raise sufficient additional funding, we will not have sufficient cash flows and liquidity to fund our planned business operations, and may be forced to limit many, if not all, of our programs and consider other means of creating value for our stockholders, such as licensing to others the development and commercialization of products that we consider valuable and would otherwise likely develop ourselves. Even if we are able to raise additional capital, such financings may only be available on unattractive terms, or could result in significant dilution of stockholders’ interests. The consolidated financial statements do not include any adjustments relating to recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might be necessary should we be unable to continue in existence.

 

We have not achieved profitability since our inception and we expect to continue to incur net losses for the foreseeable future. We expect our net cash expenditures in 2020 to be comparable to 2019. If any of our clinical trials are successful, we will incur substantial costs beyond the present and planned clinical trials. The nature, design, size, and cost of further studies will depend in large part on the outcome of preceding studies and discussions with regulators.

 

For additional risks, please see “Risk Factors” in Part II of this report and in previously disclosed in our most recent annual report on Form 10-K and our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020 and March 31, 2020.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

As a smaller reporting company, the Company is not required to provide the information otherwise required by this Item.

 

37

 

 

Item 4. Controls and Procedures

 

Managements’ Evaluation of our Disclosure Controls and Procedures

 

Our management, with the participation of our principal executive and principal financial officers, evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2020. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Based on the evaluation of our disclosure controls and procedures as of September 30, 2020, our principal executive and principal financial officers concluded that, as of such date, our disclosure controls and procedures were effective.

 

Changes in Internal Control Over Financial Reporting

 

Our management, with the participation of our principal executive and principal financial officers, evaluated any changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that occurred during our most recently completed fiscal quarter. Based on that evaluation, our principal executive and principal financial officers concluded that no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2020 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

 

38

 

 

PART II — OTHER INFORMATION

 

Item 1. Legal Proceedings

 

We are not party to any pending material legal proceedings and are not aware of any such proceedings contemplated by governmental authorities.

 

Item 1A. Risk Factors

 

The following risk factors should be read in conjunction with the “Risk Factors” previously disclosed in our annual report on Form 10-K filed with the SEC on March 27, 2020 and our Quarterly Reports on Form 10-Q for the quarters ended June 30, 2020 and March 31, 2020.

 

We may not comply with the Nasdaq continued listing requirements. If we are unable to comply with the continued listing requirements of the Nasdaq Capital Market, our Common Stock could be delisted, which could affect our Common Stock's market price and liquidity and reduce our ability to raise capital.

 

We are required to meet certain qualitative and financial tests to maintain the listing of our securities on The Nasdaq Capital Market. As of September 30, 2020, we were not in compliance with the Nasdaq continued listing requirements related to minimum bid price. As of September 30, 2020 we were in compliance with the Nasdaq continued listing requirements related to minimum stockholders' equity; however, at certain times during 2019 and 2018 we were not in compliance with this requirement.

 

On October 6, 2020, we received a letter from The Nasdaq Capital Market (“Nasdaq”) indicating that we failed to comply with the minimum bid price requirement of Nasdaq Listing Rule 5550(a)(2). Nasdaq Listing Rule 5550(a) (2) requires that companies listed on Nasdaq maintain a minimum closing bid price of at least $1.00 per share.

 

Under Nasdaq Listing Rule 5810(c)(3)(A), we have a 180 calendar day grace period, or until April 5, 2021, to regain compliance by meeting the continued listing standard. The continued listing standard will be met if the Company’s common stock has a minimum closing bid price of at least $1.00 per share for a minimum of ten consecutive business days during the 180 calendar day grace period.

 

If we are not in compliance by April 5, 2021, we may be afforded a second 180 calendar day period to regain compliance. To qualify, we would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for The Nasdaq Capital Market, except for the minimum bid price requirement. In addition, we would be required to notify Nasdaq of our intention to cure the minimum bid price deficiency during the second compliance period, by effecting a reverse stock split, if necessary.

 

If we do not regain compliance within the allotted compliance period(s), including any extensions that may be granted by Nasdaq, Nasdaq will provide notice that the Company’s common stock will be subject to delisting. At that time, we may appeal the Nasdaq Staff’s determination to a Nasdaq Hearings Panel.

 

We intend to monitor the closing bid price of the Company’s common stock and consider our available options to resolve the noncompliance with the minimum bid price requirement.

 

There can be no assurance that we will be able to regain compliance with the minimum bid price requirement or will otherwise be in compliance with other Nasdaq listing criteria.

 

If we are unable to maintain compliance with the continued listing requirements of the Nasdaq Capital Market, our Common Stock could be delisted, making it could be more difficult to buy or sell our securities and to obtain accurate quotations, and the price of our securities could suffer a material decline. Delisting could also impair our ability to raise capital.

 

39

 

 

The COVID-19 pandemic could adversely impact our business, including our clinical trials, drug manufacturing and nonclinical activities.

 

The COVID-19 virus continues to spread globally and, as of September 2020, has spread to nearly every country and region in the world, including those in which we have active clinical trial sites. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce, as worker shortages have occurred; supply chains have been disrupted; facilities and production have been suspended; and demand for certain goods and services, such as medical services and supplies, has spiked, while demand for other goods and services, such as travel, has fallen. In response to the spread of COVID-19, the majority of our corporate employees and our administrative employees are working remotely. As the COVID-19 pandemic continues to spread around the globe, we may experience disruptions that could severely impact our business, clinical trials, drug manufacturing and nonclinical activities, including:

 

· delays or difficulties in enrolling patients in our clinical trials, such as the previous temporary hold of enrollment in the investigator-initiated Phase 1 study of rigosertib in combination with a PD-1 inhibitor for patients with progressive K-Ras mutated non-small cell lung cancer;

 

· delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;

 

· diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;

 

· interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and study procedures, which may impact the integrity of subject data and clinical study endpoints;

 

· interruption or delays in the operations of the FDA or other regulatory authorities, which may impact review and approval timelines;

 

· interruption of, or delays in receiving, supplies of our product candidates from our contract manufacturing organizations due to staffing shortages, production slowdowns or stoppages and disruptions in delivery systems;

 

· delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and interruption in global shipping that may affect the transport of clinical trial materials;

 

· interruptions in nonclinical studies due to restricted or limited operations at our laboratory facility or those of our outsourced service providers;

 

· limitations on employee resources that would otherwise be focused on the conduct of our nonclinical studies or clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;

 

· delays in receiving approval from local regulatory authorities to initiate our planned clinical trials;

 

· changes in local regulations as part of a response to COVID-19 which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;

 

· delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees;

 

· refusal of the FDA to accept data from clinical trials in affected geographies outside the United States; and

 

· interruption or delays to our discovery and development pipeline.

 

40

 

 

In addition, the spread of COVID-19 may impact the trading price of shares of our common stock and could further severely impact our ability to raise additional capital on a timely basis or at all.

 

The COVID-19 pandemic continues to rapidly evolve. The extent to which the COVID-19 may impact our business, including our drug manufacturing, nonclinical activities, clinical trials and financial condition will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.

 

To the extent the COVID-19 pandemic adversely affects our business and financial results, it may also have the effect of heightening many of the other risks described in this section and in the “Risk Factors” section of our Annual Report on Form 10-K for the year ended December 31, 2019 and our Quarterly Reports on Form 10-Q for the quarters ended March 31, 2020, June 30, 2020 and September 30, 2020.

 

41

 

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

Grants of PSUs and SARs

 

On July 9, 2020, the compensation committee of the board of directors and the board approved a cash bonus program of cash-settled stock appreciation right (“SAR”) awards and cash-settled performance stock unit (“PSU”) awards to the Company’s employees. An aggregate of SAR awards with respect to 3,850,700 shares of common stock and PSU awards with respect to 1,863,300 shares of common stock were granted to the Company’s employees. The SAR awards will be settled in cash, vest 33% on the first anniversary of the date of grant, and the remaining 67% monthly over the next 24 months, have a per-share base amount of $0.56, which was the closing sales price of a share of the Company’s common stock on the grant date, and are in all cases subject to the terms and conditions of the Company’s form of SAR award agreement. The PSU awards vest 50% upon the submission of a new drug application (“NDA”) to the U.S. FDA for rigosertib in higher-risk myelodysplastic syndromes (“HR-MDS”) and 50% upon U.S. FDA approval of rigosertib for HR-MDS. The PSU awards have a maximum value of $1.44 per share. The maximum price per share is the per-share value based on the Company’s market capitalization at $250 million and the Company’s outstanding shares of common stock, which was 174,177,448 shares on July 9, 2020. In all cases, the PSU awards are subject to the terms and conditions of the Company’s form of PSU award agreement.

 

In addition, on July 9, 2020, based on the recommendation of the compensation committee, the board approved a change in the non-employee director compensation policy that would provide for an annual SAR award with respect to 125,000 shares of common stock for each of the Company’s non-employee directors. No other changes to the non-employee director compensation policy were approved and, on July 9, 2020, the Board approved the initial 125,000 SAR award to each of the non-employee directors. The SAR awards vest on the first anniversary of grant subject to the director’s continued service and will be settled in cash, have a per-share base amount of $0.56, and are in all cases subject to the terms and conditions of the Company’s form of SAR award agreement.

 

Each SAR subject to an SAR award represents the right to a cash payment equal to the excess, if any, of (i) the fair market value of each underlying share of the Company’s common stock, determined on the date of exercise of the SAR minus (ii) the base amount. Pursuant to the terms of the SAR awards, in no event may the cash payment for each SAR exceed $0.88, which is the maximum price per share of $1.44, minus the base amount of $0.56, subject to adjustment in accordance with the terms of the Stock Appreciation Right Award Agreement. The maximum price per share is the per-share value based on the Company’s market capitalization at $250 million and the Company’s outstanding shares of common stock, which was 174,177,448 shares on July 9, 2020.

 

The issuances of the securities described above were not registered under the Securities Act because they were made in transactions exempt from registration under Section 4(a)(2) of the Securities Act and/or Rule 506 promulgated thereunder.

 

Item 3. Defaults Upon Senior Securities

 

Not applicable.

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

Item 5. Other Information

 

Not applicable.

 

42

 

 

Item 6. Exhibits

 

Exhibit

Number

  Description
     
     
10.1   Form of Stock Appreciation Right Award Agreement (for Employees) (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 10, 2020).
10.2   Form of Stock Appreciation Right Award Agreement (for Non-Employee Directors).
10.3   Form of Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July10, 2020).
31.1   Rule 13a-14(a)/15d-14(a) Certifications of Principal Executive Officer
31.2   Rule 13a-14(a)/15d-14(a) Certifications of Principal Financial Officer
32.1   Section 1350 Certifications of Principal Executive Officer
32.2   Section 1350 Certifications of Principal Financial Officer
     
101.INS   XBRL Instance
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB   XBRL Taxonomy Extension Labels Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

43

 

 

EXHIBIT INDEX

 

Exhibit

Number

  Description
     
     
10.1   Form of Stock Appreciation Right Award Agreement (for Employees) (Incorporated by reference to Exhibit 10.1 to the Company's Current Report on Form 8-K filed on July 10, 2020).
10.2   Form of Stock Appreciation Right Award Agreement (for Non-Employee Directors).
10.3    Form of Performance Stock Unit Award Agreement (Incorporated by reference to Exhibit 10.2 to the Company's Current Report on Form 8-K filed on July10, 2020).
31.1   Rule 13a-14(a)/15d-14(a) Certifications of Principal Executive Officer
31.2   Rule 13a-14(a)/15d-14(a) Certifications of Principal Financial Officer
32.1   Section 1350 Certifications of Principal Executive Officer
32.2   Section 1350 Certifications of Principal Financial Officer
     
101.INS   XBRL Instance
101.SCH   XBRL Taxonomy Extension Schema Document
101.CAL   XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF   XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB   XBRL Taxonomy Extension Labels Linkbase Document
101.PRE   XBRL Taxonomy Extension Presentation Linkbase Document

 

44

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

  ONCONOVA THERAPEUTICS, INC.
   
Dated: November 16, 2020  
   
  /s/ STEVEN M. FRUCHTMAN, M. D.
  Steven M. Fruchtman, M.D.
  President and Chief Executive Officer
  (Principal Executive and Principal Operating Officer)
   
Dated: November 16, 2020  
   
  /s/ MARK GUERIN
  Mark Guerin
  Chief Financial Officer
  (Principal Financial Officer)

 

45

 

Onconova Therapeutics (NASDAQ:ONTX)
Historical Stock Chart
From Dec 2020 to Jan 2021 Click Here for more Onconova Therapeutics Charts.
Onconova Therapeutics (NASDAQ:ONTX)
Historical Stock Chart
From Jan 2020 to Jan 2021 Click Here for more Onconova Therapeutics Charts.