Item
2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The
following discussion and analysis contains forward-looking statements about our plans and expectations of what may happen in the
future. Forward-looking statements are based on a number of assumptions and estimates that are inherently subject to significant
risks and uncertainties, and our results could differ materially from the results anticipated by our forward-looking statements
as a result of many known or unknown factors, including, but not limited to, those factors discussed in “Risk Factors”
and incorporated by reference herein. See also the “Special Cautionary Notice Regarding Forward-Looking Statements”
set forth at the beginning of this report.
You
should read the following discussion and analysis in conjunction with the unaudited financial statements, and the related footnotes
thereto, appearing elsewhere in this report, and in conjunction with management’s discussion and analysis and the audited
financial statements included in our annual report on Form 10-K for the year ended October 31, 2017.
Overview
Advaxis
is a late-stage biotechnology company focused on the discovery, development and commercialization of proprietary
Lm
-based
antigen delivery products with the lead program in Phase 3 development. These immunotherapies are based on a platform technology
that utilizes live attenuated
Listeria monocytogenes
bioengineered to secrete antigen/adjuvant fusion proteins. Through
a license from the University of Pennsylvania, Advaxis has exclusive access to this proprietary formulation of attenuated
Lm
called
Lm
Technology. These
Lm
-based strains are believed to be a significant advancement in immunotherapy as
they integrate multiple functions into a single immunotherapy as they access and direct antigen presenting cells to stimulate
anti-tumor T cell immunity, stimulate and activate the immune system with the equivalent of multiple adjuvants, and simultaneously
reduce tumor protection in the tumor microenvironment to enable the T cells to eliminate tumors.
As the field of immunotherapy continues to
evolve, the flexibility of the
Lm
Technology platform has allowed Advaxis to develop highly innovative products. To date,
Lm
Technology has demonstrated preclinical synergy with multiple checkpoint inhibitors, co-stimulatory agents and radiation
therapy, with clinical trials currently underway or planned in combination with Merck & Co., Inc. (“Merck”), AstraZeneca
PLC (“AstraZeneca”), and Bristol-Myers Squibb Company’s (“BMS”) PD-1/PDL-1 inhibitors. The safety
profile of all of the
Lm
Technology constructs seen to date has been generally predictable and manageable, consisting
mostly of mild to moderate flu-like symptoms that have been transient and associated with infusion.
Advaxis
will continue to invest in its core clinical franchises and will also remain opportunistic based on Investigator Sponsored Trials
(“ISTs”) as well as licensing opportunities. Our proprietary
Lm
Technology platform is protected by a range
of patents, covering both product and process, some of which we believe can be maintained into 2038.
HPV
Related Cancers
We
have developed a franchise in HPV-related cancers based on axalimogene filolisbac, an
Lm
–based antigen delivery product
designed to target cells expressing HPV. Axalimogene filolisbac is currently under investigation in three HPV-associated cancers:
cervical cancer, head and neck cancer, and anal cancer, either as a monotherapy or in combination with other therapies.
The
Company has decided to align and simplify its strategy by using axalimogene filolisbac exclusively in all ongoing and planned
HPV-related cancer clinical trials, including the upcoming ADVANCE trial, previously planned with ADXS-DUAL. The Company believes
that harmonizing to a single product candidate for all HPV-related programs will streamline developmental, regulatory and commercialization
strategies.
Cervical
Cancer
There
are approximately 530,000 new cases of cervical cancer caused by HPV worldwide every year, and 13,240 new cases in the U.S. alone,
according to the WHO Human Papillomavirus and Related Cancers in the World Summary Report 2018 (“WHO”). Current preventative
vaccines cannot protect all women who are infected with this very common virus. Current preventative HPV vaccines such as Gardasil
®
and Cervarix
®
cannot treat or protect the large population of adults already infected with the virus, leaving
several generations of women vulnerable. Furthermore, challenges with acceptance, accessibility, and compliance have resulted
in suboptimal vaccination rates, with approximately 50% of young women and 38% of young men being fully vaccinated in the United
States, according to statistics published by the Centers for Disease Control in 2018. Vaccination rates are even lower in other
countries around the world.
We
completed a randomized Phase 2 clinical study (
Lm
-LLO-E7-15), conducted exclusively in India, in 110 women with recurrent/refractory
cervical cancer. The final results showed that 34.9% (38/109) of patients were alive at 12 months, 24.8% (27/109) of patients
were Long-term Survivors (“LTS”) alive greater than 18 months. Of the 15 patients consenting to further follow-up
beyond 18 months, 12 (11%) achieved 24-month OS status (range 24 – 34+ months) at the time of study closure. Axalimogene
filolisbac was found to be well tolerated with the majority of the AEs were mild to moderate in severity (566 of 704 reported
AEs, 80.4%) and were not related to study drug (539 of 704 reported AEs, 76.6%). These data have been accepted and will be published
in the May 2018 edition of the peer-reviewed
International Journal of Gynecological Cancer
.
We
are conducting a Phase 3 trial evaluating axalimogene filolisbac in patients with high-risk, locally advanced cervical (“AIM2CERV”
or “
A
dvaxis
Im
munotherapy
2
Prevent
Cerv
ical Recurrence”). The study
is being conducted under a Special Protocol Assessment (“SPA”), and has been determined by the FDA to be adequate,
well-designed, and suitable for registration if successful. This study will be conducted in collaboration with the GOG/NRG Oncology,
and we have initiated the AIM2CERV study to support a Biologics License Application (“BLA”) submission in the U.S.
and regulatory registration in other territories around the world.
AIM2CERV is a double-blind, randomized, placebo-controlled,
Phase 3 study of adjuvant axalimogene filolisbac, following primary chemoradiation treatment of women with high-risk locally advanced
cervical cancer (“HRLACC”). The primary objective of AIM2CERV is to compare the disease free survival of axalimogene
filolisbac to placebo administered in the adjuvant setting following standard concurrent chemotherapy and radiotherapy (“CCRT”)
administered with curative intent to patients with HRLACC. Secondary endpoints include examining overall survival and safety.
Our goal is to develop a treatment to prevent or reduce the risk of cervical cancer recurrence after primary, standard of care
treatment in women who are at high risk of recurrence. The study is active in thirteen countries with 124 sites open to
date, and is currently enrolling patients.
We have a clinical trial collaboration
agreement with MedImmune, the global biologics research and development arm of AstraZeneca, and are conducting a Phase 1/2, open-label,
multicenter, two-part study to evaluate the safety and efficacy of axalimogene filolisbac in combination with MedImmune’s
investigational anti-PD-L1 immune checkpoint inhibitor, durvalumab, as a combination treatment for patients with metastatic squamous
or non-squamous carcinoma of the cervix and metastatic HPV-associated squamous cell Carcinoma of the head and neck (“SCCHN”).
For the axalimogene filolisbac and durvalumab dose escalation portion of the study, the dose-escalation phase has been completed.
We have commenced enrollment in the Part A (20 patients with SCCHN) and B (90 patients with cervical cancer) expansion phases;
however, this trial was placed on clinical hold by FDA on March 9, 2018 following its review of a safety report regarding a Grade
5 Serious Adverse Event occurring on February 27, 2018 and involving respiratory failure which followed a sixth combination cycle
(11
th
dose of axalimogene filolisbac, 21
st
dose of durvalumab) in the trial. Over 250 patients have received
axalimogene filolisbac, and approximately 700 doses have been delivered across multiple trials in HPV-associated cancers, to date,
and this is the first time we have seen this type of event. Enrollment and further dosing are on hold for this trial, and we are
working closely with the site investigator and FDA to review this event in detail and to determine a path forward from this clinical
hold. At this time, this hold does not affect any other current clinical trials or programs.
The
GOG Foundation, Inc. (now a member of NRG Oncology), under the sponsorship of the Cancer Therapy Evaluation Program (“CTEP”)
of the National Cancer Institute (“NCI”), conducted GOG-0265, an open-label, single arm Phase 2 study of axalimogene
filolisbac in persistent or recurrent cervical cancer (patients must have received at least 1 prior chemotherapy regimen for the
treatment of their recurrent/metastatic disease, not including that administered as a component of primary treatment) at numerous
clinical sites in the U.S. The study was a Simon 2-stage design. The primary efficacy endpoint was the 12-month survival rate,
with the objective of the secondary efficacy endpoints to evaluate progression-free survival, overall survival and objective tumor
response. The primary safety endpoints were to evaluate the number of patients with dose-limiting toxicities and the frequency
and severity of adverse effects.
The
first stage of enrollment in GOG-0265 was successfully completed with 26 patients treated and met the predetermined safety and
efficacy criteria required to proceed into the second stage of patient enrollment. Stage 2 of the study began enrollment in February
2015, and in October 2016, Advaxis and the GOG Foundation/NRG Oncology examined the 12-month survival rate and safety data obtained
from the 24 patients who had previously enrolled in Stage 2. The Stage 2 population demonstrated that treatment with axalimogene
filolisbac resulted in a 37.5% (9/24) 12-month survival rate. This data was consistent with the findings in Stage 1 that showed
a 38.5% 12-month survival rate, despite a greater proportion of Stage 2 patients having failed bevacizumab treatment. Taken together,
the available data from both stages of GOG-0265 comprise a Phase 2 clinical trial in 50 subjects with a 12 month survival rate
of 38% (19/50). The protocol defined logistic model-based calculation of the expected 12-month milestone survival rate was calculated
to be 24.5% using the key predictors from the patients enrolled in the study. The 12 month survival rate of 38% for patients receiving
axalimogene filolisbac in the study represented a 55% improvement over the expected 12-month milestone survival rate of 24.5%.
Overall,
28 out of 50 (56%) patients experienced a Grade 1 or Grade 2 TRAE associated with axalimogene filolisbac infusion. The most common
(>30%) Grade 1 or Grade 2 TRAEs were fatigue, chills, anemia, nausea and fever. Eighteen (36%) patients experienced a Grade
3 TRAE and two patients experienced a Grade 4 AE, including a Klebsiella lung infection in one patient, and hypotension/cytokine
related symptoms in another patient, which were considered possibly related to treatment. Upon review of these findings, we announced
early closure of GOG-0265. Results from the GOG-0265 study were presented as an oral late-breaker presentation at the Society
of Gynecologic Oncology (“SGO”) annual meeting on March 14, 2017.
We
have entered into a clinical development collaboration agreement with BMS to evaluate their PD-1 immune checkpoint inhibitor,
OPDIVO
®
(nivolumab), in combination with axalimogene filolisbac as a potential treatment option for women with
metastatic cervical cancer. We plan to initiate a global, randomized, registrational quality trial, the ADVANCE trial, in 2018
and will evaluate this combination regimen in women with persistent, recurrent or metastatic (squamous or non-squamous cell) carcinoma
of the cervix who have failed at least one prior line of systemic chemotherapy. Under the terms of the agreement, each party will
bear its own internal costs and provide its immunotherapy agents. Advaxis will sponsor the study and pay third-party costs.
Axalimogene
filolisbac has received FDA orphan drug designation for invasive FIGO Stage II-IV cervical cancer, and has received Fast Track
designation from the FDA for high-risk locally advanced cervical cancer patients. Axalimogene filolisbac has also been classified
as an advanced-therapy medicinal product (“ATMP”) for the treatment of cervical cancer by the European Medicines Agency’s
(“EMA”) Committee for Advanced Therapies (“CAT”). The CAT is the EMA’s committee responsible for
assessing the quality, safety and efficacy of ATMPs. The Company has completed the CAT certification procedure and the CAT has
certified the preclinical and quality information have met the scientific and technical standards for a MAA.
On
February 13, 2018, the Company issued a press release announcing the submission of a conditional MAA to the EMA for the Company’s
lead
Lm
Technology product candidate, axalimogene filolisbac, for the treatment of adult women who progress beyond first-line
therapy of PRmCC. The MAA submission was primarily based on data from the GOG-0265 study, as well as supportive data from other
clinical trials evaluating axalimogene filolisbac. In parallel with the MAA review process, the Company will continue assessing
partnership opportunities for the potential commercialization of axalimogene filolisbac in Europe.
Head
and Neck Cancer
SCCHN
is the most frequently occurring malignant tumor of the head and neck and is a major cause of morbidity and mortality worldwide.
More than 90% of SCCHNs originate from the mucosal linings of the oral cavity, pharynx, or larynx and 70% of these cancers are
caused by HPV, with the incidence increasing every year. According to the American Cancer Society, head and neck cancer accounts
for about 3% of all cancers in the United States. According to the 2017 American Cancer Society data report, approximately 30,000
new cases will be diagnosed in the United States in 2017.
The
safety and immunogenicity of axalimogene filolisbac is being evaluated in a Phase 2 IST at Mount Sinai and Baylor College of Medicine
in a pre-surgery “window of opportunity” trial in patients with HPV-positive head and neck cancer. This clinical trial
is the first to evaluate the immunologic and pathologic effects of axalimogene filolisbac in patients at the time of initial diagnosis
of HPV-associated head and neck cancer. The trial met its Stage 1 primary objective which allowed accrual to proceed in the second
stage of the trial which is intended. The Stage 2 objective is consistent with Stage 1 and enrollment is ongoing.
As
stated above, we have entered into a clinical trial collaboration agreement with MedImmune to collaborate on a Phase 1/2, open-label,
multicenter, two part trial to evaluate safety and efficacy of axalimogene filolisbac, in combination with durvalumab (MEDI4736),
for patients with metastatic squamous or non-squamous carcinoma of the cervix and metastatic HPV-associated SCCHN. Part 1 of this
trial is complete, and the Company has commenced enrollment in the Part A (20 patients with SCCHN) and B (90 patients with cervical
cancer) expansion phases.
We
will continue to be opportunistic towards alternative funding approaches for continued development in HPV-positive head and neck
cancer, and hope to announce an IST with an academic institution in 2018. Axalimogene filolisbac has received FDA orphan drug
designation for HPV-associated head and neck cancer.
Anal
Cancer
According
to the American Cancer Society, nearly all squamous cell anal cancers are linked to infection by HPV, the same virus that causes
cervical cancer. According to the 2017 American Cancer Society data report, approximately 8,200 new cases will be diagnosed in
the United States in 2017.
The
safety and efficacy of axalimogene filolisbac was evaluated in a Phase 2 IST by Brown University in patients with high-risk locally
advanced anal cancer. As of December 2017, no further enrollment in this trial is planned. 10 patients were treated including
one with N2 and four with N3 disease. Two patients had grade 3 acute toxicities following the initial dose of axalimogene filolisbac
including chills/rigors (n = 2), back pain (n = 1), and hyponatremia (n = 1). All toxicities occurred within 24 hours of administration.
There was no apparent increase in chemoradiation toxicities or myelosuppression. One patient had a Grade 5 cardiopulmonary event
shortly after beginning 5-FU treatment. This patient did not receive a dose of axalimogene filolisbac. All 9 assessable patients
had complete clinical responses by sigmoidoscopy. Eight of the 9 patients (89%) are progression-free at a median follow-up of
42 months. These data were accepted and published in the International Journal of Radiation Oncology.
We
conducted a Phase 2 multi-center, open-label, Simon two-stage trial (“FAWCETT” or “
F
ighting
A
nal-Cancer
w
ith
C
TL
E
nhancing
T
umor
T
herapy”), testing axalimogene filolisbac in patients with persistent
or recurrent metastatic anal cancer. FAWCETT is designed to evaluate the efficacy and safety of axalimogene filolisbac as a monotherapy
in patients with HPV-associated metastatic anal cancer who have received at least one prior treatment regimen for the advanced
disease. The trial met the criteria to proceed to Stage 2 of enrollment, but the Company has decided not to initiate the Stage
2 portion of the trial in order to focus its resources on other clinical priorities at this time. We will continue to evaluate
alternative funding sources and collaborations to further develop this program in anal cancer. Axalimogene filolisbac has
received FDA and EMA orphan drug designation for anal cancer.
ADXS-NEO
Franchise
The
Company made the decision to branch into the growing field of individualized cancer treatments with ADXS-NEO. ADXS-NEO is designed
to create individualized therapies by activating the patient’s immune system to respond against multiple mutations, or neoantigens,
identified from an individual patient’s tumor through DNA sequencing. In August 2016, Advaxis entered into a global agreement
with Amgen Inc. (“Amgen”) for the development and commercialization of ADXS-NEO.
ADXS-NEO
is an individualized
Lm
Technology antigen delivery product developed using whole-genome sequencing of a patient’s
tumor to identify neoantigens is designed to work by presenting a large payload of neoantigens directly into dendritic cells within
the patient’s immune system and stimulating a T cell response against cancerous cells.
We
have filed an IND amendment and we plan to initiate the trial by June 2018. The initial tumor types for the Phase 1 are microsatellite
stable colorectal cancer, head and neck cancer, and non-small cell lung cancer.
ADXS-HOT
Franchise (preclinical)
Advaxis
is developing a novel portfolio of immunotherapy constructs for major cancers that combines our optimized
Lm
Technology
vector with promising targets to generate potent anti-cancer immunity. The ADXS-HOT franchise is a series of novel cancer immunotherapies
that will target somatic mutations (“hotspots”), cancer testis antigens (“CTAs”) and oncofetal antigens
(“OFAs”). These three types of targets form the basis of the ADXS-HOT program because they have the potential to generate
more potent, tumor specific, and high strength killer T cells, compared with over-expressed native sequence TAAs. Most hotspot
mutations and OFA/CTA proteins play critical roles in oncogenesis; targeting both at once could significantly impair cancer proliferation.
The ADXS-HOT franchise products will combine many high avidity targets that are expressed in a large portion of patients with
the target disease into one “off-the-shelf” treatment, ready to administer for multiple patients. The ADXS-HOT technology
has a strong Intellectual Property (“IP”) position, with potential protection into 2038, and an IP filing strategy
providing for broad coverage opportunities across multiple disease platforms and combination therapies.
The
Company is currently prioritizing product development in the most prevalent cancers, with the first tumor type to be non small
cell lung cancer (“NSCLC”). Advaxis plans to file multiple ADXS-HOT INDs in 2018, including NSCLC, with a first-in-human
trial in one of the ADXS-HOT products to commence in 2018.
ADXS-PSA
Franchise
Prostate
Cancer
According
to the American Cancer Society, prostate cancer is the second most common type of cancer found in American men, and is the second
leading cause of cancer death in men, behind only lung cancer. More than 161,000 men are estimated to be diagnosed with prostate
cancer in 2017, with over 26,000 deaths each year. Unfortunately, in about 10 – 20% of cases, men with prostate cancer will
go on to develop castration-resistant prostate cancer (“CRPC”), which refers to prostate cancer that progresses despite
androgen deprivation therapy. Metastatic CRPC (“mCRPC”) occurs when the cancer spreads to other parts of the body
and there is a rising prostate-specific antigen (“PSA”) level. This stage of prostate cancer has an average survival
of 9-13 months, is associated with deterioration in quality of life, and has few therapeutic options available.
According
to a data review published by MD Anderson Cancer Center in 2016, checkpoint inhibitor monotherapy has not shown significant activity
in mCRPC to date. The authors hypothesize that may be due to the inability of the checkpoint inhibitor to infiltrate the tumor
microenvironment, and that combination therapy with agents that induce T cell infiltration within the tumor may improve performance
of checkpoints in prostate cancer.
Lm
Technology constructs have been shown by multiple labs to reduce number and suppressive
function of Tregs and MDSCs in the tumor microenvironment and cause the destruction of Tregs as soon as 5 days after dosing in
models. This reduction of immune suppression in the tumors has been attributed to our proprietary
tLLO
-fusion peptides
expressed by multiple copies of the plasmids in each bacteria. Advaxis feels that the combination of ADXS-PSA, our immunotherapy
designed to target the PSA antigen, with a checkpoint inhibitor may provide an alternative treatment option for patients with
mCRPC. Clinical benefit in prostate cancer could be a significant value creator to expand the
Lm
Technology platform into
the prostate cancer market.
Advaxis
has entered into a clinical trial collaboration and supply agreement with Merck & Co. (“Merck”) to evaluate the
safety and efficacy of ADXS-PSA as monotherapy and in combination with KEYTRUDA
®
(“pembrolizumab”),
Merck’s anti PD-1 antibody, in a Phase 1/2, open-label, multicenter, dose determination and expansion trial in patients
with previously treated metastatic, castration-resistant prostate cancer (Keynote-046). For the ADXS-PSA monotherapy dose escalation
portion of the trial has been completed, the safety of the combination was confirmed and enrollment in the expansion cohort phase
was initiated. Enrollment in this phase of the trial was completed in January 2017.
Preliminary
data identifying potential pharmacodynamics biomarkers of clinical response and preliminary immune correlative data in mCRPC patients
treated with ADXS-PSA monotherapy were presented at the third annual CRI-CIMT-EATI-AACR International Cancer Immunotherapy Conference
in September 2017, and at the Society for Immunotherapy of Cancer (“SITC”) in November 2017. Viewed collectively,
the data presented at CRI-CIMT-EATI-AACR 2017 and SITC 2017 show signs of activity that ADXS-PSA allows for generation of sustained,
strengthened T cells against prostate cancer, while weakening the TME and allowing T cells access to the tumor. The Company
has submitted an abstract to ASCO and hopes to be able to present initial data from the combination arm of the trial, if accepted
for presentation, at ASCO 2018 or another suitable medical conference.
In
addition, the Company is actively developing an additional product candidate for prostate cancer, currently in preclinical testing,
which could complement ADXS-PSA.
Results
of Operations
Revenue
Revenue
decreased $1,735,215 to $2,055,627 for the three months ended January 31, 2018 compared to $3,790,842 for the three months ended
January 31, 2017. The decrease was due to a change in the estimated performance period associated with upfront fees received from
Amgen in conjunction with the collaboration agreement signed in August 2016.
Research
and Development Expenses
We
make significant investments in research and development to support our pre-clinical and clinical development programs. Research
and development expenses for the three months ended January 31, 2018 and 2017 were categorized as follows:
|
|
Three
Months Ended January 31,
|
|
|
|
2018
|
|
|
2017
|
|
|
|
|
|
|
|
|
HPV-associated
cancers
|
|
$
|
5,551,174
|
|
|
$
|
3,964,585
|
|
Prostate
cancer
|
|
|
702,151
|
|
|
|
886,630
|
|
Neoantigen
therapy
|
|
|
371,807
|
|
|
|
397,774
|
|
Personnel
expenses
|
|
|
5,963,156
|
|
|
|
4,754,838
|
|
Professional
fees
|
|
|
2,945,699
|
|
|
|
1,570,729
|
|
Laboratory
costs
|
|
|
2,050,700
|
|
|
|
1,269,731
|
|
Other
clinical trial expenses
|
|
|
218,920
|
|
|
|
470,964
|
|
Other
expenses
|
|
|
766,659
|
|
|
|
333,303
|
|
Partner
reimbursements
|
|
|
(1,500,000
|
)
|
|
|
-
|
|
Total
research & development expense
|
|
$
|
17,070,266
|
|
|
$
|
13,648,554
|
|
Axalimogene
Filolisbac Franchise
HPV-associated
expenses increased $1,586,589 to $5,551,174 for the three months ended January 31, 2018 compared to $3,964,585 for the three months
ended January 31, 2017. The increase resulted primarily from startup activities for additional countries in the Phase 3 AIM2CERV
trial.
Personnel
Expenses
Personnel
expenses increased $1,208,318 to $5,963,156 for the three months ended January 31, 2018 compared to $4,754,838 for the three months
ended January 31, 2017. The increase relates primarily to a 33% increase in R&D headcount.
Professional
Fees
Professional
fees increased $1,374,970 to $2,945,699 for the three months ended January 31, 2018 compared to $1,570,729 for the three months
ended January 31, 2017. The increase is primarily attributable to an increase in drug manufacturing process validation costs and
drug stability studies in support of the MAA.
Laboratory
Costs
Laboratory
costs increased $780,969 to $2,050,700 for the three months ended January 31, 2018 compared to $1,269,731 for the three months
ended January 31, 2017. The increase is primarily attributable to an increase in headcount and laboratory space, as well as support
of the MAA.
Partner
reimbursements
During
the three months ended January 31, 2018, the Company received $1,500,000 of clinical development payments from Amgen for ADXS-NEO
compared to $0 for the same period in 2017.
General
and Administrative Expenses
General
and administrative expenses primarily include salary and benefit costs for employees included in our finance, legal and administrative
organizations, outside legal and professional services, and facilities costs. General and administrative expenses decreased $1,794,977
to $5,532,832 for the three months ended January 31, 2018, compared with $7,327,809 for the three months ended January 31, 2017.
The decrease was primarily attributable to a decrease in stock compensation due to the resignation of two officers during fiscal
2017.
Liquidity
and Capital Resources
Our
major sources of cash have been proceeds from various public and private offerings of our common stock, option and warrant exercises,
and interest income. From October 2013 through February 2018, we raised approximately $245.2 million in gross proceeds from various
public and private offerings of our common stock. We have not yet commercialized any drug, and we may not become profitable. Our
ability to achieve profitability depends on a number of factors, including our ability to complete our development efforts, obtain
regulatory approvals for our drug, successfully complete any post-approval regulatory obligations, successfully compete with other
available treatment options in the marketplace, overcome any clinical holds that the FDA may impose and successfully manufacture
and commercialize our drug alone or in partnership. We may continue to incur substantial operating losses even after we begin
to generate revenues from our drug candidates.
As
of January 31, 2018, the Company had approximately $59.4 million in cash, restricted cash, cash equivalents and short-term
investment securities on its balance sheet. We believe our current cash position as of January 31, 2018 along with
the net proceeds received from the Company’s underwritten public offering that closed on February 26, 2018 is sufficient
to fund our business plan approximately into second calendar quarter of 2019. The actual amount of cash that we will need to operate
is subject to many factors.
Since
our inception through January 31, 2018, we reported accumulated net losses of approximately $321.6 million and recurring negative
cash flows from operations. We anticipate that we will continue to generate significant losses from operations for the foreseeable
future.
Cash
Flows
Operating
Activities
Net
cash used in operating activities for the three months ended January 31, 2018 was approximately $12.7 million (including proceeds
from the sale of our state NOLs and R&D tax credits of approximately $4.5 million) primarily from spending associated with
our clinical trial programs and general and administrative spending.
Net
cash used in operating activities for the three months ended January 31, 2017 was approximately $14.2 million (including proceeds
from the sale of our state NOLs and R&D tax credits of approximately $2.5 million) primarily from spending associated with
our clinical trial programs and general and administrative spending.
Investing
Activities
Net
cash provided by investing activities for the three months ended January 31, 2018 was approximately $12.0 million resulting from
the use of proceeds from matured short-term investment securities to fund operating activities. This was partially
offset by restricted cash established with a letter of credit, purchases of property and equipment, legal cost spending in support
of our intangible assets (patents) and costs paid to Penn for patents.
Net
cash used in investing activities for the three months ended January 31, 2017 was approximately $41.2 million resulting from investments
in held-to-maturity investments, purchases of property and equipment, legal cost spending in support of our intangible assets
(patents) and costs paid to Penn for patents.
Financing
Activities
Cash
provided by financing activities was approximately $2.6 million and $192,000 for the three months ended January 31, 2018 and 2017
respectively. The net increase resulted primarily from proceeds of approximately $2.7 million from the sale of 881,629 shares
of our Common Stock at-the-market transactions.
Our
capital resources and operations to date have been funded primarily with the proceeds from public, private equity and debt financings,
NOL tax sales and income earned on investments and grants. We have sustained losses from operations in each fiscal year since
our inception, and we expect losses to continue for the indefinite future, due to the substantial investment in research and development.
As of January 31, 2018 and October 31, 2017, we had an accumulated deficit of $321,634,693 and $301,142,227, respectively, and
stockholders’ equity of $39,270,805 and $54,260,167, respectively.
Contractual
Commitments and Obligations
The
disclosure of our contractual obligations and commitments was reported in our Annual Report on Form 10-K for the year ended October
31, 2017 filed on December 21, 2017. There have been no material changes from the contractual commitments and obligations previously
disclosed in our Annual Report on Form 10-K other than the changes described in Note 10, “Commitments and Contingencies”
in this Quarterly Report on Form 10-Q.
Off-Balance
Sheet Arrangements
As
of January 31, 2018, we had no off-balance sheet arrangements.
Critical
Accounting Estimates
The
preparation of financial statements in accordance with GAAP accepted in the U.S. requires management to make estimates and assumptions
that affect the reported amounts and related disclosures in the financial statements. Management considers an accounting estimate
to be critical if:
|
●
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it
requires assumptions to be made that were uncertain at the time the estimate was made, and
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changes
in the estimate of difference estimates that could have been selected could have material impact in our results of operations
or financial condition.
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While
we base our estimates and judgments on our experience and on various other factors that we believe to be reasonable under the
circumstances, actual results could differ from those estimates and the differences could be material. The most significant estimates
impact the following transactions or account balances: stock compensation, warrant liability valuation and impairment of intangibles.
See
Note 2 to our financial statements that discusses significant accounting policies.
New
Accounting Standards
See
Note 2 to our financial statements that discusses new accounting pronouncements.