ITEM 1 - Financial
Statements
Soligenix, Inc. and Subsidiaries
Consolidated Balance Sheets
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
(unaudited)
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
11,168,305
|
|
|
$
|
5,420,708
|
|
Contracts and grants receivable
|
|
|
334,787
|
|
|
|
1,018,835
|
|
Research and development incentives receivable
|
|
|
299,749
|
|
|
|
444,043
|
|
Prepaid expenses and other current assets
|
|
|
174,482
|
|
|
|
609,739
|
|
Total current assets
|
|
|
11,977,323
|
|
|
|
7,493,325
|
|
Security deposit
|
|
|
22,757
|
|
|
|
22,757
|
|
Office furniture and equipment, net
|
|
|
32,846
|
|
|
|
36,093
|
|
Deferred issuance costs
|
|
|
39,715
|
|
|
|
39,324
|
|
Intangible assets, net
|
|
|
6,117
|
|
|
|
19,699
|
|
Right-of-use lease assets
|
|
|
55,393
|
|
|
|
125,412
|
|
Research and development incentives receivable
|
|
|
95,525
|
|
|
|
-
|
|
Other assets
|
|
|
30,998
|
|
|
|
38,750
|
|
Total assets
|
|
$
|
12,260,674
|
|
|
$
|
7,775,360
|
|
Liabilities and shareholders’ equity
|
|
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
2,521,494
|
|
|
$
|
2,735,442
|
|
Accrued expenses
|
|
|
3,157,532
|
|
|
|
3,157,386
|
|
Accrued compensation
|
|
|
76,660
|
|
|
|
298,173
|
|
Paycheck Protection Program loan
|
|
|
185,702
|
|
|
|
-
|
|
Lease liabilities - current
|
|
|
54,455
|
|
|
|
121,075
|
|
Total current liabilities
|
|
|
5,995,843
|
|
|
|
6,312,076
|
|
Non-current liabilities:
|
|
|
|
|
|
|
|
|
Paycheck Protection Program loan, net of current
|
|
|
232,128
|
|
|
|
|
|
Lease liabilities, net of current
|
|
|
2,101
|
|
|
|
6,149
|
|
Total liabilities
|
|
|
6,230,072
|
|
|
|
6,318,225
|
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
Shareholders’ equity:
|
|
|
|
|
|
|
|
|
Preferred stock, 350,000 shares authorized; none issued or outstanding
|
|
|
-
|
|
|
|
-
|
|
Common stock, $.001 par value; 50,000,000 shares authorized; 28,591,432 shares and 21,753,124 shares issued and outstanding at June 30, 2020 and December 31, 2019, respectively
|
|
|
28,591
|
|
|
|
21,753
|
|
Additional paid-in capital
|
|
|
191,922,671
|
|
|
|
177,006,004
|
|
Accumulated other comprehensive loss
|
|
|
(36,951
|
)
|
|
|
(45,010
|
)
|
Accumulated deficit
|
|
|
(185,883,709
|
)
|
|
|
(175,525,612
|
)
|
Total shareholders’ equity
|
|
|
6,030,602
|
|
|
|
1,457,135
|
|
Total liabilities and shareholders’ equity
|
|
$
|
12,260,674
|
|
|
$
|
7,775,360
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Operations
For the Three and Six Months Ended June
30, 2020 and 2019
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues:
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract revenue
|
|
$
|
292,461
|
|
|
$
|
1,060,877
|
|
|
$
|
1,137,647
|
|
|
$
|
1,700,435
|
|
Grant revenue
|
|
|
212,827
|
|
|
|
484,087
|
|
|
|
292,195
|
|
|
|
989,317
|
|
Total revenues
|
|
|
505,288
|
|
|
|
1,544,964
|
|
|
|
1,429,842
|
|
|
|
2,689,752
|
|
Cost of revenues
|
|
|
(363,339
|
)
|
|
|
(1,086,814
|
)
|
|
|
(1,192,844
|
)
|
|
|
(2,014,738
|
)
|
Gross profit
|
|
|
141,949
|
|
|
|
458,150
|
|
|
|
236,998
|
|
|
|
675,014
|
|
Operating expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Research and development
|
|
|
2,170,045
|
|
|
|
1,853,950
|
|
|
|
4,870,216
|
|
|
|
3,496,668
|
|
General and administrative
|
|
|
785,776
|
|
|
|
769,091
|
|
|
|
1,654,443
|
|
|
|
1,643,300
|
|
Research and development expense - milestone
|
|
|
-
|
|
|
|
-
|
|
|
|
5,000,000
|
|
|
|
-
|
|
Total operating expenses
|
|
|
2,955,821
|
|
|
|
2,623,041
|
|
|
|
11,524,659
|
|
|
|
5,139,968
|
|
Loss from operations
|
|
|
(2,813,872
|
)
|
|
|
(2,164,891
|
)
|
|
|
(11,287,661
|
)
|
|
|
(4,464,954
|
)
|
Foreign currency transaction gain/(loss)
|
|
|
(3,583
|
)
|
|
|
1,519
|
|
|
|
(26,818
|
)
|
|
|
6,526
|
|
Interest income, net
|
|
|
2,017
|
|
|
|
39,851
|
|
|
|
23,964
|
|
|
|
84,604
|
|
Research and development incentives
|
|
|
38,675
|
|
|
|
-
|
|
|
|
95,525
|
|
|
|
-
|
|
Net loss before income taxes
|
|
|
(2,776,763
|
)
|
|
|
(2,123,521
|
)
|
|
|
(11,194,990
|
)
|
|
|
(4,373,824
|
)
|
Income tax benefit
|
|
|
-
|
|
|
|
-
|
|
|
|
836,893
|
|
|
|
610,676
|
|
Net loss applicable to common stockholders
|
|
$
|
(2,776,763
|
)
|
|
$
|
(2,123,521
|
)
|
|
$
|
(10,358,097
|
)
|
|
$
|
(3,763,148
|
)
|
Basic & diluted net loss per share
|
|
$
|
(0.10
|
)
|
|
$
|
(0.12
|
)
|
|
$
|
(0.41
|
)
|
|
$
|
(0.21
|
)
|
Basic & diluted weighted average common shares outstanding
|
|
|
26,901,781
|
|
|
|
18,436,894
|
|
|
|
25,153,350
|
|
|
|
18,258,932
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Comprehensive
Loss
For the Three and Six Months Ended June
30, 2020 and 2019
(Unaudited)
|
|
Three Months Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss
|
|
$
|
(2,776,763
|
)
|
|
$
|
(2,123,521
|
)
|
|
$
|
(10,358,097
|
)
|
|
$
|
(3,763,148
|
)
|
Other comprehensive loss:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Foreign currency translation adjustments
|
|
|
(8,184
|
)
|
|
|
(3,988
|
)
|
|
|
8,059
|
|
|
|
(3,339
|
)
|
Comprehensive loss
|
|
$
|
(2,784,947
|
)
|
|
$
|
(2,127,509
|
)
|
|
$
|
(10,350,038
|
)
|
|
$
|
(3,766,487
|
)
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Changes in
Shareholders’ Equity
For the Six Months Ended June 30, 2020
and 2019
(Unaudited)
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2019
|
|
|
21,753,124
|
|
|
$
|
21,753
|
|
|
$
|
177,006,004
|
|
|
$
|
(45,010
|
)
|
|
$
|
(175,525,612
|
)
|
|
$
|
1,457,135
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
4,545,116
|
|
|
|
4,545
|
|
|
|
9,455,404
|
|
|
|
-
|
|
|
|
-
|
|
|
|
9,459,949
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(425,524
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(425,524
|
)
|
Issuance of common stock for milestone
|
|
|
1,956,182
|
|
|
|
1,956
|
|
|
|
4,998,044
|
|
|
|
|
|
|
|
|
|
|
|
5,000,000
|
|
Issuance of common stock to vendors
|
|
|
30,000
|
|
|
|
30
|
|
|
|
58,970
|
|
|
|
-
|
|
|
|
-
|
|
|
|
59,000
|
|
Exercise of common stock options
|
|
|
2,189
|
|
|
|
2
|
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
2
|
|
Exercise of warrants
|
|
|
304,821
|
|
|
|
305
|
|
|
|
685,079
|
|
|
|
|
|
|
|
|
|
|
|
685,384
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
144,694
|
|
|
|
-
|
|
|
|
-
|
|
|
|
144,694
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
8,059
|
|
|
|
-
|
|
|
|
8,059
|
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(10,358,097
|
)
|
|
|
(10,358,097
|
)
|
Balance, June 30, 2020
|
|
|
28,591,432
|
|
|
$
|
28,591
|
|
|
$
|
191,922,671
|
|
|
$
|
(36,951
|
)
|
|
$
|
(185,883,709
|
)
|
|
$
|
6,030,602
|
|
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December 31, 2018
|
|
|
17,682,839
|
|
|
$
|
17,683
|
|
|
$
|
172,436,176
|
|
|
$
|
(3,669
|
)
|
|
$
|
(166,170,020
|
)
|
|
$
|
6,280,170
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
861,352
|
|
|
|
861
|
|
|
|
841,383
|
|
|
|
-
|
|
|
|
-
|
|
|
|
842,244
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,215
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(33,215
|
)
|
Issuance of common stock to vendors
|
|
|
197,019
|
|
|
|
197
|
|
|
|
160,860
|
|
|
|
-
|
|
|
|
-
|
|
|
|
161,057
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
152,465
|
|
|
|
-
|
|
|
|
-
|
|
|
|
152,465
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,339
|
)
|
|
|
-
|
|
|
|
(3,339
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,763,148
|
)
|
|
|
(3,763,148
|
)
|
Balance, June 30, 2019
|
|
|
18,741,210
|
|
|
$
|
18,741
|
|
|
$
|
173,557,669
|
|
|
$
|
(7,008
|
)
|
|
$
|
(169,933,168
|
)
|
|
$
|
3,636,234
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Changes in
Shareholders’ Equity
For the Three Months Ended June 30, 2020
and 2019
(Unaudited)
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2020
|
|
|
25,778,431
|
|
|
$
|
25,778
|
|
|
$
|
186,624,561
|
|
|
$
|
(28,767
|
)
|
|
$
|
(183,106,946
|
)
|
|
$
|
3,514,626
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
2,813,001
|
|
|
|
2,813
|
|
|
|
5,467,910
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,470,723
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(250,803
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(250,803
|
)
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
81,003
|
|
|
|
-
|
|
|
|
-
|
|
|
|
81,003
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(8,184
|
)
|
|
|
-
|
|
|
|
(8,184
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,776,763
|
)
|
|
|
(2,776,763
|
)
|
Balance, June 30, 2020
|
|
|
28,591,432
|
|
|
$
|
28,591
|
|
|
$
|
191,922,671
|
|
|
$
|
(36,951
|
)
|
|
$
|
(185,883,709
|
)
|
|
$
|
6,030,602
|
|
|
|
Common Stock
|
|
|
Additional Paid-In
|
|
|
Accumulated Other Comprehensive
|
|
|
Accumulated
|
|
|
|
|
|
|
Shares
|
|
|
Par Value
|
|
|
Capital
|
|
|
Loss
|
|
|
Deficit
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, March 31, 2019
|
|
|
18,189,208
|
|
|
$
|
18,189
|
|
|
$
|
173,076,044
|
|
|
$
|
(3,020
|
)
|
|
$
|
(167,809,647
|
)
|
|
$
|
5,281,566
|
|
Issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
414,983
|
|
|
|
415
|
|
|
|
319,245
|
|
|
|
-
|
|
|
|
-
|
|
|
|
319,660
|
|
Issuance costs associated with FBR At Market Sales Issuance Agreement
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,832
|
)
|
|
|
-
|
|
|
|
-
|
|
|
|
(13,832
|
)
|
Issuance of common stock to vendor
|
|
|
137,019
|
|
|
|
137
|
|
|
|
103,320
|
|
|
|
-
|
|
|
|
-
|
|
|
|
103,457
|
|
Share-based compensation expense
|
|
|
-
|
|
|
|
-
|
|
|
|
72,892
|
|
|
|
-
|
|
|
|
-
|
|
|
|
72,892
|
|
Foreign currency translation adjustment
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(3,988
|
)
|
|
|
-
|
|
|
|
(3,988
|
)
|
Net loss
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(2,123,521
|
)
|
|
|
(2,123,521
|
)
|
Balance, June 30, 2019
|
|
|
18,741,210
|
|
|
$
|
18,741
|
|
|
$
|
173,557,669
|
|
|
$
|
(7,008
|
)
|
|
$
|
(169,933,168
|
)
|
|
$
|
3,636,234
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
For the Six Months Ended June 30,
(Unaudited)
|
|
2020
|
|
|
2019
|
|
Operating activities:
|
|
|
|
|
|
|
Net loss
|
|
$
|
(10,358,097
|
)
|
|
$
|
(3,763,148
|
)
|
Adjustments to reconcile net loss to net cash used in operating activities:
|
|
|
|
|
|
|
|
|
Amortization and depreciation
|
|
|
35,448
|
|
|
|
22,992
|
|
Non-cash lease expenses
|
|
|
66,298
|
|
|
|
60,041
|
|
Share-based compensation
|
|
|
144,694
|
|
|
|
152,465
|
|
Issuance of common stock for milestone
|
|
|
5,000,000
|
|
|
|
-
|
|
Issuance of common stock for services
|
|
|
59,000
|
|
|
|
114,557
|
|
Realized gain on sale of office furniture
|
|
|
-
|
|
|
|
(3,843
|
)
|
Change in operating assets and liabilities:
|
|
|
|
|
|
|
|
|
Contracts and grants receivable
|
|
|
684,048
|
|
|
|
(473,830
|
)
|
Prepaid expenses and other current assets
|
|
|
434,877
|
|
|
|
7,504
|
|
Research and development incentives receivable
|
|
|
19,754
|
|
|
|
-
|
|
Operating lease liability
|
|
|
(67,004
|
)
|
|
|
(59,197
|
)
|
Deferred revenue
|
|
|
-
|
|
|
|
69,976
|
|
Accounts payable and accrued expenses
|
|
|
(136,035
|
)
|
|
|
1,308,577
|
|
Accrued compensation
|
|
|
(221,513
|
)
|
|
|
(244,466
|
)
|
Total adjustments
|
|
|
6,019,567
|
|
|
|
954,776
|
|
Net cash used in operating activities
|
|
|
(4,338,530
|
)
|
|
|
(2,808,372
|
)
|
|
|
|
|
|
|
|
|
|
Investing activities:
|
|
|
|
|
|
|
|
|
Purchases of office furniture and equipment
|
|
|
(7,147
|
)
|
|
|
-
|
|
Proceeds from the sale of office furniture
|
|
|
-
|
|
|
|
5,500
|
|
Net cash provided by (used in) investing activities
|
|
|
(7,147
|
)
|
|
|
5,500
|
|
|
|
|
|
|
|
|
|
|
Financing activities:
|
|
|
|
|
|
|
|
|
Proceeds from issuance of common stock pursuant to FBR At Market Sales Issuance Agreement
|
|
|
9,459,949
|
|
|
|
842,244
|
|
Costs associated with FBR At Market Sales Issuance Agreement
|
|
|
(425,915
|
)
|
|
|
(29,291
|
)
|
Proceeds from the exercise of warrants
|
|
|
685,384
|
|
|
|
-
|
|
Financing lease principal repayments
|
|
|
(3,664
|
)
|
|
|
(3,317
|
)
|
Paycheck Protection Program loan
|
|
|
417,830
|
|
|
|
-
|
|
Net cash provided by financing activities
|
|
|
10,133,584
|
|
|
|
809,636
|
|
Effect of foreign exchange rate on cash and cash equivalents
|
|
|
(40,310
|
)
|
|
|
(4,192
|
)
|
Net increase/(decrease) in cash and cash equivalents
|
|
|
5,747,597
|
|
|
|
(1,997,428
|
)
|
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
5,420,708
|
|
|
|
8,983,717
|
|
Cash and cash equivalents at end of period
|
|
$
|
11,168,305
|
|
|
$
|
6,986,289
|
|
|
|
|
|
|
|
|
|
|
Supplemental information:
|
|
|
|
|
|
|
|
|
Cash paid for state income tax
|
|
$
|
-
|
|
|
$
|
5,000
|
|
Cash paid for lease liabilities:
|
|
|
|
|
|
|
|
|
Operating lease
|
|
$
|
71,298
|
|
|
$
|
69,750
|
|
Financing lease
|
|
$
|
4,272
|
|
|
$
|
4,272
|
|
|
|
|
|
|
|
|
|
|
Non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
Right-of-use assets and lease liabilities recognized on January 1, 2019
|
|
$
|
-
|
|
|
$
|
255,962
|
|
Deferred issuance cost included in accounts payable
|
|
$
|
85,657
|
|
|
$
|
18,537
|
|
Deferred issuance cost reclassified to additional-paid-in capital
|
|
$
|
85,266
|
|
|
$
|
7,679
|
|
Issuance of restricted common stock to vendor for website re-development
|
|
$
|
-
|
|
|
$
|
46,500
|
|
Issuance of stock options, cash exercise price received December 2019
|
|
$
|
1,882
|
|
|
$
|
-
|
|
The accompanying notes are an integral part
of these consolidated financial statements.
Soligenix, Inc.
Notes to Consolidated Financial Statements
(Unaudited)
Note 1. Nature of Business
Basis of Presentation
Soligenix, Inc. (the “Company”)
is a late-stage biopharmaceutical company focused on developing and commercializing products to treat rare diseases where there
is an unmet medical need. The Company maintains two active business segments: Specialized BioTherapeutics (formerly “BioTherapeutics”)
and Public Health Solutions (formerly “Vaccines/BioDefense”).
The Company’s Specialized BioTherapeutics
business segment is developing a novel photodynamic therapy (SGX301) utilizing topical synthetic hypericin activated with safe
visible fluorescent light for the treatment of cutaneous T-cell lymphoma (“CTCL”), its first-in-class innate defense
regulator technology, dusquetide (SGX942) for the treatment of oral mucositis in head and neck cancer, and proprietary formulations
of oral beclomethasone 17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal disorders characterized
by severe inflammation, including pediatric Crohn’s disease (SGX203) and acute radiation enteritis (SGX201).
The Company’s Public Health Solutions
business segment includes active development programs for RiVax®, its ricin toxin vaccine candidate and SGX943,
a therapeutic candidate for antibiotic resistant and emerging infectious disease, and vaccine programs targeting both filoviruses
(such as Marburg and Ebola) and coronaviruses. The development of the vaccine programs is currently supported by the heat stabilization
technology, known as ThermoVax®. To date, this business segment has been supported with government grant and contract
funding from the National Institute of Allergy and Infectious Diseases (“NIAID”), the Biomedical Advanced Research
and Development Authority and the Defense Threat Reduction Agency (“DTRA”).
The Company generates revenues under government
grants primarily from the National Institutes of Health (“NIH”) and government contracts from NIAID. The Company is
currently developing RiVax® under a NIAID contract of up to $21.2 million over six years, and a one-year NIH grant
of $150,000 in support of its SGX942 pediatric program. In addition, the Company has a subcontract of approximately $700,000 from
a NIAID grant over five years for its thermostabilization technology, and a DTRA subcontract of approximately $600,000 over three
years for SGX943. The Company will continue to apply for additional government funding.
The Company is subject to risks common
to companies in the biotechnology industry including, but not limited to, development of new technological innovations, dependence
on key personnel, protections of proprietary technology, compliance with the United States (“U.S.”) Food and Drug Administration
(the “FDA”) regulations, and other regulatory authorities, litigation, and product liability. Results for the three
and six months ended June 30, 2020 are not necessarily indicative of results that may be expected for the full year.
Liquidity
In accordance with Accounting Standards
Codification 205-40, Going Concern, the Company has evaluated whether there are conditions and events, considered in the aggregate,
that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date the
consolidated financial statements are issued. As of June 30, 2020, the Company had an accumulated deficit of $185,883,709. During
the six months ended June 30, 2020, the Company incurred a net loss of $10,358,097 and used $4,338,530 of cash in operating activities.
The Company expects to continue to generate losses in the foreseeable future. The Company’s liquidity needs will be largely
determined by the budgeted operational expenditures incurred in regards to the progression of its product candidates. The Company’s
plans to meet its liquidity needs primarily include its ability to control the timing and spending on its research and development
programs and raising additional funds through potential partnership and/or financings. Based on the Company’s approved operating
budget, current rate of cash outflows, cash on hand, proceeds from government contract and grant programs, and proceeds available
from the At Market Issuance Sales Agreement (“FBR Sales Agreement”) with B. Riley FBR Inc. (“FBR”), management
believes that its current cash will be sufficient to meet the anticipated cash needs for working capital and capital expenditures
for at least the next 12 months from issuance of the financial statements.
As of June 30, 2020, the Company had cash
and cash equivalents of $11,168,305 as compared to $5,420,708 as of December 31, 2019, representing an increase of $5,747,597 or
106%. As of June 30, 2020, the Company had working capital of $5,992,411 as compared to working capital of $1,181,249 as of December
31, 2019, representing an increase of $4,811,162 or 407%. The increase in cash and working capital was primarily related to the
management of the Company’s expenses, and proceeds received from the utilization of the FBR Sales Agreement and warrant exercises
during the six months ended June 30, 2020.
Management’s business strategy can
be outlined as follows:
|
●
|
Following positive primary endpoint topline analysis for the Phase 3 clinical trial of SGX301, as well as further statistically significant improvement in response rates with longer treatment (12 weeks compared to 6 weeks), continue to explore partnership and commercialization while pursuing New Drug Application filing;
|
|
●
|
Following positive interim analysis and enrollment completion report final topline results in the Company’s pivotal Phase 3 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
|
|
●
|
Continue development of RiVax® in combination with the Company’s ThermoVax® technology to develop a new heat stable vaccine in biodefense with NIAID funding support;
|
|
|
|
|
●
|
Continue development of our therapeutic SGX943 and our vaccine programs targeting both filoviruses (such as Marburg and Ebola) and coronaviruses with DTRA and NIAID funding support;
|
|
●
|
Continue to apply for and secure additional government funding for each of the Company’s Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements;
|
|
●
|
Pursue business development opportunities for the Company’s pipeline programs, as well as explore merger/acquisition strategies; and
|
|
●
|
Acquire or in-license new clinical-stage compounds for development.
|
The Company’s plans with respect
to its liquidity management include, but are not limited to, the following:
|
●
|
The Company has up to $1.54 million in active government contract and grant funding still available as of June 30, 2020, to support its associated research programs through 2020 and beyond, provided the federal agencies exercise all options and do not elect to terminate the contracts or grants for convenience. The Company plans to submit additional contract and grant applications for further support of its programs with various funding agencies.
|
|
●
|
The Company has continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expects to continue to do so for the foreseeable future.
|
|
●
|
The Company will continue to pursue Net Operating Loss (“NOL”) sales in the state of New Jersey pursuant to its Technology Business Tax Certificate Transfer Program if available.
|
|
●
|
The Company plans to pursue potential partnerships for pipeline programs; however, there can be no assurances that it can consummate such transactions.
|
|
●
|
The Company has up to $1.5 million remaining from the FBR Sales Agreement as of August 10, 2020 under the prospectus supplement filed April 10, 2020.
|
|
|
|
|
●
|
The Company has been granted a Paycheck Protection Program Loan through the financial stimulus packages afforded by both the federal and state governments based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19. The Company was granted a total of $417,830 from JPMorgan Chase Bank, N.A. to fund the Company’s payroll costs and other expenses allowed by the program. The Company will continue to explore and evaluate additional funding options through financial stimulus packages afforded by both the federal and state governments based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19 as they become available.
|
|
|
|
|
●
|
The Company may seek additional capital in the private and/or public equity markets, to continue its operations, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. The Company is evaluating additional equity/debt financing opportunities on an ongoing basis and may execute them when appropriate. However, there can be no assurances that the Company can consummate such a transaction, or consummate a transaction at favorable pricing.
|
Note 2. Summary of Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include
Soligenix, Inc., and its wholly and majority owned subsidiaries. All significant intercompany accounts and transactions have been
eliminated as a result of consolidation.
Operating Segments
Operating segments are defined as components
of an enterprise about which separate financial information is available that is evaluated on a regular basis by the chief operating
decision maker, or decision making group, in deciding how to allocate resources to an individual segment and in assessing the performance
of the segment. The Company divides its operations into two operating segments: Specialized BioTherapeutics and Public Health Solutions.
Cash and Cash Equivalents
The Company considers all highly liquid
investments with maturities of three months or less when purchased to be cash equivalents.
Contracts and Grants Receivable
Contracts and grants receivable consist
of amounts due from various grants from the NIH and contracts from NIAID, an institute of NIH, for costs incurred prior to the
period end under reimbursement contracts. The amounts were billed to the respective governmental agencies in the month subsequent
to period end and collected shortly thereafter. Accordingly, no allowance for doubtful amounts has been established. If amounts
become uncollectible, they are charged to operations.
Intangible Assets
One of the most significant estimates or
judgments that the Company makes is whether to capitalize or expense patent and license costs. The Company makes this judgment
based on whether the technology has alternative future uses, as defined in Financial Accounting Standards Board (“FASB”)
Accounting Standards Codification (“ASC”) 730, Research and Development. Based on this consideration, the Company
capitalizes payments made to legal firms that are engaged in filing and protecting rights to intellectual property and rights for
its current products in both the domestic and international markets. The Company believes that patent rights are one of its most
valuable assets. Patents and patent applications are a key component of intellectual property, especially in the early stage of
product development, as their purchase and maintenance gives the Company access to key product development rights from Soligenix’s
academic and industry partners. These rights can also be sold or sub-licensed as part of its strategy to partner its products at
each stage of development as the intangible assets have alternative future use. The legal costs incurred for these patents consist
of work associated with filing new patents designed to protect, preserve and maintain the Company’s rights, and perhaps extend
the lives of the patents. The Company capitalizes such costs and amortizes intangibles on a straight-line basis over their expected
useful life – generally a period of 11 to 16 years.
The Company did not capitalize any patent
related costs during the three or six months ended June 30, 2020 and 2019.
Website Development Costs
In February 2019, Altamont Pharmaceutical
Holdings, LLC, a company which since January 1, 2019 beneficially owned 5% or more of the shares of the Company’s outstanding
common stock but which beneficially owned less than 5% of the Company’s outstanding common stock as of June 30, 2020, signed
a service agreement with a third-party vendor to re-develop the Company’s website. Upon completion of the project at the
end of June 2019, the Company capitalized the related website development costs of $46,500 in accordance with FASB Codification
ASC 350-50 “Accounting for Web Site Development Costs”, which was reported in other assets in the accompanying consolidated
balance sheets. Beginning with the three months ended September 30, 2019, the Company started amortizing the website development
costs on a straight-line basis over three years, the estimated useful life of the website. The Company will also review its capitalized
website development costs periodically for impairment. Website amortization expense for the three months ended June 30, 2020 was
$3,875 and for the six months ended June 30, 2020 was $7,752 and accumulated amortization was $15,502 as of June 30, 2020.
Impairment of Long-Lived Assets
Office furniture and equipment, website
development costs and intangible assets with finite lives are evaluated and reviewed for impairment whenever events or changes
in circumstances indicate that the carrying amount may not be recoverable. The Company recognizes impairment of long-lived assets
in the event the net book value of such assets exceeds the estimated future undiscounted cash flows attributable to such assets.
If the sum of the expected undiscounted cash flows is less than the carrying value of the related asset or group of assets, a loss
is recognized for the difference between the fair value and the carrying value of the related asset or group of assets. Such analyses
necessarily involve significant judgment.
The Company did not record any impairment
of long-lived assets for the three or six months ended June 30, 2020 or 2019.
Fair Value of Financial Instruments
FASB ASC 820 — Fair Value Measurements
and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. FASB ASC 820 requires disclosures about the fair value
of all financial instruments, whether or not recognized, for financial statement purposes. Disclosures about the fair value of
financial instruments are based on pertinent information available to the Company on June 30, 2020. Accordingly, the estimates
presented in these financial statements are not necessarily indicative of the amounts that could be realized on disposition of
the financial instruments.
FASB ASC 820 specifies a hierarchy of valuation
techniques based on whether the inputs to those valuation techniques are observable or unobservable. Observable inputs reflect
market data obtained from independent sources, while unobservable inputs reflect market assumptions. The hierarchy gives the highest
priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurement) and the lowest
priority to unobservable inputs (Level 3 measurement).
The three levels of the fair value hierarchy
are as follows:
|
●
|
Level 1 — Quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 1 primarily consists of financial instruments whose value is based on quoted market prices such as exchange-traded instruments and listed equities.
|
|
●
|
Level 2 — Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 2 includes financial instruments that are valued using models or other valuation methodologies. These models consider various assumptions, including volatility factors, current market prices and contractual prices for the underlying financial instruments. Substantially all of these assumptions are observable in the marketplace, can be derived from observable data or are supported by observable levels at which transactions are executed in the marketplace.
|
|
●
|
Level 3 — Unobservable inputs for the asset or liability. Financial instruments are considered Level 3 when their fair values are determined using pricing models, discounted cash flows or similar techniques and at least one significant model assumption or input is unobservable.
|
The carrying amounts reported in the consolidated
balance sheet for cash and cash equivalents, contracts and grants receivable, tax receivable, research and development incentives
receivable, accounts payable, accrued expenses, and accrued compensation approximate their fair value based on the short-term nature
of these instruments.
Revenue Recognition
The Company’s revenues are primarily
generated from government contracts and grants. The revenue from government contracts and grants is based upon subcontractor costs
and internal costs incurred that are specifically covered by the contracts and grants, plus a facilities and administrative rate
that provides funding for overhead expenses and management fees. These revenues are recognized when expenses have been incurred
by subcontractors or when the Company incurs reimbursable internal expenses that are related to the government contracts and grants.
Research and Development Costs
Research and development costs are charged
to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development includes costs
such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials,
salaries, share-based compensation, employee benefits, equipment depreciation and allocation of various corporate costs. Purchased
in-process research and development expense represents the value assigned or paid for acquired research and development for which
there is no alternative future use as of the date of acquisition.
Share-Based Compensation
Stock options are issued with an exercise
price equal to the market price on the date of grant. Stock options issued to directors upon re-election vest quarterly for a period
of one year (new director issuances are fully vested upon issuance). Stock options issued to employees generally vest 25% on the
grant date, then 25% each subsequent year for a period of three years. These options have a ten year life for as long as the individuals
remain employees or directors. In general, when an employee or director terminates their position, the options will expire within
three months, unless otherwise extended by the Board.
From time to time, the Company issues restricted
shares of common stock to vendors and consultants as compensation for services performed under the Company’s 2015 Equity
Incentive Plan (the “2015 Plan”). The 2015 Plan provides for the grant of stock options, restricted stock, deferred
stock and unrestricted stock to our employees and non-employees (including consultants). The shares issued under the 2015 Plan
are registered on Form S-8 (SEC File No. 333-208515). However, as shares of common stock are not covered by a reoffer prospectus,
the certificates reflecting such shares reflect a Securities Act of 1933, as amended (the “Securities Act”) restrictive
legend. Stock compensation expense for equity-classified awards to nonemployees is measured on the date of grant and is recognized
when the services are performed.
The fair value of options issued during
the six months ended June 30, 2020 and 2019 was estimated using the Black-Scholes option-pricing model and the following assumptions:
|
●
|
a dividend yield of 0%;
|
|
●
|
an expected life of 4 years;
|
|
●
|
volatility of 77.08% - 78.96% for 2020 and 90.87% - 92.93% for 2019
|
|
●
|
risk free interest rates ranging from 1.38% - 1.66% for 2020 and 1.835% - 2.50% for 2019
|
The fair value of each option grant made
during the six months ended June 30, 2020 and 2019 was estimated on the date of each grant using the Black-Scholes option pricing
model and recognized as share-based compensation expense ratably over the option vesting periods, which approximates the service
period.
Foreign Currency Transactions and Translation
In 2018, the Company changed the status
of a wholly owned subsidiary in the United Kingdom (“UK”) from inactive to active and incurred expenditures in multiple
currencies including the U.S. dollar, the British Pound and the Euro to fund its clinical trial operations in the UK and select
countries in Europe. In accordance with FASB ASC 830 Foreign Currency Matters, the UK subsidiary expresses its U.S. dollar
and Euro denominated transactions in its functional currency, the British Pound, with related transaction gains or losses included
in net income. On a quarterly basis, the financial statements of the UK subsidiary are translated into U.S. dollars and consolidated
into the Company’s financials, with related translation adjustments reported as a cumulative translation adjustment (“CTA”),
which is a component of accumulated other comprehensive loss. During the three months ended June 30, 2020 and 2019, the Company
recognized a foreign currency transaction loss of $3,583 and a gain of $1,519, respectively, in the
accompanying consolidated statements of operations. During the six months ended June 30, 2020 and 2019, the Company recognized
a foreign currency transaction loss of $26,818 and a foreign currency transaction gain of $6,526, respectively, in the accompanying
consolidated statements of operations.
Income Taxes
Deferred tax assets and liabilities are
recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing
assets and liabilities and their respective tax basis. A valuation allowance is established when it is more likely than not that
all or a portion of a deferred tax asset will not be realized. A review of all available positive and negative evidence is considered,
including the Company’s current and past performance, the market environment in which the Company operates, the utilization
of past tax credits, and the length of carryback and carryforward periods. Deferred tax assets and liabilities are measured utilizing
tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or
settled. The Company recognized an income tax benefit of $836,893 and $610,676 from the sale of New Jersey NOL carryforwards during
the six months ended June 30, 2020 and 2019, respectively. The Company recognizes accrued interest and penalties associated with
uncertain tax positions, if any, as part of the income tax provision. There were no tax related interest and penalties recorded
for the six months ended June 30, 2020 or 2019. Additionally, the Company has not recorded an asset for unrecognized tax benefits
or a liability for uncertain tax positions at June 30, 2020 and December 31, 2019.
Research and Development Incentive Income
and Receivable
The Company recognizes other income from
United Kingdom research and development incentives when there is reasonable assurance that the income will be received, the relevant
expenditure has been incurred, and the consideration can be reliably measured. The small or medium sized enterprise (“SME”)
research and development tax relief program supports companies that seek to research and develop an advance in their field and
is governed through legislative law by HM Revenue & Customs as long as specific eligibility criteria are met.
Management has assessed the Company’s
research and development activities and expenditures to determine which activities and expenditures are likely to be eligible under
the SME research and development tax relief program described above. At each period end, management estimates the refundable tax
offset available to the Company based on available information at the time. As the tax incentives may be received without regard
to an entity’s actual tax liability, they are not subject to accounting for income taxes. As a result, amounts realized under
the SME research and development tax relief program are recorded as a component of other income.
The following table shows the change in
the United Kingdom research and development incentives receivable from December 31, 2019 to June 30, 2020:
|
|
Long-term
|
|
|
Current
|
|
Balance at December 31, 2019
|
|
$
|
-
|
|
|
$
|
444,043
|
|
UK research and development incentives
|
|
|
95,525
|
|
|
|
(115,278
|
)
|
Foreign currency translation
|
|
|
-
|
|
|
|
(29,016
|
)
|
Balance at June 30, 2020
|
|
$
|
95,525
|
|
|
$
|
299,749
|
|
Reclassifications
Certain amounts in the statement of operations for the three
and six months ended June 30, 2019 were reclassified to conform to the current year presentation.
Earnings Per Share
Basic earnings per share (“EPS”)
excludes dilution and is computed by dividing income (loss) available to common stockholders by the weighted-average number of
common shares outstanding for the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts
to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock that shared in
the earnings of the entity. Since there is a significant number of options and warrants outstanding, fluctuations in the actual
market price can have a variety of results for each period presented.
The following table summarizes potentially
dilutive adjustments to the number of common shares which were excluded from the diluted calculation because their effect would
be anti-dilutive due to the losses in each period:
|
|
As of June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Common stock purchase warrants
|
|
|
5,886,817
|
|
|
|
6,303,643
|
|
Stock options
|
|
|
1,499,580
|
|
|
|
1,093,032
|
|
Total
|
|
|
7,386,397
|
|
|
|
7,396,675
|
|
The weighted average exercise price of
the Company’s warrants and stock options outstanding at June 30, 2020 were $2.92 and $3.20 per share, respectively, and at
June 30, 2019 were $4.97 and $3.09 per share, respectively.
Use of Estimates and Assumptions
The preparation of financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions such
as the fair value of warrants and, stock options and the useful life of intangibles that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those estimates and presentation.
Note 3. Intangible Assets
The following is a summary of intangible
assets which consists of licenses and patents:
|
|
Cost
|
|
|
Accumulated Amortization
|
|
|
Net Book Value
|
|
|
|
|
|
|
|
|
|
|
|
June 30, 2020
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
462,234
|
|
|
$
|
456,117
|
|
|
$
|
6,117
|
|
Patents
|
|
|
1,893,185
|
|
|
|
1,893,185
|
|
|
|
-
|
|
Total
|
|
$
|
2,355,419
|
|
|
$
|
2,349,302
|
|
|
$
|
6,117
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
December 31, 2019
|
|
|
|
|
|
|
|
|
|
|
|
|
Licenses
|
|
$
|
462,234
|
|
|
$
|
442,535
|
|
|
$
|
19,699
|
|
Patents
|
|
|
1,893,185
|
|
|
|
1,893,185
|
|
|
|
-
|
|
Total
|
|
$
|
2,355,419
|
|
|
$
|
2,335,720
|
|
|
$
|
19,699
|
|
Amortization expense was $6,791 for each of the three months
ended June 30, 2020 and 2019. Amortization expense was $13,582 for each of the six months ended June 30, 2020 and 2019.
Based on the balance of licenses and patents
at June 30, 2020, future amortization expense through December 31, 2020 is expected to be $6,117.
License fees and royalty payments are expensed as incurred,
as the Company does not attribute any future benefits of such payments.
Note 4. Leases
The Company classifies a lease for its
office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey and a lease for a copier machine in the office as an operating
lease and a financing lease, respectively, and records related right-of-use lease assets and lease liabilities accordingly. As
of June 30, 2020, the Company’s consolidated balance sheet included a right-of-use lease asset of $46,089 for the office
space and $9,304 for the copier machine. Lease liabilities in the Company’s consolidated balance sheet included corresponding
lease liabilities of $46,555 and $10,001 respectively. During the six months ended June 30, 2020, the Company recognized lease
expense of $70,595 for the operating lease, in addition to amortization expense of $3,721 and interest expense of $608 for the
financing lease in the Company’s consolidated statement of operations.
The following represents a reconciliation
of contractual lease cash flows to the right-of-use lease assets and liabilities recognized in the financial statements:
|
|
Operating Lease
|
|
|
Financing Lease
|
|
Right-of-use lease asset:
|
|
|
|
|
|
|
Right-of-use lease asset, January 1, 2020
|
|
$
|
112,387
|
|
|
$
|
13,025
|
|
Less: reduction/amortization
|
|
|
66,298
|
|
|
|
3,721
|
|
Right-of-use lease asset, June 30, 2020
|
|
$
|
46,089
|
|
|
$
|
9,304
|
|
|
|
|
|
|
|
|
|
|
Lease liability:
|
|
|
|
|
|
|
|
|
Lease liability, January 1, 2020
|
|
$
|
113,559
|
|
|
$
|
13,665
|
|
Less: repayments
|
|
|
67,004
|
|
|
|
3,664
|
|
Lease liability, June 30, 2020
|
|
$
|
46,555
|
|
|
$
|
10,001
|
|
|
|
|
|
|
|
|
|
|
Lease expenses for the six months ended June 30, 2020:
|
|
|
|
|
|
|
|
|
Lease expense
|
|
$
|
70,595
|
|
|
$
|
-
|
|
Amortization expense
|
|
|
-
|
|
|
|
3,721
|
|
Interest expense
|
|
|
-
|
|
|
|
608
|
|
Total
|
|
$
|
70,595
|
|
|
$
|
4,329
|
|
|
|
|
|
|
|
|
|
|
Contractual cash payments for the remaining lease term as of June 30, 2020:
|
|
|
|
|
|
|
|
|
2020
|
|
$
|
47,533
|
|
|
$
|
4,272
|
|
2021
|
|
|
-
|
|
|
|
6,408
|
|
Total
|
|
$
|
47,533
|
|
|
$
|
10,680
|
|
Remaining lease term (months) as of June 30, 2020
|
|
|
4
|
|
|
|
15
|
|
Note 5. Accrued Expenses
The following is a summary of the Company’s accrued expenses:
|
|
June 30,
2020
|
|
|
December 31,
2019
|
|
|
|
|
|
|
|
|
Clinical trial expenses
|
|
$
|
3,047,866
|
|
|
$
|
3,020,030
|
|
Other
|
|
|
109,666
|
|
|
|
137,356
|
|
Total
|
|
$
|
3,157,532
|
|
|
$
|
3,157,386
|
|
Note 6. Income Taxes
The Company had gross NOLs at December
31, 2019 of approximately $107,767,000 for federal tax purposes, approximately $16,180,000 for state tax purposes and approximately
$815,000 for foreign tax purposes. Federal losses generated in 2018 or later will carry forward indefinitely. In addition, the
Company has $8,315,000 of various tax credits which expire from 2020 to 2037. The Company may be able to utilize its NOLs to reduce
future federal and state income tax liabilities. However, these NOLs are subject to various limitations under Internal Revenue
Code (“IRC”) Section 382. IRC Section 382 limits the use of NOLs to the extent there has been an ownership change of
more than 50 percentage points. In addition, the NOL carryforwards are subject to examination by the taxing authority and could
be adjusted or disallowed due to such exams. Although the Company has not undergone an IRC Section 382 analysis, it is likely that
the utilization of the NOLs may be substantially limited.
The Company and one or more of its subsidiaries
files income tax returns in the U.S. Federal jurisdiction, and various state and local jurisdictions. During 2020 and 2019, in
accordance with the State of New Jersey’s Technology Business Tax Certificate Program, which allowed certain high technology
and biotechnology companies to sell unused NOL carryforwards to other New Jersey-based corporate taxpayers, the Company sold New
Jersey NOL carryforwards, resulting in the recognition of $836,893 and $610,676 of income tax benefit, net of transaction costs,
respectively. The Company has not yet sold its 2019 New Jersey NOLs but may be able to do so in the future. There can be no assurance
as to the continuation or magnitude of this program in the future.
Note 7. Shareholders’ Equity
Preferred Stock
The Company has 350,000 shares of preferred
stock authorized, none of which are issued or outstanding.
Common Stock
The following items represent transactions
in the Company’s common stock for the six months ended June 30, 2020:
|
●
|
On January 8, 2020, the Company issued 2,189 shares of common stock as a result of an option exercise. The exercise price of the option was $0.86 per share. The cash exercise price for those shares was received in December 2019.
|
|
|
|
|
●
|
The Company issued a vendor 10,000 shares of common stock with a fair value of $1.68 per share on January 8, 2020, another 10,000 shares of common stock with a fair value of $2.25 per share on February 10, 2020 and another 10,000 shares of common stock with a fair value of $1.97 per share on March 12, 2020, in each case as partial consideration for its service performed. The shares were fully vested on the date of grant and resulted in the recognition of $59,000 of expense during the six months ended June 30, 2020.
|
|
●
|
On February 20, 2020, the Company issued 206 shares of common stock as a result of a cashless exercise of warrants. The exercise price of the warrants was $2.50.
|
|
|
|
|
●
|
On March 23, 2020, the Company issued 1,956,182 shares of common stock for payment on an achieved milestone. The fair value of the shares was $2.56 per share based upon a formula set forth in the asset purchase agreement.
|
|
|
|
|
●
|
During the six months ended June 30, 2020, the Company issued 304,615 shares of common stock as a result of warrant exercises. The exercise price of the warrants was $2.25 per share.
|
|
|
|
|
●
|
During the six months ended June 30, 2020, the Company sold 4,545,116 shares of common stock pursuant to the FBR Sales Agreement at a weighted average price of $2.08 per share.
|
The issuances of the Company’s common
stock to vendors and as a result of option exercises described above were issued under the 2015 Plan and are registered on a Registration
Statement on Form S-8. However, as shares of common stock are not covered by a reoffer prospectus, the certificates evidencing
such shares reflect a Securities Act restrictive legend.
The issuances of the Company’s common
stock (a) as a result of warrant exercises described above, other than upon cashless exercise, were registered on a Registration
Statement on Form S-1, (b) for payment on an achieved milestone described above were registered on a Registration Statement on
Form S-3 and (c) pursuant to the FBR Sales Agreement described above were registered on a Registration Statement on Form S-3.
The Company’s common stock issued
as a result of the cashless exercise of the warrants described above were exempt from registration pursuant to Section 3(a)(9)
of the Securities Act.
FBR At Market Issuance Sales Agreement
On August 11, 2017, the Company entered
into the FBR Sales Agreement to sell shares of the Company’s common stock from time to time, through an “at-the-market”
equity offering program under which FBR acts as sales agent. Under the FBR Sales Agreement, the Company sets the parameters for
the sale of shares, including the number of shares to be issued, the time period during which sales may be requested to be made,
limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made.
The FBR Sales Agreement provides that FBR is entitled to compensation for its services in an amount equal to 3% of the gross proceeds
from the sale of shares sold under the FBR Sale Agreement. The Company has no obligation to sell any shares under the FBR Sales
Agreement, and may suspend solicitation and offers under the FBR Sales Agreement at any time.
The Company’s shelf registration
statement on Form S-3 (File No. 333- 217738) filed on May 5, 2017 (the “May 2017 Registration Statement”) with the
U.S. Securities and Exchange Commission (the “SEC”) expired on August 10, 2020, but which may be utilized for a period
up to six months or until a new shelf registration statement is declared effective, whichever occurs first. All sales under the
FBR Sales Agreement from August 11, 2017 through August 10, 2020 were made pursuant to the May 2017 Registration Statement.
Future sales of common stock made pursuant to the FBR Sales
Agreement, if any, will be made pursuant to the May 2017 Registration Statement or, once declared effective, the Company’s
shelf registration statement on Form S-3 (File No. 333- 239928) filed on July 17, 2020 with the SEC, and any amendments thereto,
the base prospectus filed as part of such registration statement, and any prospectus supplements. Through July 28, 2020, the shares
sold pursuant to the FBR Sales Agreement were issued pursuant to General Instruction I.B.6 of Form S-3, which permits the Company
to sell shelf securities in a public primary offering with a value not exceeding one-third of the average market value of the Company’s
voting and non-voting common equity held by non-affiliates in any 12-month period as long as the aggregate market value of the
Company’s outstanding voting and non-voting common equity held by non-affiliates is less than $75 million. As of July 28,
2020, the Company’s outstanding voting and non-voting common equity held by non-affiliates exceeded $75 million.
As of August 10, 2020, there was $1.5 million available for
the sale of common stock under the FBR Sales Agreement.
Note 8. Commitments and Contingencies
Contractual Obligations
The Company has commitments of approximately
$450,000 as of June 30, 2020 for several licensing agreements with consultants and universities. Additionally, the Company has
collaboration and license agreements, which upon clinical or commercialization success, may require the payment of milestones of
up to $7.9 million and/or royalties up to 6% of net sales of covered products, if and when achieved. However, there can be no assurance
that clinical or commercialization success will occur.
The Company currently leases approximately
6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey pursuant to a lease that was amended
in October 2017 and expires in October 2020. This office space currently serves as the Company’s corporate headquarters.
The rent is currently $11,883 per month, or approximately $23.00 per square foot, which rate will continue for the remainder of
the lease.
On September 3, 2014, the Company entered
into an asset purchase agreement with Hy Biopharma, Inc. (“Hy Biopharma”) pursuant to which the Company acquired certain
intangible assets, properties and rights of Hy Biopharma related to the development of Hy BioPharma’s synthetic hypericin
product. As consideration for the assets acquired, the Company paid $275,000 in cash and issued 184,912 shares of common stock
with a fair value based on the Company’s stock price on the date of grant of $3,750,000. These amounts were charged to research
and development expense during the third quarter of 2014 as the assets will be used in the Company’s research and development
activities and do not have alternative future use pursuant to generally accepted accounting principles in the U.S.
In March 2020, the Company filed a prospectus
supplement covering the offer and sale of up to 1,956,182 shares of the Company’s common stock which were issued to Hy Biopharma.
The Company was required to issue the shares to Hy Biopharma as payment following the achievement of a milestone under the asset
purchase agreement, specifically, the Phase 3 clinical trial of SGX301 being successful in the treatment of CTCL. The number of
shares of the Company’s common stock issued to Hy Biopharma was calculated using an effective price of $2.56 per share, based
upon a formula set forth in the asset purchase agreement, for total expense of $5 million.
Provided all future success-oriented milestones
are attained, the Company will be required to make additional payments of up to $5.0 million, if and when achieved. Payments will
be payable in restricted securities of the Company provided they do not exceed 19.9% ownership of the Company’s outstanding
stock.
In January 2020, the Company’s Board
of Directors authorized the amendment of Dr. Schaber’s employment agreement to increase the number of shares of the Company’s
common stock from 5,000 to 500,000 issuable to Dr. Schaber immediately prior to the completion of a transaction, or series or a
combination of related transactions, negotiated by its Board of Directors whereby, directly or indirectly, a majority of its capital
stock or a majority of its assets are transferred from the Company and/or its stockholders to a third party.
As a result of the above agreements, the
Company has the following contractual obligations:
Year
|
|
Research and Development
|
|
|
Property and Other Leases
|
|
|
Total
|
|
July 1 through December 31, 2020
|
|
$
|
50,000
|
|
|
$
|
51,805
|
|
|
$
|
101,805
|
|
2021
|
|
|
100,000
|
|
|
|
6,408
|
|
|
|
106,408
|
|
2022
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2023
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2024
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
Total
|
|
$
|
450,000
|
|
|
$
|
58,213
|
|
|
$
|
508,213
|
|
CARES Act Loan
On April 13, 2020, the Company was advised
that one of its principal banks, JPMorgan Chase Bank, N.A., had approved a $417,830 loan (the “Loan”) under the Paycheck
Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief and Economic Security Act that was signed into law
on March 27, 2020.
As a U.S. small business, the Company qualified
for the PPP, which allows businesses and nonprofits with fewer than 500 employees to obtain loans of up to $10 million to incentivize
companies to maintain their workers as they manage the business disruptions caused by the COVID-19 pandemic. The PPP provides for
loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The PPP loan proceeds may
be used for eligible purposes, including payroll, benefits, rent and utilities.
The Loan, has a term of two years, is unsecured, and is guaranteed
by the Small Business Administration. The short –term portion of the Loan is $185,702 and the long-term portion of the Loan
is $232,128 with accrued interest expense of $682 as of June 30, 2020. The Loan bears interest at a fixed rate of 0.98% per annum,
with the first six months of interest and principal deferred. Some or all of the Loan may be forgiven if at least 75% of the Loan
proceeds are used by the Company to cover payroll costs, including benefits and if the Company maintains its employment and compensation
within certain parameters during the eight-week or twenty-four-week period following the Loan origination date and complies
with other relevant conditions. The Company intends to use the proceeds for purposes consistent with the PPP and expects to meet
the conditions for forgiveness of the Loan.
Contingencies
Based on the current outbreak of SARS-CoV-2,
the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions
to the Company’s operating business, including but not limited to, the sourcing of materials for product candidates, manufacture
of supplies for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued
availability of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval
at investigational study sites.
The future impact of the outbreak is highly
uncertain and cannot be predicted, and the Company cannot provide any assurance that the outbreak will not have a material adverse
impact on the Company’s operations or future results or filings with regulatory health authorities. The extent of the impact
to the Company, if any, will depend on future developments, including actions taken to contain the coronavirus.
Note 9. Operating Segments
The Company maintains two active operating
segments: Specialized BioTherapeutics and Public Health Solutions. Each segment includes an element of overhead costs specifically
associated with its operations, with its corporate shared services group responsible for support functions generic to both operating
segments.
|
|
Three Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
468,009
|
|
|
$
|
1,095,865
|
|
Specialized BioTherapeutics
|
|
|
37,279
|
|
|
|
449,099
|
|
Total
|
|
$
|
505,288
|
|
|
$
|
1,544,964
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) from Operations
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
(50,737
|
)
|
|
$
|
204,121
|
|
Specialized BioTherapeutics
|
|
|
(1,808,652
|
)
|
|
|
(1,462,334
|
)
|
Corporate
|
|
|
(954,483
|
)
|
|
|
(905,678
|
)
|
Total
|
|
$
|
(2,813,872
|
)
|
|
$
|
(2,164,891
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
7,318
|
|
|
$
|
4,316
|
|
Specialized BioTherapeutics
|
|
|
3,167
|
|
|
|
4,168
|
|
Corporate
|
|
|
7,317
|
|
|
|
4,448
|
|
Total
|
|
$
|
17,802
|
|
|
$
|
12,932
|
|
|
|
|
|
|
|
|
|
|
Other Income, Net
|
|
|
|
|
|
|
|
|
Specialized BioTherapeutics
|
|
$
|
35,091
|
|
|
$
|
(2,339
|
)
|
Corporate
|
|
|
2,018
|
|
|
|
43,709
|
|
Total
|
|
$
|
37,109
|
|
|
$
|
41,370
|
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
8,377
|
|
|
$
|
8,072
|
|
Specialized BioTherapeutics
|
|
|
18,962
|
|
|
|
19,094
|
|
Corporate
|
|
|
53,664
|
|
|
|
45,726
|
|
Total
|
|
$
|
81,003
|
|
|
$
|
72,892
|
|
|
|
Six Months Ended
June 30,
|
|
|
|
2020
|
|
|
2019
|
|
Revenues
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
1,376,818
|
|
|
$
|
1,776,218
|
|
Specialized BioTherapeutics
|
|
|
53,024
|
|
|
|
913,534
|
|
Total
|
|
$
|
1,429,842
|
|
|
$
|
2,689,752
|
|
|
|
|
|
|
|
|
|
|
Income/(Loss) from Operations
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
(209,239
|
)
|
|
$
|
195,110
|
|
Specialized BioTherapeutics
|
|
|
(9,166,503
|
)
|
|
|
(2,798,891
|
)
|
Corporate
|
|
|
(1,911,919
|
)
|
|
|
(1,861,173
|
)
|
Total
|
|
$
|
(11,287,661
|
)
|
|
$
|
(4,464,954
|
)
|
|
|
|
|
|
|
|
|
|
Amortization and Depreciation Expense
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
14,621
|
|
|
$
|
8,718
|
|
Specialized BioTherapeutics
|
|
|
6,237
|
|
|
|
8,845
|
|
Corporate
|
|
|
14,590
|
|
|
|
5,429
|
|
Total
|
|
$
|
35,448
|
|
|
$
|
22,992
|
|
|
|
|
|
|
|
|
|
|
Other Income, Net
|
|
|
|
|
|
|
|
|
Specialized BioTherapeutics
|
|
$
|
68,706
|
|
|
$
|
2,670
|
|
Corporate
|
|
|
23,965
|
|
|
|
88,460
|
|
Total
|
|
$
|
92,671
|
|
|
$
|
91,130
|
|
|
|
|
|
|
|
|
|
|
Share-Based Compensation
|
|
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
17,842
|
|
|
$
|
13,268
|
|
Specialized BioTherapeutics
|
|
|
44,251
|
|
|
|
40,002
|
|
Corporate
|
|
|
82,601
|
|
|
|
99,195
|
|
Total
|
|
$
|
144,694
|
|
|
$
|
152,465
|
|
|
|
As of
|
|
|
As of
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
Identifiable Assets
|
|
|
|
|
|
|
Public Health Solutions
|
|
$
|
273,943
|
|
|
$
|
1,018,673
|
|
Specialized BioTherapeutics
|
|
|
86,639
|
|
|
|
41,705
|
|
Corporate
|
|
|
11,900,092
|
|
|
|
6,714,982
|
|
Total
|
|
$
|
12,260,674
|
|
|
$
|
7,775,360
|
|
Note 10. Subsequent Events
Sales Pursuant
to FBR At Market Issuance Sales Agreement
From July 1, 2020 through August 10, 2020, the Company issued
1,252,287 shares of common stock pursuant to the FBR Sales Agreement at a weighted average price of $2.58 per share for total proceeds
of $3,231,319.
Office Lease
Amendment
The Company currently
leases approximately 6,200 square feet of office space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey. This office space
currently serves as the Company’s corporate headquarters. Pursuant to an amendment on July 7, 2020, the lease has been extended
from November 2020 to October 2022. The current rent of $11,883 per month, or approximately $23.00 per square foot will be reduced
to $21.50 per square foot, making the monthly payment $10,850 starting in November 2020.
ITEM 2 – Management’s
Discussion and Analysis OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis
provides information to explain our results of operations and financial condition. You should also read our unaudited consolidated
interim financial statements and their notes included in this Form 10-Q, and our audited consolidated financial statements and
their notes, Risk Factors and other information included in our Annual Report on Form 10-K for the year ended December 31, 2019.
We provide addresses to internet sites solely for the information to investors. We do not intend any addresses to be active links
or to otherwise incorporate the contents of any website into this report.
Cautionary Note Regarding Forward-Looking
Statements
This Quarterly Report on Form 10-Q contains
forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that reflect our current
expectations about our future results, performance, prospects and opportunities. These forward-looking statements are not guarantees
of future performance and are subject to significant risks, uncertainties, assumptions and other factors, which are difficult to
predict and may cause actual results to differ materially from those expressed in, or implied by, any forward-looking statements.
The forward-looking statements within this report may be identified by words such as “believes,” “anticipates,”
“expects,” “intends,” “may,” “would,” “will” and other similar expressions.
However, these words are not the exclusive means of identifying these statements. Statements that are not historical facts are
based on our current expectations, beliefs, assumptions, estimates, forecasts and projections for our business and the industry
and markets related to our business and are forward-looking statements.
Actual outcomes and results may differ
materially from what is expressed in such forward-looking statements. Important factors which may affect these actual outcomes
and results include, without limitation:
|
●
|
uncertainty as to whether our product candidates will be sufficiently safe and effective to support regulatory approvals;
|
|
|
|
|
●
|
uncertainty inherent in developing vaccines, and manufacturing and conducting preclinical and clinical trials of vaccines;
|
|
|
|
|
●
|
our ability to obtain future financing or funds when needed, either through the raising of capital, the incurrence of convertible or other indebtedness or through strategic financing or commercialization partnerships;
|
|
|
|
|
●
|
that product development and commercialization efforts will be reduced or discontinued due to difficulties or delays in clinical trials or a lack of progress or positive results from research and development efforts;
|
|
|
|
|
●
|
maintenance and progression of our business strategy;
|
|
|
|
|
●
|
the possibility that our products under development may not gain market acceptance;
|
|
|
|
|
●
|
our expectations about the potential market sizes and market participation potential for our product candidates may not be realized;
|
|
|
|
|
●
|
our expected revenues (including sales, milestone payments and royalty revenues) from our product candidates and any related commercial agreements of ours may not be realized;
|
|
|
|
|
●
|
the ability of our manufacturing partners to supply us or our commercial partners with clinical or commercial supplies of our products in a safe, timely and regulatory compliant manner and the ability of such partners to timely address any regulatory issues that have arisen or may in the future arise; and
|
|
|
|
|
●
|
competition existing today or that may arise in the future, including the possibility that others may develop technologies or products superior to our products;
|
|
●
|
the effect that global pathogens could have on financial markets, materials sourcing, patients, governments and population (e.g. COVID-19); and
|
|
|
|
|
●
|
other factors, including those “Risk Factors” set forth under Part II, Item 1A. “Risk Factors” in this Quarterly Report and in our Annual Report on Form 10-K for the year ended December 31, 2019.
|
Except as expressly required by the
federal securities laws, we undertake no obligation to publicly update or revise any forward-looking statements to reflect events
or circumstances occurring subsequent to the filing of this Form 10-Q with the United States Securities and Exchange Commission
(“the SEC”) or for any other reason. You should carefully review and consider the various disclosures we make in this
report and our other reports filed with the SEC that attempt to advise interested parties of the risks, uncertainties and other
factors that may affect our business.
Our Business Overview
We are a late-stage biopharmaceutical company
focused on developing and commercializing products to treat rare diseases where there is an unmet medical need. We maintain two
active business segments: Specialized BioTherapeutics (formerly “BioTherapeutics”) and Public Health Solutions (formerly
“Vaccines/BioDefense”).
Our Specialized BioTherapeutics business
segment is developing a novel photodynamic therapy (SGX301) utilizing topical synthetic hypericin activated with safe visible fluorescent
light for the treatment of cutaneous T-cell lymphoma (“CTCL”), our first-in-class innate defense regulator technology,
dusquetide (SGX942) for the treatment of oral mucositis in head and neck cancer, and proprietary formulations of oral beclomethasone
17,21-dipropionate (“BDP”) for the prevention/treatment of gastrointestinal (“GI”) disorders characterized
by severe inflammation, including pediatric Crohn’s disease (SGX203) and acute radiation enteritis (SGX201).
Our Public Health Solutions business segment
includes active development programs for RiVax®, our ricin toxin vaccine candidate and SGX943, our therapeutic candidate
for antibiotic resistant and emerging infectious disease, and our vaccine programs targeting both filoviruses (such as Marburg
and Ebola) and coronaviruses. The development of our vaccine programs currently is supported by our heat stabilization technology,
known as ThermoVax®. To date, this business segment has been supported with government grant and contract funding
from the National Institute of Allergy and Infectious Diseases (“NIAID”), the Biomedical Advanced Research and Development
Authority and the Defense Threat Reduction Agency (“DTRA”).
An outline of our business strategy follows:
|
●
|
Following positive primary endpoint topline analysis for the Phase 3 clinical trial of SGX301, as well as further statistically significant improvement in response rates with longer treatment (12 weeks compared to 6 weeks), continue to explore partnership and commercialization while pursuing New Drug Application (“NDA”) filing;
|
|
●
|
Following positive interim analysis and completion of enrollment in June 2020, report final topline results in our pivotal Phase 3 clinical trial of SGX942 for the treatment of oral mucositis in head and neck cancer;
|
|
●
|
Continue development of RiVax®
in combination with our ThermoVax® technology to develop a new heat stable vaccine in biodefense with NIAID
funding support;
|
|
|
|
|
●
|
Continue development of our therapeutic SGX943 and our vaccine programs targeting both filoviruses (such as Marburg and Ebola) and coronaviruses with DTRA and NIAID funding support;
|
|
●
|
Continue to apply for and secure additional government funding for each of our Specialized BioTherapeutics and Public Health Solutions programs through grants, contracts and/or procurements;
|
|
●
|
Pursue business development opportunities for our pipeline programs, as well as explore merger/acquisition strategies; and
|
|
●
|
Acquire or in-license new clinical-stage compounds for development.
|
Corporate Information
We were incorporated in Delaware in 1987
under the name Biological Therapeutics, Inc. In 1987, we merged with Biological Therapeutics, Inc., a North Dakota corporation,
pursuant to which we changed our name to “Immunotherapeutics, Inc.” We changed our name to “Endorex Corp.”
in 1996, to “Endorex Corporation” in 1998, to “DOR BioPharma, Inc.” in 2001, and finally to “Soligenix,
Inc.” in 2009. Our principal executive offices are located at 29 Emmons Drive, Suite B-10, Princeton, New Jersey 08540 and
our telephone number is (609) 538-8200.
Our Product Candidates in Development
The following tables summarize our product
candidates under development:
Specialized BioTherapeutics Product
Candidates*
Soligenix Product Candidate
|
|
Therapeutic Indication
|
|
Stage of Development
|
|
|
|
|
|
SGX301
|
|
Cutaneous T-Cell Lymphoma
|
|
Phase 2 trial completed; demonstrated significantly higher response rate compared to placebo; Phase 3 trial completed; demonstrated statistical significance in primary endpoint in March 2020 and demonstrated continued improvement in treatment response with extended treatment in April 2020; additional extended treatment and follow-up outcomes pending throughout 2020
|
|
|
|
|
|
SGX942
|
|
Oral Mucositis in Head and Neck Cancer
|
|
Phase 2 trial completed; demonstrated significant response compared to placebo with positive long-term (12 month) safety also reported; Phase 3 clinical trial enrollment completed in June 2020, with positive interim analysis received in August 2019; final results expected in the fourth quarter of 2020
|
|
|
|
|
|
SGX203†
|
|
Pediatric Crohn’s disease
|
|
Phase 1/2 clinical trial completed; efficacy data, pharmacokinetic (PK)/pharmacodynamic (PD) profile and safety profile demonstrated; Phase 3 clinical trial initiation contingent upon additional funding, such as through partnership
|
|
|
|
|
|
SGX201†
|
|
Acute Radiation Enteritis
|
|
Phase 1/2 clinical trial completed; safety profile and preliminary efficacy demonstrated; further clinical development contingent upon additional funding, such as through partnership
|
Public Health Solutions*†
ThermoVax®
|
|
Thermostability of vaccines for Ricin toxin, Ebola, Marburg and SARS-CoV-2 (COVID-19) viruses
|
|
Pre-clinical
|
|
|
|
|
|
RiVax®
|
|
Vaccine against
Ricin Toxin Poisoning
|
|
Phase 1a and 1b trials completed, safety and neutralizing antibodies for protection demonstrated; Phase 1c trial initiated December 2019, closed January 2020
|
|
|
|
|
|
SGX943
|
|
Therapeutic against Emerging Infectious Diseases
|
|
Pre-clinical
|
|
*
|
Timelines subject to potential disruption due to COVID-19
outbreak.
|
|
†
|
Contingent upon continued government contract/grant
funding or other funding source.
|
Specialized BioTherapeutics Overview
SGX301 – for Treating Cutaneous
T-Cell Lymphoma
SGX301 is a novel, first-in-class, photodynamic
therapy that utilizes safe visible light for activation. The active ingredient in SGX301 is synthetic hypericin, a photosensitizer
which is topically applied to skin lesions and then activated by fluorescent light 16 to 24 hours later. Hypericin is also found
in several species of Hypericum plants, although the drug used in SGX301 is chemically synthesized by a proprietary manufacturing
process and not extracted from plants. Importantly, hypericin is optimally activated with visible light thereby avoiding the negative
consequences of ultraviolet light. Other light therapies using UVA or UVB light can result in serious adverse effects including
secondary skin cancers.
Combined with photoactivation, in clinical
trials synthetic hypericin has demonstrated significant anti-proliferative effects on activated normal human lymphoid cells and
inhibited growth of malignant T-cells isolated from CTCL patients. In both settings, it appears that the mode of action is an induction
of cell death in a concentration as well as a light dose-dependent fashion. These effects appear to result, in part, from the generation
of singlet oxygen during photoactivation of hypericin.
Hypericin is one of the most efficient
known generators of singlet oxygen, the key component for phototherapy. The generation of singlet oxygen induces necrosis and apoptosis
in adjacent cells. The use of topical synthetic hypericin coupled with directed visible light results in generation of singlet
oxygen only at the treated site. We believe that the use of visible light (as opposed to cancer-causing ultraviolet light) is a
major advance in photodynamic therapy. In a published Phase 2 clinical study in CTCL, after six weeks of twice weekly therapy,
a majority of patients experienced a statistically significant (p<0.04) improvement with SGX301 whereas the placebo was
ineffective: 58.3% compared to 8.3%, respectively.
SGX301 has received Orphan Drug designation
as well as Fast Track designation from the United States (“U.S.”) Food and Drug Administration (“FDA”).
The Orphan Drug Act is intended to assist and encourage companies to develop safe and effective therapies for the treatment of
rare diseases and disorders. In addition to providing a seven-year term of market exclusivity for SGX301 upon final FDA approval,
Orphan Drug designation also positions us to be able to leverage a wide range of financial and regulatory benefits, including government
grants for conducting clinical trials, waiver of FDA user fees for the potential submission of an NDA for SGX301, and certain tax
credits. In addition, Fast Track is a designation that the FDA reserves for a drug intended to treat a serious or life-threatening
condition and one that demonstrates the potential to address an unmet medical need for the condition. Fast Track designation is
designed to facilitate the development and expedite the review of new drugs. For instance, should events warrant, we will be eligible
to submit a NDA for SGX301 on a rolling basis, permitting the FDA to review sections of the NDA prior to receiving the complete
submission. Additionally, NDAs for Fast Track development programs ordinarily will be eligible for priority review. SGX301 for
the treatment of CTCL also was granted Orphan Drug designation from the European Medicines Agency (“EMA”) Committee
for Orphan Medical Products and Promising Innovative Medicine (“PIM”) designation from the Medicines and Healthcare
Products Regulatory Agency (“MHRA”) in the United Kingdom (“UK”).
In August 2018, the U.S. Patent Office
granted us a patent titled “Systems and Methods for Producing Synthetic Hypericin” for the unique proprietary process
manufacturing the highly purified form of synthetic hypericin, the active pharmaceutical ingredient in SGX301.
In October 2019, the U.S. Patent Office
allowed the divisional patent application titled “Systems and Methods for Producing Synthetic Hypericin”. The allowed
claims are directed to unique, proprietary methods to produce a novel, highly purified form of synthetic hypericin. This new divisional
claim set expands on the previous issued claims in the parent U.S. patent.
In April 2020, the European patent office
granted the divisional patent application titled “Formulations and Methods of Treatment of Skin Conditions” (No. 2932973).
The granted claims are directed to the therapeutic use of synthetic hypericin in the treatment of CTCL. This new patent expands
on our comprehensive patent estate, which includes protection on the composition of the purified synthetic hypericin, methods of
synthesis and therapeutic methods of use in both CTCL and psoriasis, and is being pursued worldwide.
Based on the positive and previously published
Phase 2 results, we initiated our pivotal Phase 3 clinical study of SGX301 for the treatment of CTCL during December 2015. This
trial, referred to as the “FLASH” study (Fluorescent Light Activated Synthetic Hypericin),
aims to evaluate the response to SGX301 as a skin directed therapy to treat early stage CTCL. We have completed patient enrollment
with approximately 35 CTCL centers across the U.S. participating in this pivotal trial. The Phase 3 protocol is a highly powered,
double-blind, randomized, placebo-controlled, multicenter trial that enrolled 169 subjects (166 evaluable). The trial consists
of three treatment cycles, each of eight weeks duration. Treatments are administered twice weekly for the first six weeks and treatment
response is determined at the end of the eighth week. In the first treatment cycle, approximately 66% of subjects received SGX301
and 33% received placebo treatment of their index lesions. In the second cycle, all subjects received SGX301 treatment of their
index lesions, and in the third cycle, all subjects received or are receiving SGX301 treatment of all of their lesions. The majority
of subjects enrolled elected to continue into the third optional, open-label cycle of the study. We continue to work closely with
the Cutaneous Lymphoma Foundation, as well as the National Organization for Rare Disorders. Subjects are followed for an additional
six months after their last evaluation visit. The primary efficacy endpoint is assessed on the percentage of patients in each of
the two treatment groups (i.e., SGX301 and placebo) achieving a partial or complete response of the treated lesions, defined as
a ≥ 50% reduction in the total Composite Assessment of Index Lesion Disease Severity (“CAILS”) score for three index
lesions at the Cycle 1 evaluation visit (Week 8) compared to the total CAILS score at baseline. Other secondary measures assess
treatment response including duration, degree of improvement, time to relapse and safety.
During September 2017, the National Cancer
Institute (“NCI”), part of the National Institutes of Health (“NIH”) awarded us a Small Business Innovation
Research (“SBIR”) grant of approximately $1.5 million over two years to support the conduct of our pivotal, Phase 3,
randomized, double-blind, placebo-controlled study evaluating SGX301 (synthetic hypericin) as a treatment for CTCL. This grant
has been exhausted as of December 2019.
During October 2018, an Independent Data
Monitoring Committee (“DMC”) completed an unblinded interim analysis with data from approximately 100 subjects, including
an assessment of the Phase 3 FLASH study’s primary efficacy endpoint. The DMC provided a positive recommendation to randomize
approximately 40 additional subjects into the trial to maintain the rigorous assumption of 90% statistical power for the primary
efficacy endpoint. No safety concerns were reported by the DMC based on the interim analysis.
Positive primary endpoint analysis for
the Phase 3 study for SGX301 was completed in March 2020. The study enrolled 169 patients (166 evaluable) randomized 2:1 to receive
either SGX301 (116 patients) or placebo (50 patients) and demonstrated a statistically significant treatment response (p=0.04)
in the CAILS primary endpoint assessment at 8 weeks for Cycle 1. A total of 16% of the patients receiving SGX301 achieved at least
a 50% reduction in their index lesions compared to only 4% of patients in the placebo group at 8 weeks. SGX301 treatment in the
first cycle was safe and well tolerated.
During April 2020, analysis of the second
open-label treatment cycle (“Cycle 2”) was completed, showing that continued treatment with SGX301 twice weekly for
an additional 6 weeks (12 weeks total) increased the positive response rate to 40% (p<0.0001 compared to placebo and p<0.0001
compared to 6-weeks treatment). After the subsequent additional 6-week treatment, the response rate in patients receiving a total
of 12 weeks treatment increased two and a half-fold. Treatment responses were assessed at Week 8 (after 6 weeks of treatment) and
at week 16 (after 12 weeks of treatment). A positive response was defined as an improvement of at least 50% in the CAILS for three
index lesions evaluated in both Cycles 1 and 2. The data continues to indicate that SGX301 is safe and well tolerated.
We estimate the potential worldwide market
for SGX301 is in excess of $250 million for all applications, including the treatment of CTCL. This potential market information
is a forward-looking statement, and investors are urged not to place undue reliance on this statement. While we have determined
this potential market size based on assumptions that we believe are reasonable, there are a number of factors that could cause
our expectations to change or not be realized.
Cutaneous T-Cell Lymphoma
CTCL is a class of non-Hodgkin’s
lymphoma (“NHL”), a type of cancer of the white blood cells that are an integral part of the immune system. Unlike
most NHLs, which generally involve B-cell lymphocytes (involved in producing antibodies), CTCL is caused by an expansion of malignant
T-cell lymphocytes (involved in cell-mediated immunity) normally programmed to migrate to the skin. These skin-trafficking malignant
T-cells migrate to the skin, causing various lesions to appear that may change shape as the disease progresses, typically beginning
as a rash and eventually forming plaques and tumors. Mycosis fungoides (“MF”) is the most common form of CTCL. It generally
presents with skin involvement only, manifested as scaly, erythematous patches. Advanced disease with diffuse lymph node and visceral
organ involvement is usually associated with a poorer response rate to standard therapies. A relatively uncommon sub-group of CTCL
patients present with extensive skin involvement and circulating malignant cerebriform T-cells, referred to as Sézary syndrome.
These patients have substantially graver prognoses (expected five-year survival rate of 24%), than those with MF (expected five-year
survival rate of 88%).
CTCL mortality is related to stage of disease,
with median survival generally ranging from about 12 years in the early stages to only 2.5 years when the disease has advanced.
There is currently no FDA-approved drug for front-line treatment of early stage CTCL. Treatment of early-stage disease generally
involves skin-directed therapies. One of the most common unapproved therapies used for early-stage disease is oral 5 or 8-methoxypsoralen
(“Psoralen”) given with ultraviolet A (“UVA”) light, referred to as PUVA, which is approved for dermatological
conditions such as disabling psoriasis not adequately responsive to other forms of therapy, idiopathic vitiligo and skin manifestations
of CTCL in persons who have not been responsive to other forms of treatment. Psoralen is a mutagenic chemical that interferes with
DNA causing mutations and other malignancies. Moreover, UVA is a carcinogenic light source that when combined with the Psoralen,
results in serious adverse effects including secondary skin cancers; therefore, the FDA requires a Black Box warning for PUVA.
CTCL constitutes a rare group of NHLs,
occurring in about 4% of the approximate 500,000 individuals living with NHL. We estimate, based upon review of historic published
studies and reports and an interpolation of data on the incidence of CTCL, that it affects over 20,000 individuals in the U.S.,
with approximately 2,800 new cases seen annually.
Dusquetide
Dusquetide (research name: SGX94) is an
innate defense regulator (“IDR”) that regulates the innate immune system to simultaneously reduce inflammation, eliminate
infection and enhance tissue healing.
Dusquetide is based on a new class of short,
synthetic peptides known as IDRs. It has a novel mechanism of action in that it modulates the body’s reaction to both injury
and infection and is both simultaneously anti-inflammatory and anti-infective. IDRs have no direct antibiotic activity but modulate
host responses, increasing survival after infections with a broad range of bacterial Gram-negative and Gram-positive pathogens
including both antibiotic sensitive and resistant strains, as well as accelerating resolution of tissue damage following exposure
to a variety of agents including bacterial pathogens, trauma and chemo- or radiation-therapy. IDRs represent a novel approach to
the control of infection and tissue damage via highly selective binding to an intracellular adaptor protein, sequestosome-1, also
known as p62, which has a pivotal function in signal transduction during activation and control of the innate defense system. Preclinical
data indicate that IDRs may be active in models of a wide range of therapeutic indications including life-threatening bacterial
infections as well as the severe side-effects of chemo- and radiation-therapy. Additionally, due to selective binding to p62, dusquetide
may have potential anti-tumor action.
Dusquetide has demonstrated efficacy in
numerous animal disease models including mucositis, colitis, skin infection and other bacterial infections and has been evaluated
in a double-blind, placebo-controlled Phase 1 clinical trial in 84 healthy volunteers with both single ascending dose and multiple
ascending dose components. Dusquetide was shown to have a good safety profile and be well-tolerated in all dose groups when administered
by IV over 7 days and was consistent with safety results seen in pre-clinical studies. We believe that market opportunities for
dusquetide include, but are not limited to, oral and GI mucositis, acute Gram-positive bacterial infections (e.g., methicillin
resistant Staphylococcus aureus (MRSA)), acute Gram-negative infections (e.g., acinetobacter, melioidosis), and acute radiation
syndrome.
SGX942 – for Treating Oral
Mucositis in Head and Neck Cancer
SGX942 is our product candidate containing
our IDR technology, dusquetide, targeting the treatment of oral mucositis in head and neck cancer patients. Oral mucositis in this
patient population is an area of unmet medical need where there are currently no approved drug therapies. Accordingly, we received
Fast Track designation for the treatment of oral mucositis as a result of radiation and/or chemotherapy treatment in head and neck
cancer patients from the FDA. In addition, dusquetide has been granted PIM designation in the UK by the MHRA for the treatment
of severe oral mucositis in head and neck cancer patients receiving chemoradiation therapy. The U.S. Patent and Trademark Office
and the European Patent Office granted us the patent titled “Novel Peptides and Analogs for Use in the Treatment of Oral
Mucositis” on August 16, 2016 and January 23, 2019, respectively. The newly issued patent claims therapeutic use of dusquetide
and related IDR analogs, and adds to composition of matter claims for dusquetide and related analogs that have been granted in
the U.S. and worldwide.
We initiated a Phase 2 clinical study of
SGX942 for the treatment of oral mucositis in head and neck cancer patients in December of 2013. We completed enrollment in this
trial in the second half of 2015, and in December 2015 released positive preliminary results. In this Phase 2 proof-of-concept
clinical study that enrolled 111 patients, SGX942, at a dose of 1.5 mg/kg, successfully reduced the median duration of severe oral
mucositis by 50%, from 18 days to 9 days (p=0.099) in all patients and by 67%, from 30 days to 10 days (p=0.040) in patients receiving
the most aggressive chemoradiation therapy for treatment of their head and neck cancer. The p-values met the prospectively defined
statistical threshold of p<0.1 in the study protocol. A less severe occurrence of oral mucositis, ulcerative oral mucositis
(defined as oral mucositis with a WHO score ≥2 corresponding to the occurrence of overt ulceration in the mouth), was also monitored
during the study. In the patients receiving the most aggressive chemoradiation therapy, the median duration of oral mucositis was
found to decrease from 65 days in the placebo treated patients to 51 days in the patients treated with SGX942 1.5 mg/kg (p=0.099).
In addition to identifying the best dose
of 1.5 mg/kg, this study achieved all objectives, including increased incidence of “complete response” of tumor at
the one month follow-up visit (47% in placebo vs. 63% in SGX942 at 1.5 mg/kg). Decreases in mortality and decreases in infection
rate were also observed with SGX942 treatment, consistent with the preclinical results observed in animal models.
SGX942 was found to be generally safe and
well tolerated, consistent with the safety profile observed in the prior Phase 1 study conducted in 84 healthy volunteers. The
long-term (12 month) follow-up data was consistent with the preliminary positive safety and efficacy findings. While the placebo
population experienced the expected 12-month survival rate of approximately 80%, as defined in the Surveillance, Epidemiology,
and End Results statistics 1975-2012 from the National Cancer Institute, the SGX942 1.5 mg/kg treatment group reported a 12-month
survival rate of 93% (7% mortality in the SGX942 1.5 mg/kg group compared to 19% in the placebo group). Similarly, tumor resolution
(complete response) at 12 months was better in the SGX942 1.5 mg/kg treatment group relative to the placebo population (80% in
the 1.5 mg/kg group compared to 74% in the placebo group). Moreover, in the patients receiving chemotherapy every third week, the
SGX942 1.5 mg/kg treatment group had a tumor resolution rate (complete response) of 82% throughout the 12 months following chemoradiation
therapy, while the placebo group experienced a 64% complete response rate. The long-term follow-up results from the Phase 2 study
are reviewed in “Dusquetide: Reduction in Oral Mucositis associated with Enduring Ancillary Benefits in Tumor Resolution
and Decreased Mortality in Head and Neck Cancer Patients” published online in Biotechnology Reports and available at the
following link: https://doi.org/10.1016/j.btre.2017.05.002. In addition to safety, evaluations of other secondary efficacy endpoints,
such as the utilization of opioid pain medication, indicated that the SGX942 1.5mg/kg treatment group had a 40% decrease in the
use of opioids at the later stage of the treatment phase of the trial, when oral mucositis is usually most severe and expected
to increase pain medication use. This was in contrast to the placebo group, which demonstrated a 10% increase in use of opioids
over this same period. Data from this Phase 2 trial was published online in the Journal of Biotechnology. The publication also
delineates the supportive nonclinical data in this indication, demonstrating consistency in the qualitative and quantitative biological
response, including dose response, across the nonclinical and clinical data sets. The results are available at the following link:
https://www.sciencedirect.com/science/article/pii/S0168165616315668?via%3Dihub.
On September 9, 2016, we and SciClone Pharmaceuticals,
Inc. (“SciClone”) entered into an exclusive license agreement, pursuant to which we granted rights to SciClone to develop,
promote, market, distribute and sell SGX942 in defined territories. Under the terms of the license agreement, SciClone will be
responsible for all aspects of development, product registration and commercialization in the territories, having access to data
generated by us. In exchange for exclusive rights, SciClone will pay us royalties on net sales, and we will supply commercial drug
product to SciClone on a cost-plus basis, while maintaining worldwide manufacturing rights.
We have received clearance from the FDA
to advance the pivotal Phase 3 protocol for SGX942 in the treatment of oral mucositis in patients with head and neck cancer receiving
chemoradiation therapy. Additionally, we have received positive Scientific Advice from the EMA for the development of SGX942 as
a treatment for oral mucositis in patients with head and neck cancer. The Scientific Advice from the EMA indicates that a single,
double-blind, placebo-controlled, multinational, Phase 3 pivotal study, if successful, in conjunction with the Phase 2 dose-ranging
study, is generally considered sufficient to support a marketing authorization application (“MAA”) to the EMA for potential
licensure in Europe. The advice also provided several suggestions to strengthen the study design and data collection that were
integrated into the final protocol. Scientific Advice is offered by the EMA to stakeholders for clarification of questions arising
during development of medicinal products. The scope of Scientific Advice is limited to scientific issues and focuses on development
strategies rather than pre-evaluation of data to support an MAA. Scientific Advice is legally non-binding and is based on the current
scientific knowledge which may be subject to future changes.
We are working with leading oncology centers,
a number of which participated in the Phase 2 study, to advance this Phase 3 clinical trial referred to as the “DOM–INNATE”
study (Dusquetide treatment in Oral Mucositis – by modulating INNATE immunity). Based on the
positive and previously published Phase 2 results (Study IDR-OM-01), the pivotal Phase 3 clinical trial (Study IDR-OM-02) is a
highly powered, double-blind, randomized, placebo-controlled, multinational trial that enrolled 268 subjects with squamous cell
carcinoma of the oral cavity and oropharynx who were scheduled to receive a minimum total cumulative radiation dose of 55 Gy fractionated
as 2.0-2.2 Gy per day with concomitant cisplatin chemotherapy given as a dose of 80-100 mg/m2 every third week. Subjects
were randomized to receive either 1.5 mg/kg SGX942 or placebo given twice a week during and for two weeks following completion
of chemoradiation therapy (“CRT”). The primary endpoint for the study is the median duration of severe oral mucositis,
which is assessed by oral examination at each treatment visit and then through six weeks following completion of CRT. Oral mucositis
is evaluated using the WHO Grading system. Severe oral mucositis is defined as a WHO Grade of ≥3. Subjects are followed for
an additional 12 months after the completion of treatment.
During July 2017, we initiated our pivotal
Phase 3 study with a controlled roll-out of U.S. study sites, followed by the addition of European centers in 2018. Approximately
50 U.S. and European oncology centers are participating in this pivotal Phase 3 study.
During September 2017, the National Institute
of Dental and Craniofacial Research (“NIDCR”), part of the NIH, awarded us a SBIR grant of approximately $1.5 million
over two years to support the conduct of our Phase 3, multinational, randomized, double-blind, placebo-controlled study evaluating
SGX942 (dusquetide) as a treatment for severe oral mucositis in patients with head and neck cancer receiving CRT. This grant has
been exhausted as of August 2019.
On April 9, 2019, the U.S. Patent Office
issued a new patent No. 10,253,068 titled “Novel Peptides for Treating and Preventing Immune-Related Disorders, Including
Treating and Preventing Infection by Modulating Innate Immunity” for our dusquetide related analogs.
In April 2019, the Pediatric Committee
of the EMA approved our Pediatric Investigation Plan (“PIP”) for SGX942, a prerequisite for filing a Marketing Authorization
Application (“MAA”) for any new medicinal product in Europe. The EMA also agreed that we may defer conducting the PIP
until successful completion of our ongoing pivotal Phase 3 clinical trial of SGX942, which allows us to file the adult indication
MAA prior to completion of the PIP.
During August 2019, an independent DMC
completed an unblinded interim analysis with data from approximately 90 subjects, including an assessment of the Phase 3 DOM-INNATE
study’s primary efficacy endpoint. The DMC provided a positive recommendation to randomize approximately 70 additional subjects
into the trial to maintain the rigorous assumption of 90% statistical power for the primary efficacy endpoint. No safety concerns
were reported by the DMC based on the interim analysis.
In June 2020, enrollment of 268 subjects
was completed. We currently anticipate final top-line results during the fourth quarter 2020.
In August 2019, the NIDCR, part of the
NIH, awarded us a Phase 1 SBIR grant of approximately $150,000 to support the evaluation of SGX942 (dusquetide) in pediatric indications.
This award will facilitate the assessment of SGX942 safety in juvenile animals, supporting future studies in pediatric populations,
including oral mucositis indications in pediatric patients undergoing stem cell transplants and treatments for head and neck cancer.
In February 2020, the Japanese Patent Office
granted the patent titled “Novel Peptides and Analogs for Use in the Treatment of Oral Mucositis.” This allowance builds
on similar intellectual property in the U.S., New Zealand, Australia and Singapore and patent applications pending in other jurisdictions
worldwide. The new claims cover therapeutic use of dusquetide (active ingredient in SGX942) and related IDR analogs, and add to
composition of matter claims for dusquetide and related analogs that have been granted in the U.S. and worldwide.
We estimate the potential worldwide market
for SGX942 is in excess of $500 million for all applications, including the treatment of oral mucositis. This potential market
information is a forward-looking statement, and investors are urged not to place undue reliance on this statement. While we have
determined this potential market size based on assumptions that we believe are reasonable, there are a number of factors that could
cause our expectations to change or not be realized.
Oral Mucositis
Mucositis is the clinical term for damage
done to the mucosa by anticancer therapies. It can occur in any mucosal region, but is most commonly associated with the mouth,
followed by the small intestine. We estimate, based upon our review of historic studies and reports, and an interpolation of data
on the incidence of mucositis, that mucositis affects approximately 500,000 people in the U.S. per year and occurs in 40% of patients
receiving chemotherapy. Mucositis can be severely debilitating and can lead to infection, sepsis, the need for parenteral nutrition
and narcotic analgesia. The GI damage causes severe diarrhea. These symptoms can limit the doses and duration of cancer treatment,
leading to sub-optimal treatment outcomes.
The mechanisms of mucositis have been extensively
studied and have been linked to the interaction of chemotherapy and/or radiation therapy with the innate defense system. Bacterial
infection of the ulcerative lesions is regarded as a secondary consequence of dysregulated local inflammation triggered by therapy-induced
cell death, rather than as the primary cause of the lesions.
We estimate, based upon our review of historic
studies and reports, and an interpolation of data on the incidence of oral mucositis, that oral mucositis is a subpopulation of
approximately 90,000 patients in the U.S., with a comparable number in Europe. Oral mucositis almost always occurs in
patients with head and neck cancer treated with radiation therapy (greater than 80% incidence of severe mucositis) and is common
in patients undergoing high dose chemotherapy and hematopoietic cell transplantation, where the incidence and severity of oral
mucositis depends greatly on the nature of the conditioning regimen used for myeloablation.
Oral BDP
Oral BDP (beclomethasone 17,21-dipropionate)
represents a first-of-its-kind oral, locally acting therapy tailored to treat GI inflammation. BDP has been
marketed in the U.S. and worldwide since the early 1970s as the active pharmaceutical ingredient in a nasal spray and in a metered-dose
inhaler for the treatment of patients with allergic rhinitis and asthma. Oral BDP is specifically formulated for oral administration
as a single product consisting of two tablets. One tablet is intended to release BDP in the upper sections of the GI tract and
the other tablet is intended to release BDP in the lower sections of the GI tract.
Based on its pharmacological characteristics,
oral BDP may have utility in treating other conditions of the GI tract having an inflammatory component. We are planning to pursue
development programs for the treatment of pediatric Crohn’s disease, acute radiation enteritis and GI acute radiation syndrome
pending further grant funding. We are also exploring the possibility of testing oral BDP for local inflammation associated with
ulcerative colitis, among other indications.
In July 2019, the European Patent Office
issued two patents, both titled “Topically Active Steroids for use in Radiation and Chemotherapeutic Injury”, following
the expiration of the objection period. The new patents (#2,373,160 and #2,902,031) claim use of oral beclomethasone 17,21-dipropionate
(BDP) for treatment of damage to the GI tract as a result of acute radiation injury, including total body irradiation in the accidental
or biodefense context.
We estimate the potential worldwide market
for oral BDP is in excess of $500 million for all applications, including the treatment of pediatric Crohn’s disease. This
potential market information is a forward-looking statement, and investors are urged not to place undue reliance on this statement.
While we have determined this potential market size based on assumptions that we believe are reasonable, there are a number of
factors that could cause our expectations to change or not be realized.
SGX203 – for Treating Pediatric
Crohn’s Disease
SGX203 is a two tablet delivery system
of BDP specifically designed for oral use that allows for administration of immediate and delayed release BDP throughout the small
bowel and the colon. The FDA has given SGX203 Orphan Drug designation as well as Fast Track designation for the treatment of pediatric
Crohn’s disease. We will pursue a pivotal Phase 3 clinical trial of SGX203 for the treatment of pediatric Crohn’s disease
contingent upon additional funding, such as through partnership funding support.
Pediatric Crohn’s Disease
Crohn’s disease causes inflammation
of the GI tract. Crohn’s disease can affect any area of the GI tract, from the mouth to the anus, but it most commonly affects
the lower part of the small intestine, called the ileum. The swelling caused by the disease extends deep into the lining of the
affected organ. The swelling can induce pain and can make the intestines empty frequently, resulting in diarrhea. Because the symptoms
of Crohn’s disease are similar to other intestinal disorders, such as irritable bowel syndrome and ulcerative colitis, it
can be difficult to diagnose. People of Ashkenazi Jewish heritage have an increased risk of developing Crohn’s disease.
Crohn’s disease can appear at any
age, but it is most often diagnosed in adults in their 20s and 30s. However, approximately 30% of people with Crohn’s disease
develop symptoms before 20 years of age. We estimate, based upon our review of historic published studies and reports, and an interpolation
of data on the incidence of pediatric Crohn’s disease, that pediatric Crohn’s disease is a subpopulation of approximately
80,000 patients in the U.S. with a comparable number in Europe. Crohn’s disease tends to be both severe and extensive in
the pediatric population and a relatively high proportion (approximately 40%) of pediatric Crohn’s patients have involvement
of their upper GI tract.
Crohn’s disease presents special
challenges for children and teens. In addition to bothersome and often painful symptoms, the disease can stunt growth, delay puberty,
and weaken bones. Crohn’s disease symptoms may sometimes prevent a child from participating in enjoyable activities. The
emotional and psychological issues of living with a chronic disease can be especially difficult for young people.
SGX201 – for Preventing Acute
Radiation Enteritis
SGX201 is a delayed-release formulation
of BDP specifically designed for oral use. In 2012, we completed a Phase 1/2 clinical trial testing SGX201 in prevention of acute
radiation enteritis. Patients with rectal cancer scheduled to undergo concurrent radiation and chemotherapy prior to surgery were
randomized to one of four dose groups. The objectives of the study were to evaluate the safety and maximal tolerated dose of escalating
doses of SGX201, as well as the preliminary efficacy of SGX201 for prevention of signs and symptoms of acute radiation enteritis.
The study demonstrated that oral administration of SGX201 was safe and well tolerated across all four dose groups. There was also
evidence of a potential dose response with respect to diarrhea, nausea and vomiting and the assessment of enteritis according to
National Cancer Institute Common Terminology Criteria for Adverse Events for selected GI events. In addition, the incidence of
diarrhea was lower than that seen in published historical control data in this patient population. This program was supported in
part by a $500,000 two-year SBIR grant awarded by the NIH. We continue to work with our Radiation Enteritis medical advisors to
identify additional funding opportunities to support the clinical development program.
We have received Fast Track designation
from the FDA for SGX201 for acute radiation enteritis.
Acute Radiation Enteritis
External radiation therapy is used to treat
most types of cancer, including cancer of the bladder, uterine, cervix, rectum, prostate, and vagina. During delivery of treatment,
some level of radiation will also be delivered to healthy tissue, including the bowel, leading to acute and chronic toxicities.
The large and small bowels are very sensitive to radiation and the larger the dose of radiation the greater the damage to normal
bowel tissue. Radiation enteritis is a condition in which the lining of the bowel becomes swollen and inflamed during or after
radiation therapy to the abdomen, pelvis, or rectum. Most tumors in the abdomen and pelvis need large doses, and almost all patients
receiving radiation to the abdomen, pelvis, or rectum will show signs of acute enteritis.
Patients with acute enteritis may have
nausea, vomiting, abdominal pain and bleeding, among other symptoms. Some patients may develop dehydration and require hospitalization.
With diarrhea, the GI tract does not function normally, and nutrients such as fat, lactose, bile salts, and vitamin B12 are not
well absorbed.
Symptoms will usually resolve within two
to six weeks after therapy has ceased. Radiation enteritis is often not a self-limited illness, as over 80% of patients who receive
abdominal radiation therapy complain of a persistent change in bowel habits. Moreover, acute radiation injury increases the risk
of development of chronic radiation enteropathy, and overall 5% to 15% of the patients who receive abdominal or pelvic irradiation
will develop chronic radiation enteritis.
We estimate, based upon our review of historic
published studies and reports, and an interpolation of data on the treatment courses and incidence of cancers occurring in the
abdominal and pelvic regions, there to be over 100,000 patients annually in the U.S., with a comparable number in Europe, who receive
abdominal or pelvic external beam radiation treatment for cancer, and these patients are at risk of developing acute and chronic
radiation enteritis.
Public Health Solutions Overview
ThermoVax® –
Thermostability Technology
ThermoVax® is a novel method
for thermostabilizing vaccines with a variety of adjuvants, resulting in a single vial which can be reconstituted with water for
injection immediately prior to use.
One of the adjuvants utilized in ThermoVax®
is aluminum salts (known colloquially as Alum). Alum is the most widely employed adjuvant technology in the vaccine industry.
The value of ThermoVax®
lies in its potential ability to eliminate the need for cold chain production, transportation, and storage for Alum-adjuvanted
vaccines. This would relieve the high costs of producing and maintaining vaccines under refrigerated conditions. Based on historical
reports from the World Health Organization and other scientific reports, we believe that a meaningful proportion of vaccine doses
globally are wasted due to excursions from required cold chain temperature ranges. This is due to the fact that many vaccines need
to be maintained either between 2 and 8 degrees Celsius (“C”), frozen below -20 degrees C, or frozen below -60 degrees
C, and even brief excursions from these temperature ranges usually necessitate the destruction of the product or the initiation
of costly stability programs specific for the vaccine lots in question. ThermoVax® has the potential to facilitate
easier storage and distribution of strategic national stockpile vaccines for ricin exposure in emergency settings.
ThermoVax® development,
specifically in the context of an Alum adjuvant, was supported pursuant to our $9.4 million NIAID grant enabling development of
thermo-stable ricin (RiVax®) and anthrax vaccines. Proof-of-concept preclinical studies with ThermoVax®
indicate that it is able to produce stable vaccine formulations using adjuvants, protein immunogens, and other components
that ordinarily would not withstand long temperature variations exceeding customary refrigerated storage conditions. These studies
were conducted with our Alum-adjuvanted ricin toxin vaccine, RiVax® and our Alum-adjuvanted anthrax vaccine. Each
vaccine was manufactured under precise lyophilization conditions using excipients that aid in maintaining native protein structure
of the key antigen. When RiVax® was kept at 40 degrees C (104 degrees Fahrenheit) for up to one year, all of the
animals vaccinated with the lyophilized RiVax® vaccine developed potent and high titer neutralizing antibodies.
In contrast, animals that were vaccinated with the liquid RiVax® vaccine kept at 40 degrees C did not develop neutralizing
antibodies and were not protected against ricin exposure. The ricin A chain is extremely sensitive to temperature and rapidly loses
the ability to induce neutralizing antibodies when exposed to temperatures higher than 8 degrees C. When the anthrax vaccine was
kept for up to 16 weeks at 70 degrees C, it was able to develop a potent antibody response, unlike the liquid formulation kept
at the same temperature. Moreover, we also have demonstrated the compatibility of our thermostabilization technology with other
secondary adjuvants such as TLR-4 agonists.
We also entered into a collaboration agreement
with Axel Lehrer, PhD of the Department of Tropical Medicine, Medical Microbiology and Pharmacology, John A. Burns School of Medicine,
University of Hawaiʻi at Manoa (“UH Manoa”) and Hawaii Biotech,
Inc. (“HBI”) to develop a heat stable subunit Ebola vaccine. Dr. Lehrer, a co-inventor of the Ebola vaccine with HBI,
has shown proof of concept efficacy with subunit Ebola vaccines in non-human primates. The most advanced Ebola vaccines involve
the use of vesicular stomatitis virus and adenovirus vectors – live, viral vectors which complicate the manufacturing, stability
and storage requirements. Dr. Lehrer’s vaccine candidate is based on highly purified recombinant protein antigens, circumventing
many of these manufacturing difficulties. Dr. Lehrer and HBI have developed a robust manufacturing process for the required proteins.
Application of ThermoVax® may allow for a product that can avoid the need for cold chain distribution and storage,
yielding a vaccine ideal for use in both the developed and developing world. This agreement has expired in accordance with its
terms.
During September 2017, we announced we
will be participating in a NIAID Research Project (R01) grant awarded to UH Manoa for the development of a trivalent thermostabilized
filovirus vaccine (including protection against Zaire ebolavirus, Sudan ebolavirus and Marburg Marburgvirus),
with our awarded funding of approximately $700,000 over five years. Previous collaborations demonstrated the feasibility of developing
a heat stable subunit Ebola vaccine. Under the terms of the subaward, we will continue to support vaccine formulation development
with our proprietary vaccine thermostabilization technology, ThermoVax®. Ultimately, the objective is to produce
a thermostable trivalent filovirus vaccine for protection against Ebola and related diseases, allowing worldwide distribution without
the need for cold storage. Based on current U.S. government needs, efforts have recently been expanded to focus on a monovalent
or bivalent vaccine to specifically address Marburg marburgvirus.
On December 21, 2010, we executed a worldwide
exclusive license agreement with the University of Colorado (“UC”) for certain patents relating to ThermoVax®
in all fields of use. In April 2018, the UC delivered a notice of termination of our license agreement based upon our failure to
achieve one of the development milestones: initiation of the Phase 1 clinical trial of the heat stabilization technology by March
31, 2018. After negotiating with the UC, we and the UC agreed to extend the termination date to October 31, 2018 in order to allow
us time to agree upon a potential agreement that would allow us to keep the rights to, and to continue to develop, the heat stabilization
technology or a product candidate containing the heat stabilization technology in our field of use.
On October 31, 2018, in a series of related
transactions, (a) we and the UC agreed to terminate the original license agreement, (b) the UC and VitriVax, Inc. (“VitriVax”)
executed a worldwide exclusive license agreement for the heat stabilization technology for all fields of use, and (c) we and VitriVax
executed a worldwide exclusive sublicense agreement for the heat stabilization technology for use in the fields of ricin and Ebola
vaccines. We paid a $100,000 sublicense fee on the effective date of the sublicense agreement. To maintain the sublicense we are
obliged to pay a minimum annual royalty of $20,000 until first commercial sale of a sublicensed product, upon which point, we shall
pay an earned royalty of 2% of net sales subject to a minimum royalty of $50,000 each year. We are also required to pay royalty
on any sub-sublicense income based on a declining percentage of all sub-sublicense income calculated within the contractual period
until reaching a minimum of 15% after two years. In addition, we are required to pay VitriVax milestone fees of: (a) $50,000 upon
initiation of a Phase 2 clinical trial of the sublicensed product, (b) $200,000 upon regulatory approval of a sublicensed product,
and (c) $1 million upon achieving $10 million in aggregate net sales of a sublicensed product in the U.S. or equivalent. To date
none of these milestones have been met.
On February 7, 2019, European Journal of
Pharmaceutics and Biopharmaceutics published a scientific article demonstrating the successful thermostabilization of an Alum-adjuvanted
Ebola subunit vaccine candidate.
On July 31, 2019, we and our collaborators
presented two posters on the trivalent vaccine program. The first poster outlined the stability of the lyophilized formulations
of the Ebola virus glycoprotein upon lyophilization and storage at temperatures as high as 40 degrees C (104 degrees F) and identified
potential stability assays. The second poster further demonstrated the ability to co-lyophilize multiple antigens in the presence
of an emulsion forming adjuvant, facilitating the development of a thermostable trivalent vaccine.
On March 11, 2020, we entered into a research
collaboration with the Axel Lehrer, PhD of the Department of Tropical Medicine, Medical Microbiology and Pharmacology, John A.
Burns School of Medicine, UH Manoa to further expand the filovirus collaboration to investigation of potential coronavirus vaccines,
including for SARS-CoV-2 (causing COVID-19). This research collaboration will utilize the technology platform developed in the
search for filovirus vaccines and will use well-defined surface glycoprotein(s) from one or more coronaviruses, which are expected
to be protective for COVID-19.
On April 16, 2020, we obtained an exclusive
worldwide license for CoVaccine HTTM, a novel vaccine adjuvant, from BTG Specialty Pharmaceuticals (“BTG”),
a division of Boston Scientific Corporation, for the fields of coronavirus infection (including SARS-CoV-2, the cause of COVID-19),
and pandemic flu. CoVaccine HTTM is a novel adjuvant, which has been shown to enhance both cell-mediated and antibody-mediated
immunity. We and our collaborators, including UH Manoa and Dr. Axel Lehrer, have successfully demonstrated the utility of CoVaccine
HTTM in the development of our heat stable filovirus vaccine program, with vaccine candidates against Ebola and Marburg
virus disease. Given this previous success, CoVaccine HTTM will potentially be an important component of our vaccine
technology platform currently being assessed for use against coronaviruses including SARS-CoV-2, the cause of COVID-19. The license
agreement was executed between us and Protherics Medicines Development, one of the companies that make up the BTG specialty pharmaceutical
business, which owns the CoVaccine HTTM intellectual property.
On July 28, 2020, we announced the availability
of a pre-print manuscript (available at https://doi.org/10.1101/2020.07.24.220715)
describing a prototype COVID-19 vaccine using the novel CoVaccine HT™ adjuvant and demonstrating significant immunogenicity,
including strong total and neutralizing antibody responses, with a balanced Th1 response, as well as enhancement of cell mediated
immunity. These are all considered to be critical attributes of a potential COVID-19 vaccine.
RiVax® –
Ricin Toxin Vaccine
RiVax® is our proprietary
vaccine candidate being developed to protect against exposure to ricin toxin and if approved, would be the first ricin vaccine.
The immunogen in RiVax® induces a protective immune response in animal models of ricin exposure and functionally
active antibodies in humans. The immunogen consists of a genetically inactivated ricin A chain subunit that is enzymatically inactive
and lacks residual toxicity of the holotoxin. RiVax® has demonstrated statistically significant (p < 0.0001)
preclinical survival results, providing 100% protection against acute lethality in an aerosol exposure non-human primate model
(Roy et al, 2015, Thermostable ricin vaccine protects rhesus macaques against aerosolized ricin: Epitope-specific neutralizing
antibodies correlate with protection, PNAS USA 112:3782-3787), and has also been shown to be well tolerated and immunogenic in
two Phase 1 clinical trials in healthy volunteers. Results of the first Phase 1 human trial of RiVax® established
that the immunogen was safe and induced antibodies that we believe may protect humans from ricin exposure. The antibodies generated
from vaccination, concentrated and purified, were capable of conferring immunity passively to recipient animals, indicating that
the vaccine was capable of inducing functionally active antibodies in humans. The outcome of this study was published in the Proceedings
of the National Academy of Sciences (Vitetta et al., 2006, A Pilot Clinical Trial of a Recombinant Ricin Vaccine in Normal Humans,
PNAS, 103:2268-2273). The second trial which was completed in September 2012 and was sponsored by University of Texas Southwestern
Medical Center (“UTSW”), evaluated a more potent formulation of RiVax® that contained an Alum adjuvant.
The results of the Phase 1b study indicated that Alum-adjuvanted RiVax® was safe and well tolerated, and induced
greater ricin neutralizing antibody levels in humans than adjuvant-free RiVax®. The outcomes of this second study
were published in the Clinical and Vaccine Immunology (Vitetta et al., 2012, Recombinant Ricin Vaccine Phase 1b Clinical Trial,
Clin. Vaccine Immunol. 10:1697-1699). We have adapted the original manufacturing process for the immunogen contained in RiVax®
for thermostability and large scale manufacturing and recent studies have confirmed that the thermostabilized RiVax®
formulation enhances the stability of the RiVax® antigen, enabling storage for at least 1 year at temperatures
up to 40°C (104 °F). The program will pursue approval via the FDA “Animal Rule” since it is not possible to
test the efficacy of the vaccine in a clinical study which would expose humans to ricin. Uniform, easily measured and species-neutral
immune correlates of protection that can be measured in humans and animals, and are indicative of animal survival to subsequent
ricin challenge, are central to the application of the “Animal Rule”. Recent work has identified such potential correlates
of immune protection in animals and work to qualify and validate these approaches is continuing, with the goal of utilizing these
assays in a planned Phase 1/2 clinical trial with the thermostable RiVax® formulation. During September 2018, we
published an extended stability study of RiVax®, showing up to 100% protection in mice after 12 months storage at
40°C (104 °F) as well as identification of a potential in vitro stability indicating assay, critical to adequately confirming
the long-term shelf life of the vaccine. We have entered into a collaboration with IDT Biologika GmbH to scale-up the formulation/filling
process and continue development and validation of analytical methods established at IDT to advance the program. We also have initiated
a development agreement with Emergent BioSolutions, Inc. to implement a commercially viable, scalable production technology for
the RiVax® drug substance protein antigen.
The development of RiVax®
has been sponsored through a series of overlapping challenge grants, UC1, and cooperative grants, U01, from the NIH, granted to
us and to UTSW where the vaccine originated. The second clinical trial was supported by a grant from the FDA’s Office of
Orphan Products to UTSW. To date, we and UTSW have collectively received approximately $25 million in grant funding from the NIH
for the development of RiVax®. In September 2014, we entered into a contract with the NIH for the development of
RiVax® pursuant to which we have been awarded an additional $21.2 million of funding in the aggregate. The development
agreements with Emergent BioSolutions and IDT are specifically funded under this NIH contract.
In 2017, NIAID exercised options to fund
additional animal efficacy studies and good manufacturing practices compliant RiVax® bulk drug substance and finished
drug product manufacturing, which is required for the conduct of future preclinical and clinical safety and efficacy studies. The
exercised options provide us with approximately $4.5 million in additional non-dilutive funding, bringing the total amount awarded
to date under this contract to $21.2 million, of which $1.1 million is still available. The total award of up to $21.2 million
will support the preclinical, manufacturing and clinical development activities necessary to advance heat stable RiVax®
with the FDA. In addition to the ongoing funding of $21.2 million for the development of RiVax®, biomarkers for
RiVax® testing have been successfully identified, facilitating potential approval under the FDA Animal Rule.
During December 2019, we initiated a third
Phase 1 double-blind, placebo-controlled, randomized study in eight healthy adult volunteer subjects designed to evaluate the safety
and immunogenicity of RiVax® utilizing ThermoVax®. During January 2020, we suspended the study after
Emergent Manufacturing Operations Baltimore LLC (“EMOB”), the manufacturer of the drug substance, notified us that,
after releasing of the final drug product to us, EMOB identified that the active drug substance tested outside the established
specification parameters. Two subjects had received doses as part of the study before the manufacturer provided this notice. Those
two subjects will continue to be monitored and data captured in accordance with the study protocol; however, they will not receive
further doses of study drug. A clinical safety report will be generated at study completion.
During April 2020, we received notification
from NIAID that they would not be exercising the final contract option to support the conduct of a Phase 1/2 clinical study in
healthy volunteers. As a result, the total contract award will not exceed $21.2 million.
In connection with failures relating to
the manufacture of RiVax® bulk drug substance, on July 1, 2020, we filed a demand for arbitration against Emergent
Biosolutions, Inc. (“EBS”), Emergent Product Development Gaithersburg, Inc. (“EPDG”); and EMOB (together
with EBS and EPDG, “Emergent”) with the American Arbitration Association in Mercer County, New Jersey. We have alleged
that (a) EPDG breached contracts, an express warranty, a warranty of merchantability, and a warranty of fitness for a particular
purpose, (b) EMOB breached a contract; (c) EPDG was unjustly enriched; (d) EPDG and EMOB were negligent in the performance of their
work; and (e) EBS fraudulently induced us into entering into the contracts with EPDG and EMOB. We are seeking to recover damages
in excess of $19 million from Emergent. Emergent has answered the demand for arbitration denying the allegations and asserting
affirmative defenses. While we intend to vigorously pursue this arbitration, we cannot offer any assurances as to any result from
the arbitration or that we will recover any damages from Emergent. For more details regarding the arbitration against Emergent,
see Part II – Item 1. “Legal Proceedings” in this Quarterly Report.
RiVax® has been granted
Orphan Drug designation as well as Fast Track designation by the FDA for the prevention of ricin intoxication. In addition, RiVax®
has also been granted Orphan Drug designation in the European Union from the EMA Committee for Orphan Medical Products.
Assuming development efforts are successful
for RiVax®, we believe potential government procurement contract(s) could reach as much as $200 million. This
potential procurement contract information is a forward-looking statement, and investors are urged not to place undue reliance
on this statement. While we have determined this potential procurement contract value based on assumptions that we believe are
reasonable, there are a number of factors that could cause our expectations to change or not be realized.
As a new chemical entity, an FDA approved
RiVax® vaccine has the potential to qualify for a biodefense Priority Review Voucher (“PRV”). Approved
under the 21st Century Cures Act in late 2016, the biodefense PRV is awarded upon approval as a medical countermeasure when the
active ingredient(s) have not been otherwise approved for use in any context. PRVs are transferable and can be sold, with sales
in recent years in excess of $100 million. When redeemed, PRVs entitle the user to an accelerated review period of nine months,
saving a median of seven months review time as calculated in 2009. However, FDA must be advised 90 days in advance of the use of
the PRV and the use of a PRV is associated with an additional user fee ($2.2 million for fiscal year 2020).
Ricin Toxin
Ricin toxin can be cheaply and easily produced,
is stable over long periods of time, is toxic by several routes of exposure and thus has the potential to be used as a biological
weapon against military and/or civilian targets. As a bioterrorism agent, ricin could be disseminated as an aerosol, by injection,
or as a food supply contaminant. The potential use of ricin toxin as a biological weapon of mass destruction has been highlighted
in a Federal Bureau of Investigation Bioterror report released in November 2007 titled Terrorism 2002-2005, which states that “Ricin
and the bacterial agent anthrax are emerging as the most prevalent agents involved in WMD investigations” (http://www.fbi.gov/stats-services/publications/terrorism-2002-2005/terror02_05.pdf).
In recent years, Al Qaeda in the Arabian Peninsula has threatened the use of ricin toxin to poison food and water supplies and
in connection with explosive devices. Domestically, the threat from ricin remains a concern for security agencies. In April 2013,
letters addressed to the U.S. President, a Senator and a judge tested positive for ricin. As recently as October 2018, an envelope
addressed to President Trump was suspected to contain this potent and potentially lethal toxin, which was subsequently confirmed
to contain pieces of castor beans used to make ricin.
The Centers for Disease Control and Prevention
has classified ricin toxin as a Category B biological agent. Ricin works by first binding to glycoproteins found on the exterior
of a cell, and then entering the cell and inhibiting protein synthesis leading to cell death. Once exposed to ricin toxin, there
is no effective therapy available to reverse the course of the toxin. The recent ricin threat to government officials has heightened
the awareness of this toxic threat. Currently, there is no FDA approved vaccine to protect against the possibility of ricin toxin
being used in a terrorist attack, or its use as a weapon on the battlefield nor is there a known antidote for ricin toxin exposure.
SGX943 – for Treating Emerging
and/or Antibiotic-Resistant Infectious Diseases
SGX943 is an IDR, containing the same active
ingredient as SGX942. Dusquetide is a fully synthetic, 5-amino acid peptide with high aqueous solubility and stability. Extensive
in vivo preclinical studies have demonstrated enhanced clearance of bacterial infection with SGX943 administration. SGX943
has shown efficacy against both Gram-negative and Gram-positive bacterial infections in preclinical models, independent of whether
the bacteria is antibiotic-resistant or antibiotic-sensitive.
The innate immune system is responsible
for rapid and non-specific responses to combat bacterial infection. Augmenting these responses represents an alternative approach
to treating bacterial infections. In animal models, IDRs are efficacious against both antibiotic-sensitive and antibiotic-resistant
infections, both Gram-positive and Gram-negative bacteria, and are active irrespective of whether the bacteria occupies a primarily
extracellular or intracellular niche. IDRs are also effective as stand-alone agents or in conjunction with antibiotics. An IDR
for the treatment of serious bacterial infections encompasses a number of clinical advantages including:
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Treatment when antibiotics are contraindicated, such as:
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o
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before the infectious organism and/or its antibiotic susceptibility is known; or
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o
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in at-risk populations prior to infection.
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●
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An ability to be used as an additive, complementary treatment with antibiotics, thereby:
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|
o
|
enhancing efficacy of sub-optimal antibiotic regimens (e.g., partially antibiotic-resistant infections);
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o
|
enhancing clearance of infection, thereby minimizing the generation of antibiotic resistance (e.g., in treating melioidosis); and
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o
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reducing the required antibiotic dose, again potentially minimizing the generation of antibiotic resistance.
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●
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An ability to modulate the deleterious consequences of inflammation in response to the infection, including the inflammation caused by antibiotic-driven bacterial lysis; and
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●
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Being unlikely to generate bacterial resistance since the IDR acts on the host, and not the pathogen.
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Importantly, systemic inflammation and
multi-organ failure is the ultimate common outcome of not only emerging and/or antibiotic-resistant infectious diseases, but also
of most biothreat agents (e.g., Burkholderia pseudomallei), indicating that dusquetide would be applicable not only to antibiotic-resistant
infection, but also to biothreat agents, especially where the pathogen is not known and/or has been engineered for enhanced antibiotic
resistance.
In May 2019, we were awarded a DTRA subcontract
of approximately $600,000 over three years to participate in a biodefense contract for the development of medical countermeasures
against bacterial threat agents. As of June 30, 2020, there was negligible revenue earned or expense incurred related to the DTRA
subcontract.
Critical Accounting Policies
Our discussion and analysis of our financial
condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance
with accounting principles generally accepted in the U.S. The preparation of these financial statements requires us to make estimates
and judgments that affect the reported amounts of assets, liabilities and expenses, and related disclosure of contingent assets
and liabilities. We evaluate these estimates and judgments on an on-going basis.
Revenue Recognition
Our revenues are primarily generated from
government contracts and grants. The revenue from government contracts and grants is based upon subcontractor costs and internal
costs incurred that are specifically covered by the contracts and grants, plus a facilities and administrative rate that provides
funding for overhead expenses and management fees. These revenues are recognized when expenses have been incurred by subcontractors
or when we incur reimbursable internal expenses that are related to the government contracts and grants.
Research and Development Costs
Research and development costs are charged
to expense when incurred in accordance with FASB ASC 730, Research and Development. Research and development includes costs
such as clinical trial expenses, contracted research and license agreement fees with no alternative future use, supplies and materials,
salaries, share-based compensation, employee benefits, equipment depreciation and allocation of various corporate costs. Purchased
in-process research and development expense represents the value assigned or paid for acquired research and development for which
there is no alternative future use as of the date of acquisition.
Use of Estimates and Assumptions
The preparation of financial statements
in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions such
as the fair value of warrants and stock options and the useful life of intangibles that affect the reported amounts in the financial
statements and accompanying notes. Actual results could differ from those estimates.
Material Changes in Results of Operations
Three and Six Months Ended June 30,
2020 Compared to June 30, 2019
For the three months ended June 30, 2020,
we had a net loss of $2,776,763 as compared to a net loss of $2,123,521 for the same period in the prior year, representing an
increase in the net loss of $653,242 or 31%. This increase in net loss was primarily the result of increased research and development
spending primarily attributable to higher clinical trial site and patient fees. For the six months ended June 30, 2020, we had
a net loss of $10,358,097 as compared to a net loss of $3,763,148 for the same period in the prior year, representing an increase
in the net loss of $6,594,949 or 175%. This increase in net loss was primarily the result of the issuance of $5,000,000 of common
stock as a milestone payment to Hy Biopharma, Inc. (“Hy Biopharma”) triggered by the successful Phase 3 clinical trial
of SGX301 for the treatment of CTCL and increased research and development spending primarily attributable to higher clinical trial
site and patient fees.
Our revenues and associated costs incurred
relate to the government contracts and grants awarded in support of RiVax®, our ricin toxin vaccine candidate; grants
received to support the development of SGX943 for treatment of emerging and/or antibiotic-resistant infectious diseases; ThermoVax®,
our thermostabilization technology; and the assessment of SGX942 safety in juvenile animals. For the three months ended June 30,
2020, we had revenues of $505,288 as compared to $1,544,964 for the same period in the prior year, representing a decrease of $1,039,676
or 67%. For the six months ended June 30, 2020, we had revenues of $1,429,842 as compared to $2,689,752 for the same period in
the prior year, representing a decrease of $1,259,910 or 47%. We also incurred costs related to those revenues for the three months
ended June 30, 2020 and 2019 of $363,339 and $1,086,814, respectively, representing a decrease of $723,475 or 67%. We also incurred
cost related to those revenues for the six months ended June 30, 2020 and 2019 of $1,192,844 and $2,014,738, respectively, representing
a decrease of $821,894 or 41%. Our gross profit for the three months ended June 30, 2020 was $141,949 or 28% of revenues, as compared
to $458,150 or 30% of revenues for the same period in 2019, representing a decrease of $316,201 or 69%. Our gross profit from the
six months ended June 30, 2020 was $236,998 or 17% of revenues, as compared to $675,014 or 25% of revenues for the same period
in 2019, representing a decrease of $438,016 or 65%. The decreases in revenues and gross profit were primarily the result of two
grants with higher gross margins expiring during the three and six months ended June 30, 2020 that were active for the three and
six months ended June 30, 2019.
Research and development expenses were
$2,170,045 for the three months ended June 30, 2020 as compared to $1,853,950 for the same period in 2019, representing an increase
of $316,095 or 17%. Research and development expenses were $4,870,216 for the six months ended June 30, 2020 as compared to $3,496,668
for the same period in 2019, representing an increase of $1,373,548 or 39%. The increase in research and development spending for
the three and six months ended June 30, 2020 was primarily attributable to higher clinical trial site and patient fees incurred
during the periods ended June 30, 2020 compared to the same periods in 2019.
General and administrative expenses were
$785,776 for the three months ended June 30, 2020, as compared to $769,091 for the same period in 2019, representing an increase
of $16,685 or 2%. General and administrative expenses were $1,654,443 for the six months ended June 30, 2020, as compared to $1,643,300
for the same period in 2019, representing an increase of $11,143 or 1%.
Research and development expense - milestone
expense was $5,000,000 for the six months ended June 30, 2020. The expense was due to the issuance of 1,956,182 shares of common
stock to Hy Biopharma during the three months ended March 31, 2020 following the achievement of a milestone under the asset purchase
agreement, specifically, the Phase 3 clinical trial of SGX301 being successful in the treatment of CTCL. No milestones were achieved
during the three and six months ended June 30, 2019.
Interest income, net for the three months ended June 30, 2020
was $2,017 as compared to $39,851 for the same period in 2019, representing a decrease of $37,834 or 95%. Interest income for the
six months ended June 30, 2020 was $23,964 as compared to $84,604 for the same period in 2019, representing a decrease of $60,640
or 72%. The decrease is due to lower interest and dividend rates on our cash and cash equivalents investments for the three and
six months ended June 30, 2020 as compared to the same periods in 2019.
Financial Condition
Cash and Working Capital
As of June 30, 2020, we had cash and cash
equivalents of $11,168,305 as compared to $5,420,708 as of December 31, 2019, representing an increase of $5,747,597 or 106%. As
of June 30, 2020, we had working capital of $5,992,411 as compared to working capital of $1,181,249 as of December 31, 2019, representing
an increase of $4,811,162 or 407%. The increase in cash and working capital was primarily related to the management of our expenses,
and proceeds received from the increased use of the At Market Issuance Sales Agreement (“FBR Sales Agreement”) with
B. Riley FBR, Inc. and the warrant exercises completed during the six months ended June 30, 2020.
Based on our current rate of cash outflows,
cash on hand, proceeds from government contract and grant programs and proceeds available from the FBR Sales Agreement, management
believes that its current cash will be sufficient to meet the anticipated cash needs for working capital and capital expenditures
for at least the next twelve months from issuance of the financial statements.
Our plans with respect to our liquidity
management include, but are not limited to, the following:
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We have up to $1.54 million in active government contract funding still available as of June 30, 2020 to support our associated research programs through 2020 and beyond, provided the federal agencies exercise all options and do not elect to terminate the contracts for convenience. We plan to submit additional contract and grant applications for further support of our programs with various funding agencies.
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We have continued to use equity instruments to provide a portion of the compensation due to vendors and collaboration partners and expect to continue to do so for the foreseeable future.
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We will continue to pursue net operating loss sales in the state of New Jersey pursuant to its Technology Business Tax Certificate Transfer Program if the program is available.
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We plan to pursue potential partnerships for pipeline programs; however, there can be no assurances that we can consummate such transactions.
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We have up to $1.5 million remaining from the FBR Sales Agreement as of August 10, 2020 under the prospectus supplement updated April 10, 2020.
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We have been granted a Paycheck Protection Program Loan through the financial stimulus packages afforded by both the federal and state governments based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19. We were granted a total of $417,830 from JPMorgan Chase Bank, N.A. to fund our payroll costs and other expenses allowed by the program. We will continue to explore and evaluate additional funding options through financial stimulus packages afforded by both the federal and state governments based on the current outbreak of SARS-CoV-2, the pathogen responsible for COVID-19 as they become available.
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We may seek additional capital in the private and/or public equity markets, pursue government contracts and grants as well as business development activities, to continue our operations, respond to competitive pressures, develop new products and services, and to support new strategic partnerships. We are currently evaluating additional equity/debt financing opportunities on an ongoing basis and may execute them when appropriate. However, there can be no assurances that we can consummate such a transaction, or consummate a transaction at favorable pricing.
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Expenditures
Under our budget and based upon our existing
product development agreements and license agreements pursuant to letters of intent and option agreements, we expect our total
research and development expenditures for the next 12 months to be approximately $6.5 million before any contract or grant reimbursements,
of which $5.4 million relates to the Specialized BioTherapeutics business and $1.1 million relates to the Public Health Solutions
business. We anticipate contract and grant reimbursements in the next 12 months of approximately $1.4 million to offset research
and development expenses in both the Specialized BioTherapeutics and the Public Health Solutions business segments.
The table below details our costs for research
and development by program and amounts reimbursed for the six months ended June 30:
|
|
2020
|
|
|
2019
|
|
Research & Development Expenses
|
|
|
|
|
|
|
RiVax® and ThermoVax® Vaccines
|
|
$
|
427,087
|
|
|
$
|
174,039
|
|
SGX942 (Dusquetide)
|
|
|
2,281,418
|
|
|
|
2,379,270
|
|
SGX301
|
|
|
1,907,390
|
|
|
|
721,507
|
|
Other
|
|
|
254,321
|
|
|
|
221,852
|
|
Total
|
|
$
|
4,870,216
|
|
|
$
|
3,496,668
|
|
|
|
|
|
|
|
|
|
|
Reimbursed under Government Contracts and Grants
|
|
|
|
|
|
|
|
|
RiVax® and ThermoVax® Vaccines
|
|
$
|
1,112,019
|
|
|
$
|
1,406,500
|
|
SGX942 (Dusquetide)
|
|
|
80,825
|
|
|
|
321,461
|
|
SGX301
|
|
|
-
|
|
|
|
286,777
|
|
Total
|
|
$
|
1,192,844
|
|
|
$
|
2,014,738
|
|
Grand Total
|
|
$
|
6,063,060
|
|
|
$
|
5,511,406
|
|
Contractual Obligations
We have licensing fee commitments of approximately
$450,000 as of June 30, 2020 for several licensing agreements with entities, consultants and universities. Additionally, we have
collaboration and license agreements, which upon clinical or commercialization success may require the payment of milestones of
up to $7.9 million and/or royalties up to 6% of net sales of covered products, if and when achieved. However, there can be no assurance
that clinical or commercialization success will occur.
We currently lease approximately 6,200 square feet of office
space at 29 Emmons Drive, Suite B-10 in Princeton, New Jersey pursuant to a lease that was amended in October 2017 and expires
in October 2020. Pursuant to an amendment executed on July 7, 2020, the lease has been extended to October 2022. The current rent
of $11,883 per month, or approximately $23.00 per square foot will be reduced to $21.50 per square foot, making the monthly payment
$10,850 starting in November 2020. Our office space is sufficient to satisfy our current needs.
On September 3, 2014, we entered into an
asset purchase agreement with Hy Biopharma pursuant to which we acquired certain intangible assets, properties and rights of Hy
Biopharma related to the development of Hy BioPharma’s synthetic hypericin product. As consideration for the assets acquired,
we initially paid $275,000 in cash and issued 184,912 shares of common stock with a fair value based upon our stock price on the
date of grant of $3,750,000. These amounts were charged to research and development expense during the third quarter of 2014 as
the assets will be used in our research and development activities and do not have alternative future use pursuant to generally
accepted accounting principles in the U.S.
On March 20, 2020, we filed a prospectus
supplement covering the offer and sale of up to 1,956,182 shares of our common stock which were issued to Hy Biopharma. We were
required to issue the shares to Hy Biopharma as payment following the achievement of a milestone under the asset purchase agreement,
specifically, the Phase 3 clinical trial of SGX301 being successful in the treatment of CTCL. The number of shares of our common
stock issued to Hy Biopharma was calculated using an effective price of $2.56 per share, based upon a formula set forth in the
asset purchase agreement.
Provided the final success-oriented milestone
is attained, we will be required to make a payment of up to $5.0 million, if and when achieved. The potential future payment will
be payable in our common stock not to exceed 19.9% of our outstanding stock.
In January 2020, our Board of Directors
authorized an amendment to Dr. Schaber’s employment agreement to increase the number of shares of common stock from 5,000
to 500,000, issuable to Dr. Schaber immediately prior to the completion of a transaction, or series or a combination of related
transactions, negotiated by our Board of Directors whereby, directly or indirectly, a majority of our capital stock or a majority
of our assets are transferred from us and/or our stockholders to a third party.
As a result of the above agreements, we
have future contractual obligations as follows:
Year
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|
Licensing Fees
|
|
|
Property and Other Leases
|
|
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Total
|
|
July 1 through December 31, 2020
|
|
$
|
50,000
|
|
|
$
|
51,805
|
|
|
$
|
101,805
|
|
2021
|
|
|
100,000
|
|
|
|
6,408
|
|
|
|
106,408
|
|
2022
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2023
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
2024
|
|
|
100,000
|
|
|
|
-
|
|
|
|
100,000
|
|
Total
|
|
$
|
450,000
|
|
|
$
|
58,213
|
|
|
$
|
508,213
|
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CARES Act Loan
On April 13, 2020, we were advised that
one of our principal banks, JPMorgan Chase Bank, N.A., had approved a $417,830 loan (the “Loan”) under the Paycheck
Protection Program (“PPP”) pursuant to the Coronavirus Aid, Relief and Economic Security Act that was signed into law
on March 27, 2020.
As a U.S. small business, we qualified
for the PPP, which allows businesses and nonprofits with fewer than 500 employees to obtain loans of up to $10 million to incentivize
companies to maintain their workers as they manage the business disruptions caused by the COVID-19 pandemic. The PPP provides for
loans for amounts up to 2.5 times of the average monthly payroll expenses of the qualifying business. The PPP loan proceeds may
be used for eligible purposes, including payroll, benefits, rent and utilities.
The Loan, has a term of two years, is unsecured, and is guaranteed
by the Small Business Administration. The Loan bears interest at a fixed rate of 0.98% per annum, with the first six months of
interest and principal deferred. Some or all of the Loan may be forgiven if at least 75% of the Loan proceeds are used by us to
cover payroll costs, including benefits and if we maintain our employment and compensation within certain parameters during the
eight-week or twenty-four-week period following the Loan origination date and comply with other relevant conditions.
We intend to use the proceeds for purposes consistent with the PPP and expect to meet the conditions for forgiveness of the Loan.
Contingencies
Based on the current outbreak of SARS-CoV-2,
the pathogen responsible for COVID-19, which has already had an impact on financial markets, there could be additional repercussions
in our operating business, including but not limited to, the sourcing of materials for product candidates, manufacture of supplies
for preclinical and/or clinical studies, delays in clinical operations, which may include the availability or the continued availability
of patients for trials due to such things as quarantines, conduct of patient monitoring and clinical trial data retrieval at investigational
study sites.
The future impact of the outbreak is highly
uncertain and cannot be predicted, and we cannot provide any assurance that the outbreak will not have a material adverse impact
on our operations or future results or filings with regulatory health authorities. The extent of the impact, if any, we will depend
on future developments, including actions taken to contain the coronavirus.