ABEONA THERAPEUTICS INC. - Quarter Report: 2009 September (Form 10-Q)

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

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

 

Delaware		83-0221517
(State or other jurisdiction		(I.R.S. Employer I.D. No.)
of (I.R.S. Employer I.D. No.)
	2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
	(Address of principal executive offices)

 

		(214) 905-5100
	(Registrant’s telephone number, including area code)

Large accelerated filer o		Accelerated filer o		Non-accelerated filer o		Smaller reporting company þ
		(Do not check if a smaller reporting company)

 

 

 

 

 

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

 

·

MuGard™ is our approved product for the management of oral mucositis, a frequent side-effect of cancer therapy for which there is no established treatment. The market for mucositis treatment is estimated to be in excess of $1 billion world-wide. MuGard, a proprietary nanopolymer formulation, has received marketing approval in the U.S. from the Food & Drug Administration (“FDA”). MuGard has been launched in Germany, Italy, UK and Greece  by our European commercial partner, SpePharm.

·

Our lead product candidate in development for the treatment of cancer is ProLindac™, a nanopolymer DACH-platinum prodrug. We recently completed a Phase 2 clinical trial on ProLindac in the EU in patients with ovarian cancer. The clinical study had positive safety and efficacy results. We are currently planning a number of combination trials, looking at combining ProLindac with other cancer agents such as taxol and gemcitabine, in solid tumor indications including colorectal and ovarian. The DACH-platinum incorporated in ProLindac is the same active moiety as that in oxaliplatin (Eloxatin; Sanofi-Aventis), which has generated cumulative sales in excess of $2.0 billion.

·

Thiarabine, or 4-thio Ara-C, is a next generation nucleoside analog licensed from Southern Research Institute. Previously named SR9025 and OSI-7836, the compound has been in two Phase 1/2 solid tumor human clinical trials and was shown to have anti-tumor activity. We are working with leukemia and lymphoma specialists at MD Anderson Cancer Center in Houston and intend to initiate additional Phase 2 clinical trials in adult AML, ALL and other indications.

·

Cobalamin™ is our proprietary preclinical nanopolymer oral drug delivery technology based on the natural vitamin B12 oral uptake mechanism. We are currently developing a product for the oral delivery of insulin, and are conducting sponsored development of a product for oral delivery of human growth hormone.

·	Cobalamin-mediated cancer targeted delivery is a preclinical technology which makes use of the fact that cell surface receptors for vitamins such as B12 are often overexpressed by cancer cells.

Compound		Originator		Technology		Indication		Clinical Stage (1)
MuGard™		Access		Mucoadhesive liquid		Mucositis		(510k) Marketing clearance received
ProLindacTM (Polymer      Platinate, AP5346)		Access / Univ of London		Synthetic polymer		Cancer		Phase 2
Thiarabine (4-thio Ara-C)		Southern Research Institute		Small molecule		Cancer		Phase 1/2
Oral Insulin		Access		Cobalamin		Diabetes		Pre-clinical
Oral Delivery System		Access		Cobalamin		Various		Pre-clinical
Cobalamin-Targeted Therapeutics		Access		Cobalamin		Anti-tumor		Pre-clinical

(1)	For more information, see “Government Regulation” under Item 1 in our Annual Report on Form 10-K for the year endedDecember 31, 2008.

·	research and development expenses incurred by MacroChem in the third quarter of 2008, which are no longer ongoing ($386,000);

·	lower scientific consulting expenses ($149,000);

·	lower salary and related expenses ($129,000);

·	other net decreases in research spending ($92,000); and

·	offset by higher expenses due to the cost of option grants ($91,000).

·	higher shareholder consultant expenses ($2,012,000) to inform investors about Access and to expand our shareholder base;

·	higher business professional expenses ($371,000);

·	higher expenses due to the cost of option grants ($89,000);

·	offset by general and administrative expenses incurred by MacroChem in the third quarter of 2008 that are no longer ongoing ($732,000);

·	lower accrual of potential liquidated damages under an investor rights agreement with certain investors ($205,000);

·	lower director and officer insurance and lower director fees ($111,000) due to lower insurance costs and directors taking options instead of fees in 2009;

·	lower salary and related expenses ($83,000); and

·	other net decreases in general and administrative expenses ($50,000).

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 1.

LEGAL PROCEEDINGS

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEED

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

ITEM 5.

OTHER INFORMATION

 

 

ITEM 6.

EXHIBITS

 

2.2	Agreement and Plan of Merger, by and among Access Pharmaceuticals, Inc., Somanta Acquisition Corporation, Somanta Pharmaceuticals, Inc., Somanta Incorporated and Somanta Limited, dated April 18, 2007. (Incorporated by reference to Exhibit 2.1 to our Form 8-K dated April 18, 2007)

2.3	Agreement and Plan of Merger, by and among Access Pharmaceuticals, Inc., MACM Acquisition Corporation and MacroChem Corporation, dated July 9, 2008.

3.1	Certificate of Incorporation (Incorporated by Reference to Exhibit 3(a) of our Form 8-B dated July 12, 1989, Commission File Number 9-9134)

3.3	Certificate of Merger filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031)

3.4	Certificate of Amendment of Certificate of Incorporation filed January 25, 1996. (Incorporated by reference to Exhibit E of our Registration Statement on Form S-4 dated December 21, 1995, Commission File No. 33-64031)

3.5	Certificate of Amendment of Certificate of Incorporation filed July 18, 1996. (Incorporated by reference to Exhibit 3.8 of our Form 10-K for the year ended December 31, 1996)

 

3.6	Certificate of Amendment of Certificate of Incorporation filed June 18, 1998. (Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter ended June 30, 1998)

 

3.7	Certificate of Amendment of Certificate of Incorporation filed July 31, 2000. (Incorporated by reference to Exhibit 3.8 of our Form 10-Q for the quarter ended March 31, 2001)

3.8	Certificate of Designations of Series A Junior Participating Preferred Stock filed November 7, 2001 (Incorporated by reference to Exhibit 4.1.h of our Registration Statement on Form S-8, dated December 14, 2001, Commission File No. 333-75136)

3.9	Amended and Restated Bylaws (Incorporated by reference to Exhibit 3.1 of our Form 10-Q for the quarter ended June 30, 1996)

3.10	Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock (Incorporated by reference to Exhibit 3.10 to our Form 10-K for the year ended December 31, 2007)

3.11	Certificate of Amendment to Certificate of Designations, Rights and Preferences of Series A Cumulative Convertible Preferred Stock filed June 11, 2008 (Incorporated by reference to Exhibit 3.11 of our Form 10-Q for the quarter ended June 30, 2008)

31.1	Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

31.2	Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to Rule 13a-14(a)/15d-14(a)

32.1*

Certification of Chief Executive Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

32.2*

Certification of Chief Financial Officer of Access Pharmaceuticals, Inc. pursuant to 18 U.S.C. Section 1350

 

 

Date:	November 16, 2009	By:	/s/ Jeffrey B. Davis
			Jeffrey B. Davis
			Chief Executive Officer
			(Principal Executive Officer)
Date:	November 16, 2009	By:	/s/ Stephen B. Thompson
			Stephen B. Thompson
			Vice President and Chief Financial Officer
			(Principal Financial and Accounting Officer

 

 

 

 

ASSETS	September 30, 2009		December 31, 2008
	(unaudited)		(unaudited)   (See Note 4)
Current assets Cash and cash equivalents    Receivables Prepaid expenses and other current assets	$        1,672,000 23,000 45,000		$        2,677,000 147,000            175,000
Total current assets	1,740,000		2,999,000
Property and equipment, net	59,000		95,000
Patents, net	840,000		999,000
Other assets	66,000		78,000
Total assets	$        2,705,000		$        4,171,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities   Accounts payable   Accrued expenses   Dividends payable   Accrued interest payable   Notes payable   Current portion of deferred revenue	$        3,692,000 1,208,000 2,294,000 446,000 - 352,000		$        3,287,000 1,295,000 1,896,000 145,000 825,000 164,000
Total current liabilities	7,992,000		7,612,000
Long-term deferred revenue Long-term debt	4,812,000 5,500,000		2,245,000 5,500,000
Total liabilities	18,304,000		15,357,000
Commitments and contingencies
Stockholders' deficit   Convertible Series A preferred stock - $.01 par value; authorized       2,000,000 shares; 2,992.3617 issued and outstanding at September 30, 2009 and  3,242.8617 at December 31, 2008   Common stock - $.01 par value; authorized 100,000,000 shares;      issued, 13,111,545 at September 30, 2009 and 9,467,474 at      December 31, 2008   Additional paid-in capital   Notes receivable from stockholders   Treasury stock, at cost – 163 shares   Accumulated deficit	-     131,000 231,106,000 (1,045,000) (4,000) (245,787,000)		-     95,000 225,753,000 (1,045,000) (4,000) (235,985,000)
Total stockholders' deficit	(15,599,000)		(11,186,000)
Total liabilities and stockholders' deficit	$        2,705,000		$        4,171,000

 

		Three months ended September 30,								Nine months ended September 30,
		2009				2008				2009				2008
						(See Note 4)				(See Note 4)				(See Note 4)
Revenues
License revenues		$	124,000			$	38,000			$	228,000			$	77,000
Royalties			20,000				-				20,000				-
Sponsored research and development			-				9,000				-				140,000
Total revenues			144,000				47,000				248,000				217,000
Expenses
Research and development			561,000				1,670,000				1,830,000				22,682,000
General and administrative			3,458,000				2,167,000				6,212,000				6,285,000
Depreciation and amortization			65,000				80,000				197,000				246,000
Total expenses			4,084,000				3,917,000				8,239,000				29,213,000
Loss from operations			(3,940,000	)			(3,870,000	)			(7,991,000	)			(28,996,000	)
Interest and miscellaneous income			2,000				32,000				18,000				173,000
Interest and other expense			(133,000	)			(183,000	)			(395,000	)			(512,000	)
			(131,000	)			(151,000	)			(377,000	)			(339,000	)
Net loss			(4,071,000	)			(4,021,000	)			(8,368,000	)			(29,335,000	)
Less preferred stock dividends			471,000				523,000				1,434,000				2,873,000
Net loss allocable to common stockholders		$	(4,542,000	)		$	(4,544,000	)		$	(9,802,000	)		$	(32,208,000	)
Basic and diluted loss per common share   Net loss allocable to common shareholders		$	(0.37	)		$	(0.55	)		$	(0.86	)		$	(3.97	)
Weighted average basic and diluted common shares outstanding			12,204,696				8,303,457				11,375,793				8,107,247

 

	Common Stock		Preferred Stock		Additional paid-in capital	Notes receivable from stockholders	Treasury stock	Accumulated deficit
	Shares	Amount	Shares	Amount

Access-MacroChem,    as if combined at   December 31, 2008    (See Note 4)			9,467,000			$	95,000				3,242.8617			$	-			$	225,753,000			$	(1,045,000	)		$	(4,000	)		$	(235,985,000	)
Common stock issued for   preferred dividends			894,000				9,000				-				-				847,000				-				-				-
Warrants issued for   services			-				-				-				-				24,000				-				-				-
Stock option   compensation expense			-				-				-				-				56,000				-				-				-
Common stock issued to   MacroChem noteholders   for notes and accrued   interest			859,000				8,000				-				-				851,000				-				-				-
Common stock issued to   former MacroChem   executives			95,000				1,000				-				-				132,000				-				-				-
Preferred dividends			-				-				-				-				-				-				-				(480,000	)
Net loss			-				-				-				-				-				-				-				(2,089,000	)
Balance at March 31, 2009			11,315,000				113,000				3,242.8617				-				227,663,000				(1,045,000	)			(4,000	)			(238,554,000	)
Warrants issued for   services			-				-				-				-				27,000				-				-				-
Stock option   compensation expense			-				-				-				-				252,000				-				-				-
Preferred stock converted   into common stock			117,000				1,000				(35.0000	)			-				(1,000	)			-				-				-
Common stock issued to   former MacroChem   executives			30,000				-				-				-				64,000				-				-				-
Common stock issued    for cash exercise of   options			25,000				-				-				-				14,000				-				-				-
Restricted common stock    issued for services			127,000				2,000				-				-				314,000				-				-				-
Preferred dividends			-				-				-				-				-				-				-				(483,000	)
Net loss			-				-				-				-				-				-				-				(2,208,000	)
Balance at June 30, 2009			11,614,000				116,000				3,207.8617				-				228,333,000				(1,045,000	)			(4,000	)			(241,245,000	)
Warrants issued for   services			-				-				-				-				503,000				-				-				-
Stock option   compensation expense			-				-				-				-				285,000				-				-				-
Preferred stock converted   into common stock			719,000				8,000				(215.5000	)			-				(8,000	)			-				-				-
Common stock issued for   preferred dividends			21,000				-				-				-				71,000				-				-				-
Common stock issued    for cash exercise of   options			210,000				2,000				-				-				142,000				-				-				-
Common stock issued    for warrant exercises			33,000				-				-				-				-				-				-				-
Restricted common stock    issued for services			515,000				5,000				-				-				1,780,000				-				-				-
Preferred dividends			-				-				-				-				-				-				-				(471,000	)
Net loss			-				-				-				-				-				-				-				(4,071,000	)
Balance at September 30, 2009			13,112,000			$	131,000				2,992.3617			$	-			$	231,106,000			$	(1,045,000	)		$	(4,000	)		$	(245,787,000	)

 

 

		Nine Months ended September 30,
		2009				2008
Cash flows from operating activities:
Net loss		$	(8,368,000	)		$	(29,335,000	)
Adjustments to reconcile net loss to net cash used               in operating activities:
Depreciation and amortization			197,000				245,000
Stock option compensation expense			593,000				899,000
Stock and warrants issued for services			2,852,000				427,000
Acquired in-process research and development			-				18,536,000
Change in operating assets and liabilities:
Receivables			124,000				(295,000	)
Prepaid expenses and other current assets			130,000				(121,000	)
Other assets			12,000				-
Accounts payable and accrued expenses			318,000				317,000
Dividends payable			(109,000	)			(25,000	)
Accrued interest payable			334,000				315,000
Deferred revenue			2,755,000				1,475,000
Net cash used in operating activities			(1,162,000	)			(7,562,000	)
Cash flows from investing activities:
Capital expenditures			(2,000	)			(31,000	)
Proceeds from sale of asset			1,000				-
Redemptions of short-term investments and certificate     of deposits			-				3,104,000
Virium acquisition by MacroChem, net of cash acquired			-				(240,000	)
Somanta acquisition, net of cash acquired			-				(65,000	)
Net cash provided by (used in) investing activities			(1,000	)			2,768,000
Cash flows from financing activities:
Proceeds from debt issuance			-				625,000
Payments of notes payable			-				(639,000	)
Proceeds from exercise of common stock options			158,000				15,000
Proceeds from preferred stock issuances, net of costs			-				2,444,000
Net cash provided by financing activities			158,000				2,445,000
Net decrease in cash and cash equivalents			(1,005,000	)			(2,349,000	)
Cash and cash equivalents at beginning of period			2,677,000				2,582,000
Cash and cash equivalents at end of period		$	1,672,000			$	233,000
Supplemental cash flow information:
Cash paid for interest		$	-			$	9,000
Supplemental disclosure of noncash transactions:
Shares issued for payables, notes payable and accrued interest			859,000				1,576,000
Shares issued for dividends on preferred stock			927,000				-
Preferred stock dividends in dividends payable			1,434,000				2,873,000
Beneficial conversion feature –      February 2008 preferred stock dividends      November 2007 preferred stock dividends correction			- -				857,000 451,000
Preferred stock issuance costs paid in cash			-				281,000
Debt discount related to MacroChem convertible debt issuance			-				93,000

 

	September 30, 2009		December 31, 2008
	Gross carrying value	Accumulated amortization	Gross carrying value	Accumulated Amortization
Amortizable intangible assets   Patents	$         2,624	$      1,784	$     2,624	$1,625

 

 

2009		$            53
2010		212
2011		212
2012		82
2013		44
over 5 years		237
Total		$         840

 

		Access Pharmaceuticals				MacroChem Corporation				Combined
Current assets		$	3,550,000			$	84,000			$	2,999,000
Total assets			4,257,000				549,000				4,171,000
Current liabilities			4,906,000				3,346,000				7,612,000
Long-term deferred revenue			2,245,000				24,000				2,245,000
Long-term debt			5,500,000				-				5,500,000
Stockholders’ deficit			(8,394,000	)			(2,925,000	)			(11,186,000	)

 

	For the nine months ended September 30, 2009			For the year ended December 31, 2008
	Access Pharmaceuticals	MacroChem Corporation	Combined	Access Pharmaceuticals	MacroChem Corporation	Combined

 

Total revenues		$	248,000			$	-			$	248,000			$	291,000			$	4,000			$	295,000
Expenses
Research and development			1,830,000				-				1,830,000				12,613,000				10,622,000				23,235,000
General and administrative			6,020,000				192,000				6,212,000				4,340,000				3,123,000				7,463,000
Depreciation and    amortization			156,000				41,000				197,000				253,000				71,000				324,000
Total expenses			8,006,000				233,000				8,239,000				17,206,000				13,816,000				31,022,000
Loss from operations			(7,758,000	)			(233,000	)			(7,991,000	)			(16,915,000	)			(13,812,000	)			(30,727,000	)
Interest and miscellaneous    income			18,000				-				18,000				178,000				33,000				211,000
Interest and other expense			(369,000	)			(26,000	)			(395,000	)			(478,000	)			(433,000	)			(911,000	)
Gain on change in value of    warrant liability			-				-				-				-				3,972,000				3,972,000
			(351,000	)			(26,000	)			(377,000	)			(300,000	)			3,572,000				3,272,000
Loss from operations			(8,109,000	)			(259,000	)			(8,368,000	)			(17,215,000	)			(10,240,000	)			(27,455,000	)
Less preferred stock    dividends			(1,434,000	)			-				(1,434,000	)			(3,358,000	)			-				(3,358,000	)
Net loss allocable to    common stockholders		$	(9,543,000	)		$	(259,000	)		$	(9,802,000	)		$	(20,573,000	)		$	(10,240,000	)		$	(30,813,000	)
Basic and diluted loss per    common share
Net loss allocable to      common stockholders			-				-			$	(0.86	)			-				-			$	(3.69	)
Weighted average basic      and diluted common      shares outstanding			-				-				11,375,793				-				-				8,354,031