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

 

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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 of		(I.R.S. Employer I.D. No.)
incorporation or organization)
	2600 Stemmons Frwy, Suite 176, Dallas, TX 75207
	(Address of principal executive offices)

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

 

 

ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

·

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 allowance in the U.S. from the Food & Drug Administration (“FDA”). MuGard has been launched in Germany, Italy, UK, Greece and the Nordic countries by our European commercial partner, SpePharm.

·

Our lead development candidate 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 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.

·	Angiolix® is our preclinical humanized monoclonal antibody which acts as an anti-angiogenesis factor and is targeted to lactadherin, a glycoprotein secreted by cancer cells, notably breast, ovarian and colorectal cancers.

·	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
Angiolix®		Immunodex, Inc.		Humanized monoclonal antibody		Cancer		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 ended December 31, 2008.

·	research and development expenses incurred by MacroChem in the second quarter of 2008, which are no longer ongoing, and MacroChem’s acquisition of Virium on April 18, 2008, which resulted in a second quarter non-cash in-process research and development expense ($9,657,000);

·	lower costs for product manufacturing for a new ProLindac clinical trial in 2009 as some manufacturing is complete and a clinical trial has started ($459,000);

·	lower salary and related expenses ($67,000);

·	lower scientific consulting expenses ($63,000) ;

·	offset by higher expenses due to the cost of option grants ($72,000); and

·	other net decreases in research spending ($99,000).

·	general and administrative expenses incurred by MacroChem in the second quarter of 2008 that are no longer ongoing ($1,177,000);

·	lower patent expenses ($172,000);

·	lower salary and related expenses ($17,000);

·	offset by higher business professional expenses ($214,000);

·	higher shareholder consultant expenses ($185,000);

·	higher expenses due to the cost of option grants ($96,000);

·	accrual of potential liquidated damages under an investor rights agreement with certain investors ($109,000); and

·	other net decreases in general and administrative expenses ($10,000).

·	the Somanta acquisition resulted in a one-time non-cash in-process research and development expense in the first quarter of 2008 ($8,879,000);

·	research and development expenses incurred by MacroChem in the first six months of 2008, which are no longer ongoing ($465,000);

·	MacroChem’s acquisition of Virium on April 18, 2008 which resulted in a one-time non-cash in-process research and development expense ($9,657,000);

·	lower costs for product manufacturing due to the start of a new ProLindac clinical trial ($594,000);

·	lower salary and related expenses ($60,000);

·	lower scientific consulting expenses ($60,000);

·	lower travel expenses ($56,000);

·	offset by higher expenses due to option grants ($95,000); and

·	other net decreases in research spending ($67,000).

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Steven H. Rouhandeh; 14,763,704- For; and 173,600-Withheld Authority

Stephen B. Howell, MD; 14,754,551- For; and 182,753- Withheld Authority

David P. Luci; 14,670,070- For; and 267,234- Withheld Authority

The terms of office as a director of Access of each of Mark J. Ahn, Mark J. Alvino, Esteban Cvitkovic and Jeffrey B. Davis continued after the meeting.

 

 

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:		August 12, 2009		By:	/s/ Jeffrey B. Davis
					Jeffrey B. Davis
					Chief Executive Officer
					(Principal Executive Officer)
Date:		August 12, 2009		By:	/s/ Stephen B. Thompson
					Stephen B. Thompson
					Vice President and Chief Financial Officer
					(Principal Financial and Accounting Officer

 

 

 

 

	June 30, 2009		December 31, 2008
ASSETS	(unaudited)		(unaudited) (See Note 4)
Current assets Cash and cash equivalents    Receivables Prepaid expenses and other current assets	$        1,231,000 15,000 56,000		$        2,677,000 147,000            173,000
Total current assets	1,302,000		2,997,000
Property and equipment, net	70,000		95,000
Patents, net	909,000		1,015,000
Other assets	70,000		123,000
Total assets	$        2,351,000		$        4,230,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities   Accounts payable   Accrued expenses   Dividends payable   Accrued interest payable   Notes payable   Current portion of deferred revenue	$        3,653,000 1,029,000 1,866,000 340,000 - 256,000		$        3,824,000 798,000 1,896,000 145,000 825,000 164,000
Total current liabilities	7,144,000		7,652,000
Long-term deferred revenue Long-term debt	3,533,000 5,500,000		2,245,000 5,500,000
Total liabilities	16,177,000		15,397,000
Commitments and contingencies
Stockholders' deficit Convertible Series A preferred stock - $.01 par value; authorized 2,000,000 shares; 3,207.8617 issued at June 30, 2009 and 3,242.8617 at December 31, 2008 Common stock - $.01 par value; authorized 100,000,000 shares; issued, 11,613,605 at June 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	-     116,000 228,333,000 (1,045,000) (4,000) (241,226,000)		-     95,000 225,753,000 (1,045,000) (4,000) (235,966,000)
Total stockholders' deficit	(13,826,000)		(11,167,000)
Total liabilities and stockholders' deficit	$        2,351,000		$        4,230,000

 

 

		Three months ended June 30,								Six months ended June 30,
		2009				2008  (See Note 4)				2009  (See Note 4)				2008  (See Note 4)
Revenues
License revenues		$	63,000			$	22,000			$	104,000			$	39,000
Sponsored research and development			-				110,000				-				131,000
Total revenues			63,000				132,000				104,000				170,000
Expenses
Research and development			582,000				10,855,000				1,269,000				21,012,000
General and administrative			1,507,000				2,279,000				2,754,000				4,118,000
Depreciation and amortization			66,000				78,000				132,000				166,000
Total expenses			2,155,000				13,212,000				4,155,000				25,296,000
Loss from operations			(2,092,000	)			(13,080,000	)			(4,051,000	)			(25,126,000	)
Interest and miscellaneous income			2,000				40,000				16,000				141,000
Interest and other expense			(118,000	)			(221,000	)			(262,000	)			(329,000	)
			(116,000	)			(181,000	)			(246,000	)			(188,000	)
Net loss			(2,208,000	)			(13,261,000	)			(4,297,000	)			(25,314,000	)
Less preferred stock dividends			483,000				517,000				963,000				2,350,000
Net loss allocable to common stockholders		$	(2,691,000	)		$	(13,778,000	)		$	(5,260,000	)		$	(27,664,000	)
Basic and diluted loss per common share Net loss allocable to common shareholders		$	(0.24	)		$	(1.69	)		$	(0.48	)		$	(3.45	)
Weighted average basic and diluted common shares outstanding			11,406,700				8,135,869				10,954,472				8,008,064

(unaudited)

 

			Common Stock								Preferred Stock												Notes
																			Additional				receivable
																			paid-in				from				Treasury				Accumulated
			Shares				Amount				Shares				Amount				capital				stockholders				stock				deficit
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	)		$	(235,966,000	)
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	)			(238,535,000	)
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	)		$	(241,226,000	)

 

 

 

		Six Months ended June 30,
		2009				2008
Cash flows from operating activities:
Net loss		$	(4,297,000	)		$	(25,314,000	)
Adjustments to reconcile net loss to cash used               in operating activities:
Depreciation and amortization			132,000				166,000
Stock option expense			308,000				673,000
Stock and warrants issued for services			564,000				100,000
Acquired in-process research and development			-				18,536,000
Change in operating assets and liabilities:
Receivables			132,000				(70,000	)
Prepaid expenses and other current assets			117,000				(255,000	)
Other assets			53,000				-
Accounts payable and accrued expenses			60,000				(754,000	)
Dividends payable			(137,000	)			(25,000	)
Accrued interest payable			229,000				209,000
Deferred revenue			1,380,000				1,069,000
Net cash used in operating activities			(1,459,000	)			(5,665,000	)
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			-				1,470,000
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	)			1,134,000
Cash flows from financing activities:
Proceeds from debt issuance			-				400,000
Payments of notes payable			-				(639,000	)
Proceeds from exercise of common stock options			14,000				15,000
Proceeds from preferred stock issuances, net of costs			-				2,444,000
Net cash provided by financing activities			14,000				2,220,000
Net decrease in cash and cash equivalents			(1,446,000	)			(2,311,000	)
Cash and cash equivalents at beginning of period			2,677,000				2,582,000
Cash and cash equivalents at end of period		$	1,231,000			$	271,000
Supplemental cash flow information:
Cash paid for interest		$	-			$	8,000
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			856,000				-
Preferred stock dividends in dividends payable			963,000				525,000
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

 

(1)	Interim Financial Statements

	June 30, 2009		December 31, 2008
	Gross carrying value	Accumulated amortization	Gross carrying value	Accumulated Amortization
Amortizable intangible assets   Patents	$         2,624	$      1,715	$     2,624	$1,609

 

 

2009		$         106
2010		212
2011		212
2012		82
2013		44
over 5 years		253
Total		$         909

 

 

 

		Access Pharmaceuticals				MacroChem Corporation				Combined
Current assets		$	3,550,000			$	82,000			$	2,997,000
Total assets			4,257,000				608,000				4,230,000
Current liabilities			4,906,000				3,485,000				7,652,000
Long-term deferred revenue			2,245,000				29,000				2,245,000
Long-term debt			5,500,000				-				5,500,000
Stockholders’ deficit			(8,394,000	)			(2,906,000	)			(11,167,000	)

 

 

 

		For the six months ended June 30, 2009												For the year ended December 31, 2008
		Access Pharmaceuticals				MacroChem Corporation				Combined				Access Pharmaceuticals				MacroChem Corporation				Combined
Total revenues		$	103,000			$	1,000			$	104,000			$	291,000			$	4,000			$	295,000
Expenses
Research and development			1,269,000				-				1,269,000				12,613,000				10,698,000				23,311,000
General and administrative			2,558,000				196,000				2,754,000				4,340,000				3,044,000				7,384,000
Depreciation and    amortization			105,000				27,000				132,000				253,000				55,000				308,000
Total expenses			3,932,000				223,000				4,155,000				17,206,000				13,797,000				31,003,000
Loss from operations			(3,829,000	)			(222,000	)			(4,051,000	)			(16,915,000	)			(13,793,000	)			(30,708,000	)
Interest and miscellaneous    income			16,000				-				16,000				178,000				33,000				211,000
Interest and other expense			(236,000	)			(26,000	)			(262,000	)			(478,000	)			(433,000	)			(911,000	)
Gain on change in value of    warrant liability			-				-				-				-				3,972,000				3,972,000
			(220,000	)			(26,000	)			(246,000	)			(300,000	)			3,572,000				3,272,000
Loss from operations			(4,049,000	)			(248,000	)			(4,297,000	)			(17,215,000	)			(10,221,000	)			(27,436,000	)
Less preferred stock    dividends			(963,000	)			-				(963,000	)			(3,358,000	)			-				(3,358,000	)
Net loss allocable to    common stockholders		$	(5,012,000	)		$	(248,000	)		$	(5,260,000	)		$	(20,573,000	)		$	(10,221,000	)		$	(30,794,000	)
Basic and diluted loss per    common share
Net loss allocable to      common stockholders			-				-			$	(0.48	)			-				-			$	(3.69	)
Weighted average basic      and diluted common      shares outstanding			-				-				10,954,472				-				-				8,354,031