Acer Therapeutics Inc. - Quarter Report: 2015 September (Form 10-Q)

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þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Quarterly Period Ended September 30, 2015

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
	For the Transition Period from                      to

Commission File Number: 001-33004

	2635 Technology Forest Blvd.
Texas	The Woodlands, Texas 77381	76-0333165
(State or other jurisdiction of	(Address of principal executive	(I.R.S. Employer
Incorporation or organization)	offices and zip code)	Identification No.)

Large accelerated filer  o		Accelerated filer    o
Non-accelerated filer    o (Do not check if a smaller reporting company)		Smaller reporting company   þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  o    No þ

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PART I – FINANCIAL INFORMATION		Page
Item 1.	Financial Statements
	Unaudited Consolidated Balance Sheets as of September 30, 2015 and December 31, 2014	1
	Unaudited Consolidated Statements of Operations: For the three and nine months ended September 30, 2015 and 2014	2
	Unaudited Consolidated Statement of Changes in Stockholders’ Equity: For the nine months ended September 30, 2015	3
	Unaudited Consolidated Statements of Cash Flows: For the nine months ended September 30, 2015 and 2014	4
	Notes to Unaudited Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	10
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	20
Item 4.	Controls and Procedures	21
Item 5.	Other Information	21
PART II – OTHER INFORMATION
Item 1A.	Risk Factors	22
Item 6.	Exhibits	39
Signatures		41

 

 

 

		September 30,				December 31,
		2015				2014
Assets
Current assets:
Cash and cash equivalents		$	15,592,500			$	9,906,373
Subscription Receivable			232,934				-
Other current assets			329,323				758,943
Total current assets			16,154,757				10,665,316
Property & equipment, net of accumulated depreciation of $2,372,198 and $2,099,389, respectively			886,878				1,098,104
Other long-term assets			9,734				38,939
Total assets		$	17,051,369			$	11,802,359
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable		$	1,018,179			$	702,494
Accrued expenses			1,041,220				1,199,184
Deferred revenue			2,905,165				1,230,746
Total current liabilities			4,964,564				3,132,424
Long term liabilities:
Deferred revenue, net of current portion			726,293				1,230,748
Total liabilities			5,690,857				4,363,172
Stockholders' equity:
Preferred stock, no par value, 10,000,000 shares authorized, none issued and outstanding			-				-
Common stock, $0.01 par value, 150,000,000 shares authorized, 6,864,340 and 3,529,344 shares issued and outstanding			68,643				35,293
Additional paid in capital			162,253,818				148,724,102
Accumulated deficit			(150,961,949)				(141,320,208	)
Total stockholders' equity			11,360,512				7,439,187
Total liabilities and stockholders' equity		$	17,051,369			$	11,802,359

 

		Three Months  Ended September 30,								Nine Months Ended September 30,
		2015				2014				2015				2014
Revenue:
Option revenue		$	726,291			$	307,686			$	1,830,036			$	964,209
Expenses:
Research and development			2,420,220				3,173,538				7,853,076				9,393,887
General and administrative			1,023,848				917,335				3,375,602				2,987,582
Loss on disposition of assets			1,167				-				1,167				-
Depreciation and amortization			89,018				97,364				280,003				291,608
Operating loss			(2,807,962)				(3,880,551	)			(9,679,812)				(11,708,868	)
Interest income, net			2,222				2,498				5,290				11,982
Other income, net			11,760				-				32,781				-
Net loss		$	(2,793,980)			$	(3,878,053)			$	(9,641,741	)		$	(11,696,886	)
Basic and diluted loss per share		$	(0.42)			$	(1.11)			$	(1.75)			$	(3.38	)
Weighted average shares outstanding - Basic and diluted			6,709,251				3,478,324				5,498,228				3,461,479

 

 

		Common Stock
		Shares				Par				Additional Paid in Capital				Accumulated Deficit				Total
Balances at December 31, 2014			3,529,344			$	35,293			$	148,724,102			$	(141,320,208)			$	7,439,187
Cancellation of fractional shares			(1,365)				(13)				(5,015)				—				(5,028)
Shares issued for services			9,317				93				66,870				—				66,963
Common stock sold for cash			3,325,941				33,259				12,802,093				—				12,835,352
Exercise of warrants			1,103				11				4,399				—				4,410
Option expense			—				—				661,369				—				661,369
Net loss			—				—				—				(9,641,741)				(9,641,741)
Balances at September 30, 2015			6,864,340			$	68,643			$	162,253,818			$	(150,961,949)			$	11,360,512

		Nine Months Ended
		September 30,
		2015				2014
Cash flows from operating activities
Net loss		$	(9,641,741)			$	(11,696,886	)
Adjustments to reconcile net loss to net cash used in operating activities:
Restricted stock expense			66,963				201,998
Depreciation			280,003				291,608
Loss on disposition of equipment			1,167				-
Option expense			661,369				840,303
Changes in:
Other current assets			429,620				394,746
Accounts payable			315,685				(324,156	)
Accrued expenses			(157,964)				621,493
Deferred revenue			1,169,964				(964,209	)
Other assets			29,205				128,992
Net cash used in operating activities			(6,845,729)				(10,506,111	)
Cash flows from investing activities
Purchase of property & equipment			(69,944)				(149,187	)
Net cash used in investing activities			(69,944)				(149,187	)
Cash flows from financing activities
Common stock and warrants sold for cash, net of offering costs			12,602,418				648,175
Cash generated from exercise of warrants			4,410				-
Cash paid for fractional shares			(5,028)				-
Net cash provided by financing activities			12,601,800				648,175
Net change in cash and cash equivalents			5,686,127				(10,007,123	)
Cash and cash equivalents at beginning of period			9,906,373				23,644,542
Cash and cash equivalents at end of period		$	15,592,500			$	13,637,419
Cash paid for:
Interest		$	50			$	958
Income taxes				-			-

 

 

Description		September  30, 2015				December  31, 2014
Deferred offering costs		$	15,224			$	259,989
Prepaid expenses			314,099				498,954
		$	329,323			$	758,943

 

·	Opexa recognized stock-based compensation expense of $33,213 related to vested shares of restricted common stock issued to certain members of Opexa’s management and non-employee directors on February 28, 2014.

·	On March 31, 2015, 2,557 shares of restricted common stock with an aggregate fair value of $11,250 were issued to certain non-employee directors for service on Opexa’s Board. Opexa recognized stock-based compensation of $11,250 related to these shares. The shares vested immediately upon grant.

·

On April 9, 2015, Opexa issued 3,137,305 shares of common stock and Series M warrants to purchase a like number of shares upon the closing of a rights offering. Opexa raised $13,804,140 in gross proceeds, before expenses, through subscriptions for 3,137,305 units at a price of $4.40 per unit. Net proceeds were $12,095,210 after deduction of related fees and expenses, including dealer-manager fees, totaling $1,708,847.

·	In June 2015, Opexa issued 953 shares of common stock and received gross proceeds of $3,810 upon the exercise of Series M warrants to purchase 953 shares of common stock.

·	On June 30, 2015, 3,160 shares of restricted common stock with an aggregate fair value of $11,250 were issued to certain non-employee directors for service on Opexa’s Board. Opexa recognized stock-based compensation of $11,250 related to these shares. The shares vested immediately upon grant.

·	In July 2015, Opexa issued 150 shares of common stock and received gross proceeds of $600 upon the exercise of Series M warrants to purchase 150 shares of common stock.

·

On September 1, 2015, Opexa sold 113,636 shares of common stock for $4.40 per share and issued Series N warrants to purchase a like number of shares for gross and net proceeds of $499,999 upon the closing of tranche one of a private placement.  Opexa also agreed to sell and the purchasers agreed to purchase an additional aggregate of $4.5 million of common stock in four additional tranches upon Opexa’s achievement of certain milestones to further the clinical development of OPX-212, Opexa’s autologous T-cell immunotherapy being developed for the treatment of neuromyelitis optica.

·	On September 28, 2015, Opexa effected the 1:8 Reverse Stock Split. An aggregate of 1,365 shares of common stock were identified as fractional shares, and cash in the amount of $5,028 was paid in lieu of these fractional shares.

·	On September 30, 2015, 3,600 shares of restricted common stock with an aggregate fair value of $11,250 were issued to certain non-employee directors for service on Opexa’s Board. Opexa recognized stock-based compensation of $11,250 related to these shares. The shares vested immediately upon grant.

·	On September 30, 2015 Opexa sold an aggregate of 75,000 shares of common stock under the ATM agreement for gross and net proceed of $240,143 and $ 232,934 respectively. These sales settled and shares were issued in October 2015.

 

 

		Number of Shares				Weighted Avg. Exercise Price				Weighted Average Remaining Contract Term (# years)				Intrinsic Value
Outstanding at January 1, 2015			302,834			$	23.34
Granted			135,430				5.22
Exercised			-				-
Forfeited and canceled			(20,016	)			10.03
Outstanding at September 30, 2015			418,248			$	18.11				7.9			$	802
Exercisable at September 30, 2015			199,524			$	26.37				6.9			$	-

 

		Number of Shares				Weighted Avg. Exercise Price				Weighted Average Remaining Contract Term (# years)				Intrinsic Value
Outstanding at January 1, 2015			380,814			$	29.92
Granted			3,311,128				4.16
Exercised			(1,103)				4.00
Forfeited and canceled			(27,885)				74.96
Outstanding at September 30, 2015			3,662,954				6.30				2.42				-
Exercisable at September 30, 2015			3,662,954				6.30				2.42				-

 

·	market conditions;

·	our capital position;

·	our ability to compete with larger, better financed pharmaceutical and biotechnology companies;

·	new approaches to the treatment of our targeted diseases;

·	our expectation of incurring continued losses;

·	our uncertainty of developing a marketable product;

·	our ability to raise additional capital to continue our development programs (including to undertake and complete any ongoing or further clinical studies for Tcelna or OPX-212);

·	our ability to maintain compliance with NASDAQ listing standards;

·

the success of our clinical trials (including the Phase IIb trial for Tcelna in SPMS which, depending upon results, may determine whether Merck Serono elects to exercise its Option to acquire an exclusive, worldwide (excluding Japan) license of our Tcelna program for the treatment of multiple sclerosis (MS);

·	whether Merck Serono exercises its Option and, if so, whether we receive any development or commercialization milestone payments or royalties from Merck Serono pursuant to the Option;

·	our dependence (if Merck Serono exercises its Option) on the resources and abilities of Merck Serono for the further development of Tcelna;

·	the efficacy of Tcelna for any particular indication, such as for relapsing remitting MS or secondary progressive MS, and the efficacy of OPX-212 for neuromyelitis optica (NMO);

·	our ability to develop and commercialize products;

·	our ability to obtain required regulatory approvals;

·	our compliance with all Food and Drug Administration regulations;

·	our ability to obtain, maintain and protect intellectual property rights (including for Tcelna and OPX-212);

·	the risk of litigation regarding our intellectual property rights or the rights of third parties;

·	the success of third party development and commercialization efforts with respect to products covered by intellectual property rights that we may license or transfer;

·	our limited manufacturing capabilities;

·	our dependence on third-party manufacturers;

·	our ability to hire and retain skilled personnel;

·	our volatile stock price; and

·	other risks detailed in our filings with the SEC.

 

 

·

In the modified intent to treat patient population consisting of all patients who received at least one dose of study product and had at least one MRI scan at week 28 or later (n=142), the ARR for Tcelna-treated patients was 0.214 as compared to 0.339 for placebo-treated patients, which represented a 37% decrease in ARR for Tcelna as compared to placebo in the general population;

·

In a prospective group of patients with more active disease (ARR>1, n=50), Tcelna demonstrated a 55% reduction in ARR as compared to placebo, an 88% reduction in whole brain atrophy and a statistically significant improvement in disability (EDSS) compared to placebo (p<0.045) at week 52 during the 24-week period following the administration of the full course of treatment; and

·	In a retrospective analysis in patients naïve to previous disease modifying treatment, the results showed that patients, when treated with Tcelna, had a 56% to 73% reduction in ARR versus placebo for the various subsets and p values ranged from 0.009 to 0.06.

 

 

 

 

 

 

 

 

 

 

 

·

Tranche 2: $1,000,000 in shares of common stock, at a per share purchase price of 90% of the 10-day volume weighted average price of the common stock for the 10 trading days (the “10-day VWAP”) immediately preceding the Tranche 2 milestone, which is the submission to the FDA of a preclinical study package to support the filing of an IND application for OPX-212, so long as such submission occurs on or before February 15, 2016 or any later date agreed to by the purchasers.

·

Tranche 3: $1,500,000 in shares of common stock, at a per share purchase price of 90% of the 10-day VWAP immediately preceding the Tranche 3 milestone, which is the acceptance of such IND by the FDA, so long as such acceptance occurs on or before the later of May 15, 2016 or three months following the Tranche 2 closing, or any later date agreed to by the purchasers.

·

Tranche 4: $1,000,000 in shares of common stock, at a per share purchase price of 90% of the 10-day VWAP immediately preceding the Tranche 4 milestone, which is the enrollment of the first patient in a Phase 1/2 clinical study of OPX-212 in patients with NMO, so long as such enrollment occurs on or before the later of August 30, 2016 or five months following the Tranche 3 closing, or any later date agreed to by the purchasers.

·

Tranche 5: $1,000,000 in shares of common stock, at per share purchase price of 90% of the 10-day VWAP immediately preceding the Tranche 5 milestone, which is the enrollment of patients representing at least 30% of the minimum targeted enrollment in such Phase 1/2 study, so long as such enrollment occurs on or before the later of December 31, 2016 or four months following the Tranche 4 closing, or any later date agreed to by the purchasers.

 

·	our ability to establish, enforce and maintain strategic arrangements for research, development, clinical testing, manufacturing and marketing;

·	the accuracy of the assumptions underlying our estimates for capital needs in 2015 and beyond as well as for the clinical study of Tcelna and OPX-212;

·	scientific progress in our research and development programs;

·	the magnitude and scope of our research and development programs;

·	our progress with preclinical development and clinical trials;

·	the time and costs involved in obtaining regulatory approvals;

·	the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing patent claims; and

·	the number and type of product candidates that we pursue.

 

 

 

·	does not have sufficient resources or decides not to devote the necessary resources due to internal constraints such as limited cash or human resources;

·	decides to pursue a competitive potential product;

·	cannot obtain the necessary regulatory approvals;

·	determines that the market opportunity is not attractive; or

·	cannot manufacture or obtain the necessary materials in sufficient quantities from multiple sources or at a reasonable cost.

 

·	FDA or IRB objection to proposed protocols;

·	discussions or disagreement with the FDA over the adequacy of trial design to potentially demonstrate effectiveness, and subsequent design modifications;

·	unforeseen safety issues;

·	determination of dosing issues, epitope profiles, and related adjustments;

·	lack of effectiveness during clinical trials;

·	slower than expected rates of patient recruitment;

·	product quality problems (e.g., sterility or purity);

·	challenges to patient monitoring, retention and data collection during or after treatment (e.g., patients’ failure to return for follow-up visits or to complete the trial, detection of epitope profiles in subsequent visits, etc.); and

·	failure of medical investigators to follow our clinical protocols.

·	any third party upon whom we rely does not successfully carry out its contractual duties or regulatory obligations or meet expected deadlines;

·	licenses needed from third parties for manufacturing in order to conduct Phase III trials or to conduct commercial manufacturing, if applicable, are not obtained;

·	any such third party needs to be replaced; or

·	the quality or accuracy of the data obtained by the third party is compromised due to its failure to adhere to clinical protocols or regulatory requirements or for other reasons.

·	difficulties in integrating the development program for the acquired product candidate into our existing operations;

·	diversion of financial and management resources from existing operations;

·	risks of entering new potential markets or technologies;

·	inability to generate sufficient funding to offset acquisition costs; and

·	delays that may result from our having to perform unanticipated preclinical trials or other tests on the product candidate.

 

 

 

·	demonstration of efficacy;

·	relative convenience and ease of administration;

·	the prevalence and severity of any adverse side effects;

·	availability and cost of alternative treatments, including cheaper generic drugs;

·	pricing and cost effectiveness, which may be subject to regulatory control;

·	effectiveness of sales and marketing strategies for the product and competition for such product;

·	the product labeling or product insert required by the FDA or regulatory authority in other countries; and

·	the availability of adequate third-party insurance coverage or reimbursement.

 
 

 

·	obtain and maintain patents to protect our product candidates such as Tcelna;

·	obtain and maintain any required or desirable licenses to use certain technologies of third parties, which may be protected by patents;

 

 

·	protect our trade secrets and know-how;

·	operate without infringing the intellectual property and proprietary rights of others;

·	enforce the issued patents under which we hold rights; and

·	develop additional proprietary technologies that are patentable.

·	we or our licensor might not have been the first to make the inventions covered by pending patent applications or issued patents owned by, or licensed to, us;

·	we or our licensor might not have been the first to file patent applications for these inventions;

·	others may independently develop similar or alternative technologies or duplicate any of the technologies owned by, or licensed to, us;

·	it is possible that none of the pending patent applications owned by, or licensed to, us will result in issued patents;

·	any patents under which we hold rights may not provide us with a basis for commercially viable products, may not provide us with any competitive advantages or may be challenged by third parties as invalid, or unenforceable under U.S. or foreign laws; or

·	any of the issued patents under which we hold rights may not be valid or enforceable or may be circumvented successfully in light of the continuing evolution of domestic and foreign patent laws.

·	payment of actual damages, royalties, lost profits, potentially treble damages and attorneys’ fees, if we are found to have willfully infringed a third party’s patent rights;

·	injunctive or other equitable relief that may effectively block our ability to further develop, commercialize and sell our products;

·	we or our collaborators having to enter into license arrangements that may not be available on commercially acceptable terms if at all; or

·	significant cost and expense, as well as distraction of our management from our business.

 

 

 

·	the development status of any drug candidates, such as Tcelna, including clinical study results and determinations by regulatory authorities with respect thereto;

·	the initiation, termination, or reduction in the scope of any collaboration arrangements (such as developments involving Merck Serono and the Option, including a decision by Merck Serono to exercise or not exercise the Option) or any disputes or developments regarding such collaborations;

·	announcements of technological innovations, new commercial products or other material events by our competitors or us;

·	disputes or other developments concerning our proprietary rights;

·	changes in, or failure to meet, securities analysts’ or investors’ expectations of our financial performance;

·	additions or departures of key personnel;

·	discussions of our business, products, financial performance, prospects or stock price by the financial and scientific press and online investor communities;

·	public concern as to, and legislative action with respect to, the pricing and availability of prescription drugs or the safety of drugs and drug delivery techniques;

·	regulatory developments in the United States and in foreign countries; or

·	dilutive effects of sales of shares of common stock by us or our shareholders, and sales of common stock acquired upon exercise or conversion by the holders of warrants, options or convertible notes.

 

 

 

 

Item 6.	Exhibits
Exhibit No.	Description
3.1*	Certificate of Amendment to the Restated Certificate of Formation of Opexa Therapeutics, Inc., effective as of September 9, 2015.
3.2	Certificate of Amendment to the Restated Certificate of Formation of Opexa Therapeutics, Inc., effective as of September 28, 2015 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 28, 2015).
4.1	Form of Series N Warrant issued on September 1, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 1, 2015).
10.1	Stock Purchase Agreement by and between Opexa Therapeutics, Inc. and the purchasers party thereto, dated September 1, 2015 (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 1, 2015).
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1*		Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*		Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*		Financial statements from the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2015, formatted in Extensible Business Reporting Language (XBRL):  (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

_______________

*	Filed herewith.

 

 

Date: November 10, 2015		By:	/s/  Neil K. Warma
			Neil K. Warma President and Chief Executive Officer (Principal Executive Officer)

Date: November 10, 2015		By:	/s/  Karthik Radhakrishnan
			Karthik Radhakrishnan Chief Financial Officer (Principal Financial and Accounting Officer)

 

Exhibit No.	Description
3.1*	Certificate of Amendment to the Restated Certificate of Formation of Opexa Therapeutics, Inc., effective as of September 9, 2015.
3.2	Certificate of Amendment to the Restated Certificate of Formation of Opexa Therapeutics, Inc., effective as of September 28, 2015 (incorporated by reference to Exhibit 3.1 to the Company’s Current Report on Form 8-K filed on September 28, 2015).
4.1	Form of Series N Warrant issued on September 1, 2015 (incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed on September 1, 2015).
10.1	Stock Purchase Agreement by and between Opexa Therapeutics, Inc. and the purchasers party thereto, dated September 1, 2015. (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed on September 1, 2015).
31.1*	Certification of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2*	Certification of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1*	Certification of Principal Executive Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2*	Certification of Principal Financial Officer pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101*	Financial statements from the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 2015, formatted in Extensible Business Reporting Language (XBRL):  (i) Consolidated Balance Sheets; (ii) Consolidated Statements of Operations; (iii) Consolidated Statements of Changes in Stockholders’ Equity; (iv) Consolidated Statements of Cash Flows; and (v) Notes to Consolidated Financial Statements.

_______________

*	Filed herewith.