Monopar Therapeutics - Quarter Report: 2020 June (Form 10-Q)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
☒
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the Quarterly Period Ended June 30, 2020
☐
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: : 001-39070
MONOPAR THERAPEUTICS INC.
(Exact name of registrant as specified in its charter)
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DELAWARE
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32-0463781
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(State or other jurisdiction of
incorporation or organization)
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(I.R.S. employer
identification number)
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1000 Skokie Blvd., Suite 350, Wilmette, IL
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60091
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(Address of principal executive offices)
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(zip code)
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(847) 388-0349
(Registrant’s telephone number, including area
code)
Securities registered pursuant to Section 12(b) of the
Act:
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Title of each class
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Trading Symbol(s)
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Name of each exchange on which registered
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Common
Stock, $0.001 par value
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MNPR
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The
Nasdaq Stock Market LLC
(Nasdaq Capital Market)
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Securities registered pursuant to Section 12(g) of the
Act:
None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file
such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted
electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§ 232.405 of this
chapter) during the preceding 12 months (or for such shorter period
that the registrant was required to submit such files).
Yes ☒ No ☐
Indicate by check mark whether the registrant is a large
accelerated filer, an accelerated filer, a non-accelerated filer, a
smaller reporting company, or an emerging growth company. See the
definitions of “large accelerated filer,”
“accelerated filer,” “smaller reporting
company” and “emerging growth company” in Rule
12b-2 of the Exchange Act.
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Large accelerated filer
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☐
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Accelerated filer
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☐
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Non-accelerated filer
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☐
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Smaller reporting company
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☒
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period
for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange
Act. ☒
Indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the
Act). Yes ☐ No ☒
The number of shares outstanding with respect to each of the
classes of our common stock, as of July 31, 2020, is set forth
below:
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Class
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Number
of shares outstanding
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Common
Stock, par value $0.001 per share
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10,736,396
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MONOPAR THERAPEUTICS INC.
TABLE OF CONTENTS
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33
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Forward-Looking Statements
This
Quarterly Report on Form 10-Q contains “forward-looking
statements” within the meaning of Section 27A of the
Securities Act of 1933, as amended (the “Act”) and
Section 21E of the Securities Exchange Act of 1934, as amended. All
statements other than statements of historical facts included in
this Quarterly Report on Form 10-Q are forward-looking statements.
The words “hopes,” “believes,”
“anticipates,” “plans,”
“seeks,” “estimates,”
“projects,” “expects,”
“intends,” “may,” “could,”
“should,” “would,” “will,”
“continue,” and similar expressions are intended to
identify forward-looking statements. The following uncertainties
and factors, among others, could affect future performance and
cause actual results to differ materially from those matters
expressed in or implied by forward-looking statements:
●
our ability to
raise sufficient funds by mid-2021 in order for us to start the
Phase 3 portion of our Validive Phase 2b/3 clinical trial and
thereafter in order to complete the trial, support further
development of camsirubicin in and beyond the Phase 2 trial,
support further development of potential radio-immuno-therapeutics
to treat severe COVID-19 (patients with SARS-CoV-2 infection) and
generally to support our current and any future product candidates
through completion of clinical trials, approval processes and, if
applicable, commercialization;
●
our ability to find
a suitable pharmaceutical partner to further our development
efforts, if we are unable to raise sufficient additional
financing;
●
risks and
uncertainties associated with our research and development
activities, including our clinical trials;
●
estimated
timeframes for our clinical trials and regulatory reviews for
approval to market products;
●
plans to research,
develop and commercialize our current and future product
candidates;
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the rate and degree
of market acceptance and competitive clinical efficacy and safety
of any products for which we receive marketing
approval;
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the difficulties of
commercialization, marketing and manufacturing capabilities and
strategy;
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uncertainties of
intellectual property position and strategy;
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challenging future
financial performance;
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the risks inherent
in our estimates regarding expenses, capital requirements and need
for additional financing;
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the uncertain
impact of government laws and regulations;
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our ability to
attract and retain key personnel;
●
the impact of the
COVID-19 pandemic on our ability to advance our clinical programs
and raise additional financing; and
●
uncertainty of
financial and operational projections.
Although
we believe that the expectations reflected in such forward-looking
statements are appropriate, we can give no assurance that such
expectations will be realized. Cautionary statements are disclosed
in this Quarterly Report on Form 10-Q. All subsequent written and
oral forward-looking statements attributable to us or persons
acting on our behalf are expressly qualified in their entirety by
the cautionary statements. We undertake no obligation to update any
statements made in this Quarterly Report on Form 10-Q or elsewhere,
including without limitation any forward-looking statements, except
as required by law.
Any forward-looking statements in this
Quarterly Report reflect our current views with respect to future
events or to our future financial performance and involve known and
unknown risks, uncertainties and other factors that may cause our
actual results, performance or achievements to be materially
different from any future results, performance or achievements
expressed or implied by these forward-looking statements.
Information that is based on estimates, forecasts, projections,
market research or similar methodologies is inherently subject to
uncertainties and actual events or circumstances may differ
materially from events and circumstances reflected in this
information.
1
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
Monopar Therapeutics Inc.
Condensed Consolidated
Balance Sheets
(Unaudited)
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June
30, 2020
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December
31, 2019*
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Assets
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Current
assets:
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Cash
and cash equivalents
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$12,546,189
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$13,213,929
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Other
current assets
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183,416
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15,711
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Total
current assets
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12,729,605
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13,229,640
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Other non-current
assets
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73,050
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122,381
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Total
assets
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$12,802,655
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$13,352,021
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Liabilities
and Stockholders’ Equity
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Current
liabilities:
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Accounts
payable, accrued expenses and other current
liabilities
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$525,748
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$724,165
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Current
portion of bank loan
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47,379
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—
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Total
current liabilities
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573,127
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724,165
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Long-term
liabilities:
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Non-current
portion of bank loan
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75,021
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—
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Total
long-term liabilities
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75,021
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—
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Total
liabilities
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648,148
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724,165
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Commitments and
contingencies (Note 6)
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Stockholders’
equity:
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Common
stock, par value of $0.001 per share, 40,000,000 authorized,
10,735,973 and 10,587,632 shares issued and outstanding at June 30,
2020 and December 31, 2019, respectively
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10,736
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10,587
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Additional
paid-in capital
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40,572,598
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38,508,825
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Accumulated
other comprehensive loss
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(11,554)
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(10,970)
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Accumulated
deficit
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(28,417,273)
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(25,880,586)
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Total
stockholders' equity
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12,154,507
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12,627,856
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Total
liabilities and stockholders’ equity
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$12,802,655
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$13,352,021
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*
Derived from the Company’s audited consolidated financial
statements.
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
2
Monopar Therapeutics Inc.
Condensed Consolidated
Statements of Operations and Comprehensive Loss
(Unaudited)
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Three
Months Ended June 30,
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Six
Months Ended June 30,
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2020
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2019
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2020
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2019
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Operating
expenses:
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Research and
development
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$832,503
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$329,294
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$1,176,910
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$1,164,894
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General and
administrative
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631,629
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602,815
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1,423,236
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1,174,524
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Total operating
expenses
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1,464,132
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932,109
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2,600,146
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2,339,418
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Loss from
operations
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(1,464,132)
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(932,109)
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(2,600,146)
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(2,339,418)
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Other
income:
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Interest income,
net
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18,322
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26,409
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63,459
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57,483
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Net
loss
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(1,445,810)
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(905,700)
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(2,536,687)
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(2,281,935)
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Other comprehensive
income:
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Foreign currency
translation gain (loss)
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3,457
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1,067
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(584)
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(1,060)
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Comprehensive
loss
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$(1,442,353)
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$(904,633)
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$(2,537,271)
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$(2,282,995)
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Net loss per
share:
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Basic and
diluted
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$(0.14)
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$(0.10)
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$(0.24)
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$(0.25)
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Weighted average
shares outstanding:
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Basic and
diluted
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10,648,285
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9,291,421
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10,628,635
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9,291,421
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The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
3
Monopar Therapeutics Inc.
Condensed Consolidated Statements of
Stockholders’ Equity
(Unaudited)
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Common Stock
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Additional
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Accumulated
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Shares
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Amount
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Paid-in Capital
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Other Comprehensive Loss
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Accumulated Deficit
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Total Stockholders' Equity
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Balance
at January 1, 2019
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9,291,421
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$9,291
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$28,567,221
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$(2,396)
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$(21,655,712)
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$6,918,404
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Stock-based
compensation (non-cash)
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—
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—
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233,776
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—
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—
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233,776
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Net
loss
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—
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—
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—
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—
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(1,376,235)
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(1,376,235)
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Accumulated
other comprehensive loss
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—
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—
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—
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(2,127)
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—
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(2,127)
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Balance
at March 31, 2019
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9,291,421
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9,291
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28,800,997
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(4,523)
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(23,031,947)
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5,773,818
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Stock-based
compensation (non-cash)
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—
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—
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257,633
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—
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—
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257,633
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Net
loss
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—
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—
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—
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—
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(905,700)
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(905,700)
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Accumulated
other comprehensive gain
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—
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—
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—
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1,067
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—
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1,067
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Balance
at June 30, 2019
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9,291,421
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$9,291
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$29,058,630
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$(3,456)
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$(23,937,647)
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$5,126,818
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Common Stock
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Additional
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Accumulated
|
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Shares
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Amount
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Paid-in Capital
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Other Comprehensive Loss
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Accumulated Deficit
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Total Stockholders' Equity
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Balance
at January 1, 2020
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10,587,632
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$10,587
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$38,508,825
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$(10,970)
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$(25,880,586)
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$12,627,856
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Issuance
of common stock under a Capital on DemandTM
Sales Agreement
with
JonesTrading Institutional Services
LLC, net of commissions and fees of $16,284
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33,903
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34
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526,109
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—
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—
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526,143
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Issuance
of common stock to non-employee
directors
pursuant to vested restricted stock units
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1,288
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1
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(1)
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—
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—
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—
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Stock-based
compensation (non-cash)
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—
|
—
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338,497
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—
|
—
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338,497
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|
Offering
costs
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—
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—
|
(2,161)
|
—
|
—
|
(2,161)
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|
Net
loss
|
—
|
—
|
—
|
—
|
(1,090,877)
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(1,090,877)
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Accumulated
other comprehensive loss
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—
|
—
|
—
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(4,041)
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—
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(4,041)
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|
Balance
at March 31, 2020
|
10,622,823
|
10,622
|
39,371,269
|
(15,011)
|
(26,971,463)
|
12,395,417
|
|
Issuance
of common stock under a Capital on DemandTM
Sales Agreement
with
JonesTrading Institutional Services
LLC, net of commissions and fees of $29,425
|
111,858
|
113
|
950,577
|
—
|
—
|
950,690
|
|
Issuance
of common stock to non-employee
directors
pursuant to vested restricted stock units
|
1,292
|
1
|
(1)
|
|
—
|
—
|
|
Stock-based
compensation (non-cash)
|
—
|
—
|
367,358
|
—
|
—
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367,358
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|
Offering
costs
|
—
|
—
|
(116,605)
|
|
|
(116,605)
|
|
Net
loss
|
—
|
—
|
—
|
—
|
(1,445,810)
|
(1,445,810)
|
|
Accumulated
other comprehensive gain
|
—
|
—
|
—
|
3,457
|
—
|
3,457
|
|
Balance
at June 30, 2020
|
10,735,973
|
$10,736
|
$40,572,598
|
$(11,554)
|
$(28,417,273)
|
$12,154,507
|
The
accompanying notes are an integral part of these condensed
consolidated financial statements.
4
Monopar Therapeutics Inc.
Condensed Consolidated
Statements of Cash Flows
(Unaudited)
|
|
Six
Months Ended June 30,
|
|
|
|
2020
|
2019
|
|
Cash flows from operating activities:
|
|
|
|
Net
loss
|
$(2,536,687)
|
$(2,281,935)
|
|
Adjustments to
reconcile net loss to net cash used in operating
activities:
|
|
|
|
Stock-based
compensation expense (non-cash)
|
705,855
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491,409
|
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Changes
in operating assets and liabilities, net
|
|
|
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Other current
assets
|
(122,258)
|
(13,902)
|
|
Accounts payable,
accrued expenses and other current liabilities
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(167,954)
|
68,721
|
|
Net cash used in
operating activities
|
(2,121,044)
|
(1,735,707)
|
|
Cash
flows from financing activities:
|
|
|
|
Cash proceeds
from the sales of common stock under a Capital on
DemandTM
Sales Agreement with JonesTrading Institutional Services LLC, net
of cash commissions and fees of $43,999
|
1,421,569
|
—
|
|
Offering
costs
|
(89,521)
|
(26,177)
|
|
PPP
forgivable bank loan
|
122,400
|
—
|
|
Net
cash provided by (used in) financing activities
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1,454,448
|
(26,177)
|
|
Effect
of exchange rates
|
(1,144)
|
(1,060)
|
|
Net
decrease in cash and cash equivalents
|
(667,740)
|
(1,762,944)
|
|
Cash and cash equivalents at beginning of period
|
13,213,929
|
6,892,772
|
|
Cash and cash equivalents at end of period
|
$12,546,189
|
$5,129,828
|
The
accompanying notes are an integral
part of
these condensed consolidated financial statements.
5
MONOPAR THERAPEUTICS INC.
NOTES
TO CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
June 30, 2020
Note
1 - Nature of Business and Liquidity
Nature of Business
Monopar Therapeutics Inc. (“Monopar”
or the “Company”) is a clinical-stage
biopharmaceutical company focused on developing proprietary
therapeutics designed to extend life or improve quality of life for
cancer patients. Monopar currently has three compounds in
development: Validive®
(clonidine mucobuccal tablet;
clonidine MBT), a Phase 2b/3-ready, first-in-class mucoadhesive
buccal tablet for the prevention and treatment of radiation induced
severe oral mucositis (“SOM”) in oropharyngeal cancer
patients; camsirubicin (generic name for MNPR-201, GPX-150;
5-imino-13-deoxydoxorubicin), a proprietary Phase 2 clinical stage
topoisomerase II-alpha selective analog of doxorubicin engineered
specifically to retain anticancer activity while minimizing toxic
effects on the heart; and a preclinical stage uPAR targeted
antibody, MNPR-101, for advanced cancers and severe
COVID-19.
Liquidity
The
Company has incurred an accumulated deficit of approximately $28.4
million as of June 30, 2020. To date, the Company has primarily
funded its operations with the net proceeds from the
Company’s initial public offering of its common stock on
Nasdaq, private placements of convertible preferred stock and of
common stock, from the cash provided in the camsirubicin asset
purchase transaction, from sales of its common stock in the public
market under a Capital on DemandTM Sales Agreement and
from a forgivable bank loan. Management believes that currently
available resources will provide sufficient funds to enable the
Company to meet its planned obligations past September 2021. The
Company’s ability to fund its future operations, including
the clinical development of Validive and camsirubicin, is dependent
primarily upon its ability to execute its business strategy, to
obtain additional funding and/or to execute collaborative research
agreements. There can be no certainty that future financing or
collaborative research agreements will occur.
In
December 2019, a novel strain of coronavirus
(“COVID-19”) surfaced in China and by March 2020
COVID-19 was designated a global pandemic, resulting in
government-mandated travel restrictions and temporary shut-downs of
non-essential businesses in many states in the United States. The
Company is able to remain open but has allowed their employees to
work from home, if required by local authorities. Due to the
volatility of the stock markets resulting from travel restrictions
and indeterminate but temporary business shut-downs, the Company
faces challenges in raising substantial cash in the near-term.
In response to the current COVID-19
pandemic and its effects on clinical trials, Monopar has modified
the original adaptive design Phase 3 clinical trial for its lead
product candidate, Validive, to be a Phase 2b/3 clinical trial to
better fit the types of trials which can enroll patients in the
current environment. This modification will allow the
Company to initiate the clinical trial without requiring near-term
financing. The decision to proceed to the Phase 3 portion of the
clinical trial without a delay will largely be dependent on the
Company’s cash position closer to that time, anticipated to
be in the second half of 2021. To initiate and complete the Phase 3
portion of the clinical trial, Monopar will require additional
funding in the millions or tens of millions of dollars (depending
on if the Company has consummated a collaboration or partnership or
neither for Validive), which it is planning to pursue in the next
12 months. Due to many uncertainties, the Company is unable to
estimate the pandemic’s financial impact or duration at this
time, or its potential impact on the Company’s planned
clinical trials.
Note 2 - Significant Accounting Policies
Basis of Presentation
These
condensed consolidated financial statements include the financial
results of Monopar Therapeutics Inc., its wholly-owned French
subsidiary, Monopar Therapeutics, SARL, and its wholly-owned
Australian subsidiary, Monopar Therapeutics Australia Pty Ltd, and
have been prepared in accordance with accounting
6
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
principles
generally accepted in the United States (“GAAP”) and
include all disclosures required by GAAP for interim financial
reporting. All intercompany accounts have been eliminated. The
principal accounting policies applied in the preparation of these
condensed consolidated financial statements are set out below and
have been consistently applied in all periods presented. The
Company has been primarily involved in performing research
activities, developing product candidates, and raising capital to
support and expand these activities.
In the
opinion of management, the accompanying unaudited condensed
consolidated financial statements contain all normal, recurring
adjustments necessary to present fairly the Company’s
condensed consolidated financial position as of June 30, 2020 and
as of December 31, 2019, the Company’s condensed consolidated
results of operations and comprehensive loss for the three and six
months ended June 30, 2020 and 2019, and the Company’s
condensed consolidated cash flows for the six months ended June 30,
2020 and 2019. The condensed consolidated results of operations and
cash flows for the periods presented are not necessarily indicative
of the consolidated results of operations or cash flows which may
be reported for the remainder of 2020 or for any future
period. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with GAAP
have been condensed or omitted. The accompanying unaudited
interim condensed consolidated financial statements should be read
in conjunction with the audited financial statements and notes
thereto for the year ended December 31, 2019, included in the
Company’s Annual Report on Form 10-K filed with the United
States Securities and Exchange Commission (the “SEC”)
on March 27, 2020.
Functional Currency
The
Company's consolidated functional currency is the U.S. Dollar. The
Company's Australian subsidiary and French subsidiary use the
Australian Dollar and European Euro, respectively, as their
functional currency. At each quarter-end, each foreign subsidiary's
balance sheets are translated into U.S. Dollars based upon the
quarter-end exchange rate, while their statements of operations and
comprehensive loss are translated into U.S. Dollars based upon an
average exchange rate during the period.
Comprehensive Loss
Comprehensive loss
represents net loss plus any gains or losses not reported in the
statements of operations and comprehensive loss, such as foreign
currency translations gains and losses that are typically reflected
on the Company’s condensed consolidated statements of
stockholders’ equity.
Use of Estimates
The
preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities, disclosure of
contingent assets and liabilities, and reported amounts of revenues
and expenses in the condensed consolidated financial statements and
accompanying notes. Actual results could differ from those
estimates.
Going Concern Assessment
The
Company applies Accounting Standards Codification 205-40
(“ASC 205-40”), Disclosure of Uncertainties about an
Entity’s Ability to Continue as a Going Concern, which
the Financial Accounting Standards Board (“FASB”)
issued to provide guidance on determining when and how reporting
companies must disclose going concern uncertainties in their
financial statements. ASC 205-40 requires management to perform
interim and annual assessments of an entity’s ability to
continue as a going concern within one year of the date of issuance
of the entity’s financial statements (or within one year
after the date on which the financial statements are available to
be issued, when applicable). Further, a company must provide
certain disclosures if there is “substantial doubt about the
entity’s ability to continue as a going concern.” In
July 2020, the Company analyzed its cash requirements through
September 2021 and has determined that, based upon the
Company’s current available cash, the Company has no
substantial doubt about its ability to continue as a going
concern.
7
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Cash Equivalents
The
Company considers all highly liquid investments purchased with a
maturity of 90 days or less on the date of purchase to be cash
equivalents. Cash equivalents as of June 30, 2020 and 2019
consisted of one money market account.
Deferred Offering Costs
Deferred offering
costs represent legal, auditing, travel and filing fees related to
fundraising efforts that have not yet been concluded.
Prepaid Expenses
Prepayments are
expenditures for goods or services before the goods are used or the
services are received and are charged to operations as the benefits
are realized. Prepaid expenses include payments to development
collaborators in excess of actual expenses incurred by the
collaborator, measured at the end of each reporting period.
Prepayments also include insurance premiums and software costs of
$10,000 or more that are expensed monthly over the life of the
contract. Prepaid expenses are reflected on the Company’s
balance sheets as other current assets.
Bank Loans
In May
2020, the Company applied for and received a bank loan pursuant to
the Paycheck Protection Program (“PPP”) established
pursuant to the Coronavirus Aid, Relief, and Economic Security Act,
as administered by the U.S. Small Business Administration
(“SBA”).
The SBA
will forgive the bank loan pursuant to the PPP, if certain
conditions are met, namely the bank loan must be used primarily for
payroll during the 24-week period following receipt of the loan,
without significant staffing reductions during that period. The
Company believes it is eligible and intends to apply for loan
forgiveness in August 2020 when the bank is able to process SBA
loan forgiveness application. Should the bank loan not be forgiven,
the Company would be required to pay 1% annual interest on the loan
with principal and interest payments beginning approximately seven
months after receipt of the loan with payments over 18 months. The
Company has recorded the PPP loan on the balance sheet as of June
30, 2020 as current (due within 12 months) and non-current portions
of bank loan.
Concentration of Credit Risk
Financial
instruments that potentially subject the Company to concentration
of credit risk consist of cash and cash equivalents. The Company
maintains cash and cash equivalents at two reputable financial
institutions. As of June 30, 2020, the balance at one financial
institution was in excess of the $250,000 Federal Deposit Insurance
Corporation (“FDIC”) insurable limit. The Company has
not experienced any losses on its deposits since inception and
management believes the Company is not exposed to significant risks
with respect to these financial institutions.
Fair Value of Financial Instruments
For
financial instruments consisting of cash and cash equivalents,
accounts payable, accrued expenses, other current liabilities and
bank loans, the carrying amounts are reasonable estimates of fair
value due to their relatively short maturities.
8
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
ASC 820, Fair Value Measurements and
Disclosures, as amended,
addresses the measurement of the fair value of financial assets and
financial liabilities. Under this standard, fair value is defined
as the price that would be received to sell an asset or paid to
transfer a liability (i.e., the “exit price”) in an
orderly transaction between market participants at the measurement
date.
The
standard establishes a hierarchy for inputs used in measuring fair
value that maximizes the use of observable inputs and minimizes the
use of unobservable inputs by requiring that the most observable
inputs be used when available. Observable inputs reflect
assumptions market participants would use in pricing an asset or
liability based on market data obtained from independent sources.
Unobservable inputs reflect a reporting entity’s pricing an
asset or liability developed based on the best information
available under the circumstances. The fair value hierarchy
consists of the following three levels:
Level 1 - instrument valuations are obtained from
real-time quotes for transactions in active exchange markets
involving identical assets.
Level 2 - instrument valuations are obtained from
readily available pricing sources for comparable
instruments.
Level 3 - instrument valuations are obtained without
observable market values and require a high-level of judgment to
determine the fair value.
Determining
which category an asset or liability falls within the hierarchy
requires significant judgment. The Company evaluates its hierarchy
disclosures each reporting period. There were no transfers between
Level 1, 2 or 3 of the fair value hierarchy during the three and
six months ended June 30, 2020 and the year ended December 31,
2019. The following table presents the assets and liabilities that
are reported at fair value on our condensed consolidated balance
sheets on a recurring basis. No values were recorded in Level 2 or
Level 3 at June 30, 2020 and December 31, 2019.
Assets and Liabilities Measured at Fair Value on a Recurring
Basis
|
June
30, 2020
|
Level
1
|
Total
|
|
Assets
|
|
|
|
Cash
equivalents(1)
|
$12,397,916
|
$12,397,916
|
|
Total
|
$12,397,916
|
$12,397,916
|
|
December
31, 2019
|
Level
1
|
Total
|
|
Assets
|
|
|
|
Cash
equivalents(1)
|
$13,083,536
|
$13,083,536
|
|
Total
|
$13,083,536
|
$13,083,536
|
(1)
Cash equivalents
represent the fair value of the Company’s investment in a
money market account.
Net Loss per Share
Net
loss per share for the three and six months ended June 30, 2020 and
2019 is calculated by dividing net loss by the weighted-average
shares of common stock outstanding during the period. Diluted net
loss per share for the three and six months ended June 30, 2020 and
2019 is calculated by dividing net loss by the weighted-average
shares of the sum of a) weighted average common stock outstanding
(10,648,285 and 10,628,635 shares for the three and six months
ended June 30, 2020, respectively; 9,291,421 shares for the three
and six months ended June 30, 2019) and b) potentially dilutive
shares of common stock (such as stock options and restricted stock
units) outstanding during the period. As of June 30, 2020 and 2019,
potentially dilutive securities included
9
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
stock-based awards
to purchase up to 1,296,573 and 1,105,896 shares of the
Company’s common stock, respectively. For the three and six
months ended June 30, 2020 and 2019, potentially dilutive
securities are excluded from the computation of fully-diluted net
loss per share as their effect is anti-dilutive.
Research and Development Expenses
Research and
development (“R&D”) costs are expensed as incurred.
Major components of R&D expenses include salaries and benefits
paid to the Company’s R&D staff, fees paid to consultants
and to the entities that conduct certain R&D activities on the
Company’s behalf and materials and supplies which are used in
R&D activities during the reporting period.
The
Company accrues and expenses the costs for clinical trial
activities performed by third parties based upon estimates of the
percentage of work completed over the life of the individual study
in accordance with agreements established with contract research
organizations, service providers, and clinical trial sites. The
Company determines the estimates through discussions with internal
clinical personnel and external service providers as to progress or
stage of completion of trials or services and the agreed upon fee
to be paid for such services. Costs of setting up clinical trial
sites for participation in the trials are expensed immediately as
R&D expenses. Clinical trial site costs related to patient
screening and enrollment are accrued as patients are
screened/entered into the trial. During the three and six months
ended June 30, 2020 and 2019, the Company had no clinical trials in
progress.
Collaborative Agreements
The
Company and its collaborative partners are active participants in
collaborative arrangements and all parties would be exposed to
significant risks and rewards depending on the technical and
commercial success of the activities. Contractual payments to the
other parties in collaboration agreements and costs incurred by the
Company when the Company is deemed to be the principal participant
for a given transaction are recognized on a gross basis in R&D
expenses. Royalties and license payments are recorded as
earned.
During
the three and six months ended June 30, 2020 and 2019, no
milestones were met and no royalties were earned, therefore, the
Company did not pay or accrue/expense any license or royalty
payments.
Licensing Agreements
The
Company has various agreements licensing technology utilized in the
development of its product or technology programs. The licenses
contain success milestone obligations and royalties on future
sales. During the three and six months ended June 30, 2020 and
2019, no milestones were met and no royalties were earned,
therefore, the Company did not pay or accrue/expense any license or
royalty payments under any of its license agreements.
Patent Costs
The
Company expenses costs relating to issued patents and patent
applications, including costs relating to legal, renewal and
application fees, as a component of general and administrative
expenses in its condensed consolidated statements of operations and
comprehensive loss.
Income Taxes
On
December 16, 2015, the Company began using an asset and liability
approach for accounting for deferred income taxes, which requires
recognition of deferred income tax assets and liabilities for the
expected future tax consequences of events that have been
recognized in its financial statements but have not been reflected
in its taxable income. Estimates and judgments are required in the
calculation of certain tax liabilities and in the determination of
the recoverability of certain deferred income tax assets, which
arise from temporary differences and carryforwards. Deferred income
tax assets and liabilities are measured using the currently
enacted
tax rates that apply to taxable income in effect for the years in
which those tax assets and liabilities are expected to be realized
or settled.
10
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
The
Company regularly assesses the likelihood that its deferred income
tax assets will be realized from recoverable income taxes or
recovered from future taxable income. To the extent that the
Company believes any amounts are more likely than not to be
realized, the Company records a valuation allowance to reduce the
deferred income tax assets. In the event the Company determines
that all or part of the net deferred tax assets are not realizable
in the future, an adjustment to the valuation allowance would be
charged to earnings in the period such determination is made.
Similarly, if the Company subsequently determines deferred income
tax assets that were previously determined to be unrealizable are
now realizable, the respective valuation allowance would be
reversed, resulting in an adjustment to earnings in the period such
determination is made.
Internal Revenue
Code Section 382 (“Section 382”) provides that, after
an ownership change, the amount of a loss corporation’s net
operating loss (“NOL”) for any post-change year that
may be offset by pre-change losses shall not exceed the Section 382
limitation for that year. To date, the Company has not conducted a
Section 382 study, however, because the Company will continue to
raise significant amounts of equity in the coming years, the
Company expects that Section 382 will limit the Company’s
usage of NOLs in the future.
ASC
740, Income Taxes, requires
that the tax benefit of net operating losses, temporary
differences, and credit carryforwards be recorded as an asset to
the extent that management assesses that realization is "more
likely than not." Realization of the future tax benefits is
dependent on the Company's ability to generate sufficient taxable
income within the carryforward period. The Company has reviewed the
positive and negative evidence relating to the realizability of the
deferred tax assets and has concluded that the deferred tax assets
are not more likely than not to be realized with the exception of
its U.S. Federal R&D tax credits which will be utilized to
reduce payroll taxes in future periods. As a result, the Company
recorded a full valuation allowance as of June 30, 2020 and
December 31, 2019. The Company intends to maintain the valuation
allowance until sufficient evidence exists to support its reversal.
The Company regularly reviews its tax positions. For a tax benefit
to be recognized, the related tax position must be more likely than
not to be sustained upon examination. Any amount recognized is
generally the largest benefit that is more likely than not to be
realized upon settlement. The Company’s policy is to
recognize interest and penalties related to income tax matters as
an income tax expense. For the three and six months ended June 30,
2020 and 2019, the Company did not have any interest or penalties
associated with unrecognized tax benefits.
The
Company is subject to U.S. Federal, Illinois and California income
taxes. In addition, the Company is subject to local tax laws of
France and Australia. Tax regulations within each jurisdiction are
subject to the interpretation of the related tax laws and
regulations and require significant judgment to apply. The Company
was incorporated on December 16, 2015 and is subject to U.S.
Federal, state and local tax examinations by tax authorities for
the years ended December 31, 2019, 2018, 2017 and 2016, and for the
short tax period December 16, 2015 to December 31, 2015. The
Company does not anticipate significant changes to its current
uncertain tax positions through June 30, 2020. The Company plans on
filing its tax returns for the year ending December 31, 2019 prior
to the extended filing deadlines in all jurisdictions.
Stock-Based Compensation
The
Company accounts for stock-based compensation arrangements with
employees, non-employee directors and consultants using a fair
value method, which requires the recognition of compensation
expense for costs related to all stock-based awards, including
stock option and restricted stock unit (“RSU”) grants.
The fair value method requires the Company to estimate the fair
value of stock-based payment awards on the date of grant using an
option pricing model or the closing stock price on the date of
grant in the case of RSUs.
11
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Stock-based
compensation costs for awards granted to employees and non-employee
directors are based on the fair value of the underlying instrument
calculated using the Black-Scholes option-pricing model on the date
of grant for stock options and using the closing stock price on the
date of grant for RSUs and recognized as expense on a straight-line
basis over the requisite service period, which is the vesting
period. Determining the appropriate fair value model and related
assumptions requires judgment, including estimating the future
stock price volatility, forfeiture rates and expected terms. The
expected volatility rates are estimated based on the actual
volatility of comparable public companies over recent historical
periods of the same length as the expected term. The Company
selected these companies based on reasonably comparable
characteristics, including market capitalization, stage of
corporate development and with historical share price information
sufficient to meet the expected term (life) of the stock-based
awards. The expected term for options granted to date is estimated
using the simplified method. Forfeitures are estimated at the time
of grant and revised, if necessary, in subsequent periods if actual
forfeitures differ from those estimates. The Company has not paid
dividends and does not anticipate paying a cash dividend in the
future vesting period and, accordingly, uses an expected dividend
yield of zero. The risk-free interest rate is based on the rate of
U.S. Treasury securities with maturities consistent with the
estimated expected term of the awards. Prior to January 1, 2019,
the measurement of consultant stock-based compensation was subject
to periodic adjustments as the underlying equity instruments vested
and was recognized as an expense over the period in which services
were rendered. Since January 1, 2019, consultant stock-based
compensation is valued on the grant date and is recognized as an
expense over the period in which services are
rendered.
Recent Accounting Pronouncements
In
August 2018, the FASB issued Accounting Standards Updates
(“ASU”) No. 2018-13,
Fair Value Measurement (Topic 820): Disclosure
Framework—Changes to the Disclosure Requirements for Fair
Value Measurement. The ASU modifies, and in certain cases
eliminates, the disclosure requirements on fair value measurements
in Topic 820. The amendments in ASU No. 2018-13 are effective for
all entities for fiscal years, and interim periods within those
fiscal years, beginning after December 15, 2019. The Company
adopted this ASU and has determined that it had no material effect
on its condensed consolidated financial statements and footnote
disclosures for the three and six months ended June 30,
2020.
Note 3 - Capital Stock
Holders
of the common stock are entitled to receive such dividends as may
be declared by the Board of Directors out of funds legally
available therefor. Upon dissolution and liquidation of the
Company, holders of the common stock are entitled to a ratable
share of the net assets of the Company remaining after payments to
creditors of the Company. The holders of shares of common stock are
entitled to one vote per share for the election of each director
nominated to the board and one vote per share on all other matters
submitted to a vote of stockholders.
The
Company’s amended and restated certificate of incorporation
authorizes the Company to issue 40,000,000 shares of common stock
with a par value of $0.001 per share.
Sales of Common Stock
On
December 23, 2019, the Company closed the initial public offering
of its common stock. The Company sold 1,277,778 shares of its
common stock at a public offering price of $8.00 per share pursuant
to an underwriting agreement with JonesTrading Institutional
Services, LLC (“JonesTrading”). The Company paid
JonesTrading a customary commission and reimbursement of a portion
of their legal fees incurred in connection with the offering, which
in aggregate totaled approximately $0.7 million. Net proceeds on a
cash basis were approximately $9.4 million, after deducting
underwriting discounts and accrued, unpaid offering expenses. The
Company had incurred and paid prior to the initial public offering
approximately $0.6 million of fundraising expenses which were
capitalized on the Company’s balance sheet as deferred
offering costs and were reclassified as offering expenses (a
contra-equity balance sheet account) upon the closing of the
Company’s initial
public offering. After deducting previously paid offering expenses
of approximately $0.6 million, the accrual basis net proceeds were
$8.8 million as reported on the Company’s consolidated
statement of stockholders’ equity as of December 31, 2019
included in the Company’s Annual Report on Form 10-K filed
with the SEC on March 27, 2020. The Company’s common stock
began trading on the Nasdaq Capital Market on December 19,
2019.
12
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
On
January 13, 2020, the Company entered into a Capital on
Demand™ Sales Agreement with JonesTrading, as sales agent,
pursuant to which Monopar may offer and sell (at its discretion),
from time to time, through or to JonesTrading shares of
Monopar’s common stock, having an aggregate offering price of
up to $19.7 million. Pursuant to this agreement, as of June 30,
2020, the Company sold 145,761 shares of its common stock at an
average gross price per share of $10.45 for net proceeds of
$1,476,833, after commissions and fees of $45,709.
As
of June 30, 2020, the Company had 10,735,973 shares of common stock
issued and outstanding.
Note 4 - Stock Incentive Plan
In
April 2016, the Company’s Board of Directors and stockholders
representing a majority of the Company’s outstanding stock at
that time, approved the Monopar Therapeutics Inc. 2016 Stock
Incentive Plan, as amended (the “Plan”), allowing the
Company to grant up to an aggregate 700,000 shares of stock-based
awards in the form of stock options, restricted stock units, stock
appreciation rights and other stock-based awards to employees,
non-employee directors and consultants. In October 2017, the
Company’s Board of Directors voted to increase the stock
award pool to 1,600,000 shares of common stock, which subsequently
was approved by the Company’s stockholders. In April 2020,
the Company’s Board of Directors voted to increase the stock
award pool to 3,100,000 (and increase of 1,500,000 shares of common
stock), which was approved by the Company’s stockholders in
June 2020.
In
January 2020, the Company's Plan Administrator Committee granted
two new hire stock option grants and a consultant stock option
grant to the Company’s acting chief medical office, in
aggregate, for the purchase of 15,125 shares of the Company’s
common stock with exercise prices ranging from $16.80 to $17.75.
The stock options have a 10-year term and vest over 1 to 4
years.
In
February 2020, the Company's Plan Administrator Committee (with
regards to non-officer employees) and the Company's Compensation
Committee, as ratified by the Board of Directors (in the case of
officers and non-employee directors) granted an aggregate of
189,985 stock options with exercise prices ranging from $12.93 to
$14.35 as annual equity grants to executive officers, non-employee
directors and staff. All stock options have a 10-year term and vest
over 1 to 4 years. The annual equity grants also included an
aggregate 45,722 restricted stock units to executive officers,
non-employee directors and staff which vest over 1 to 4
years.
In
May 2020, the Company's Plan Administrator Committee granted stock
option grants to a new hire and an employee, in aggregate, for the
purchase of 4,000 shares of the Company’s common stock with
exercise prices ranging from $7.61 to $7.66. All stock options have
a 10-year term and vest over 4 years.
Under
the Plan, the per share exercise price for the shares to be issued
upon exercise of an option shall be determined by the Plan
Administrator, except that the per share exercise price shall be no
less than 100% of the fair market value per share on the grant
date. Fair market value is established by the Company’s Board
of Directors, using third party valuation reports, recent private
financings or the Company’s closing prices on Nasdaq since
the Company’s listing on December 19, 2019. Stock options
generally expire after 10 years.
13
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Stock
option activity under the Plan was as follows:
|
|
|
Options Outstanding
|
||
|
|
|
Number of Options
|
|
Weighted-Average Exercise Price
|
|
Balances at January 1, 2019
|
|
1,105,896
|
|
$
2.99
|
|
Granted
|
|
—
|
|
—
|
|
Forfeited
|
|
—
|
|
—
|
|
Exercised
|
|
(18,433)
|
|
5.97
|
|
Balances at December 31, 2019
|
|
1,087,463
|
|
2.94
|
|
Granted(1)
|
|
209,110
|
|
14.42
|
|
Forfeited
|
|
—
|
|
—
|
|
Exercised
|
|
—
|
|
—
|
|
Balances at June 30, 2020
|
|
1,296,573
|
|
4.79
|
(1)
209,110 options
vest as follows: options to purchase up to 180,401 shares of the
Company’s common stock vest 6/48ths on the six-month
anniversary of grant date and 1/48th per month thereafter; options
to purchase up to 22,584 shares of the Company’s common stock
vest quarterly over one year; and options to purchase up to 6,125
shares of the Company’s common stock vest monthly over one
year. The exercise prices per share of the 209,110 options are as
follows: for 186,985 options $14.35; for 9,000 options $17.75; for
6,125 options $16.80; for 3,000 options $12.93; for 2,000 options
$7.66 and for 2,000 options $7.61.
A
summary of options outstanding as of June 30, 2020 is shown
below:
|
Exercise
Prices
|
Number
of Shares Subject to Options Outstanding
|
Weighted-Average
Remaining Contractual Term in Years
|
Number
of Shares Subject to Options Fully Vested and
Exercisable
|
Weighted-Average
Remaining Contractual Term in Years
|
|
$0.00-$5.00
|
555,420
|
6.21
years
|
509,500
|
6.17
years
|
|
$5.01-$10.00
|
536,043
|
8.02
years
|
328,154
|
7.97
years
|
|
$10.01-$15.00
|
189,985
|
9.59
years
|
32,218
|
9.59
years
|
|
$15.01-$20.00
|
15,125
|
9.55
years
|
3,063
|
9.59
years
|
|
|
1,296,573
|
7.49
years
|
872,935
|
6.99
years
|
14
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Restricted stock
unit activity under the Plan was as follows:
|
|
Restricted
Stock Units
|
Weighted-Average
Grant Date Fair Value per Unit
|
|
Unvested
balance at January 1, 2020
|
—
|
$—
|
|
Granted
|
45,722
|
12.93
|
|
Vested
|
(2,580)
|
12.93
|
|
Forfeited
|
—
|
—
|
|
Unvested
Balance at June 30, 2020
|
43,142
|
12.93
|
During the three months ended June 30, 2020
and 2019, the Company recognized
$248,889 and $164,600, respectively, of employee and non-employee
director stock-based compensation expense as general and
administrative expenses and $100,898 and $72,324, respectively, as
research and development expenses. During the six months
ended June 30, 2020 and 2019,
the Company recognized $469,655 and $315,326, respectively, of
employee and non-employee director stock-based compensation expense
as general and administrative expenses and $201,069 and $134,665,
respectively, as research and development expenses. The stock-based
compensation expense is allocated on a departmental basis, based on
the classification of the holder. No income tax benefits have been
recognized in the condensed consolidated statements of operations
and comprehensive loss for stock-based compensation
arrangements.
The Company recognizes as an expense the fair
value of options granted to persons (currently consultants) who are
neither employees nor non-employee directors. Stock-based
compensation expense for consultants which was recorded as research
and development expense for the three months ended June 30,
2020 and 2019 was $17,571 and $20,708,
and for the six months ended June 30, 2020 and 2019
$35,131 and $41,418,
respectively.
The
fair value of options granted from inception to June 30, 2020 was
based on the Black-Scholes option-pricing model assuming the
following factors: 4.7 to 6.2 years expected term, 55% to 85%
volatility, 0.4% to 2.9% risk free interest rate and zero
dividends. The expected term for options granted to date was
estimated using the simplified method. There were 4,000 and 209,110
stock option grants during the three and six months ended June 30,
2020, respectively. For the three and six months ended June 30,
2020 the weighted average grant date fair value was $5.43 per share
and $9.22 per share, respectively. There were no stock option
grants during the three and six months ended June 30, 2019. For the
three months ended June 30, 2020 and 2019, the fair value of shares
vested was $0.4 million and $0.3 million, respectively. For the six
months ended June 30, 2020 and 2019, the fair value of shares
vested was $0.6 million and $0.5 million, respectively. At June 30,
2020, the aggregate intrinsic value of outstanding stock options
was approximately $4.9 million of which approximately $4.3 million
was vested and approximately $0.6 million is expected to vest
(representing options to purchase up to 423,638 shares of the
Company's common stock), and the weighted-average exercise price in
aggregate was $4.79 which includes $2.84 for fully vested stock
options and $8.79 for stock options expected to vest. At June 30,
2020, the unamortized unvested balance of stock-based compensation
was approximately $3.0 million to be amortized over 2.93
years.
15
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Note 5 - Related Party Transactions
In
December 2019, Tactic Pharma, LLC (“Tactic Pharma”),
purchased 125,000 shares of Monopar’s common stock in
Monopar’s initial public offering at $8 per share for an
aggregate $1 million, at which time its beneficial ownership in
Monopar was 41.6%. As of June 30, 2020, Tactic Pharma beneficially
owned 41.0% of Monopar’s common stock.
During
the three and six months ended June 30, 2020 and 2019, the Company
was governed by six members of its Board of Directors
(“Related Parties”). The Related Parties are also
current common stockholders (owning approximately an aggregate 3%
of the common stock outstanding as of June 30, 2020). None of the
Related Parties received compensation other than market-rate
salary, market-rate stock-based compensation and benefits and
performance-based bonus or in the case of non-employee directors,
market-rate Board fees and market-rate stock-based compensation.
Three of the Board members are also Managing Members of Tactic
Pharma as of June 30, 2020. Chandler D. Robinson is the
Company’s Co-Founder, Chief Executive Officer, common
stockholder, Managing Member of Tactic Pharma, former Manager of
the predecessor LLC, Manager of CDR Pharma, LLC and Board member of
Monopar as a C Corporation. Andrew P. Mazar is the Company’s
Co-Founder, Executive Vice President of Research and Development,
Chief Scientific Officer, common stockholder, Managing Member of
Tactic Pharma, former Manager of the predecessor LLC and Board
member of Monopar as a C Corporation. Michael Brown is a Managing
Member of Tactic Pharma (as of February 1, 2019 with no voting
power as it relates to the Company), a previous managing member of
Monopar as an LLC, common stockholder and Board member of Monopar
as a C Corporation. Christopher M. Starr is the Company’s
Co-Founder, Executive Chairman of the Board of Directors, common
stockholder, former Manager of the predecessor LLC and Board member
of Monopar as a C Corporation.
During
the three months ended March 31, 2019, the Company paid or accrued
approximately $33,725 in legal fees to a large national law firm,
in which a family member of the Company’s Chief Executive
Officer was a law partner through January 31, 2019. The family
member personally billed a de
minimis amount of time on the Company’s legal
engagement with the law firm in this period.
Note
6 – Commitments and Contingencies
License,
Development and Collaboration Agreements
Onxeo S.A.
In June
2016, the Company executed an option and license agreement with
Onxeo S.A. (“Onxeo”), a public French company, which
gave Monopar the exclusive option to license (on a world-wide
exclusive basis) Validive to pursue treating severe oral mucositis
in patients undergoing chemoradiation treatment for head and neck
cancers. The pre-negotiated Onxeo license agreement for Validive as
part of the option agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if the Company achieves all milestones, and escalating
royalties on net sales from 5% to 10%. On September 8, 2017, the
Company exercised the license option, and therefore paid Onxeo the
$1 million fee under the option and license agreement.
16
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Under
the agreement, the Company is required to pay royalties to Onxeo on
a product-by-product and country-by-country basis until the later
of (1) the date when a given product is no longer within the scope
of a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever the Company’s royalty payment
obligations with respect to such product have expired. The
agreement may also be terminated early for cause if either the
Company or Onxeo materially breach the agreement, or if either the
Company or Onxeo become insolvent. The Company may also choose to
terminate the agreement, either in its entirety or as to a certain
product and a certain country, by providing Onxeo with advance
notice.
The
Company plans to internally develop Validive with the near-term
goal of commencing a Phase 2b/3 clinical trial, which, if
successful, may allow the Company to apply for marketing approval
within the next several years. The Company will need to raise
significant funds to support the further development of Validive.
As of June 30, 2020, the Company had not reached any of the
pre-specified milestones and has not been required to pay Onxeo any
funds under this license agreement other than the $1 million
one-time license fee.
Grupo Español de Investigación en Sarcomas
(“GEIS”)
In
June 2019, the Company executed a clinical collaboration agreement
with GEIS for the development of camsirubicin in patients with
advanced soft tissue sarcoma (“ASTS”). GEIS will be the
study sponsor and will lead a multi-country, randomized, open-label
Phase 2 clinical trial to evaluate camsirubicin head-to-head
against the current 1st-line treatment for ASTS, doxorubicin.
Enrollment of the trial is anticipated to begin in the second half
of 2020 and will include approximately 170 ASTS patients. The
Company will provide study drug and supplemental financial support
for the clinical trial averaging approximately $2 million to $3
million per year. During the three and six months ended June 30,
2020, the Company incurred approximately $33,000 in GEIS
clinical-related expenses. In addition, the Company incurred
approximately $246,000 and $264,000 in clinical material
manufacturing and database management expenses for the Phase 2
camsirubicin clinical trial for the three and six months ended June
30, 2020, respectively. The Company can terminate the agreement by
providing GEIS with advance notice, and without affecting the
Company’s rights and ownership to any intellectual property
or clinical data.
XOMA
Ltd.
The
intellectual property rights contributed by Tactic Pharma, LLC
(“Tactic Pharma”) to the Company included the
non-exclusive license agreement with XOMA Ltd. for the humanization
technology used in the development of MNPR-101. Pursuant to such
license agreement, the Company is obligated to pay XOMA Ltd.
clinical, regulatory and sales milestones for MNPR-101 that could
reach up to $14.925 million if the Company achieves all milestones.
The agreement does not require the payment of sales royalties.
There can be no assurance that the Company will reach any
milestones under the XOMA agreement. As of June 30, 2020, the
Company had not reached any milestones and has not been required to
pay XOMA Ltd. any funds under this license agreement.
17
MONOPAR THERAPEUTICS INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2020
Operating Leases
Commencing
January 1, 2018, the Company entered into a lease for its executive
headquarters at 1000 Skokie Blvd., Suite 350, Wilmette, Illinois.
The lease term was January 1, 2018 through December 31, 2019, at
which time the lease was on a month-to-month basis. In addition,
effective February 2019, the Company leased additional office space
in the same building on a month-to-month basis.
During
the three months ended June 30, 2020 and 2019, the Company
recognized operating lease expenses of $14,620 and $13,462,
respectively. During the six months ended June 30, 2020 and 2019,
the Company recognized operating lease expenses of $28,103 and
$24,965, respectively.
Effective
January 1, 2019, the Company adopted ASU 2016-02, as amended by ASU
2018-10, which requires the Company to record leases on its
condensed consolidated balance sheet (a) a lease liability and (b)
a right-of-use asset. Because the Company had no lease obligation
(other than on a month-to-month basis) past December 31, 2019, the
Company had no lease liability and right-of-use asset on its
condensed consolidated balance sheet as of June 30, 2020 or
December 31, 2019.
Legal Contingencies
The
Company may be subject to claims and assessments from time to time
in the ordinary course of business. No claims have been asserted to
date.
Indemnification
In
the normal course of business, the Company enters into contracts
and agreements that contain a variety of representations and
warranties and provide for general indemnification. The
Company’s exposure under these agreements is unknown because
it involves claims that may be made against the Company in the
future, but that have not yet been made. To date, the Company has
not paid any claims nor been required to defend any action related
to its indemnification obligations. However, the Company may record
charges in the future as a result of future claims against these
indemnification obligations.
In
accordance with its amended and restated certificate of
incorporation and bylaws, the Company has indemnification
obligations to its officers and directors for certain events or
occurrences, subject to certain limits, while they are serving at
the Company’s request in such capacities. There have been no
claims to date.
Paycheck
Protection Program (“PPP”) Bank Loan
In May
2020, the Company applied for and received a $122,400 PPP bank loan
established pursuant to the Coronavirus Aid, Relief, and Economic
Security Act, as administered by the U.S. Small Business
Administration (“SBA”).
The SBA
will forgive the bank loan pursuant to the PPP, if certain
conditions are met, namely the bank loan must be used primarily for
payroll during the 24-week period following receipt of the loan,
without significant staffing reductions during that period. The
Company believes it is eligible and intends to apply for loan
forgiveness in August 2020 when the bank is able to process SBA
loan forgiveness application. Should the bank loan not be forgiven,
the Company would be required to pay 1% annual interest on the loan
with principal and interest payments beginning approximately seven
months after receipt of the loan with payments over 18 months. The
Company has recorded the PPP loan on the balance sheet as of June
30, 2020 as current (due within 12 months) and non-current portions
of bank loan, although the Company anticipates to reclassify the
liability to a contra-expense account on the Company’s
statements of operations and comprehensive loss in the second half
of 2020, if the Company’s PPP bank loan is fully forgiven by
the SBA.
18
Item 2. Management's Discussion and
Analysis of Financial Condition and Results of
Operations.
You
should read the following discussion and analysis of our financial
condition and results of operations together with our condensed
consolidated financial statements and related notes contained in
this Quarterly Report.
Overview
We are
a clinical stage biopharmaceutical company focused on developing
proprietary therapeutics designed to extend life or improve quality
of life for cancer patients. We are building a drug development
pipeline through the licensing and acquisition of oncology
therapeutics in late preclinical and clinical development stages.
We leverage our scientific and clinical experience to help reduce
the risk and accelerate the clinical development of our drug
product candidates.
In
December 2019, we closed our initial public offering. We sold
1,277,778 shares of our common stock at a public offering price of
$8.00 per share. Net proceeds were approximately $9.4 million,
after deducting underwriting discounts and accrued, unpaid offering
expenses. Our common stock began trading on the Nasdaq Capital
Market on December 19, 2019.
In
January 2020, we entered into a Capital on DemandTM Sales Agreement
with JonesTrading Institutional Services, LLC
(“JonesTrading”), as sales agent, pursuant to which we
may offer and sell (at our discretion), from time to time, through
or to JonesTrading shares of our common stock, having an aggregate
offering price of up to $19.7 million. Pursuant to this agreement,
as of June 30, 2020, we have sold 145,761 shares of our common
stock at an average gross price per share of $10.45 for net
proceeds of $1,476,832, after commissions of $45,709.
In June
2020, we entered into a 50/50 collaboration development agreement
with NorthStar Medical Radioisotopes, LLC (“NorthStar”)
to develop potential Radio-Immuno-Therapeutics (“RITs”)
to treat severe COVID-19 (patients with SARS-CoV-2 infection).
NorthStar is a commercial producer and supplier of medical
radioisotopes. This collaboration combines NorthStar’s
expertise in the innovative production, supply, and distribution of
important medical radioisotopes with our expertise in therapeutic
drug development and our pre-IND stage humanized urokinase
plasminogen activator receptor (“uPAR”) targeted
monoclonal antibody known as MNPR-101, along with a proprietary
portfolio of related monoclonal antibodies that target uPAR or its
ligand uPA. uPAR seems to be selectively expressed on aberrantly
activated immune cells. In response to coronavirus infection, these
rogue immune cells produce pro-inflammatory cytokines that can
cause runaway inflammation throughout the body, commonly referred
to as a cytokine storm. It is this systemic hyper-inflammatory
state that is thought to be largely responsible for the severe lung
injury and multiple organ damage that contributes to poor outcomes
and death in patients with severe COVID-19.
In this
collaboration, NorthStar and we plan to couple MNPR-101 to a
therapeutic radioisotope supplied by NorthStar in order to create a
highly selective agent that has the potential to kill aberrantly
activated cytokine-producing immune cells. By eradicating these
cells with a targeted RIT, the goal is to spare healthy cells while
quickly reducing the cytokine storm and its harmful systemic
effects. Under the
agreement, NorthStar and we will start
out sharing development costs 50/50, and the initial financial
commitment for each company is nominal. Additional financial
contributions will be subject to mutual agreement of the
parties.
Given
the COVID-19 pandemic and its effects on clinical trials and
fundraising, we have adjusted our clinical development plan
accordingly to fit what is feasible in the current environment. We
are presently simplifying the adaptive design of the Phase 3
clinical trial for our lead product candidate, Validive (clonidine
mucobuccal tablet; clonidine MBT), to a Phase 2b/3 that will allow
us to minimize touch points with patients and sites. This design
will allow us to advance to the Phase 3 portion of the trial if
supported by the Phase 2b data. We are aiming to enroll the first
patient in the Phase 2b portion of the trial in the second half of
2020. This modification will allow us to initiate the clinical
trial without requiring near-term financing. The decision to
proceed to the Phase 3 portion of the clinical trial without a
delay will largely be dependent on our cash position closer to that
time, anticipated to be in the second half of 2021. To initiate and
complete the Phase 3 portion of the clinical trial, we will require
additional funding in the millions or tens of millions of dollars
(depending on if we have consummated a collaboration or partnership
or neither for Validive), which we are planning to pursue in the
next 12 months. We are continuing to devote a portion of the net
proceeds from our initial public offering to fund our camsirubicin
Phase 2 clinical trial for which we signed a collaboration
agreement in June 2019 with Grupo Español de
Investigación en Sarcomas (“GEIS”), discussed in
further detail below. We believe we have funds sufficient to enable
GEIS to commence its open label Phase 2 clinical trial in the
second half of 2020 and to obtain results from the run-in portion
of the trial.
19
Our Product Candidates
Validive
Validive is
designed to be used prophylactically to reduce the incidence, delay
the time to onset, and decrease the duration of severe oral
mucositis (“SOM”) in patients undergoing
chemoradiotherapy (“CRT”) for oropharyngeal cancer
(“OPC”). SOM is a painful and debilitating inflammation
and ulceration of the mucous membranes lining the oral cavity and
oropharynx in response to chemoradiation. The majority of patients
receiving CRT to treat their OPC develop SOM, which remains one of
the most common and devastating side effects of treatment in this
indication. The potential clinical benefits to patients of reducing
or delaying the incidence of SOM, or reducing the duration of SOM,
include: reduced treatment discontinuations leading to potentially
improved overall survival outcomes; reduced mouth and throat pain
avoiding the need to receive parenteral nutrition; and decreased
long-term and often permanent debilitation arising from swallowing
difficulties, neck and throat spasms, and lung complications due to
food aspiration. Our mucobuccal tablet (“MBT”)
formulation is a novel delivery system for clonidine that allows
for prolonged and enhanced local delivery of drug in the regions of
mucosal radiation damage in patients with OPC. Validive has been
granted fast track designation in the U.S., orphan drug designation
in the EU, and has global intellectual property patent protection
through mid-2029 not accounting for possible
extensions.
In
September 2017, we exercised an option to license Validive from
Onxeo S.A., the company that developed Validive through its Phase 2
clinical trial. In the completed Phase 2 clinical trial, Validive
demonstrated clinically meaningful efficacy signals within the
64-patient OPC population randomized to placebo, Validive 50
µg dose and Validive 100 µg dose. The absolute incidence
of SOM in OPC patients who received a dose of Validive 100 µg
once per day was reduced by 26.3% (incidence rate of 65.2% in
placebo, 45.0% in Validive 50 µg group, and 38.9% in Validive
100 µg group). The median time to onset of SOM was 37 days in
the placebo cohort; 45 days in the Validive 50 µg cohort and
no median time of onset was reached in the Validive 100 µg
group since fewer than half of this cohort of patients developed
SOM. There was also a 37.8% reduction in the median duration of the
SOM for the Validive 100 µg group versus placebo (41.0 days
placebo group, 34.0 days Validive 50 µg group, and 25.5 days
Validive 100 µg group) in patients that developed SOM. Median
duration of SOM across all patients, inclusive of both those that
did and did not develop SOM, was 17 days in the placebo group and 0
days in each of the Validive 50 and 100 µg groups. A positive
dose response was seen in each of these three clinical endpoints.
Additionally, patients in the Validive cohorts in the Phase 2
clinical trial demonstrated a safety profile similar to that of
placebo. While not designed by us, Onxeo’s promising
preclinical studies and Phase 2 clinical trial have informed the
design and conduct of what we believe will be an effective Phase
2b/3 clinical trial.
SOM
typically arises in the immune tissue at the back of the tongue and
throat, which comprise the oropharynx, and consists of acute severe
tissue damage and pain that prevents patients from swallowing,
eating and drinking. Validive stimulates the alpha-2 adrenergic
receptor (alpha-2AR) on macrophages (white blood cells present in
the immune tissues of the oropharynx) suppressing pro-inflammatory
cytokine expression. Validive exerts its effects locally in the
oral cavity and oropharynx over a prolonged period of time through
its unique MBT formulation. Patients who develop SOM are also at
increased risk of developing late onset toxicities, including
trismus (jaw, neck, and throat spasms), dysphagia, and lung
complications, which are often irreversible and lead to increased
hospitalization and the need for further interventions sometimes
years after completion of chemoradiotherapy. We believe that a
reduction in the incidence and duration of SOM by Validive will
have the potential to reduce treatment discontinuation and/or
treatment delays potentially leading to improved survival outcomes,
and reducing or eliminating these long-term morbidities resulting
from CRT.
The OPC
target population for Validive is the most rapidly growing segment
of head and neck cancer (“HNC”) patients, with an
estimated 40,000 new cases of OPC in the U.S alone in 2019. The
growth in OPC is driven by the increasing prevalence of oral human
papilloma virus (“HPV”) infections in the U.S. and
around the world. Despite the availability of a
pediatric/adolescent HPV vaccine, the rate of OPC incidence in
adults is not anticipated to be materially reduced for many decades
due to low adoption of the vaccine to date. As a result, the
incidence of HPV-driven OPC is projected to increase for many years
to come and will continue to support a clinical need for Validive
for the prevention of CRT-induced SOM in patients with OPC since
CRT is the standard of care treatment, and we do not anticipate
this changing for years to come.
A
pre-Phase 3 meeting with the FDA was held and based on the meeting
discussion, a Phase 3 clinical protocol and accompanying
statistical analysis plan (“SAP”) was submitted to the
FDA for review and comments. We have also received protocol
assistance and advice on our Phase 3 protocol and SAP from the
European Medicines Agency Committee on Human Medicinal Products
(EMA/CHMP/SAWP). Based on comments and guidance provided by FDA and
EMA, and our analysis of the current COVID-19 pandemic and its
effects on clinical trials, we have modified our original adaptive
design Phase 3 clinical trial to be a sequential Phase 2b/3
clinical trial to better fit the current clinical research
environment. The primary endpoint, absolute incidence of SOM,
remains the same, but the overall design of the trial has been
simplified and the touch points with the healthcare system have
been minimized. The Validive program will now consist of a
randomized Phase 2b/3 clinical trial in patients with OPC. Our aim
is to commence the Phase 2b/3 clinical trial in the second half of
2020. Proceeding to the Phase 3 portion of the trial will be
subject to the Phase 2b interim results and our ability to raise
additional funding or find a suitable pharmaceutical
partner.
20
Camsirubicin
Our
second product candidate, camsirubicin, is a novel analog of
doxorubicin which has been designed to reduce the cardiotoxic side
effects generated by doxorubicin while retaining anti-cancer
activity. Camsirubicin is not metabolized to the derivatives that
are believed to be responsible for doxorubicin’s cardiotoxic
effects. A Phase 2 clinical trial for camsirubicin has been
completed in patients with advanced (e.g. unresectable or
metastatic) soft tissue sarcoma (“ASTS”). Average life
expectancy for these patients is 12-15 months. In this study, 52.6%
of patients evaluable for tumor progression demonstrated clinical
benefit (partial response or stable disease), which was
proportional to dose and consistently observed at higher cumulative
doses of camsirubicin (>1000 mg/m2). Camsirubicin was very well
tolerated in this study and underscored the ability to potentially
administer camsirubicin without restriction of cumulative dose in
patients with ASTS. Doxorubicin is limited to a lifetime cumulative
dose maximum of 450 mg/m2. Even if a patient is responding, they
are pulled off of doxorubicin treatment once this cumulative dose
has been reached.
Based
on encouraging clinical results to date, we plan to continue the
development of camsirubicin as 1st-line treatment in patients with
ASTS, where the current first line treatment is doxorubicin. The
aim is to administer camsirubicin without restricting cumulative
dose, thereby potentially improving efficacy by keeping patients
who are responding on treatment. In June 2019, we entered into a
clinical collaboration with GEIS. GEIS will lead a multi-country,
randomized, open-label Phase 2 clinical trial evaluating
camsirubicin head-to-head against doxorubicin in patients with
ASTS. GEIS is an internationally renowned non-profit organization
focused on the research, development and management of clinical
trials for sarcoma, that has worked with many of the leading
biotech and global pharmaceutical companies. Enrollment of the
trial is currently anticipated to begin in the second half of 2020,
and to include approximately 170 ASTS patients, an interim
analysis, and take around two years to enroll. The primary endpoint
of the trial will be progression-free survival, with secondary
endpoints including overall survival and incidence of
treatment-emergent adverse events. In November 2019, the European
Commission granted orphan drug designation for camsirubicin for the
treatment of soft tissue sarcoma in the EU.
MNPR-101
Our third program, MNPR-101, is a
novel first-in-class humanized monoclonal antibody to the urokinase
plasminogen activator receptor (“uPAR”) for the
treatment of advanced cancers and severe COVID-19. We have entered
into a collaboration development agreement with NorthStar to
develop potential RITs to treat severe COVID-19. This collaboration
combines NorthStar’s expertise in the innovative production,
supply, and distribution of important medical radioisotopes with
our expertise in therapeutic drug development. NorthStar and we
plan to couple MNPR-101 along with a proprietary portfolio of
related monoclonal antibodies that target uPAR or its ligand uPA
with a therapeutic radioisotope. uPAR seems to be selectively
expressed on aberrantly activated immune cells. In response to
coronavirus infection, these rogue immune cells produce
pro-inflammatory cytokines that can cause runaway inflammation
throughout the body, commonly referred to as a cytokine storm. It
is this systemic hyper-inflammatory state that is thought to be
largely responsible for the severe lung injury and further multiple
organ damage that contributes to poor outcomes and death in
patients with severe COVID-19.
We and
NorthStar have filed a provisional patent application entitled
“Precision Radioimmunotherapeutic Targeting of the Urokinase
Plasminogen Activator Receptor (uPAR) for Treatment of Severe
COVID-19 Disease” with the U.S. Patent and Trademark Office
(“USPTO”). This application covers novel compositions
and uses of cytotoxic radioisotopes attached to antibodies that
bind to uPAR, thereby creating precision targeted
radiotherapeutics, also known as uPRITs, for the treatment of
severe COVID-19 and other respiratory diseases. Advanced COVID-19
patients frequently develop severe, life-threatening, pulmonary
inflammation as a result of a viral induced cytokine storm. The
development of this cytokine storm is associated with a high rate
of mortality in severe COVID-19 patients, even with oxygen support
and mechanical ventilation. uPRITs have been designed with the goal
of selectively destroying the aberrantly activated immune cells
responsible for causing the cytokine storm. By eradicating these
cells with a targeted RIT, the goal is to spare healthy cells while
quickly reducing the cytokine storm and its harmful systemic
effects. The co-inventors of the provisional patent application are
James Harvey, Chief Scientific Officer of NorthStar, and Andrew P.
Mazar, our Chief Scientific Officer.
Revenues
We
are an emerging growth company, have no approved drugs and have not
generated any revenues. To date, we have engaged in acquiring
pharmaceutical drug product candidates, licensing rights to drug
product candidates, entering into collaboration agreements for
testing and clinical development of our drug product candidates and
providing the infrastructure to support the clinical development of
our drug product candidates. We do not anticipate commercial
revenues from operations until we complete testing and development
of one of our drug product candidates and obtain marketing approval
or we sell, enter into a collaborative marketing arrangement, or
out- license one of our drug product candidates to another party.
See “Liquidity and Capital Resources”.
21
Recently Issued and Adopted Accounting Pronouncements
A
description of recently issued accounting pronouncements that may
potentially impact our financial position and condensed
consolidated results of operations is disclosed in Note 2 to our
condensed consolidated financial statements appearing elsewhere in
this Quarterly Report on Form 10-Q.
Critical Accounting Policies and Use of Estimates
While
our significant accounting policies are described in more detail in
Note 2 of our condensed consolidated financial statements included
elsewhere in this Quarterly Report on Form 10-Q, we believe the
following accounting policies to be critical to the judgments and
estimates used in the preparation of our condensed consolidated
financial statements.
Stock-Based Compensation
We
account for stock-based compensation arrangements with employees,
non-employee directors and consultants using a fair value method,
which requires the recognition of compensation expense for costs
related to all stock-based awards, including stock option grants
and RSUs. The fair value method requires us to estimate the fair
value of stock-based payment awards on the date of grant using an
option pricing model or the closing stock price on date of grant in
the case of RSUs.
Stock-based compensation costs for stock awards
granted to our employees and non-employee directors are based on
the fair value of the underlying instruments calculated using the
Black-Scholes option-pricing model on the date of grant for stock
options and using the closing stock price on the date of
grant for RSUs and recognized as
expense on a straight-line basis over the requisite service period,
which is the vesting period. Determining the appropriate fair value
model and related assumptions requires judgment, including
selecting methods for estimating the Company’s future stock
price volatility, forfeiture rates and expected term. The expected
volatility rates are estimated based on the actual volatility of
comparable public companies over recent historical periods of the
same length as the expected term. We generally selected these
companies based on reasonably comparable characteristics, including
market capitalization, risk profiles, stage of corporate
development and with historical share price information sufficient
to meet the expected term of the stock-based awards. The expected
term for stock options granted during the three and six months
ended June 30, 2020 and 2019 was estimated using the simplified
method. Forfeitures are estimated at the time of grant and revised,
if necessary, in subsequent periods if actual forfeitures differ
from those estimates. We have not paid dividends and do not
anticipate paying a cash dividend in future vesting periods and,
accordingly, use an expected dividend yield of zero. The risk-free
interest rate is based on the rate of U.S. Treasury securities with
maturities consistent with the estimated expected term of the
awards.
22
Results of Operations
Comparison of the Three Months and Six Months Ended June 30, 2020
and June 30, 2019
The
following tables summarize the results of our operations for the
three and six months ended June 30, 2020 and 2019:
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||
|
|
(Unaudited)
|
(Unaudited)
|
||||
|
(in
thousands)
|
2020
|
2019
|
Variance
|
2020
|
2019
|
Variance
|
|
Research and
development expenses
|
$832
|
$329
|
$503
|
$1,177
|
$1,165
|
$12
|
|
General and
administrative expenses
|
632
|
603
|
29
|
1,423
|
1,174
|
249
|
|
Total operating
expenses
|
1,464
|
932
|
532
|
2,600
|
2,339
|
261
|
|
Operating
loss
|
(1,464)
|
(932)
|
(532)
|
(2,600)
|
(2,339)
|
(261)
|
|
Interest income,
net
|
18
|
26
|
(8)
|
63
|
57
|
6
|
|
Net
loss
|
$(1,446)
|
$(906)
|
$(540)
|
$(2,537)
|
$(2,282)
|
$(255)
|
Research and Development Expenses
Research and
Development (“R&D”) expenses for the three months
ended June 30, 2020 were approximately $832,000, compared to
approximately $329,000, for the three months ended June 30, 2019.
This represents an increase of approximately $503,000 primarily
attributed to increases in expenses for the planning of the
camsirubicin Phase 2 clinical trial including manufacturing of
$213,000, increases in personnel costs for three new R&D
employees, annual R&D personnel salary increases and annual
(non-cash) equity grants of approximately $113,000, increases in
Validive clinical trial planning and manufacturing costs of
approximately $89,000, an increase in the allocation of the CEO's
salary to R&D expenses of $79,000 and an increase in other
R&D expenses of $9,000.
R&D
expenses for the six months ended June 30, 2020 were approximately
$1,177,000, compared to approximately $1,165,000, for the six
months ended June 30, 2019. This represents an increase of
approximately $12,000 primarily attributed to increases in expenses
for the planning of the camsirubicin Phase 2 clinical trial
including manufacturing of $202,000, increases in personnel costs
for three new R&D employees, annual R&D personnel salary
increases and annual (non-cash) equity grants of approximately
$189,000, an increase to the
allocation of the CEO's salary to R&D expenses of $82,000 and
an increase in other R&D expenses of $33,000, partially offset
by a decrease in Validive clinical trial planning and manufacturing
costs of approximately $494,000.
General and Administrative Expenses
General
and Administrative (“G&A”) expenses for the three
months ended June 30, 2020 were approximately $632,000, compared to
approximately $603,000, for the three months ended June 30, 2019.
This represents an increase of approximately $29,000 primarily
attributed to: net increases in stock-based compensation for annual
(non-cash) equity grants and annual G&A personnel salary
increases of $110,000; external fees related to public company
compliance of $28,000, net increases in general costs of operations
of $23,000 offset by decreases in the CEO's compensation allocated
to G&A expenses of $79,000, decreases in legal, patent and
audit fees of $28,000; and decreases in stock-based compensation
for non-employee directors (non-cash) of $25,000.
G&A
expenses for the six months ended June 30, 2020 were approximately
$1,423,000, compared to approximately $1,174,000, for the six
months ended June 30, 2019. This represents an increase of
approximately $249,000 primarily attributed to: net increases in
stock-based compensation for annual (non-cash) equity grants and
annual G&A personnel salary increases of $242,000; increases in
legal, patent and audit fees of $39,000; external fees related to
public company compliance of $62,000, and net increases in general
costs of operations of $38,000, partially offset by decreases in
the CEO's compensation allocated to G&A expenses of $82,000,
and decreases in stock-based compensation for non-employee
directors (non-cash) of $50,000.
23
Interest Income
Interest income for
the three months ended June 30, 2020 compared to the three months
ended June 30, 2019 decreased by approximately $8,000, due to the
decrease in bank interest rates.
Interest income for
the six months ended June 30, 2020 compared to the six months ended
June 30, 2019 increased by approximately $6,000, due to the
increase in bank balances resulting from our initial public
offering in December 2019, partially offset by the decrease in bank
interest rates.
Liquidity
and Capital Resources
Sources of Liquidity
We have
incurred losses and cumulative negative cash flows from operations
since our inception in December 2014 resulting in an accumulated
deficit of approximately $28.4 million as of June 30, 2020. We
anticipate that we will continue to incur losses for the
foreseeable future. We expect that our research and development and
general and administrative expenses will increase to enable the
execution of our strategic plan. As a result, we anticipate that we
will need to raise additional capital to fund our future
operations. We will seek to obtain needed capital through a
combination of equity offerings, debt financings, strategic
collaborations and grant funding. To date, we have funded our
operations through private placements of our preferred and common
stock, the net receipt of funds related to the acquisition of
camsirubicin, net proceeds from the initial public offering of our
common stock and net proceeds from sales under our Capital on
Demand™ Sales Agreement. We anticipate that the currently
available funds as of July 31, 2020, will fund our operations
through September 2021.
We
invest our cash equivalents in a money market account.
Cash Flows
The
following table provides information regarding our cash flows for
the six months ended June 30, 2020 and 2019.
|
|
Six
Months Ended
|
Six
Months Ended June 30, 2020 Versus
|
|
|
|
June
30,
|
Six
Months Ended June 30, 2019
|
|
|
(in
thousands)
|
2020
|
2019
|
Variance
|
|
Net cash used in
operating activities
|
$(2,121)
|
$(1,736)
|
$(385)
|
|
Net cash provided
by (used in) financing activities
|
1,454
|
(26)
|
1,480
|
|
Effect of exchange
rates
|
(1)
|
(1)
|
—
|
|
Net decrease in
cash and cash equivalents
|
$(668)
|
$(1,763)
|
$1,095
|
Cash Flow Used in Operating Activities
The
increase of approximately $385,000 in cash flow used in operating
activities during the six months ended June 30, 2020, compared to
the six months ended June 30, 2019, was primarily a result of
increased R&D and G&A cash operating expenses.
Cash Flow Used in Investing Activities
There
was no cash flow used in investing activities for the six months
ended June 30, 2020 and 2019.
Cash Flow Provided by (Used in) Financing Activities
The increase of approximately $1,480,000 in cash
flow provided by financing activities for the six months ended June
30, 2020 compared to the six months ended June 30, 2019, was a
result of sales of our common stock under our Capital on
DemandTM Sales Agreement with JonesTrading and the receipt
of a forgivable PPP bank loan.
24
Future Funding Requirements
To
date, we have not generated any revenue from product sales. We do
not know when, or if, we will generate any revenue from product
sales. We do not expect to generate any revenue from product sales
unless and until we obtain regulatory approval of and commercialize
any of our current or future drug product candidates or we out-
license or sell a drug product candidate to another party. At the
same time, we expect our expenses to increase in connection with
our ongoing development activities, particularly as we continue the
research, development, future preclinical studies and clinical
trials of, and seek regulatory approval for, our current and future
drug product candidates. If we obtain regulatory approval of any of
our current or future drug product candidates, we will need
substantial additional funding for commercialization requirements
and our continuing drug product development
operations.
As a
company, we have not completed development through marketing
approvals of any therapeutic products. We expect to continue to
incur significant increases in expenses and increasing operating
losses for the foreseeable future. We anticipate that our expenses
will increase substantially as we:
●
advance the
clinical development and execute the regulatory strategy for
Validive;
●
continue the
clinical development and execute the regulatory strategy for
camsirubicin;
●
continue the
preclinical activities and potentially enter clinical development
of MNPR-101 for severe COVID-19;
●
acquire and/or
license additional pipeline drug product candidates and pursue the
future preclinical and/or clinical development of such drug product
candidates;
●
seek regulatory
approvals for any of our current and future drug product candidates
that successfully complete registration clinical
trials;
●
establish or
purchase the services of a sales, marketing and distribution
infrastructure to commercialize any products for which we may
obtain marketing approval;
●
develop our
manufacturing/quality capabilities or establish a reliable, high
quality supply chain sufficient to support our clinical
requirements and to provide sufficient capacity to launch and grow
the sales of any product for which we obtain marketing approval;
and
●
add or contract for
required operational, financial and management information systems
and capabilities and other specialized expert personnel to support
our drug product candidate development and planned
commercialization efforts.
25
We
anticipate that the funds available as of July 31, 2020, will fund
our planned operations through September 2021. We have based this
estimate on assumptions that may prove to be wrong, and we could
use our available capital resources sooner than we currently
expect. Because of the numerous risks and uncertainties associated
with the development and commercialization of our drug product
candidates, and the extent to which we enter into collaborations
with third parties to participate in the development and
commercialization of our drug product candidates, we are unable to
accurately estimate with high reliability the amounts and timing
required for increased capital outlays and operating expenditures
associated with our current and anticipated drug product candidate
development programs. Our future capital requirements will depend
on many factors, including:
●
the progress of
regulatory interactions and clinical development of
Validive;
●
the progress of
clinical development and regulatory outcomes of
camsirubicin;
●
the progress of
preclinical and clinical development of MNPR-101 including through
our collaboration with NorthStar;
●
the number and
characteristics of other drug product candidates that we may
license, acquire or otherwise pursue;
●
the scope,
progress, timing, cost and results of research, preclinical
development and clinical trials of current and future drug product
candidates;
●
the costs, timing
and outcomes of seeking and obtaining FDA and international
regulatory approvals;
●
the costs
associated with manufacturing/quality requirements and establishing
sales, marketing and distribution capabilities;
●
our ability to
maintain, expand and defend the scope of our intellectual property
portfolio, including the amount and timing of any payments we may
be required to make in connection with the licensing, filing,
defense and enforcement of any patents or other intellectual
property rights;
●
our need and
ability to hire or contract for additional management,
administrative, scientific, medical, sales and marketing, and
manufacturing/quality and other specialized personnel or external
expertise;
●
the effect of
competing products or new therapies that may limit market
penetration or prevent the introduction of our drug product
candidates or reduce the commercial potential of our product
portfolio;
●
our need to
implement additional internal systems and infrastructure;
and
●
the economic and
other terms, timing and success of our existing collaboration and
licensing arrangements and any collaboration, licensing or other
arrangements into which we may enter in the future, including the
timing of receipt of or payment to or from others of any milestone
or royalty payments under these arrangements.
26
Funding Requirements Second Half of 2020 Onward
Expenditures are expected to increase in the second half of 2020
onward for:
●
contract research
services and clinical site fees for the Validive Phase 2b/3
clinical trial;
●
process
development, manufacturing costs and clinical database management
of camsirubicin in connection with the GEIS Phase 2 clinical
trial;
●
supporting the
NorthStar collaboration;
●
GEIS collaboration
milestone fees; and
●
employee
compensation and consulting fees to support the planning and
initiation of our Validive Phase 2b/3 clinical trial.
We are
aiming to enroll the first patient in a Phase 2b/3 clinical trial
for Validive in the second half of 2020. We will proceed to the
Phase 3 portion of the clinical trial based on an interim analysis
of the Phase 2b portion, pending our ability to raise sufficient
funds. To commence the Phase 3 portion of the trial, we will
require additional funding in the millions or tens of millions of
dollars (depending on if we have consummated a collaboration or
partnership or neither for Validive), or find a suitable
pharmaceutical partner, both of which we are planning to pursue in
the next 12 months. There can be no assurance that any such events
will occur. We intend to continue evaluating drug product
candidates for the purpose of growing our pipeline. Identifying and
securing high quality compounds usually takes time and related
expenses; however, our spending could be significantly accelerated
in the second half of 2020 and onward if additional drug product
candidates are acquired and enter clinical development. In this
event, we may be required to expand our management team, and pay
higher contract manufacturing costs, contract research organization
fees, other clinical development costs and insurance costs that are
not currently projected. The anticipated operating cost increases
in the second half of 2020 onward are expected to be primarily
driven by the funding of our planned Validive Phase 2b/3 clinical
trial and in support of the GEIS Phase 2 clinical trial of
camsirubicin. Beyond our need to raise additional funding in the
next 12 months to start the Validive Phase 3 portion of the trial,
we will also need significant additional funding thereafter in
order to complete the clinical trial, support further development
of camsirubicin in and beyond the Phase 2 trial to support our
collaboration with NorthStar , if successful, and generally to
support our current and any future product candidates through
completion of trials, approval processes and, if applicable,
commercialization.
Until
we can generate a sufficient amount of product revenue to finance
our cash requirements, we expect to finance our future cash needs
primarily through a combination of equity offerings, debt
financings, strategic collaborations and grant funding. To the
extent that we raise additional capital through the sale of equity
or convertible debt securities, the ownership interest of our
current stockholders will be diluted, and the terms of these
securities may include liquidation or other preferences that
adversely affect our current stockholders’ rights. Debt
financing, if available, may involve agreements that include
covenants limiting or restricting our ability to take specific
actions, such as incurring additional debt, making
capital expenditures or
declaring dividends. If we raise additional funds through marketing
and distribution arrangements or other collaborations, strategic
alliances or licensing arrangements with other parties, we may have
to relinquish valuable rights to our technologies, future revenue
streams, research programs or drug product candidates or grant
licenses on terms that may not be favorable to us, which will
reduce our future returns and affect our future operating
flexibility. If we are unable to raise additional funds through
equity or debt financings when needed, we may be required to delay,
limit, reduce or terminate our pipeline product development or
commercialization efforts or grant rights to others to develop and
market drug product candidates that we would otherwise prefer to
develop and market ourselves.
27
Contractual Obligations and Commitments
License, Development and Collaboration Agreements
Onxeo S.A.
In June
2016, we executed an agreement with Onxeo S.A., a French public
company, which gave us the exclusive option to license (on a
world-wide exclusive basis) Validive (clonidine mucobuccal tablet;
clonidine MBT a mucoadhesive tablet of clonidine based on the
Lauriad mucoadhesive technology) to pursue treating severe oral
mucositis in patients undergoing chemoradiation treatment for head
and neck cancers. The agreement includes clinical, regulatory,
developmental and sales milestones that could reach up to $108
million if we achieve all milestones, and escalating royalties from
5% to 10% on net sales. In September 2017, we exercised the option
to license Validive from Onxeo for $1 million, but as of July 31,
2020, we have not been required to pay Onxeo any other funds under
the agreement. We anticipate the need to raise significant funds to
support the completion of clinical development and marketing
approval of Validive.
Under
the agreement, we are required to pay royalties to Onxeo on a
product-by-product and country-by-country basis until the later of
(1) the date when a given product is no longer within the scope of
a patent claim in the country of sale or manufacture, (2) the
expiry of any extended exclusivity period in the relevant country
(such as orphan drug exclusivity, pediatric exclusivity, new
chemical entity exclusivity, or other exclusivity granted beyond
the expiry of the relevant patent), or (3) a specific time period
after the first commercial sale of the product in such country. In
most countries, including the U.S., the patent term is generally 20
years from the earliest claimed filing date of a non-provisional
patent application in the applicable country, not taking into
consideration any potential patent term adjustment that may be
filed in the future or any regulatory extensions that may be
obtained. The royalty termination provision pursuant to (3)
described above is shorter than 20 years and is the least likely
cause of termination of royalty payments.
The
Onxeo license agreement does not have a pre-determined term, but
expires on a product-by-product and country-by-country basis; that
is, the agreement expires with respect to a given product in a
given country whenever our royalty payment obligations with respect
to such product have expired. The agreement may also be terminated
early for cause if either we or Onxeo materially breach the
agreement, or if either we or Onxeo become insolvent. We may also
choose to terminate the agreement, either in its entirety or as to
a certain product and a certain country, by providing Onxeo with
advance notice.
Grupo Español de Investigación en Sarcomas
(“GEIS”)
In June
2019, we executed a clinical collaboration with GEIS for the
development of camsirubicin in patients with advanced soft tissue
sarcoma (“ASTS”). GEIS will be the study sponsor and
will lead a multi-country, randomized, open-label Phase 2 clinical
trial to evaluate camsirubicin head-to-head against doxorubicin in
patients with ASTS. Enrollment of the trial is anticipated to begin
in the second half of 2020 and will include approximately 170 ASTS
patients. We will provide study drug and supplemental financial
support for the clinical trial averaging approximately $2 million
to $3 million per year. Cumulatively through June 30, 2020,
we incurred
approximately $33,000 in GEIS clinical-related expenses. In
addition, we incurred approximately $344,000 in clinical material
manufacturing and database management expenses for the Phase 2
camsirubicin clinical trial. We can terminate the agreement
by providing GEIS with advance notice, and without affecting the
Company’s rights and ownership to any intellectual property
or clinical data.
28
XOMA Ltd.
The
intellectual property rights contributed by Tactic Pharma, LLC to
us included the non-exclusive license agreement with XOMA Ltd. for
the humanization technology used in the development of MNPR-101.
Pursuant to such license agreement, we are obligated to pay XOMA
Ltd. clinical, regulatory and sales milestones which could reach up
to $14.925 million if we achieve all milestones for MNPR-101 The
agreement does not require the payment of sales royalties. There
can be no assurance that we will achieve any milestones. As of July
31, 2020, we had not reached any milestones and had not been
required to pay XOMA Ltd. any funds under this license
agreement.
Service Providers
In the
normal course of business, we contract with service providers to
assist in the performance of research and development, financial
strategy, audit, tax and legal support. We can elect to discontinue
the work under these agreements at any time. We could also enter
into collaborative research and development, contract research,
manufacturing and supplier agreements in the future, which may
require upfront payments and/or long-term commitments of
cash.
Office Lease
Effective January
1, 2018, we leased office space in the Village of Wilmette,
Illinois for $2,520 per month for 24 months. This office space
houses our current headquarters. On December 31, 2019, the office
lease expired and we continued to lease on a month-to-month basis.
In February 2019, we leased additional office spaces on a month-to
month basis at our headquarters and we anticipate that we will
lease additional space in the future as we hire additional
personnel.
Legal Contingencies
We are
currently not, and to date have never been, a party to any material
legal proceedings.
Indemnification
In the
normal course of business, we enter into contracts and agreements
that contain a variety of representations and warranties and
provide for general indemnification. Our exposure under these
agreements is unknown because it involves claims that may be made
against us in the future, but that have not yet been made. To date,
we have not paid any claims or been required to defend any action
related to our indemnification obligations. However, we may record
charges in the future as a result of these indemnification
obligations.
In
accordance with our Second Amended and Restated Certificate of
Incorporation and Amended and Restated Bylaws we have
indemnification obligations to our officers and Board Members for
certain events or occurrences, subject to certain limits, while
they are serving at our request in such capacity. There have been
no claims to date.
Off-Balance Sheet Arrangements
To
date, we have not had any off-balance sheet arrangements, as
defined under the SEC rules.
29
Item 4. Controls and
Procedures
Our
Chief Executive Officer and Chief Financial Officer have provided
certifications filed as Exhibits 31.1 and 32.1, and 31.2,
respectively. Such certifications should be read in conjunction
with the information contained in this Item 4 for a more complete
understanding of the matters covered by those
certifications.
(a) Disclosure Controls and Procedures
We
carried out an evaluation, under the supervision and with the
participation of our management, including our Chief Executive
Officer and Chief Financial Officer, of the effectiveness of our
disclosure controls and procedures as of June 30, 2020, pursuant to
Rules 13a15(e) and 15d15(e) under the Exchange Act. Based on that
evaluation, our Chief Executive Officer and Chief Financial Officer
have concluded that our disclosure controls and procedures, as of
such date, were effective.
(b) Changes in Internal Control over Financial
Reporting
We have
concluded that the condensed consolidated financial statements and
other financial information included in this Quarterly Report on
Form 10-Q fairly present in all material respects our financial
condition, results of operations and comprehensive loss and cash
flows as of, and for, the periods presented.
There
have been no changes in our internal control over financial
reporting during the three and six months ended June 30, 2020 that
have materially affected, or are reasonably likely to materially
affect, our internal control over financial reporting.
30
PART II. OTHER INFORMATION
Item 1A. Risk Factors
Except
for the updated risk factor set forth below, there have been no
material changes in information regarding our risk factors as
described in Item 1A of our Annual Report on Form 10-K as filed
with the SEC on March 27, 2020.
Our operations and financial results could be adversely impacted by
the global outbreak of the 2019 Novel Coronavirus (COVID-19), which
has negatively impacted our stock price and our ability to raise
substantial funds in the near-term, and may negatively impact our
ability to manufacture our product candidates for our clinical
trials, and our ability to accrue and conduct our planned clinical
trials. Any such impact will negatively impact our financial
condition and could require us to delay our clinical development
programs.
In December 2019, a novel strain of coronavirus
(“COVID-19”) was reported to have surfaced in Wuhan,
China, resulting in significant disruptions to Chinese
manufacturing and supply chain, as well as travel restrictions in
many countries. In March 2020, COVID-19 was designated a global
pandemic and many countries, including the United States, have
declared national emergencies and have implemented preventive
measures by limiting large public gatherings (social distancing)
and shelter-in-place mandates. Many employers are restricting
non-essential work travel and are requiring that employees work
from their homes to limit personal interaction. Many businesses are
closed or are operating in a substantially reduced fashion and many
employees have been laid off. While the extent of the impact of the
COVID-19 pandemic on our business and financial results is
uncertain, a continued and prolonged public health crisis such as
the COVID-19 pandemic would have a negative impact on our business,
financial condition and operating results. The COVID-19 pandemic
has resulted in significant volatility and substantial declines in
the stock markets, which has negatively impacted our stock price
and negatively impacted our ability to raise significant funds in
the near-term. It is unknown the potential impact in the long-term
in the event of a prolonged disruption or recession. In
addition, the COVID-19
pandemic could impact the conduct of clinical trials as a result
of quarantines, site closures, travel limitations,
delays in the manufacturing of our
product candidates for our clinical trials due to supply chain
disruptions, and delays in the initiation and enrollment of
patients in our planned clinical trials, or other
considerations if site personnel or trial subjects become infected
with COVID-19, which would negatively
impact our financial condition and could require us to delay our
clinical development programs. Given the dynamic nature of these
circumstances, the duration of any business disruption or potential
impact of the COVID-19 pandemic to our business is difficult to
predict. In response to the
current COVID-19 pandemic and its effects on clinical trials, we
have modified the original adaptive design Phase 3 clinical trial
for our lead product candidate, Validive, to be a Phase 2b/3
clinical trial to better fit the types of trials which can enroll
patients in the current environment. We are aiming to
enroll the first patient in a Phase 2b/3 clinical trial for
Validive in the second half of 2020. The Phase 3 portion of the
clinical trial is anticipated to start right after the Phase 2b
portion, pending our ability to raise sufficient funds. To commence
the Phase 3 portion of the trial, we will require additional
funding in the millions or tens of millions of dollars (depending
on if we have consummated a collaboration or partnership or neither
for Validive), or find a suitable pharmaceutical partner, both of
which we are planning to pursue in the next 12 months. There can be
no assurance that any such events will occur.
31
Item 6. Exhibits
The
following exhibits are filed as part of this Quarterly
Report.
|
Exhibit
|
|
Document
|
|
Incorporated
by Reference From:
|
|
|
|
Filed
herewith
|
||
|
|
|
Filed
herewith
|
||
|
|
|
Filed
herewith
|
||
|
101.INS
|
|
XBRL Instance
Document
|
|
|
|
101.SCH
|
|
XBRL Taxonomy
Extension Schema
|
|
|
|
101.CAL
|
|
XBRL Taxonomy
Extension Calculation Linkbase
|
|
|
|
101.DEF
|
|
XBRL Taxonomy
Extension Definition Linkbase
|
|
|
|
101.LAB
|
|
XBRL Taxonomy
Extension Label Linkbase
|
|
|
|
101.PRE
|
|
XBRL Taxonomy
Extension Presentation Linkbase
|
|
|
.
32
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
MONOPAR
THERAPEUTICS INC.
|
|
|
||
|
|
|
|
|
|
Dated: August 6,
2020
|
By:
|
/s/
Chandler D.
Robinson
|
|
|
|
|
Chandler D.
Robinson
|
|
|
|
|
Chief
Executive Officer and Director
(Principal
Executive Officer)
|
|
|
|
|
||
|
|
|
|
|
|
Dated: August 6,
2020
|
By:
|
/s/
Kim R.
Tsuchimoto
|
|
|
|
|
Kim R.
Tsuchimoto
|
|
|
|
|
Chief
Financial Officer
(Principal
Financial Officer)
|
|
33