UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2022
or
☐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: 001-37758
| MOLECULIN BIOTECH, INC. | |||||||||||||
| (Exact name of registrant as specified in its charter) | |||||||||||||
| Delaware | 2834 | 47-4671997 | |||||||||||
| (State or Other Jurisdiction of Incorporation or Organization) | (Primary Standard Industrial Classification Code Number) | (IRS Employer Identification Number) | |||||||||||
5300 Memorial Drive, | Suite 950 | ||||||||||||||
| Houston, | TX |
| 77007 | ||||||||||||
| (Address of principal executive offices) | (Zip Code) | ||||||||||||||
713-300-5160
(Registrant’s telephone number, including area code)
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 Registration S-T 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 definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.:
| Large accelerated filer ☐ | Smaller reporting company ☒ | |||||||
| Non-accelerated filer ☒ | Emerging growth company ☐ | |||||||
| Accelerated filer ☐ | ||||||||
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 Exchange Act.): Yes ☐ No ☒
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol (s) | Name of each exchange on which registered | ||||||
| Common Stock, par value $0.001 per share | MBRX | The NASDAQ Stock Market LLC |
The registrant had 28,578,338 shares of common stock outstanding at May 4, 2022.
Table of Contents
| Page |
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| Item 1. |
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| Condensed Consolidated Balance Sheets as of March 31, 2022 (unaudited) and December 31, 2021 |
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| Notes to Condensed Consolidated Financial Statements (unaudited) |
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| Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
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| Item 3. |
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| Item 4. |
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| Item 1. |
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| Item 1A. |
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| Item 2. |
Unregistered sales of Equity Securities and Uses of Proceeds |
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| Item 3. |
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| Item 4. |
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| Item 5. |
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| Item 6. |
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Condensed Consolidated Balance Sheets
(in thousands, except for share and per share data)
(unaudited)
| March 31, | December 31, | |||||||
| 2022 | 2021 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 66,104 | $ | 70,903 | ||||
| Prepaid expenses and other current assets | 1,156 | 1,594 | ||||||
| Total current assets | 67,260 | 72,497 | ||||||
| Furniture and equipment, net | 312 | 338 | ||||||
| Intangible assets | 11,148 | 11,148 | ||||||
| Operating lease right-of-use asset | 81 | 107 | ||||||
| Total assets | $ | 78,801 | $ | 84,090 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 2,224 | $ | 1,364 | ||||
| Accrued expenses and other current liabilities | 2,610 | 2,258 | ||||||
| Total current liabilities | 4,834 | 3,622 | ||||||
| Operating lease liability - long-term, net of current portion | 50 | 63 | ||||||
| Warrant liability - long-term | 1,252 | 1,412 | ||||||
| Total liabilities | 6,136 | 5,097 | ||||||
| Commitments and contingencies (Note 7) | ||||||||
| Stockholders' equity | ||||||||
| Preferred stock, $ par value; shares authorized, shares issued or outstanding | — | — | ||||||
| Common stock, $ par value; shares authorized; shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively | 29 | 29 | ||||||
| Additional paid-in capital | 152,260 | 151,733 | ||||||
| Accumulated other comprehensive income | 53 | 41 | ||||||
| Accumulated deficit | (79,677 | ) | (72,810 | ) | ||||
| Total stockholders’ equity | 72,665 | 78,993 | ||||||
| Total liabilities and stockholders’ equity | $ | 78,801 | $ | 84,090 | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except share and per share data)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Revenues |
$ | — | $ | — | ||||
| Operating expenses: |
||||||||
| Research and development |
4,620 | 4,105 | ||||||
| General and administrative |
2,422 | 1,939 | ||||||
| Depreciation and amortization |
32 | 44 | ||||||
| Total operating expenses |
7,074 | 6,088 | ||||||
| Loss from operations |
(7,074 | ) | (6,088 | ) | ||||
| Other income: |
||||||||
| Gain from change in fair value of warrant liability |
160 | 1,577 | ||||||
| Other income, net |
5 | 9 | ||||||
| Interest income, net |
42 | 57 | ||||||
| Net loss |
$ | (6,867 | ) | $ | (4,445 | ) | ||
| Net loss per common share - basic and diluted |
$ | (0.24 | ) | $ | (0.20 | ) | ||
| Weighted average common shares outstanding, basic and diluted |
28,578,338 | 21,808,565 | ||||||
| Net Loss |
$ | (6,867 | ) | $ | (4,445 | ) | ||
| Other comprehensive income (loss): |
||||||||
| Foreign currency translation |
12 | (4 | ) | |||||
| Comprehensive loss |
$ | (6,855 | ) | $ | (4,449 | ) | ||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
| Three Months Ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Cash flows from operating activities: |
||||||||
| Net loss |
$ | (6,867 | ) | $ | (4,445 | ) | ||
| Adjustments to reconcile net loss to net cash used in operating activities: |
||||||||
| Depreciation and amortization |
32 | 44 | ||||||
| Stock-based compensation |
527 | 405 | ||||||
| Change in fair value of warrant liability |
(160 | ) | (1,577 | ) | ||||
| Operating lease, net |
90 | 113 | ||||||
| Changes in operating assets and liabilities: |
||||||||
| Prepaid expenses and other current assets |
438 | 299 | ||||||
| Accounts payable |
860 | 799 | ||||||
| Accrued expenses and other current liabilities |
275 | 738 | ||||||
| Net cash used in operating activities |
(4,805 | ) | (3,624 | ) | ||||
| Cash flows from investing activities: |
||||||||
| Purchase of fixed assets |
(6 | ) | — | |||||
| Net cash used in investing activities |
(6 | ) | — | |||||
| Cash flows from financing activities: |
||||||||
| Proceeds from exercise of warrants |
— | 63 | ||||||
| Proceeds from sale of common stock, net of issuance costs |
— | 74,685 | ||||||
| Net cash provided by financing activities |
— | 74,748 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
12 | (4 | ) | |||||
| Net change in cash and cash equivalents |
(4,799 | ) | 71,120 | |||||
| Cash and cash equivalents, at beginning of period |
70,903 | 15,173 | ||||||
| Cash and cash equivalents, at end of period |
$ | 66,104 | $ | 86,293 | ||||
| Supplemental disclosures of cash flow information: |
||||||||
| Cash paid for taxes |
$ | 109 | $ | — | ||||
See accompanying notes to unaudited condensed consolidated financial statements.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands, except for shares)
(unaudited)
| Three Months Ended March 31, 2022 |
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| Common Stock |
Common Stock Subscribed |
Accumulated | ||||||||||||||||||||||||||||||||||
| Shares |
Par Value Amount |
Shares |
Par Value Amount |
Additional Paid-In Capital |
Accumulated Deficit |
Other Comprehensive Income (Loss) |
Subscription Receivable |
Stockholder's Equity |
||||||||||||||||||||||||||||
| Balance, December 31, 2021 |
28,578,338 | $ | 29 | — | $ | — | $ | 151,733 | $ | (72,810 | ) | $ | 41 | $ | — | $ | 78,993 | |||||||||||||||||||
| Stock-based compensation |
— | — | — | — | 527 | — | — | — | 527 | |||||||||||||||||||||||||||
| Consolidated net loss |
— | — | — | — | — | (6,867 | ) | — | — | (6,867 | ) | |||||||||||||||||||||||||
| Cumulative translation adjustment |
— | — | — | — | — | — | 12 | — | 12 | |||||||||||||||||||||||||||
| Balance, March 31, 2022 |
28,578,338 | $ | 29 | — | $ | — | $ | 152,260 | $ | (79,677 | ) | $ | 53 | $ | — | $ | 72,665 | |||||||||||||||||||
| Three Months Ended March 31, 2021 | ||||||||||||||||||||||||||||||||||||
| Common Stock | Common Stock Subscribed | Accumulated | ||||||||||||||||||||||||||||||||||
| Shares | Par Value Amount | Shares | Par Value Amount | Additional Paid-In Capital | Accumulated Deficit | Other Comprehensive Income (Loss) | Subscription Receivable | Stockholders' Equity | ||||||||||||||||||||||||||||
| Balance, December 31, 2020 | 11,536,720 | $ | 69 | 26,966 | $ | — | $ | 74,671 | $ | (56,916 | ) | $ | 65 | $ | (129 | ) | $ | 17,760 | ||||||||||||||||||
| Issuance of common stock, net of issuance costs of $ | 16,883,420 | 18 | (26,966 | ) | — | 74,537 | — | — | 129 | 74,684 | ||||||||||||||||||||||||||
| Reverse stock split | 14,285 | (60 | ) | 60 | — | — | - | |||||||||||||||||||||||||||||
| Warrants exercised | 10,000 | 1 | 115 | — | — | 116 | ||||||||||||||||||||||||||||||
| Stock-based compensation | — | — | — | — | 405 | — | — | — | 405 | |||||||||||||||||||||||||||
| Consolidated net loss | — | — | — | — | — | (4,445 | ) | — | — | (4,445 | ) | |||||||||||||||||||||||||
| Cumulative translation adjustment | — | — | — | — | — | — | (4 | ) | — | (4 | ) | |||||||||||||||||||||||||
| Balance, March 31, 2021 | 28,444,425 | $ | 28 | — | $ | — | $ | 149,788 | $ | (61,361 | ) | $ | 61 | $ | — | $ | 88,516 | |||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
Notes to the Unaudited Condensed Consolidated Financial Statements
1. Nature of Business
The terms "MBI" or "the Company", "we", "our", and "us" are used herein to refer to Moleculin Biotech, Inc. MBI is a clinical-stage pharmaceutical company, organized as a Delaware corporation in July 2015, with its focus is on the treatment of highly resistant cancers and viruses through the development of its drug candidates, based substantially on discoveries licensed from The University of Texas System on behalf of the MD Anderson Cancer Center, which the Company refers to as MD Anderson. MBI formed Moleculin Australia Pty. Ltd., (MAPL), a wholly owned subsidiary in June 2018, to perform certain preclinical development in Australia. This has enabled the Company to realize the benefits of certain research and development tax credits in Australia. In July 2021, MBI formed Moleculin Amsterdam B.V., a wholly owned subsidiary, primarily to act as its legal representative for clinical trials in Europe.
In 2019, the Company sublicensed essentially all of the rights to its technologies in over 25 countries in Europe and Asia to WPD Pharmaceuticals Sp.z o.o. (WPD or WPD Pharmaceuticals) in exchange for a minimum amount of externally funded collaboration on development in Europe over a certain amount of time. This sublicense was last amended in December 2021. Also in 2019, the Company sublicensed its technologies to Animal Life Sciences, Inc. (ALI), to enable research and commercialization for non-human use and share development data. As part of this agreement, ALI issued to the Company a 10% interest in ALI.
The Company has core technologies, based substantially on discoveries made at and licensed from MD Anderson. Having six drug candidates, three of which have now shown human activity in clinical trials, the Company believes that success in its lead program, Annamycin, has allowed and will allow further pipeline expansion into multiple high-value oncology indications.
The Company's core technologies consist of the following: a) Annamycin; b) WP1066 Portfolio; and c) WP1122 Portfolio. The Company has six drug candidates, representing all three core technologies, and three of those have shown human activity in clinical trials. In the US and Europe, the Company has conducted, are currently, or plans in the near term to be conducting clinical trials for its drug candidates - Annamycin, WP1066, WP1220, and WP1122. All trials are or were in the Phase 1 portion except the WP1220 trial, which was a proof-of-concept trial. In 2021 and early 2022, there were also three "right-to-try" (or their foreign equivalent) uses of Annamycin and WP1066. The Company plans to conduct additional trials and is in the process of obtaining the appropriate regulatory approval and beginning those trials. The Company utilizes its own internal resources and funds to conduct some of these trials and also has trials being conducted via physician-sponsored trials which utilizes primarily external funds, usually grant funds, which are not presented in the financial statements.
The Company does not have manufacturing facilities and all manufacturing activities are contracted out to third parties. Additionally, the Company does not have a sales organization. The Company’s overall strategy is to seek potential outlicensing opportunities with development/commercialization strategic partners who are better suited for the marketing, sales and distribution of its drugs, if approved.
2. Basis of presentation, principles of consolidation, significant accounting policies and liquidity
Reverse Stock Split - On January 29, 2021, the Company filed a Certificate of Amendment to its amended and restated certificate of incorporation with the Secretary of State and the State of Delaware to effect a reverse stock split of all the issued and outstanding shares of the Company's common stock at a ratio of 1 for The accompanying condensed consolidated financial statements and notes to the condensed consolidated financial statements give retroactive effect to the reverse stock split for all periods presented. Certain amounts in the financial statements, the notes thereto, and elsewhere in the Form 10-Q may be slightly different than previously reported due to rounding up of fractional shares as a result of the reverse stock split.
Basis of Presentation – Unaudited Interim Condensed Consolidated Financial Information - The accompanying unaudited interim condensed consolidated financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the U.S. (U.S. GAAP) for financial information, and in accordance with the rules and regulations of the U.S. Securities and Exchange Commission (SEC) with respect to Form 10-Q and Article 8 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. The unaudited interim condensed consolidated financial statements furnished reflect all adjustments (consisting of normal recurring adjustments), which are, in the opinion of management, necessary for a fair statement of results for the interim periods presented. Interim results are not necessarily indicative of the results for the full year. These interim unaudited condensed consolidated financial statements should be read in conjunction with the audited financial statements of the Company as of December 31, 2021 and notes thereto contained in the Form 10-K filed with the SEC on March 24, 2022.
Principles of Consolidation - The accompanying unaudited condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. Any reference in these notes to applicable guidance is meant to refer to U.S. GAAP. The Company views its operations and manages its business in one operating segment. All long-lived assets of the Company reside in the U.S.
Significant Accounting Policies - The Company's significant accounting policies are described in Note 2, Basis of Presentation, principles of consolidation and significant accounting policies, to the consolidated financial statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. There have been no material changes to the significant accounting policies during the three months ended March 31, 2022, other than those noted below.
Use of Estimates - The preparation of these condensed consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of expenses during the reporting period. Actual results could differ from those estimates. Management considers many factors in selecting appropriate financial accounting policies and controls, and in developing the estimates and assumptions that are used in the preparation of these financial statements. Management must apply significant judgment in this process. In addition, other factors may affect estimates, including expected business and operational changes, sensitivity and volatility associated with the assumptions used in developing estimates, and whether historical trends are expected to be representative of future trends. The estimation process often may yield a range of potentially reasonable estimates of the ultimate future outcomes and management must select an amount that falls within that range of reasonable estimates. This process may result in actual results differing materially from those estimated amounts used in the preparation of financial statements. Estimates are used in the following areas, among others: fair value estimates on intangible assets, warrants, and stock-based compensation expense, as well as accrued expenses and taxes.
Liquidity and Financial Condition - The Company is an early stage company and has not generated any revenues to date. As such, the Company is subject to all of the risks associated with early stage companies. Since inception, the Company has incurred losses and negative cash flows from operating activities. For the three months ended March 31, 2022 and 2021, the Company incurred net losses of $6.9 million and $4.4 million, respectively, and had net cash flows used in operating activities of $4.8 million and $3.6 million, respectively. At March 31, 2022, the Company had an accumulated deficit of $79.7 million and cash and cash equivalents of $66.1 million. The Company expects its cash on hand as of March 31, 2022 will be sufficient to fund the Company's operations beyond the near term. Such projections are subject to changes in the Company’s internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity. The Company does not expect to experience positive cash flows from operating activities in the near future and anticipates incurring operating losses for the next few years as it supports the development of its core technologies to the point of generating revenue, most likely via outlicensing, and continues to invest in research and development for additional applications of the Company's core technologies and potentially increase its pipeline of drug candidates. If the Company needs to raise additional capital in order to continue to execute its business plan, there is no assurance that additional financing will be available when needed or that management will be able to obtain financing on terms acceptable to the Company. A failure to raise sufficient capital could adversely impact the Company's ability to achieve its intended business objectives and meet its financial obligations as they become due and payable.
Cash and Cash Equivalents - Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash and cash equivalents. The Company maintains cash accounts principally at one financial institution in the U.S., which at times, may exceed the Federal Deposit Insurance Corporation’s limit. The Company has not experienced any losses from cash balances in excess of the insurance limit. The Company’s management does not believe the Company is exposed to significant credit risk at this time due to the financial condition of the financial institution where its cash is held.
Prepaid Expenses and Other Current Assets - Prepaid expenses and other current assets consist of the following (in thousands):
| March 31, 2022 | December 31, 2021 | |||||||
| Vendor prepayments and deposits | $ | 557 | $ | 486 | ||||
| Prepaid sponsored research | 329 | 474 | ||||||
| Prepaid insurance | 243 | 589 | ||||||
| Related party receivables | 22 | 22 | ||||||
| Non-trade receivables | 5 | 23 | ||||||
| Total prepaid expenses and other current assets | $ | 1,156 | $ | 1,594 | ||||
Fair Value of Financial Instruments - The Company's financial instruments consist primarily of non-trade receivables, accounts payable, accrued expenses and its warrant liability. The carrying amount of non-trade receivables, accounts payable, and accrued expenses approximates their fair value because of the short-term maturity of such.
The Company has categorized its assets and liabilities that are valued at fair value on a recurring basis into a three-level fair value hierarchy in accordance with U.S. GAAP. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets and liabilities (Level 1) and lowest priority to unobservable inputs (Level 3).
Assets and liabilities recorded in the balance sheets at fair value are categorized based on a hierarchy of inputs as follows:
Level 1 – Unadjusted quoted prices in active markets of identical assets or liabilities.
Level 2 – Quoted prices for similar assets or liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument.
Level 3 – Unobservable inputs for the asset or liability.
The Company’s financial assets and liabilities recorded at fair value on a recurring basis include the fair value of warrant liability discussed in Note 4.
The following table provides liabilities reported at fair value and measured on a recurring basis at March 31, 2022 and December 31, 2021 (in thousands):
| Description | Fair Value | Level 1 | Level 2 | Level 3 | ||||||||||||
| Fair value of warrant liability as of March 31, 2022: | $ | 1,252 | $ | — | $ | — | $ | 1,252 | ||||||||
| Fair value of warrant liability as of December 31, 2021: | $ | 1,412 | $ | — | $ | — | $ | 1,412 | ||||||||
The table below of Level 3 liabilities (in thousands) begins with the valuation as of the beginning of the first quarter and then is adjusted for changes in fair value that occurred during the first quarter. The ending balance of the Level 3 financial instrument presented above represents the Company's best estimates and may not be substantiated by comparison to independent markets and, in many cases, could not be realized in immediate settlement of the instruments.
| Three Months Ended March 31, 2022 | Warrant Liability Long-Term | Warrant Liability Total | ||||||
| Balance, December 31, 2021 | $ | 1,412 | $ | 1,412 | ||||
| Change in fair value - net | (160 | ) | (160 | ) | ||||
| Balance, March 31, 2022 | $ | 1,252 | $ | 1,252 | ||||
Loss Per Common Share - Basic net loss per common share is computed by dividing net loss available to common shareholders by the weighted-average number of common shares outstanding during the period. For purposes of this calculation, options to purchase common stock, restricted stock units subject to vesting and warrants to purchase common stock are considered to be common stock equivalents. Diluted net loss per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods when losses are reported, the weighted-average number of common shares outstanding excludes common stock equivalents, because their inclusion would be antidilutive. For the three months ended March 31, 2022 and 2021, approximately 4.8 million and approximately 3.8 million, respectively, of potentially dilutive shares were excluded from the computation of diluted earnings per share due to their antidilutive effect.
Subsequent Events - The Company’s management reviewed all material events through the date of these unaudited condensed consolidated financial statements. See Note 8 - Subsequent Events.
Recent Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, No. 2020-06, Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40) (ASU 2020-06). ASU 2020-06 simplifies the complexity associated with applying U.S. GAAP for certain financial instruments with characteristics of both liabilities and equity, including convertible instruments and contracts in an entity's own equity. The guidance is effective for the Company beginning on January 1, 2022 and prescribes different transition methods for the various provisions. The Company's adoption of this pronouncement effective January 1, 2022 did not have a material impact on the Company's condensed consolidated financial statements.
In May 2021, the FASB issued ASU No. 2021-04, Earnings Per Share (Topic 260), Debt - Modifications and Extinguishments (Subtopic 470-50), Compensation - Stock Compensation (Topic 718), and Derivatives and Hedging - Contracts in Entity's Own Equity (Subtopic 815-40): Issuer's Accounting for Certain Modifications or Exchanges of Freestanding Equity-Classified Written Call Options. ASU 2021-04 clarifies certain aspects of the current guidance to promote consistency among reporting of an issuer's accounting for modifications or exchanges of freestanding equity-classified written call options (for example, warrants) that remain equity classified after modification or exchange. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. Early adoption is permitted for all entities, including adoption in an interim period. The Company's adoption of this pronouncement effective January 1, 2022 did not have a material impact on the Company's condensed consolidated financial statements.
The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying condensed consolidated financial statements.
3. Accrued Expenses and Other Current Liabilities
Accrued expenses and other current liabilities consist of the following components (in thousands):
| March 31, 2022 |
December 31, 2021 |
|||||||
| Accrued research and development |
$ | 1,035 | $ | 1,005 | ||||
| Accrued payroll and bonuses |
869 | 606 | ||||||
| Accrued legal, regulatory, professional and other |
505 | 442 | ||||||
| Accrued liabilities due to related party |
124 | 109 | ||||||
| Operating lease liability - current |
77 | 96 | ||||||
| Total accrued expenses and other current liabilities |
$ | 2,610 | $ | 2,258 | ||||
Additionally, accounts payable includes $21,000 and $48,000 as of March 31, 2022 and December 31, 2021, respectively, for a related party payable.
4. Warrants
Liability Classified Warrants
The Company uses the Black-Scholes option pricing model to determine the fair value of its warrants at the date of issue and outstanding at each reporting date. The risk-free interest rate assumption is based upon observed interest rates on zero coupon U.S. Treasury bonds linearly interpolated to obtain a maturity period commensurate with the term of the warrants. Estimated volatility is a measure of the amount by which the Company's stock price is expected to fluctuate each year during the expected life of the warrants. Only the volatility of the Company's own stock is used in the Black-Scholes option pricing model.
The assumptions used in determining the fair value of the liability classified warrants are as follows:
| March 31, 2022 |
December 31, 2021 |
|||||
| Risk-free interest rate |
1.5% to 2.4% |
0.1% to 1.1% |
||||
| Volatility |
50.0% to 112.2% |
71.8% to 114.5% |
||||
| Expected life (years) |
0.9 to 3.4 |
0.1 to 3.6 |
||||
| Dividend yield |
—% |
—% |
A summary of the Company's liability classified warrant activity during the three months ended March 31, 2022 and related information follows:
| Number of Shares |
Range of Warrant Exercise |
Weighted Average |
Weighted Average Remaining Contractual |
|||||||||||||||||
| Under Warrant |
Price per Share |
Exercise Price |
Life (Years) |
|||||||||||||||||
| Balance at January 1, 2022 |
2,723,645 | $ | 6.30 | $ | 16.80 | $ | 9.46 | 2.6 | ||||||||||||
| Expired |
(67,349 | ) | 8.10 | 9.00 | — | — | ||||||||||||||
| Balance at March 31, 2022 |
2,656,296 | $ | 6.30 | $ | 16.80 | $ | 9.49 | 2.4 | ||||||||||||
| Exercisable at March 31, 2022 |
2,656,296 | $ | 6.30 | $ | 16.80 | $ | 9.49 | 2.4 | ||||||||||||
For a summary of the changes in fair value associated with the Company's warrant liability for the three months ended March 31, 2022, see Note 2 - Basis of presentation, principles of consolidation and significant accounting policies - Fair Value of Financial Instruments.
Equity Classified Warrants
In April 2021, the Company granted equity-classified warrants to purchase 71,500 shares of common stock with a -year term and an exercise price of $3.63 vesting quarterly over five years while services are being performed. In August 2021, the Company entered into a portfolio development advisory agreement with a related party entity, associated with Dr. Waldemar Priebe, and in connection with the agreement, the Company granted equity-classified warrants to purchase 250,000 shares of common stock with a -year term and an exercise price of $3.08. The August 2021 warrants vest as follows: (a) 50% vests upon execution of the agreement, provided the advisor does not terminate the agreement prior to the end of the one-year term; and (b) 50% vests 60 days after the end of the one-year term, subject to the Company's Board of Directors determining that the services provided have been adequately performed. Also, both the April 2021 and August 2021 warrants vest in full if there is a change of control event, as defined in the agreement.
At March 31, 2022, the Company had 396,502 equity classified warrants outstanding and 190,135 warrants were exercisable. At December 31, 2021, the Company had 396,502 equity classified warrants outstanding and 186,560 warrants were exercisable.
The Company recorded stock compensation expense for equity classified warrants of $83,000 and for the three months ended March 31, 2022 and 2021, respectively. At March 31, 2022, there was $465,000 of unrecognized stock compensation expense related to the Company's equity classified warrants.
5. Equity
2022 Stock Issuances
The Company did make any stock issuances in the three months ended March 31, 2022.
2021 Stock Issuances
In February 2021, the Company entered into an underwritten public offering for the sale by the Company of 14,273,684 shares of its common stock at a public offering price of $4.75 per share and granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering, which was exercised. The Company received total proceeds of $78.0 million, prior to deducting the underwriting discount and other estimated offering expenses. In January 2021 the Company issued 468,684 shares for gross proceeds of $2.9 million using the Company's 2020 At The Market Agreement (2020 ATM Agreement) with Oppenheimer & Co., Inc. The Company terminated the 2020 ATM Agreement on February 2, 2021.
Stock-Based Compensation and Outstanding Awards
The 2015 Stock Plan provides for the grant of stock options, stock awards, stock unit awards, and stock appreciation rights. As of March 31, 2022, there were 19,961 shares remaining to be issued under the 2015 Stock Plan.
Stock-based compensation for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| General and administrative |
$ | 361 | $ | 309 | ||||
| Research and development |
166 | 96 | ||||||
| Total stock-based compensation expense |
$ | 527 | $ | 405 | ||||
During the three months ended March 31, 2022, the Company granted 21,667 stock options with a weighted average exercise price of $1.61 per share that vest over a to -year period from the grant date on a straight-line basis over the requisite service period for each separately vesting portion of the award as if the award was, in substance, multiple awards.
6. Income Taxes
Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.
The Company does not expect to pay any significant federal, state, or foreign income taxes in 2022 as a result of the losses recorded during the three months ended March 31, 2022 and the additional losses expected for the remainder of 2022 and cumulative net operating loss carryforwards. Accounting standards require the consideration of a valuation allowance for deferred tax assets if it is “more likely than not” that some component or all of the benefits of deferred tax assets will not be realized. As a result, as of March 31, 2022 and December 31, 2021 the Company maintained a full valuation allowance for all deferred tax assets.
The Company recorded no income tax provision for the three months ended March 31, 2022 and 2021, respectively. The effective tax rate for the three months ended March 31, 2022 and 2021 is 0%. The income tax rates vary from the federal and state statutory rates primarily due to the change in fair value of the stock warrants and valuation allowances on the Company’s deferred tax assets. The Company estimates its annual effective tax rate at the end of each quarterly period. Jurisdictions with a projected loss for the year where no tax benefit can be recognized due to the valuation allowance could result in a higher or lower effective tax rate during a particular quarter depending on the mix and timing of actual earnings versus annual projections.
7. Commitments and Contingencies
In addition to the commitments and contingencies described elsewhere in these notes, see below for a discussion of the Company's commitments and contingencies as of March 31, 2022.
Lease Obligations Payable
The following summarizes quantitative information about the Company's operating leases for the three months ended March 31, 2022 and 2021, respectively (in thousands):
| Three Months Ended March 31, | ||||||||
| 2022 | 2021 | |||||||
| Lease cost: | ||||||||
| Operating lease cost | $ | 29 | $ | 29 | ||||
| Variable lease cost | 7 | 7 | ||||||
| Total | $ | 36 | $ | 36 | ||||
The Company recorded approximately $10,000 in sublease income from a related party for the three months ended March 31, 2022 and 2021, respectively. Sublease income is recorded as other income, net on the Company's condensed consolidated statement of operations and comprehensive loss. Operating cash flows from operating leases was $35,000 and $34,000 for the three months ended March 31, 2022 and 2021, respectively.
Licenses
MD Anderson - Total expenses related to the Company's license agreements with MD Anderson were$76,000 and $38,000 for the three months ended March 31, 2022 and 2021, respectively.
HPI - On March 16, 2020, the Company entered into two agreements with a related party, Houston Pharmaceuticals, Inc. (HPI). The first agreement, which has a term of years, continues a prior consulting arrangement with HPI on the Company's licensed molecules and requires payments of $43,500 per quarter to HPI. The Company plans to renew the agreement. The second agreement, which can be cancelled with days' notice by either party, allows the Company's employees access to laboratory equipment owned by HPI for a payment of $15,000 per quarter to HPI. Total expenses related to the Company's agreements with HPI were $59,000 for the three months ended March 31, 2022 and 2021, respectively.
Sponsored Research Agreements - MBI has a Sponsored Laboratory Study Agreement with MD Anderson expiring December 31, 2022. In July 2021, the Company amended its Sponsored Laboratory Study Agreement with MD Anderson for a total payment of $175,000 to support the continuation of the project. In addition, the Company also has Sponsored Research Agreements with other universities, one in the US and one in Europe. Total expenses related to the Company's Sponsored Research Agreements were $187,000 and $94,000 for the three months ended March 31, 2022 and 2021, respectively.
License Terminations - In February 2022, the Company and Exploration Invest Pte Ltd. (Exploration) entered into a license termination agreement pursuant to which the Company agreed to pay Exploration $400,000 to terminate certain License Agreements and extend confidentiality requirements until the 10-year anniversary of the license termination agreement. Additionally, in March 2021, the Company determined the stability of WP1732, a molecule in the WP1066 Portfolio was less than satisfactory and, as such, in March 2021 the Company terminated its license for WP1732 with MD Anderson. Total expenses related to the Company's license terminations were $400,000 and zero for the three months ended March 31, 2022 and 2021, respectively.
8. Subsequent Events
In addition to the subsequent events discussed elsewhere in these notes, see below for a discussion of our subsequent events occurring after March 31, 2022.
In April 2022, the Company entered into a clinical trial advisor agreement with SAWO Oncology, Ltd., for Dr. Wolfram Dempke acting as our Chief Medical Officer - Europe. As part of this agreement the Company will issue 45,000 options, subject to shareholder approval at the Company’s Annual meeting in May 2022.
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This Form 10-Q, including the Management’s Discussion and Analysis of Financial Condition and Results of Operations, contains certain forward-looking statements. Historical results may not indicate future performance. Our forward-looking statements reflect our current views about future events, are based on assumptions and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those contemplated by these statements.
Forward-looking statements include, but are not limited to, statements about:
| • | Our ability to continue our relationship with MD Anderson, including, but not limited to, our ability to maintain current licenses and license future intellectual property resulting from our sponsored research agreements with MD Anderson; | |
| • | The success or the lack thereof, including the ability to recruit patients, for a variety of reasons, of our clinical trials through all phases of clinical development; | |
| • | Our ability to satisfy any requirements imposed by the FDA (or its foreign equivalents) as a condition of our clinical trials proceeding or beginning as planned; | |
| • |
World-wide events including the war in Ukraine, the COVID-19 pandemic, and the general supply chain shortages effects on our clinical trials, clinical drug candidate supplies, preclinical activities and our ability to raise future financing; |
| • |
Our ability to obtain additional funding to commence or continue our clinical trials, fund operations and develop our product candidates; |
| • |
The need to obtain and retain regulatory approval of our drug candidates, both in the United States and in Europe, and in countries deemed necessary for future trials; |
| • |
Our ability to complete our clinical trials in a timely fashion and within our expected budget and resources; |
| • |
Compliance with obligations under intellectual property licenses with third parties; |
| • |
Any delays in regulatory review and approval of drug candidates in clinical development; |
| • | Potential efficacy of our drug candidates; | |
| • |
Our ability to commercialize our drug candidates; |
| • |
Market acceptance of our drug candidates; |
| • |
Competition from existing therapies or new therapies that may emerge; |
| • |
Potential product liability claims; |
| • |
Our dependency on third-party manufacturers to successfully, and timely, supply or manufacture our drug candidates for our preclinical work and our clinical trials; |
| • |
Our ability to establish or maintain collaborations, licensing or other arrangements; |
| • |
The ability of our sublicense partners to successfully develop our product candidates in accordance with our sublicense agreements; |
| • |
Our ability and third parties’ abilities to protect intellectual property rights; |
| • |
Our ability to adequately support future growth; and |
| • |
Our ability to attract and retain key personnel to manage our business effectively. |
We undertake no obligation to publicly update or revise any forward-looking statements, including any changes that might result from any facts, events, or circumstances after the date hereof that may bear upon forward-looking statements. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements.
Our Business
We are a clinical stage pharmaceutical company with a growing pipeline of clinical programs for the treatment of highly resistant cancers and viruses. We have three core technologies, based substantially on discoveries made at and licensed from MD Anderson Cancer Center (MD Anderson) in Houston, Texas. We have six drug candidates, three of which have now shown human activity in clinical trials.
Core Technologies
Our core technologies consist of the following: a) Annamycin, a “next generation” anthracycline designed to eliminate the cardiotoxicity associated with currently prescribed anthracyclines (Annamycin has no material cardiotoxicity noted by a specialist in subjects treated and reviewed to date in Moleculin’s clinical trials), while also significantly increasing, as shown in animal studies, drug accumulation in certain key targeted organs (such as the lungs, pancreas and liver) and avoiding multidrug resistance mechanisms when compared in non-human studies with doxorubicin (one of the most commonly used anthracyclines); b) our WP1066 Portfolio, which includes WP1066 and WP1220, two of several Immune/Transcription Modulators in the portfolio designed to inhibit p-STAT3 (phosphorylated signal transducer and activator of transcription) among other transcription factors associated with tumor activity, while also stimulating a natural immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs); and c) our WP1122 Portfolio, which contains compounds (including WP1122, WP1096, WP1097) designed to exploit the potential uses of inhibitors of glycolysis such as 2-deoxy-D-glucose (2-DG), which we believe may provide an opportunity to cut off the fuel supply of tumors by taking advantage of their high level of dependence on glucose in comparison to healthy cells, as well as target the roles of glycolysis and glycosylation in viruses, such as SARS-CoV-2 (the virus responsible for COVID-19).
Recent Business Developments
Below are recent business developments.
Annamycin
Received Allowance to Proceed with Phase 1/2 Study of Annamycin in Combination with Cytarabine for the Treatment of Acute Myeloid Leukemia (AML)
On May 5, 2022, we announced that we received allowance from the Polish Department of Registration of Medicinal Products (URPL), as well as the requisite Ethics Committee approval, to proceed with its Phase 1/2 clinical trial in Poland of Annamycin (L-ANN) in combination with Cytarabine (Ara-C) in the treatment of subjects with acute myeloid leukemia (AML) who are refractory to or relapsed after induction therapy. The Phase 1/2 L-ANN /ARA-C combination (AnnAraC) trial (MB-106), an open label trial, builds on the safety and dosage data from the two successfully concluded single agent Annamycin AML Phase 1 trials (MB-104 and MB-105) in the U.S. and Europe and the preclinical data from its sponsored research studies. The clinical trial is expected to commence patient enrollment in the first half of 2022.
Update on our MB-107 Phase 1b/2 Study of Annamycin in patients with soft tissue sarcomas metastatic to the lung
As of May 2, 2022, we have five US sites active in the MB-107 trial. Enrollment continues in the 390 mg/m2 dose level cohort, with two subjects enrolled to date in the cohort expansion (5 of 6 total in the cohort enrolled and treated). One subject remains in screening with intent to initiate therapy in the mid-May timeframe, as long as all eligibility criteria have been met.
Presentation of Positive Preclinical Annamycin Data at the AACR 2022 Annual Meeting
On April 8, 2022, we announced that preclinical data of Annamycin tested in syngeneic models of metastatic colorectal cancer established in lungs or liver was accepted for poster presentation at the American Association for Cancer Research (AACR) Annual Meeting 2022, which was held April 8-13, 2022, in New Orleans, Louisiana. The objective of this animal study was to assess the efficacy of Annamycin in experimental colorectal cancer liver and lung metastasis models. The efficacy of Annamycin was tested in syngeneic models of metastatic colorectal cancer established in lungs or liver. Annamycin exhibited robust antitumor activity in both models. We believe that this study demonstrating efficacy of Annamycin in colorectal cancer models provides compelling evidence for further preclinical development aimed at initiation of clinical studies in metastatic colorectal cancer patients.
WP1066
Received IND Clearance to Conduct Phase 1 Study of WP1066 for the Treatment of Recurrent Malignant Glioma
On April 21, 2022, we announced that we received allowance from the Food & Drug Administration (FDA) for our Investigative New Drug (IND) application to study WP1066 for the treatment of recurrent malignant glioma. With this IND now cleared, we plan to evaluate strategic partnerships and collaborations to conduct a Phase 1 open label, single arm, dose escalation study of the safety, pharmacokinetics and efficacy of oral WP1066 in adult patients with recurrent malignant glioma. We expect the clearance of this IND to further support the ongoing pediatric studies being conducted by the team at Emory University, and we are evaluating the potential for additional externally funded investigator-initiated studies.
WP1122
Received Approval from the UK’s Medicines and Healthcare Products Regulatory Agency (MHRA) for Protocol Amendment to Phase 1a Clinical Trial of WP1122 for the Treatment of COVID-19
We announced on May 10, 2022 that we received approval from the United Kingdom’s (UK) MHRA to proceed with a first-in-human Phase 1a study to evaluate the safety and pharmacokinetics of WP1122 in healthy volunteers for the treatment of COVID-19 (MB-301). The approval follows us having submitted a protocol amendment allowing for a higher ratio of diluting excipients to drug substance to facilitate a faster and simpler mixing procedure before drug administration. We expect this internally funded trial to begin in the first half of 2022.
Corporate
Licensing
We are currently in discussions with MD Anderson regarding an amendment to an existing license and a new license related to our core technologies. Such discussions are in the ordinary course of our business.
Engages Wolfram C. M. Dempke, MD, PhD, MBA as its European Chief Medical Officer
On May 4, 2022, we announced that we engaged Wolfram C. M. Dempke, MD, PhD, MBA, MRCP as our EU - Chief Medical Officer and part-time contractor for our European clinical trials. Dr. Dempke currently serves as the Vice President, Scientific Solutions: Hematology & Oncology, at Worldwide Clinical Trials. He holds oncology/hematology society memberships in the U.S. and Europe. He has published five textbooks and more than 150 peer-reviewed papers. Dr. Dempke continues to teach classes in the Munich University Medical Oncology department, Germany, and he continues to see patients on a monthly basis.
Results of Operations
The following table sets forth, for the periods indicated, data derived from our statement of operations (in thousands) and such changes in the periods are discussed below in approximate amounts:
Moleculin Biotech, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
| Three Months Ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Revenues |
$ | — | $ | — | ||||
| Operating expenses: |
||||||||
| Research and development |
4,620 | 4,105 | ||||||
| General and administrative |
2,422 | 1,939 | ||||||
| Depreciation and amortization |
32 | 44 | ||||||
| Total operating expenses |
7,074 | 6,088 | ||||||
| Loss from operations |
(7,074 | ) | (6,088 | ) | ||||
| Other income: |
||||||||
| Gain from change in fair value of warrant liability |
160 | 1,577 | ||||||
| Other income, net |
5 | 9 | ||||||
| Interest income, net |
42 | 57 | ||||||
| Net loss |
$ | (6,867 | ) | $ | (4,445 | ) | ||
Three Months Ended March 31, 2022 Compared to Three Months Ended March 31, 2021
Research and Development Expense. Research and development (R&D) expense was $4.6 million and $4.1 million for the three months ended March 31, 2022 and 2021, respectively. The increase of $0.5 million is mainly related to increased clinical trial activity as described above, a license termination fee, and costs related to manufacturing of additional drug product.
General and Administrative Expense. General and administrative expense was $2.4 million and $1.9 million for the three months ended March 31, 2022 and 2021, respectively. The increase of $0.5 million is mainly related to an increase in regulatory legal services, consulting and advisory fees.
Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $0.2 million in the first quarter of 2022 as compared to a net gain of $1.6 million in the first quarter of 2021, for the change in fair value on revaluation of our warrant liability associated with our warrants issued in conjunction with our stock offerings. We are required to revalue our liability-classified warrants at the time of each warrant exercise, if applicable, and at the end of each reporting period and reflect in the statement of operations a gain or loss from the change in fair value of the warrant in the period in which the change occurred. We calculated the fair value of the warrants outstanding using the Black-Scholes model. A gain results principally from a decline in our share price during the period and a loss results principally from an increase in our share price.
Liquidity and Capital Resources
The following table sets forth our primary sources and uses of cash for the period indicated (in thousands):
| Three Months Ended March 31, |
||||||||
| 2022 |
2021 |
|||||||
| Net cash used in operating activities |
$ | (4,805 | ) | $ | (3,624 | ) | ||
| Net cash used in investing activities |
(6 | ) | — | |||||
| Net cash provided by financing activities |
— | 74,748 | ||||||
| Effect of exchange rate changes on cash and cash equivalents |
12 | (4 | ) | |||||
| Net (decrease) increase in cash and cash equivalents |
$ | (4,799 | ) | $ | 71,120 | |||
As of March 31, 2022, there was $0.3 million of cash on hand in a bank account in Australia and we know of no related limitations impacting our liquidity in Australia.
Cash used in operating activities
Cash used in operations was $4.8 million for the three months ended March 31, 2022. This $1.2 million increase over the prior year period of $3.6 million was primarily due to payments for increased clinical trial activity, costs related to manufacturing of additional drug product, and increased consulting and advisory fees. These are all a reflection of the ongoing clinical and pre-clinical activity and the associated increase in general and administrative support for our three core drug technologies.
Cash provided in financing activities
We did not issue any stock in the three months ended March 31, 2022.
In February 2021, we completed an underwritten public offering of an aggregate of 14,273,684 shares of common stock at a public offering price of $4.75 per share. We granted the underwriters a 30-day option to purchase up to an additional 2,141,052 shares of common stock offered in the public offering. The offering closed on February 5, 2021 and gross proceeds of the offering were approximately $67.8 million, prior to deducting the underwriting discount and other offering expenses. On February 10, 2021, the underwriters of the public offering exercised in full their option to purchase an additional 2,141,052 shares of common stock at the public offering price of $4.75 per share, bringing total gross proceeds to approximately $78.0 million before underwriting discount.
In January 2021, we issued 468,684 shares for gross proceeds of $2.9 million using our 2020 ATM Agreement with Oppenheimer & Co., Inc. We terminated the 2020 ATM Agreement on February 2, 2021. Additionally, during the first quarter of 2021, 10,000 shares were issued due to the exercise of warrants related to past public offerings. Gross proceeds received due to these exercises approximated $63,000.
We believe that our existing cash and cash equivalents as of March 31, 2022 will be sufficient to meet our projected operating requirements, which include a potential increase over our current R&D rate of expenditures, into the year 2024. Such projections are subject to changes in our internally funded preclinical and clinical activities, including unplanned preclinical and clinical activity. We anticipate incurring operating losses for the next several years as we support the preclinical and clinical activities necessary to prepare our drug candidates for successful out licensing, including our efforts to expand our technologies. These factors raise uncertainties about our ability to fund operations in future years. If we need to raise additional capital in order to continue to execute our business plan, there is no assurance that additional financing will be available when needed or that we will be able to obtain financing on terms acceptable to us. A failure to raise sufficient capital could adversely impact our ability to achieve our intended business objectives and meet our financial obligations as they become due and payable.
Critical Accounting Policies and Significant Judgments and Estimates
There have been no material changes to our critical accounting policies and use of estimates from those disclosed in our Form 10-K for the year ended December 31, 2021. For a discussion of our critical accounting policies and use of estimates, refer to Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Estimates in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable as we are a smaller reporting company.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures designed to ensure that material information required to be disclosed in our filings under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that material information is accumulated and communicated to our management, including our Chief Executive Officer (CEO), who is our principal executive officer, and Chief Financial Officer (CFO), who is our principal financial and accounting officer, as appropriate, to allow timely decisions regarding required disclosures. Our CEO and CFO have evaluated these disclosure controls and procedures as of the end of the period covered by this quarterly report on Form 10-Q and have determined that such disclosure controls and procedures were effective as of March 31, 2022.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15-d-15(f) under the Exchange Act) during the three months ended March 31, 2022 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
None.
For information regarding factors that could affect our results of operations, financial condition and liquidity, refer to the section entitled “Risk Factors” in Part I, Item 1A in our annual report on Form 10-K for the year ended December 31, 2021, and in Part II, Item 1A in our prior quarterly reports on Form 10-Q filed during this fiscal year. Except as updated below, there have been no material changes from the risk factors previously disclosed in our annual report on Form 10-K for the year ended December 31, 2021 as filed with the SEC.
We may be required to make significant payments under our license agreements with MD Anderson.
Under our agreements with MD Anderson associated with Annamycin, the WP1122 Portfolio and the WP1066 Portfolio, we are responsible for certain license, milestone and royalty payments over the course of the agreements. Annual license fees can cost as high as $0.1 million depending upon the anniversary, milestone payments for the commencement of phase II and phase III clinical trials can cost as high as $0.5 million. Other milestone payments for submission of an NDA to the FDA and receipt of first marketing approval for sale of a license product can be as high as $0.6 million. Royalty payments can range in the single digits as a percent of net sales on drug products or flat fees as high as $0.6 million, depending upon certain terms and conditions. If these milestone or other non-royalty obligations become due, we may not have sufficient funds available to meet our obligations. If we fail to meet our payment obligations, our license agreements could be terminated, which would materially and adversely affect our business operations and financial condition.
We will not be able to protect our intellectual property rights throughout the world.
We are dependent on patents licensed with MD Anderson. Filing, prosecuting and defending patents in all countries throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. Consequently, we will not be able to prevent third parties from practicing our inventions in all countries outside the United States or from selling or importing products made using our inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection, but enforcement is not as strong as that in the United States. These infringing products may compete with the product candidates we may develop, without any available recourse.
The laws of some other countries do not protect intellectual property rights to the same extent as the laws of the United States. Patent protection must ultimately be sought on a country-by-country basis, which is an expensive and time-consuming process with uncertain outcomes. Accordingly, we may choose not to seek patent protection in certain countries, and we will not have the benefit of patent protection in such countries. In addition, the legal systems of some countries, particularly developing countries, do not favor the enforcement of patents and other intellectual property protection. As a result, many companies have encountered significant problems in protecting and defending intellectual property rights in foreign jurisdictions. Because the legal systems of many foreign countries do not favor the enforcement of patents and other intellectual property protection, it could be difficult for us to stop the infringement, misappropriation or violation of our patents or our licensors’ patents or marketing of competing products in violation of our proprietary rights. Proceedings to enforce our intellectual property and other proprietary rights in foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business, could put our patents or the patents of our licensors at risk of being invalidated or interpreted narrowly, could put our patent applications or the patent applications of our licensors at risk of not issuing and could provoke third parties to assert claims against us. We may not prevail in any lawsuits that we initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURE
Not applicable.
None.
| Exhibit No. |
Description |
|||||||
| 10.1 | Patent and Technology License Agreement dated February 3, 2022, by and between The Board of Regents of The University of Texas System on behalf of The University of Texas M.D. Anderson Cancer Center and Moleculin Biotech, Inc. (incorporated by reference to Exhibit 10.34 of the Company’s 10-K filed March 24, 2022) | |||||||
| 31.1* |
Certification of Principal Executive Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
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| 31.2* |
Certification of Principal Financial Officer Pursuant to Section 302 of Sarbanes-Oxley Act of 2002 |
|||||||
| 32.1* |
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| 32.2* |
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| 101.INS* |
Inline XBRL Instance Document (the Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document) |
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| 101.SCH* |
Inline XBRL Taxonomy Extension Schema Document |
|||||||
| 101.CAL* |
Inline XBRL Taxonomy Extension Calculation Linkbase Document |
|||||||
| 101.DEF* |
Inline XBRL Taxonomy Extension Definition Linkbase Document |
|||||||
| 101.LAB* |
Inline XBRL Taxonomy Extension Label Linkbase Document |
|||||||
| 101.PRE* |
Inline XBRL Taxonomy Extension Presentation Linkbase Document |
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| 104 | Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) |
* Filed herewith.
Pursuant to the requirements of Section 13 or 15(d) 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.
| MOLECULIN BIOTECH, INC. |
||||||||
| Date: May 11, 2022 |
By: |
/s/ Walter V. Klemp |
||||||
| Walter V. Klemp, |
||||||||
| Chief Executive Officer and Chairman (Principal Executive Officer) |
||||||||
| Date: May 11, 2022 | By: |
/s/ Jonathan P. Foster |
||||||
| Jonathan P. Foster, |
||||||||
| Executive Vice President & Chief Financial Officer (Principal Financial and Accounting Officer) |
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