Table of Contents

 

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 September 30, 2021

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 28,577,088 shares of common stock outstanding at November 3, 2021.

 

 

---

Table of Contents

 

 

PART 1 FINANCIAL INFORMATION

Item 1. Financial Statements

Moleculin Biotech, Inc.

Condensed Consolidated Balance Sheets

(in thousands, except for share and per share data)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except share and per share data)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands, except for shares)

(unaudited)

See accompanying notes to unaudited condensed consolidated financial statements.

Moleculin Biotech, Inc.

Notes to the Unaudited Condensed Consolidated Financial Statements

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: 

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.

Overview 

We are a clinical stage pharmaceutical company focused on the treatment of highly resistant cancers and viruses. We have three core technologies, based substantially on discoveries made at M.D. Anderson Cancer Center (MD Anderson). These three core technologies are Annamycin, the WP1066 Portfolio, and the WP1122 Portfolio and include a total of five drug candidates, three of which have now shown human activity in clinical trials.

Three Core Technologies

We consider Annamycin to be a "next generation" anthracycline, unlike any currently approved anthracyclines, as it is designed to avoid multidrug resistance mechanisms with little to no cardiotoxicity (the efficacy of all currently approved anthracyclines is limited by both multidrug resistance and cardiotoxicity). WP1066 is one of several Immune/Transcription Modulators, designed to stimulate the immune response to tumors by inhibiting the errant activity of Regulatory T-Cells (TRegs) while also inhibiting key oncogenic transcription factors, including p-STAT3 (phosphorylated signal transducer and activator of transcription 3), c-Myc (a cellular signal transducer named after a homologous avian virus called Myelocytomatosis) and HIF-1α (hypoxia inducible factor 1α). These transcription factors are widely sought targets that are believed to contribute to an increase in cell survival and proliferation, and the angiogenesis (coopting vasculature for blood supply), invasion, metastasis and inflammation associated with tumors. They may also play a role in the inability of immune checkpoint inhibitors to affect more resistant tumors. WP1220 is a close analog to WP1066 that we have developed as a potential topical therapy for skin-related diseases.

Our third core technology is centered on new compounds designed to target the roles of glycolysis and glycosylation in both cancer and viral diseases. As an example, 2-deoxy-D-glucose (2-DG) is a glucose decoy that is capable of inhibiting glycolysis, thereby cutting off the primary fuel supply for both cancer cells and viral host cells by taking advantage of their high level of dependence on glucose in comparison to healthy cells. In addition, 2-DG is capable of altering glycosylation, a process by which, when coopted by tumors, cancer cells are believed to evade the body’s immune response. In the case of viruses like SARS-CoV-2 (the virus responsible for COVID-19), glycosylation forms the glycoprotein spikes surrounding the coronavirus that give it its name and enable both evasion of the immune response and the ability to infect new host cells. One of the limitations of 2-DG, however, is how rapidly it is metabolized, resulting in a short circulation time and limited tissue/organ distribution characteristics. Our lead Metabolism/Glycosylation Inhibitor, WP1122, is a prodrug of 2-DG that appears to improve the drug-like properties of 2-DG by increasing its circulation time and improving tissue/organ distribution. Recent published research has identified that 2-DG has antiviral potential against SARS-CoV-2 in vitro and, based on publicly available information, a recently completed Phase 2 clinical trial by an unrelated company in India has reported efficacy in COVID-19 patients, resulting in the Emergency Use Authorization of 2-DG by the Drugs Controller General of India. New research also points to the potential for 2-DG to be capable of enhancing the usefulness of checkpoint inhibitors. Considering that WP1122 generally outperforms 2-DG alone in both in vitro and in vivo tumor models and in viral in vitro models, we believe WP1122 has the potential to become an important drug to potentiate existing therapies, including checkpoint inhibitors. We are also engaged in preclinical development of additional antimetabolites (WP1096 and WP1097) targeting glycolysis and glycosylation.

Clinical Trials

During 2020, three of our drug candidates accounted for five clinical trials in the U.S. and Europe. Two of those trials are ongoing externally funded studies of WP1066 in brain tumors. Two of our internally funded Phase 1 clinical trials have concluded. The U.S. trial for Annamycin in acute myeloid leukemia (AML) successfully met its safety endpoint, and the trial for WP1220 in cutaneous T-cell lymphoma (CTCL) demonstrated an objective response rate of 45% and a clinical benefit rate of 100%. An additional Phase 1/2 clinical trial of Annamycin in AML is also internally funded and is currently ongoing. In 2021, we have initiated two additional clinical trials and we anticipate the initiation of two or more new clinical trials in addition to the three trials continuing from 2020, as discussed further below. The brain tumor trial at MD Anderson will be terminated this year, as the original lead physician investigator moved to another institution, and we expect a new, similar externally funded trial to begin elsewhere in 2022.

Below we use certain terms to describe our clinical trials. By "internally funded” we mean that the primary costs of the preclinical activity and clinical trials are funded by us. “Externally funded” drug candidates include those for which preclinical work is funded and performed by external collaborators and/or for which clinical trials are physician sponsored. For externally funded research, any grant funds that support such preclinical work or clinical trials and most of the associated expenses are not reflected in our financial statements. However, the costs of drug product and other minor supporting activities that we provide for externally funded preclinical activities and clinical trials are included in our financial statements.

Recently reported data from our sponsored research demonstrates that in AML mouse models, the combination of Annamycin with Ara-C (a chemotherapy drug commonly used in AML patients) has a synergistic effect, suggesting that this combination may be more beneficial for AML patients than Annamycin as a single agent. Accordingly, and as one of the possible trials to be initiated mentioned above in 2021, we plan to begin a Phase 1/2 clinical trial of Annamycin in combination with Ara-C for the treatment of AML in Europe, by seeking approval for our own internally funded clinical trial in Europe and possibly a second, similar trial through our sublicensee, WPD Pharmaceuticals, in Poland. Furthermore, we received U.S. Food and Drug Administration (FDA) clearance in late 2020 to proceed with a Phase 1b/2 clinical trial of Annamycin for the treatment of soft tissue sarcoma (STS) lung metastases and we began this internally funded trial in the U.S. in the second quarter of 2021. Additionally, we expect in 2021 a second Phase 1b/2 clinical trial of Annamycin in sarcoma lung metastases to be primarily investigator-funded in Europe.

WP1066 is currently in two U.S. physician-sponsored Phase 1 trials, one at MD Anderson for the treatment of glioblastoma (GBM) in adults and another at Emory University for the treatment of pediatric brain tumors (including DIPG and medulloblastoma). The brain tumor trial at MD Anderson will be terminated this year and we expect a new, similar externally funded trial to begin elsewhere in 2022. We began and completed a "proof-of-concept" Phase 1 clinical trial in 2020 in Poland for a third drug, WP1220 (a molecule in the WP1066 Portfolio), for the topical treatment of cutaneous T-cell lymphoma (CTCL). We are actively seeking collaboration with a strategic partner in the near term for external funding for the continued development of WP1220 in a Phase 2 clinical trial as a topical therapy for CTCL, and based on the pace of current discussions, we do not anticipate this trial to begin this year. If we are not successful in this outreach, we may choose to use internal funds to generate additional human data to facilitate such outreach efforts.

Finally, we received authorization from regulatory authorities in the United Kingdom (U.K.) to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patients either there or in locations where the prevalence of COVID-19 will adequately support recruitment. We intend to internally fund the initial trials of WP1122 but may seek external funding opportunities. Additionally, we are planning to file an IND in the U.S. for the treatment of certain cancers with WP1122.

In summary, we had five clinical trials underway or concluded in 2020 and we now expect up to six clinical trials to be underway or approved in 2021, including externally funded trials, with more expected to begin in 2022.

Update on Clinical Trials and Licensing

Annamycin

Annamycin is currently in one Phase 1/2 clinical trial in Europe, and the Phase 1 portion of another Phase 1/2 AML trial in the U.S. has been concluded, subject to final database closure, which should occur prior to the end of 2021.

The trial in Poland is in its fifth cohort, where patients are being treated at 240 mg/m2. Patient 2 in this cohort experienced certain elevated liver enzymes (AST and ALT), which under the original clinical trial protocol, were considered a dose limiting toxicity (DLT). In this instance, the DLT was secondarily related to concomitant medication not being withheld. Although that DLT resolved, in accordance with the trial protocol, the cohort was expanded and has now enrolled a total of five patients. In March 2021, patient 4 in this cohort experienced a similar DLT, which also resolved. Although treatment was discontinued for Patients 2 and 4, a total of three patients in this cohort received the full dose of Annamycin without any DLTs and, based on preliminary data, all three responded to treatment, with one relapsed patient experiencing a partial response, a refractory patient experiencing a partial response (PR) and another relapsed patient completely clearing circulating blasts. With this preliminary data, 67% of the patients receiving a full course of treatment at 240 mg/m2 experienced clinical benefit. It is also noteworthy that the patient with a PR was refractory to prior induction therapy and, as such, a response to single agent therapy is generally not expected.

Although the elevated liver enzymes described above meet the test of a “Dose Limiting Toxicity” per the original clinical trial protocol, our medical advisors have determined that these instances were transient and self-limited with no evidence of serious sequalae (related longer-term negative effects) and, therefore, should not be considered DLTs in future patients unless these elevated enzyme levels do not return to near baseline (baseline or less than or equal to grade 1) within a reasonable time or if there is other evidence of serious sequalae. Based on this new data, we amended the protocol for this trial in Poland to change the DLT criteria as it relates to transient grade 3 elevations of liver enzymes to allow us to dose three additional patients in the 240 mg/m2 cohort. This amendment was approved and granted allowance by regulatory authorities in Poland in July 2021. If no DLT is experienced with these next three patients, we will escalate dosing in new cohorts by 30 mg/m2 instead of the 60 mg/m2 previously planned, and with a de-escalation of 15 mg/m2 at the DLT dose if future patients experience a DLT. As of the end of October, one of the three patients needed to complete the cohort was admitted to the trial and began dosing.

Additionally, our sublicense partner, WPD Pharmaceuticals Sp.z o.o. (WPD), recently announced that it was conditionally awarded a reimbursement grant of approximately $6.7 million (20.4 million PLN) from the Polish National Center for Research and Development (NCRD), for the development of Annamycin. The funds may be used for the continued development of Annamycin, including a possible clinical trial of Annamycin in combination with Ara-C for which this grant is expected to cover the reimbursement of about 60% of planned costs. WPD is a sub-licensee of certain technologies from us in 29 countries in Europe and Asia. We plan to commence a similar trial combining Annamycin with Ara-C for the treatment of AML prior to the end of 2021 and possibly prior to this grant funded trial starting. The grant-funded trial should begin in the near term and since this is an externally funded trial subject to ongoing granting authority oversight, we cannot provide any assurance as to when or if it will commence.

Regarding our ongoing U.S. clinical trial of Annamycin for the treatment of STS lung metastases, we currently have three sites open and active in the study and expect a total of five sites to be active by the first quarter of 2022. In the second quarter of 2021 this trial began enrolling and dosing patients. The three sites open are as follows: 1) Sarcoma Oncology Research Center in Santa Monica, CA; 2) Rutgers, The State University in New Brunswick, NJ; and 3) Washington University in St. Louis, MO.

On August 12, 2021, we announced that patients were treated in the first cohort at a dose level of 210 mg/m² with no drug-related adverse events constituting a dose limiting toxicity (DLT) during the 21-day DLT evaluation period, including no signs of cardiotoxicity. The results for all three patients were reviewed in the Cohort Review Meeting, which determined that the trial could progress to the next higher dose level of 270 mg/m².

On October 18, 2021, we announced that the second cohort had concluded safely and that the next cohort at the next higher dose level of 330 mg/m² would open. Additionally, we reported that four of the five patients that have completed scans to date (from cohort one and two) demonstrated a response to treatment, including three with extended and, in one case, continuing stable disease and one patient with a substantial (>30%) reduction in tumor size, constituting a PR under the protocol. The third cohort was opened the following week and one patient has enrolled and started treatment. Two other patients have been identified. Further updates on patients will be announced at the end of the third cohort.

Earlier in 2021, we announced that the Agencja Badań Medycznych (The Medical Research Agency) a Polish state agency responsible for development of scientific research in the field of medical and health sciences, awarded a grant equivalent to $1.5 million to the Maria Sklodowska-Curie National Research Institute to fund a Phase 1b/2 clinical trial of Annamycin for the treatment of STS lung metastases. The grant-funded clinical trial will be led by Prof. Piotr Rutkowski, MD, PhD, Head of Department of Soft Tissue/Bone Sarcoma and Melanoma at the Maria Sklodowska-Curie National Research Institute of Oncology in Warsaw, Poland. Prof. Piotr Rutkowski will be assisted, in part, by WPD who will provide support in preparation for and conduct of the clinical trial, which is expected to begin before the end of the first quarter of 2022. As this is a grant funded trial, we have limited input and control over timing. As a part of the collaboration between Moleculin and Prof. Rutkowski, Moleculin will be supplying the drug product and other ancillary services necessary for the clinical trial, but Moleculin will not participate in conducting the clinical trial. This trial is independent from and will be in addition to the U.S. clinical trial Moleculin is planning to conduct with Annamycin in STS lung metastases. As an important point of differentiation, the clinical protocol for the Polish trial provides for a different dosing regimen than the U.S. trial.

WP1066

The clinical trial of WP1066 for the treatment of adult brain tumors at MD Anderson has completed the fourth cohort at 8mg/kg in the dose escalation phase. In the first quarter of 2021, we were notified that the physician sponsoring this trial would be leaving MD Anderson. As a result, and as expected, MD Anderson has notified us that they will be closing this trial. Several additional institutions have expressed an interest in sponsoring similar research on WP1066 in brain tumors, so to help ensure the potential continuation of this important research, regardless of the sponsoring institution, we have requested the right to reference the MD Anderson IND, as provided for under our Clinical Trial Agreement with MD Anderson, in our own IND. We are working to continue this research in additional physician-sponsored trials in 2022.

One patient has been treated in the third cohort of the Phase 1 dose escalation portion of physician-sponsored clinical trial at Emory University for the treatment of pediatric brain tumors with WP1066 at the dose level of 8mg/kg. Two more patients will be treated at this dose level. Emory University has amended its protocol to allow dosing at 16 mg/kg after these two additional patients have been dosed, and the third cohort dosing has been deemed safe.

WP1122

Based on previously announced data demonstrating the antiviral potential of our lead antimetabolite molecule, WP1122, we intend to test the drug candidate for the potential treatment of COVID-19. Although we have previously disclosed that antiviral clinical trials in the U.S. will be dependent upon demonstrating efficacy in an appropriate COVID-19 animal model, the Medicines and Healthcare Products Regulatory Agency (MHRA) in the United Kingdom (U.K.) is not making such animal data a requirement for a clinical trial application (CTA) for a Phase 1a clinical trial beginning with healthy volunteers in that country. Based on their feedback, in August 2021 we submitted a CTA for a Phase 1a clinical trial of WP1122 for the treatment of COVID-19 in the U.K. On October 19, 2021, we announced that we received authorization from regulatory authorities in the U.K. to commence a Phase 1a clinical trial of WP1122 in healthy volunteers with the intent to progress to COVID-19 patients either there or in locations where the prevalence of COVID-19 will adequately support recruitment. We intend to internally fund the initial trials of WP1122 but may seek external funding opportunities.

The preclinical work to evaluate molecules within the WP1122 portfolio of antimetabolites (which include molecules capable of inhibiting glycolysis and altering glycosylation) for viral indications is mostly similar to the preclinical work we originally planned as part of developing WP1122 for cancer indications. Accordingly, we believe the preclinical work we have completed for WP1122 will also support an IND application or its equivalent in other countries for cancer-related clinical trials. We continue to plan to submit such an IND in the U.S. in 2021.

COVID-19 and Worldwide Supply Chain Issues 

In March 2020, the World Health Organization declared the outbreak of a novel Coronavirus (COVID-19) as a pandemic, which continues to spread throughout the world. The spread of COVID-19 has caused significant volatility in U.S. and international markets, including Poland, where we conduct some of our clinical trials and Italy, where our Annamycin drug supply is produced. There has been limited interruption of our drug supply, and most Polish clinics where we are conducting trials are limiting access for monitoring activities. Additionally, we believe COVID-19 materially slowed the recruitment of patients for our clinical trials, but we are now beginning to see an increase in recruitment. This could worsen or be alleviated at any time. Furthermore, there is significant uncertainty around the breadth and duration of business disruptions related to COVID-19, as well as its impact on the U.S. and international economies and, as such, we are unable to determine if it will have a material impact to our operations. Additionally, we believe that the potential for impact to our supply chain due to COVID-19 will be reduced as vaccine production normalizes throughout the industry. In the third quarter, worldwide supply chain issues began delaying certain shipments. The supply chain for the manufacturing of our drug candidates and supplies for clinical trials can be complicated and involves several parties. If we were to experience any supply chain issues, including as a result of the COVID-19 pandemic our product supply could be disrupted. We believe that our operations have not been materially impacted to date. In view of current worldwide trends with respect to COVID-19 and worldwide supply chain issues, we do not expect either issue to materially further impact recruitment for or the operation of current or future clinical trials. However, we cannot be certain that these trends will continue and there is the possibility they may reverse. 

We receive requests for compassionate use (or its foreign equivalent) of our drug candidates in the ordinary course of business. WP1066 and Annamycin have both been involved with such requests. As we have very limited involvement in the treatment of such patients, we do not ordinarily report the details on such uses.

Licensing

We are currently in discussions with MD Anderson regarding amendments to existing licenses and new licenses related to Annamycin and WP1122 and expect to execute the related amendments and new licenses by the end of 2021. In the second quarter, we amended the WP1122 license to allow for an additional six-month extension to file a U.S. IND for the application of WP1122 until February 2022 on the condition that we file a similar application in another country. On August 3, 2021, we filed a CTA for the application of WP1122 in the United Kingdom, which filing satisfied one of the requirements under the license agreement. In addition, we intend to file a U.S. IND for the application of WP1122 before the end of 2021, which will satisfy the remaining IND filing requirement. We retain the right to further extend these dates within the amended agreement.

Recent Business Developments

Below are recent business developments.

Annamycin

Interim Data in Phase 1b/2 Clinical Trial of Annamycin for the Treatment of Soft Tissue Sarcoma Lung Metastases

On October 18, 2021, we announced the interim and preliminary data from the first two cohorts evaluating Annamycin for the treatment of soft tissue sarcoma lung metastases. The data demonstrated 80% clinical activity, defined as stable disease or better. We have noted that no DLT’s have been experienced to-date, including cardiotoxicity. Patient enrollment in third cohort began subsequently. 

Approval to Extend Dose Escalation in Phase 1/2 European Clinical Trial Evaluating Annamycin for the Treatment of Acute Myeloid Leukemia

On July 13, 2021, we announced that we had received approval from the Bioethics Committee of the Medical University of Karol Marcinkiewicz in Poznań (Ethics Committee) as well as an allowance from the Polish Department of Registration of Medicinal Products (URPL) for a protocol amendment for our Phase 1/2 evaluating Annamycin for the treatment of subjects with acute myeloid leukemia (AML) that is refractory to or relapsed after induction therapy.

First Subject Enrolled and Dosed in Phase 1b/2 Clinical Trial of Annamycin for the Treatment of Sarcoma Lung Metastases

On June 21, 2021, we announced that we commenced enrollment and dosed the first subject in our U.S. Phase 1b/2 clinical trial evaluating Annamycin for the treatment of STS lung metastases.

Receives Clearance to Commence Phase 1b/2 Clinical Trial of Annamycin for the Treatment of Sarcoma Lung Metastases

On May 25, 2021, we announced that we received clearance to initiate our Phase 1b/2 clinical trial evaluating Annamycin for the treatment of STS lung metastases. We announced that the first of several planned clinical sites was open and we expected to begin patient enrollment.

FDA Approval of Fast Track Designation for Annamycin in the Treatment of Sarcoma Lung Metastases

On March 30, 2021, we announced that the FDA had approved our request for Fast Track Designation for our drug, Annamycin, for the treatment of soft tissue sarcoma. 

WP1066

Awarded New Rare Pediatric Disease Designation from U.S. FDA for WP1066 for the Treatment of Ependymoma

On April 14, 2021, we announced that the FDA had granted Rare Pediatric Disease Designation (RPD) to our p-STAT3 inhibitor, WP1066, for the treatment of ependymoma, one of the four unique indications for which WP1066 now has RPD status.

WP1122

Receives Authorization from the Medicines and Healthcare Products Regulatory Agency (MHRA) to Commence Phase 1a Clinical Trial of WP1122 for the Treatment of COVID-19

On October 19, 2021, we announced that we received authorization from the MHRA to commence a Phase 1a clinical trial of WP1122 in the United Kingdom. We also announced we received a favorable opinion from the London - Riverside Research Ethics Committee in the U.K. to begin the study, which is expected to be conducted at the Medicines Evaluation Unit in Manchester, United Kingdom.

IQVIA to Manage Potential COVID-19 Clinical Trial

On April 6, 2021, we announced the engagement of IQVIA Biotech, a contract research organization (CRO) to manage our efforts to begin potential clinical trials of WP1122 for the treatment of COVID-19.

Corporate

Inclusion in the Russell 2000 Index

On June 15, 2021, we announced that as part of the annual reconstitution of the Russell stock indexes, we were selected to be added to the Russell 2000 Index effective after the close of the U.S. equity markets on June 25, 2021.

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 September 30, 2021 Compared to Three Months Ended September 30, 2020

Research and Development Expense. Research and development (R&D) expense was $4.1 million and $4.4 million for the three months ended September 30, 2021 and 2020, respectively. The decrease of $0.3 million is mainly related to the timing of costs incurred in 2020 of producing additional drug product for Annamycin clinical trials.

General and Administrative Expense. General and administrative expense was $2.0 million and $1.7 million for the three months ended September 30, 2021 and 2020, respectively. The increase of $0.3 million is mainly related to an increase in consulting and advisory fees and an increase in our corporate insurance.

Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $1.7 million in the third quarter of 2021 as compared to a net gain of $2.7 million in the third quarter of 2020, 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.

Nine Months Ended September 30, 2021 Compared to Nine Months Ended September 30, 2020

Research and Development Expense. Research and development (R&D) expense was $11.2 million and $11.0 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of $0.2 million is mainly related to increased clinical trial activity as described above, and costs related to manufacturing of additional drug product.

General and Administrative Expense. General and administrative expense was $6.4 million and $5.1 million for the nine months ended September 30, 2021 and 2020, respectively. The increase of $1.3 million is mainly related to an increase in consulting and advisory fees and an increase in our corporate insurance.

Gain from Change in Fair Value of Warrant Liability. We recorded a net gain of $4.4 million in the third quarter of 2021 as compared to a net gain of $1.5 million in the third quarter of 2020, 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): 

As of September 30, 2021, 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 $14.7 million for the nine months ended September 30, 2021. This $0.1 million increase over the prior year period of $14.6 million was primarily due to payments for increased consulting and advisory fees as well as an increase in our corporate insurance. 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

In June 2021, we entered into an At Market Issuance Sales Agreement (2021 ATM Agreement) with Oppenheimer & Co. Inc. Pursuant to the terms of the 2021 ATM Agreement, we may offer and sell, from time to time through Oppenheimer shares of our common stock with an aggregate sales price of up to $50.0 million. As of the date of this report, there have been no issuances under the 2021 ATM Agreement.

In June 2021, we entered into a Purchase Agreement with Lincoln Park Capital Fund (Lincoln Park Agreement). Pursuant to the terms of the Purchase Agreement, Lincoln Park agreed to purchase from us up to $20.0 million of common stock (subject to certain limitations) from time to time during the term of the Purchase Agreement. Pursuant to the terms of the Purchase Agreement, at the time we signed the Purchase Agreement, we issued 107,788 shares of common stock to Lincoln Park as an initial fee for its commitment to purchase shares of our common stock under the Purchase Agreement, and have agreed to issue Lincoln Park up to an additional 53,893 shares of common stock as commitment shares pro-rata when and if Lincoln Park purchases (at our discretion) the $20.0 million aggregate commitment.

To date, we have not used the 2021 ATM Agreement nor the Lincoln Park Agreement to raise additional capital beyond what is described above.

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.

In February 2020, we entered into subscription agreements with institutional investors to purchase 1,250,000 shares of our common stock and warrants to purchase 937,501 shares of common stock at a combined public offering price of $4.80 per share and related warrant resulting in gross proceeds of $6.0 million. Each warrant has an exercise price of $6.30 per share and were exercisable six months from the date of issuance and will expire five years from the date they were first exercisable.

In April 2020, we issued 1,195,162 shares of common stock at an average price of $8.65 per share pursuant to the 2020 ATM Agreement. We received total proceeds of $10.3 million, prior to deducting transaction expenses. Additionally, during the second quarter of 2020, 750 shares were issued due to the exercise of warrants related to past public offerings. Gross proceeds received due to these exercises approximated $5,000. 

In July 2020, we issued 216,855 shares of common stock at an average price of $8.82 per share through the ATM Prospectus Supplement. We received total proceeds of $1.9 million, net of $0.1 million in transaction expenses. 

We believe that our existing cash and cash equivalents as of September 30, 2021 will be sufficient to meet our projected operating requirements, which include a forecasted 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, 2020. 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, 2020.

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 September 30, 2021.

Changes in Internal Control Over Financial Reporting

There has been 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 nine months ended September 30, 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Our employees are working remotely due to the COVID-19 pandemic, but we do not believe that our adjustments to how we work have materially impacted our internal controls over financial reporting. We continue to monitor and assess the potential impact of the COVID-19 pandemic on our internal controls and strive to minimize the impact on our internal control design and operating effectiveness.

PART II – OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

None.

ITEM 1A. RISK FACTORS

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, 2020, 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, 2020 and in our prior quarterly reports on Form 10-Q filed during this fiscal year, each as filed with the SEC.

We, or our third-party manufacturers, may be unable to successfully scale-up manufacturing of our product candidates in sufficient quality and quantity, which would delay or prevent us from developing our product candidates and commercializing approved products, if any.

In order to conduct clinical trials of our product candidates, we will need to manufacture them in large quantities. We, or any manufacturing partners, may be unable to successfully increase the manufacturing capacity for any of our product candidates in a timely or cost-effective manner, or at all. In addition, quality issues may arise during scale-up activities. If we or any manufacturing partners are unable to successfully scale up the manufacture of our product candidates in sufficient quality and quantity, the development, testing and clinical trials of that product candidate may be delayed or become infeasible, and regulatory approval or commercial launch of any resulting product may be delayed or not obtained, which could significantly harm our business. In addition, the supply chain for the manufacturing of our product candidates is complicated and can involve several parties. If we were to experience any supply chain issues, including as a result of the COVID-19 pandemic, our product supply could be seriously disrupted. 

Shareholder activism could cause material disruption to our business.

Publicly traded companies have increasingly become subject to campaigns by activist investors advocating corporate actions such as actions related to environment, social and governance (ESG) matters, among other issues. Responding to proxy contests and other actions by such activist investors or others in the future could be costly and time-consuming, disrupt our operations and divert the attention of our Board of Directors and senior management from the pursuit of our business strategies, which could adversely affect our results of operations and financial condition.

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.

ITEM 5. OTHER INFORMATION. 

None.

ITEM 6. EXHIBITS 

* Filed herewith.

SIGNATURES