BriaCell Therapeutics Corp. 10-Q

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. References to the “Company,” “our,” “us” or “we” refer to BriaCell Therapeutics Corp. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and the notes thereto contained elsewhere in this report. Certain information contained in the discussion and analysis set forth below includes forward-looking statements that involve risks and uncertainties. Introduction This Management’s Discussion and Analysis (“MD&A”) should be read together with other information, including our unaudited condensed interim consolidated financial statements and the related notes to those statements included in Part I, Item 1 of this Quarterly Report (the “Condensed Consolidated Financial Statements”), our consolidated financial statements appearing in our Annual Report on Form 10-K for the year ended July 31, 2023 (the “Annual Report”) and Part I, Item 1A, Risk Factors, of the Annual Report. This MD&A provides additional information on our business, recent developments, financial condition, cash flows and results of operations, and is organized as follows: ● Part 1 - Business Overview. This section provides a general description of our business, which we believe is important in understanding the results of our operations, financial condition, and potential future trends. ● Part 2 - Results of Operations. This section provides an analysis of our results of operations for the first half and second quarter of fiscal 2024 in comparison to the first half and second quarter of fiscal 2023. ● Part 3 - Financial Liquidity and Capital Resources. This section provides an analysis of our cash flows and outstanding debt and commitments. Included in this analysis is a discussion of the amount of financial capacity available to fund our ongoing operations and future commitments. We prepare and report our unaudited Condensed Consolidated Financial Statements in accordance with U.S. GAAP. Our unaudited Condensed Consolidated Financial Statements, and the financial information contained herein, are reported in U.S Dollars. Cautionary Note Regarding Forward-Looking Statements This Quarterly Report on Form 10-Q includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act. We have based these forward-looking statements on our current expectations and projections about future events. These forward-looking statements are subject to known and unknown risks, uncertainties and assumptions about us that may cause our actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by such forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “could,” “would,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “continue,” or the negative of such terms or other similar expressions. Factors that might cause or contribute to such a discrepancy include, but are not limited to, those described in our other SEC filings. Overview BriaCell Therapeutics Corp. (the “Company”), is a clinical-stage biotechnology company that is developing novel immunotherapies to transform cancer care. Immunotherapies have come to the forefront in the fight against cancer as they harness the body’s own immune system to recognize and destroy cancer cells. The Company is currently advancing its Bria-IMT™ targeted immunotherapy in combination with an immune check point inhibitor. (Retifanlimab) in a pivotal 1 Phase 3 study in advanced metastatic breast cancer. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. BriaCell reported benchmark-beating patient survival and clinical benefit in advanced metastatic breast cancer with median overall survival of 13.4 months in BriaCell’s advanced metastatic breast cancer patients vs. 6.7-9.8 months for similar patients reported in the literature in its Phase 2 study of Bria-IMT™ combination study with retifanlimab at the 2023 San Antonio Breast Cancer Symposium. A completed Bria-IMT™ Phase 1 combination study with retifanlimab (an anti-PD1 antibody manufactured by Incyte) confirmed tolerability and early-stage efficacy. BriaCell is also developing a personalized off-the-shelf immunotherapy, Bria-OTS™, which provides a platform technology to develop personalized off-the-shelf immunotherapies for numerous types of cancer, and a soluble CD80 protein therapeutic which acts both as a stimulator of the immune system as well as an immune checkpoint inhibitor. 1 “Pivotal” is an industry term referring to a Phase 3 clinical study intended to show and confirm the safety and efficacy of a treatment. 16 Recent Developments On August 31, 2023, the Company closed the previously announced plan of arrangement spinout transaction (the “Arrangement”) pursuant to which certain pipeline assets of the Company, including Bria-TILsRx™ and protein kinase C delta (PKCδ) inhibitors for multiple indications including cancer (the “BriaPro Assets”), were spun-out to BriaPro Therapeutics Corp. (“BriaPro”), resulting in a 2/3rd owned subsidiary of the Company with the remaining 1/3rd held by BriaCell shareholders (“BriaCell Shareholders”). Pursuant to the terms of the Arrangement, BriaPro has acquired the entire right and interest in and to the BriaPro Assets in consideration for the issuance by BriaPro to the Company of BriaPro common shares. Under the terms of the Arrangement, for each BriaCell share held immediately prior to closing, BriaCell Shareholders receive one (1) common share of BriaPro, and one (1) new common share of BriaCell (retiring their old share) having the same terms and characteristics as the existing BriaCell common shares. The Company will remain listed on the NASDAQ Stock Market and Toronto Stock Exchange, and BriaPro is an unlisted reporting issuer in Canada. As noted above, immediately following the closing of the Arrangement, the Company controlled 2/3rd of the BriaPro common shares representing approximately 66.6% of the issued and outstanding common shares of BriaPro As a result of the Arrangement, there were approximately 47,945,178 BriaPro common shares issued and outstanding immediately following consummation of the Arrangement. The Corporation now beneficially owns or controls approximately 31,963,452 BriaPro common shares, representing 2/3rd of the issued and outstanding BriaPro common shares. On October 3, 2023, BriaCell initiated its pivotal Phase 3 Study of Bria-IMT™ in advanced metastatic breast Cancer. The study will evaluate the efficacy and safety of the Bria-IMT™ combination regimen with an immune check point inhibitor (Retifanlimab) in patients who have failed at least two approved therapies for the disease. Bria-IMT™ is currently under Fast Track Designation by the U.S. FDA intended to accelerate the review process of novel treatments that address unmet medical needs. Positive completion of the pivotal study, following review by FDA, could lead to full approval of the Bria-IMT™ immune checkpoint inhibitor combination in advanced metastatic breast cancer. FDA has agreed that improvement in overall survival in the Bria-IMT™ combination arm as compared to the physician’s choice of treatment arm will be the primary endpoint of the study. The study will enroll 177 patients in the Bria-IMT™ combination therapy arm and 177 patients in the treatment of physician’s choice arm. To gather additional information on the Bria-IMT™ regimen alone, 50 patients will be enrolled in this regimen and will be eligible for combination therapy following their initial post treatment evaluation. BriaCell expects frequent and responsive FDA communication under its Fast Track status during the pivotal Phase 3 study. The successful completion of the pivotal Phase 3 study would allow BriaCell to subsequently submit a Biologics License Application and accelerate the path to commercialization. On May 17, 2024, the Company closed a registered direct offering with healthcare-focused institutional investors and a certain existing investor and a director of the Company for the purchase and sale of 2,402,935 common shares of the Company (or pre-funded warrants in lieu thereof) and warrants to purchase up to an aggregate of 2,402,935 common shares of the Company for aggregate gross proceeds of approximately $5.0 million before deducting placement agent fees and other offering expenses (the “Offering”). Each common share (or pre-funded warrant in lieu thereof) was sold together with one warrant to purchase one common share at a combined purchase price of $2.00 to the institutional investors and $2.215 to the existing investor and director of the Company. The warrants have an exercise price of $2.11 per share, will become exercisable six months from the date of issuance and expire five years from the initial exercise date. 17 Results of Operations for the Three Months Ended April 30, 2024 and 2023 Three months ended April 30, 2024 2023 (Unaudited) (Unaudited) Operating Expenses: Research and development expenses $ 7,657,632 $ 3,860,568 General and administrative expenses 1,572,016 1,816,461 Total operating expenses 9,229,648 5,677,029 Operating loss (9,229,648 ) (5,677,029 ) Financial expenses, net 10,958,887 781,593 Share of loss on equity investments (36,997 ) - Net loss for the period $ 1,692,242 $ (4,895,436 ) Net loss attributable to non-controlling interest (23,517 ) - Net loss for the period attributable to BriaCell 1,715,759 (4,895,436 ) Net loss per share attributable to BriaCell – basic and diluted $ 0.11 $ (0.32 ) Research and Development Costs Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials. The following is a breakdown of our research and development costs by project: Three months ended April 30, 2024 2023 Clinical trials $ 4,663,049 $ 1,617,172 Pre-clinical projects 2,109,316 908,800 Chemical, Manufacturing and Control Costs (“CMC Costs”) 458,172 671,590 Other 427,095 667,006 $ 7,657,632 $ 3,860,568 Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. a longer than expected overall survival). Additionally, our costs increased significantly compared with the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™. Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including Bria-OTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2024 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80). Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. The following is a breakdown of our research and development costs by nature of expenses: Three months ended April 30, 2024 2023 Clinical trial sites and investigational drug costs $ 6,165,072 $ 2,469,105 Wages and salaries 1,090,902 947,509 Laboratory Rent 109,500 49,440 Supplies 165,264 155,079 Professional fees 581 - Share-based compensation 126,313 239,435 $ 7,657,632 $ 3,860,568 18 For the three-month period ended April 30, 2024, total research costs amounted to $7,657,632 as compared to $3,860,568 for the three-month period ended April 30, 2023. The rise in these costs is primarily attributed to the continued expansion of the Company’s clinical trials, specifically our Bria-IMT™ trial. Clinical trials and investigational drug costs increased from $2,469,105 in 2023 to $6,165,072 in 2024. Laboratory costs increase during 2024 as well, including the hiring of additional lab employees which increased from $947,509 in 2023 to $1,090,902 in 2024 and increased supplies from $155,079 in 2023 to $165,264 in 2024. General and Administrative Expenses For the three-month period ended April 30, 2024, general and administrative expenses amounted to $1,572,016 as compared to $1,816,461 for the three-month period ended April 30, 2023. The decrease relates primarily to a lowering of shareholder communication expense, insurance expenses, and professional fees. Financial income (expenses), net For the three-month period ended April 30, 2024, financial expense, net, amounted to $10,958,887 as compared to $781,593 for the three-month period ended April 30, 2023. The large difference is due to the change in value of the Company’s warrant liability which amounted to a gain of $10,945,672 in the three-month period ending April 30, 2024, and a gain of $539,427 in the three-month period ending April 30, 2023. Loss (profit) for the period The Company reported a profit for the three-month period ended April 30, 2024, of $1,692,242, as compared to a loss of $4,895,436 for the three-month period ended April 30, 2023. The profit in 2024 is due to a significant decrease in fair value of the warrant liability. Results of Operations for the Nine Months Ended April 30, 2024 and 2023 Nine months ended April 30, 2024 2023 (Unaudited) (Unaudited) Operating Expenses: Research and development expenses $ 22,772,344 $ 10,169,140 General and administrative expenses 4,789,778 5,397,363 Total operating expenses 27,562,122 15,566,503 Operating loss (27,562,122 ) (15,566,503 ) Financial expenses, net 23,934,668 (2,317,236 ) Share of loss on equity investments (55,342 ) - Net loss for the period $ (3,682,796 ) (17,883,739 ) Net loss attributable to non-controlling interest (105,495 ) - Net loss for the period attributable to BriaCell (3,577,301 ) (17,883,739 ) Net loss per share attributable to BriaCell – basic and diluted $ (0.22 ) $ (1.15 ) Weighted average number of shares used in computing net basic earnings per share of common stock 15,981,726 15,518,036 Weighted average number of shares used in computing net diluted earnings per share of common stock 15,981,726 15,518,036 19 Research and Development Costs Research costs are comprised primarily of (i) salaries and wages to Company employees at our laboratory; and (ii) Clinical trials and investigational drug costs, which include the testing and manufacture of our investigational drugs and costs of our clinical trials. The following is a breakdown of our research and development costs by project: Nine months ended April 30, 2024 2023 Clinical trials $ 12,650,189 $ 4,656,919 Pre-clinical projects 7,171,285 2,513,141 CMC Costs 1,425,481 1,416,198 Other 1,525,389 1,582,882 $ 22,772,344 $ 10,169,140 Our clinical trial expenses include the extra costs for our immunotherapy program, Bria-IMT™, Phase I/IIa clinical trial. Clinical trial expenses increased in 2024 as patients stayed in the trial for a longer period of time (i.e. longer than expected overall survival). Additionally, our costs increased significantly compared with those in the same period in 2023 for much higher set up costs for the pivotal Phase 3 study of Bria-IMT™ combination regimen with Retifanlimab in advanced breast cancer, and additional expenses in preparation for the upcoming clinical studies of Bria-OTS™. Pre-clinical projects include expenses incurred in our off-the-shelf personalized immunotherapies, including Bria-OTS+™, and Bria-PROS™. Our pre-clinical costs have increased in 2023 as we hired more staff to accelerate our existing pre-clinical program and added an additional pre-clinical program (sCD80). CMC Costs include the manufacturing of Bria-IMT™ and Bria-OTS™. CMC Costs increased in 2024 to support the pivotal Phase 3 study, and the upcoming clinical studies of Bria-OTS™. Other costs are ancillary expenses we incur such as costs to maintain our patents, investigation of early-stage projects, scientific advisory board expenses, contracts with vendors for pre-clinical work, and administration costs associated with all our research and development expenditure. Other costs increased in 2024 as we investigated additional potential pre-clinical projects. The following is a breakdown of our research and development costs by nature of expenses: Nine months ended April 30, 2024 2023 Clinical trial sites and Investigational drug costs $ 17,763,490 $ 5,799,621 Wages and salaries 3,513,306 2,946,494 Laboratory Rent 305,980 145,440 Supplies 566,830 455,504 Professional fees 4,363 7,299 Share-based compensation 618,375 814,782 $ 22,772,344 $ 10,169,140 For the nine-month period ending April 30, 2024, research costs amounted to $22,772,344, a significant increase from the $10,169,140 incurred during the same period in 2023. This upturn was primarily fueled by the expansion of the Company’s Phase 2 trial, and initiation of the Phase 3 trial of the Bria-IMT™ regimen, and heightened costs associated with clinical trials and investigational drugs, surging from $5,799,621 in 2023 to $17,763,490 in 2024. Concurrently, laboratory costs increased due to the recruitment of additional employees, growing from $145,440 to $305,980. Notably, non-cash share-based compensation expenses decreased from $814,782 in 2023 to $618,375 in 2024, mitigating some of the overall increase in research and development expenses. General and Administrative Expenses For the nine-month period ended April 30, 2024, general and administrative expenses amounted to $4,789,778 as compared to $5,397,363 for the nine-month period ended April 30, 2023. This reduction is mainly attributed to a decrease in professional fees, which declined from $1,230,220 in 2023 to $970,569 in 2024 and insurance expenses which declined from $1,241,716 in 2023 to $859,287 in 2024. Financial income (expenses), net For the nine-month period ending April 30, 2024, net financial income amounted to $23,934,668, a significant increase from the loss of $2,317,236 recorded in the same period of 2023. This substantial difference is primarily attributed to the change in the value of the Company’s warrant liability, which is directly affected by the shortened life of the warrants and decrease in share price, resulting in a gain of $23,660,003 for the nine-month period ended April 30, 2024, compared to a loss of $2,972,285 in the nine-month period ended April 30, 2023. 20 Loss for the period The Company reported a loss for the period ended April 30, 2024, of $3,682,796 as compared to $17,883,739 for the period ended April 30, 2023. The reduced loss in 2024 was primarily due to a significant increase in operational spending, offset by a large gain resulting from the decrease in the fair value of the warrant liability. In contrast, the larger loss in the prior period was primarily due to higher operational spending and an increase in the value of the Company’s warrant liability. Going Concern Uncertainty The financial statements have been prepared on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of business for the foreseeable future. The continuing operations of the Company are dependent upon its ability to continue to raise adequate financing and to commence profitable operations in the future. As of April 30, 2024, the Company has total assets of $6,203,266 (July 31, 2023 - $27,163,577) and a negative working capital balance of $1,227,767 (July 31, 2023 - positive $25,147,050). The Company had negative cash flows from operating activities during the nine-month period ended April 30, 2024 of $20,090,398. The Company is planning to finance its research and developmental activities from its existing and future working capital resources and will continue to evaluate additional sources of capital and financing. The uncertainty of the Company’s ability to raise such financial capital casts significant doubt on the Company’s ability to continue as a going concern. Liquidity and Capital Resources As of April 30, 2024, the Company has a negative working capital of $1,227,767 (July 31, 2023 – positive $25,147,050) and an accumulated deficit of $84,229,532 (July 31, 2023 - $80,652,231). As of April 30, 2024, the Company’s capital resources consist primarily of cash and cash equivalents, comprising mostly of cash on deposit with banks, investments in money market funds, investments in U.S. government securities, U.S. government agency securities, and investment grade corporate debt securities. Our investment policy and strategy are focused on preservation of capital and supporting our liquidity requirements. Historically, the Company has financed its operation through private and public placement of equity securities, as well as debt financing. The Company’s ability to fund its longer-term cash requirements is subject to multiple risks, many of which are beyond its control. The Company intends to raise additional capital, either through debt or equity financings in order to achieve its business plan objectives. Management believes that it can be successful in obtaining additional capital; however, there can be no assurance that the Company will be able to do so. There is no assurance that any funds raised will be sufficient to enable the Company to attain profitable operations or continue as a going concern. To the extent that the Company is unsuccessful, the Company may need to curtail or cease its operations and implement a plan to extend payables or reduce overhead until sufficient additional capital is raised to support further operations. There can be no assurance that such a plan will be successful. To this end, as of March 1, 2024, certain directors and officers have agreed to defer payment of their directors’ fees/compensation until further notice. In addition, we are reducing expenditure on certain non-core activities whilst maintaining our focus on our Phase 3 Bria-IMT™ pivotal study in advanced metastatic breast cancer. During the nine-month period ended April 30, 2024, the Company’s overall position of cash and cash equivalents decreased by $20,315,398, as compared to $12,871,553 for the nine-month period ended April 30, 2023. This decrease in cash can be attributed to the following: The Company’s net cash used in operating activities during the nine-month period ended April 30, 2024, was $20,090,398, as compared to $12,825,853 for the nine-month period ended April 30, 2023. Cash used in investing activities for the nine-month period ended April 30, 2024, was $225,000 compared to nil for the nine-month period ended April 30, 2023. Cash used in financing activities for the nine-month period ended April 30, 2024, was nil, as compared to $45,700 for the nine-month period ended April 30, 2023. 21 Off-Balance Sheet Arrangements None. Tabular Disclosure of Contractual Obligations None. Critical Accounting Policies and Estimates There have been no material changes to our critical accounting policies and estimates from the information provided in the MD&A section in our Annual Report. New Accounting Policies Adopted The Company did not adopt any new accounting policies during the nine-month period ended April 30, 2024.