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, 2024 (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 quarter of fiscal 2024 in comparison to the first 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 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 Phase 3 study in metastatic breast cancer. Bria-IMT™ is currently under Fast Track Designation by the U.S. Food and Drug Administration(the “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 metastatic breast cancer. BriaCell reported benchmark-beating patient survival and clinical benefit in metastatic breast cancer with median overall survival of 13.4 months in BriaCell’s 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 personalized off-the-shelf immunotherapies, Bria-OTS™ and 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. 18 Recent Developments On October 15, 2024, the Company provided an update on its pivotal Phase 3 study in metastatic breast cancer - 35 clinical sites (18 main and 17 satellite) are active and enrolling patients. Additional sites are in various stages of start-up. Interim data will be analyzed once 144 events (deaths) occur, comparing the overall survival (OS) in patients treated with the Bria-IMT™ combination regimen versus those treated with physician’s choice as the primary endpoint. Positive results of the pivotal Phase 3 study could result in full approval and marketing authorization for Bria-IMT™ in MBC patients. Secondary analyses include comparison of the Bria-IMT™ combination regimen vs Bria-IMT™ monotherapy. BriaCell recently announced impressive Phase 2 survival data in a similar MBC patient population. The Bria-IMT™ combination regimen has received FDA Fast Track designation. On October 22, 2024, the Company reported that in the Company’s Phase 2 clinical study, patients treated with the same Bria-IMT™ regimen formulation being used in the ongoing Phase 3 pivotal trial experienced a one-year survival rate of 55% (i.e. 55% of patients remain alive at least one year after starting on the study). This rate exceeds the survival data of the current standard of care for similar patients (see Table 1). Notably, 4 of 13 patients recruited in 2022 remain in survival follow-up as well. On November, 21, 2024, the Company announced that the first patient was dosed in its Phase 1/2 study (ClinicalTrials.gov identifier: NCT06471673) to evaluate the safety and efficacy of Bria-OTS™, BriaCell’s personalized next generation immunotherapy. The study will investigate Bria-OTS™ alone and in combination with immune check point inhibitor tislelizumab® (manufactured and supplied by BeiGene, Ltd.) for the treatment of metastatic breast cancer. Bria-OTS™ is an enhanced form of Bria-IMT™, currently in pivotal Phase 3 study for metastatic breast cancer. On November 23, 2024, Marc Lustig resigned from the board of directors of the Company. On December 13, 2024, the Company closed a public offering for the purchase and sale of 7,400,000 common shares of the Company and warrants to purchase up to an aggregate of 7,400,000 common shares of the Company for aggregate gross proceeds of approximately $5.55 million before deducting underwriting discounts, commissions, and other offering expenses (the “December 2024 Offering”). Each common share was sold together with one warrant to purchase one common share at a combined purchase price of $0.75. The warrants have an exercise price of $0.9375 per share, and are immediately exercisable for a period of five years from the closing date. In addition, the Company issued 370,000 agent warrants. The agent warrants are immediately exercisable for a period of five years from the closing date at an exercise price of $0.9375. Results of Operations for the Three Months Ended October 31, 2024, and 2023 Three months ended October 31, 2024 2023 Operating expenses: Research and development expenses $ 3,665,341 6,857,257 General and administrative expenses 1,487,491 1,645,771 Total operating expenses 5,152,832 8,503,028 Operating loss (5,152,832 ) (8,503,028 ) Financial income, net 11,714 179,822 Change in fair value of the warrant liability (616,643 ) 14,282,078 Share of loss on equity investment (71,515 ) - Net income (loss) for the period $ (5,829,276 ) $ 5,958,872 Net loss attributable to non-controlling interest (27,101 ) (42,671 ) Net income (loss) for the period attributable to BriaCell (5,802,175 ) 6,001,543 Net income (loss) per share attributable to BriaCell – basic $ (0.22 ) $ 0.38 Net income (loss) per share attributable to BriaCell – diluted (0.22 ) (0.50 ) Weighted average number of shares used in computing net basic earnings per share of common stock 26,641,036 15,619,676 Weighted average number of shares used in computing net diluted earnings per share of common stock 26,641,036 16,674,891 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. 19 The following is a breakdown of our research and development costs by nature of expenses: Three months ended October 31, 2024 2023 Clinical trial sites and investigational drug costs $ 2,439,667 $ 5,397,438 Wages and salaries 949,089 1,020,725 Laboratory Rent 114,330 88,480 Supplies 99,430 89,023 Depreciation 22,839 - Professional fees 7,268 3,782 Share-based compensation 32,718 257,809 $ 3,665,341 $ 6,857,257 For the three-month period ending October 31, 2024, research costs amounted to $3,665,341, a significant decrease from the $6,857,257 incurred during the same period in 2023. This reduction was primarily driven by lower clinical trial sites and investigational drug costs, which decreased from $5,397,438 in 2023 to $2,439,667 in 2024. The decrease reflects the conclusion of the Bria-IMT™ Phase 1/2a trial and a focus on optimizing expenditures for the pivotal Phase 3 trial. Wages and salaries decreased slightly, from $1,020,725 in 2023 to $949,089 in 2024, reflecting resource allocation adjustments. Laboratory rent increased to $114,330 in 2024, up from $88,480 in 2023, due to expanded use of facilities to support ongoing research. Supplies also increased, from $89,023 in 2023 to $99,430 in 2024, driven by higher operational needs. Depreciation expenses of $22,839 were recognized in 2024, reflecting investments in capital assets to support research activities. Professional fees increased to $7,268 in 2024, compared to $3,782 in 2023, primarily due to consulting and support for clinical operations. Notably, share-based compensation expenses decreased significantly, from $257,809 in 2023 to $32,718 in 2024, contributing to the overall reduction in research and development expenses. Our clinical trial expenses are broken down as follows: Three months ended October 31, 2024 2023 Bria-IMT™ Pivotal Phase 3 study $ 2,185,543 $ 2,278,258 Bria-IMT™ Phase 1/2a 142,496 1,214,440 Indirect research and development expenses allocated to trials 111,628 134,592 $ 2,439,667 $ 3,627,290 Clinical trial expenses for the three months ended October 31, 2024, were $2,439,667, compared to $3,627,290 during the same period in 2023. The decrease in expenses is primarily attributable to the conclusion of patient recruitment and related activities in the Bria-IMT™ Phase 1/2a clinical trial in fiscal 2024. This reduction in costs aligns with our transition to the pivotal Phase 3 study of Bria-IMT™, which has become the primary focus of our clinical development efforts. For the three-month period ending October 31, 2024, Bria-IMT™ Pivotal Phase 3 Study costs amounted to $2,185,543, remaining consistent with the prior year’s $2,278,258. This consistency reflects our strategic decision to optimize spending while focusing expenditures on this pivotal trial, underscoring our commitment to prioritizing the Phase 3 study as the cornerstone of our clinical development program. Resources were effectively allocated toward patient recruitment, trial operations, and preparation for key milestones. For the three-month period ending October 31, 2024, Bria-IMT™ Phase 1/2a costs amounted to $142,496, a significant decrease compared to $1,214,440 during the same period in 2023. This decrease is attributed to the trial’s conclusion in fiscal 2024, with only minimal remaining expenses related to final data analysis and study close-out activities. For the three-month period ending October 31, 2024, indirect research and development expenses allocated to trials amounted to $111,628, compared to $134,592 in the prior year. This reduction is primarily due to streamlined trial operations and a shift in resource allocation toward the pivotal Phase 3 study. We remain focused on advancing the pivotal Phase 3 study of Bria-IMT™ in advanced breast cancer and continue to direct resources accordingly to ensure its timely progression. General and Administrative Expenses For the three-month period ending October 31, 2024, general and administrative expenses amounted to $1,487,491, showing a decrease from $1,645,771 in the same period of 2023. The decrease in general and administrative expenses primarily stems from lower insurance premiums, professional fees and share-based compensation expenses. The Company has reduced general and administrative expenses in order to devote more resources to its clinical program. Financial income (expenses), net For the three-month period ending October 31, 2024, net financial income amounted to $11,714, a significant decrease from the $179,822 recorded in the same period of 2023. Financial income for the three-month period ending October 31, 2024 primarily consists of interest income of $13,050, offset by a foreign exchange loss of $1,336. In comparison, For the three-month period ending October 31, 2023, interest income was $190,815, while foreign exchange losses totaled $10,993. The decrease in financial income from 2023 to 2024 reflects lower interest income due to reduced cash and cash equivalents available for investment in interest-bearing funds Profit (loss) for the period For the three-month period ended October 31, 2024, the Company reported a loss of $5,829,276 compared to a gain of $5,958,872 for the same period in 2023. The loss in the three-month period ended October 31, 2024, primarily resulted from the significant change in the fair value of the warrant liability, which accounted for a loss of $616,643 in 2024 compared to a gain of $14,282,078 in 2023. This highlights the substantial impact that warrant liability valuation has on the Company’s overall financial performance, despite decreased operational spending during the period, particularly in research and development. 20 Liquidity, Capital Resources and 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 October 31, 2024, and a positive working capital balance of $3,230,459 (July 31, 2024 negative balance of $3,807,303). As of October 31, 2024, the Company has total assets of $10,414,330 (July 31, 2024 - $5,872,261), a positive working capital of $3,230,459 (July 31, 2024 – negative balance of $3,807,303) and an accumulated deficit of $91,245,872 (July 31, 2024 - $85,443,697). As of October 31, 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, for several months during calendar year 2024, certain directors and officers agreed to defer payment of their directors’ fees/compensation until we completed a financing, after which, these fees were paid in full. Further, certain officers have indicated their willingness to receive a portion of their compensation in equity of the Company, subject to applicable Nasdaq rules. In addition, we continue to reduce 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 period ended October 31, 2024, the Company’s overall position of cash and cash equivalents increased by $4,930,176 from the period ended July 31, 2024 (including effects of foreign exchange). This increase in cash can be attributed to the following: The Company’s net cash used in operating activities during the period ended October 31, 2024, was $6,955,076 as compared to $7,605,245 for the period ended October 31, 2023. Cash gained in financing activities for the period ended October 31, 2024, was 11,960,252 as compared to nil for the period ended October 31, 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 period ended October 31, 2024.