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Item 2. Management’s Discussion and Analysis

2016-09-12 compared with 2016-06-14 · 65 added, 51 removed, 167 unchanged (41% of the section changed)

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This report on Form 10-Q contains certain forward-looking statements.

All statements other than statements of historical fact are "forward-looking statements" for purposes of these provisions, including any projections of earnings, revenues, or other financial items;

All statements other than statements of historical fact are “forward-looking statements”

for purposes of these provisions, including any projections of earnings, revenues, or other financial items;

any statements of the plans, strategies, and objectives of management for future operation;

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In this quarterly report, unless otherwise specified, all dollar amounts are expressed in U.S.

Dollars (US$) and all references to "common shares" refer to the common shares in our capital stock.

As used in this quarterly report, the terms "we", "us", "our" and "our company" mean Pivot Pharmaceuticals Inc., unless otherwise indicated.

Dollars (US$) and all references to “common shares”

refer to the common shares in our capital stock.

As used in this quarterly report, the terms “we”, “us”, “our”

and “our company”

mean Pivot Pharmaceuticals Inc., unless otherwise indicated.

General Overview

We are a development stage pharmaceutical company.

We were incorporated in the Province of British Columbia, Canada under the name "649186 B.C.

Ltd.", on June 10, 2002.

On September 9, 2003, we changed our name to "Xerxes Health Corp." and on June 26, 2007, we changed our name to "Neurokine Pharmaceuticals Inc.".

We were incorporated in the Province of British Columbia, Canada under the name “649186 B.C.

Ltd.”, on June 10, 2002.

On September 9, 2003, we changed our name to “Xerxes Health Corp.”

and on June 26, 2007, we changed our name to “Neurokine Pharmaceuticals Inc.”.

Effective June 4, 2014, we filed with the British Columbia Registrar of Companies a Form 11, Notice of Alteration, wherein we increased our authorized share capital from 500,000,000 common shares without par value to an unlimited number of common shares without par value.

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On November 20, 2015, we completed the acquisition of IndUS Pharmaceuticals, Inc.

("IndUS"), a Delaware corporation, pursuant to an Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 among our company, Pivot Pharma U.S.

(“IndUS”), a Delaware corporation, pursuant to an Agreement and Plan of Merger and Acquisition Agreement dated as of November 4, 2015 among our company, Pivot Pharma U.S.

Inc., our wholly owned subsidiary, IndUS and Sindu Research Laboratories Pvt Ltd.

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Our Current Business

We are a development stage biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceutical products, focused on the strategy of identifying new therapeutic treatments to address unmet medical needs in women's health including but not limited to urological and/or gynecological disturbances;

We are a development stage biopharmaceutical company engaged in the development and commercialization of therapeutic pharmaceutical products, focused on the strategy of identifying new therapeutic treatments to address unmet medical needs in women’s health including but not limited to urological and/or gynecological disturbances;

and advancing novel anticancer drug candidates to provide new treatment options for metastatic cancers in women that do not have adequate treatment options or have poor response to existing treatment options due to inherent or acquired mutations.

Our research and development activities are focused on i) advancing novel drug candidates for the treatment of women's cancers including, but not limited to metastatic endometrial cancer and triple-negative breast cancer, which have limited treatment options;

and ii) leveraging novel drug delivery treatment options to allow 'targeted' delivery of drugs to address women's health needs in urological and/or gynecological indications, and iii) opportunistically in-licensing later-stage drug candidates to augment our drug pipeline .

Where appropriate, we intend to depart from these strategies to opportunistically acquire additional novel treatment options to address unmet or under-served medical needs in women's health.

Our research and development activities are focused on i) advancing novel drug candidates for the treatment of women’s cancers including, but not limited to metastatic endometrial cancer and triple-negative breast cancer, which have limited treatment options;

and ii) leveraging novel drug delivery treatment options to allow ‘targeted’

delivery of drugs to address women’s health needs in urological and/or gynecological indications, and iii) opportunistically in-licensing later-stage drug candidates to augment our drug pipeline.

Where appropriate, we intend to depart from these strategies to opportunistically acquire additional novel treatment options to address unmet or under-served medical needs in women’s health.

Our business model currently includes the following activities:

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· conducting appropriate laboratory tests and clinical trials;

advancing novel drug candidates to treat women's cancers from our acquisition of IndUS to support Investigational New Drug application to allow first-in-human trials;

opportunistically acquiring later-stage drug candidates that provide new treatment options to address unmet medical needs in women's health in cancer and lower urinary tract symptoms;

· advancing novel drug candidates to treat women’s cancers from our acquisition of IndUS to support Investigational New Drug application to allow first-in-human trials;

· opportunistically acquiring later-stage drug candidates that provide new treatment options to address unmet medical needs in women’s health in cancer and lower urinary tract symptoms;

· establishing partnerships with large and specialty pharmaceutical companies and/or biotechnology companies to collaboratively develop and/or commercialize our products.

One of our areas of focus includes developing therapeutic applications for existing drugs using novel delivery technologies for the treatment of diseases and conditions specific to cancer and/or urological disturbances in women.

The diseases and conditions that are the subject of our research and development program include addressing resistant cancers affecting women's health and developing new treatment options using novel drugs and/or novel delivery approaches to address oncological and urological conditions such as various gynecological and breast cancers as well as lower urinary tract symptoms such as overactive bladder.

The diseases and conditions that are the subject of our research and development program include addressing resistant cancers affecting women’s health and developing new treatment options using novel drugs and/or novel delivery approaches to address oncological and urological conditions such as various gynecological and breast cancers as well as lower urinary tract symptoms such as overactive bladder.

Our current pipeline addresses the therapeutic areas of cancer and lower urinary tract symptoms (LUTS):

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These molecules are novel DNA damage response inhibitors and belong to the chemical class of pyrrolobenzodiazepine dimers (PBDs).

These molecules have shown preclinical activity in cancers that have mutations in their tumor suppression and/or DNA repair abilities and have shown 'synthetic lethality' when dosed as monotherapy in such resistant cancers and/or in combination with standard-of-care drugs that are used in chemotherapeutic regimens for such patients.

These molecules have shown preclinical activity in cancers that have mutations in their tumor suppression and/or DNA repair abilities and have shown ‘synthetic lethality’

when dosed as monotherapy in such resistant cancers and/or in combination with standard-of-care drugs that are used in chemotherapeutic regimens for such patients.

PVT-005 and PVT-006 have shown excellent activity in tumor cells that have genetic or epigenetic mutations in DNA mismatch repair (mlh1, MSH2), tumor suppression functions (p53, PTEN) and/or homologous recombination (HR) functions.

They have shown significant synergies with platinum-based drugs such as cisplatin, and other drugs like topoisomerase II and I inhibitors (doxorubicin and camptothecin, respectively) and receptor tyrosine kinase (RTK) inhibitors – all or some of which are part of standard-of-care chemotherapeutic regimens to treat ovarian, breast, colorectal, non-small cell lung and other cancers that affect women's health.

Our research and development strategy is focused on developing novel treatment options to address various unmet medical needs in women's health, including but not limited to 1) urological and gynecological disturbances such as lower urinary tract symptoms;

and 2) addressing unmet or under-served medical needs in women's cancers such as metastatic endometrial or triple-negative breast cancer that have inherent or acquired mutations rendering them resistant to existing treatment options and represent orphan drug designation opportunities.

Our research and development strategy is focused on developing novel treatment options to address various unmet medical needs in women’s health, including but not limited to 1) urological and gynecological disturbances such as lower urinary tract symptoms;

and 2) addressing unmet or under-served medical needs in women’s cancers such as metastatic endometrial or triple-negative breast cancer that have inherent or acquired mutations rendering them resistant to existing treatment options and represent orphan drug designation opportunities.

Our Research and Development Strategy

Our management team has implemented a business-minded and cost-conscious approach to product research and development by focusing on development of novel therapies to address unmet needs in women's health.

Our research and development strategy will develop novel delivery options for new and/or existing drugs to address needs in women's health as well as advance some of its patented and proprietary novel anticancer drugs in gynecological and/or breast cancers through its recent acquisition of IndUS.

Our research and development strategy will develop novel delivery options for new and/or existing drugs to address needs in women’s health as well as advance some of its patented and proprietary novel anticancer drugs in gynecological and/or breast cancers through its recent acquisition of IndUS.

In order for a drug to be successful, it must be both efficacious and acceptably safe.

Before a drug may be commercially marketed, it must be scrutinized and approved by applicable health authorities (such as the Food and Drug Administration ("FDA") in the United States) in each country or jurisdiction where it is sought to be sold.

Before a drug may be commercially marketed, it must be scrutinized and approved by applicable health authorities (such as the Food and Drug Administration (“FDA”) in the United States) in each country or jurisdiction where it is sought to be sold.

In pharmaceutical research and development, clinical trials are conducted to allow safety and efficacy data to be collected for new drugs or devices.

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If the drug successfully passes through Phases I, II and III, it will usually be approved by the national regulatory authority for use in the general population.

Phase IV trials are 'post-approval' studies.

Phase IV trials are ‘post-approval’

Due to the considerable cost that may be required to complete a full series of clinical trials, the burden of paying for all the necessary people and services is usually borne by the sponsor, who may be the pharmaceutical or biotechnology company that developed the drug that is the subject of the study.

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Furthermore, approval rates for new drugs at each clinical trial stage are prohibitively low, which may require the sponsor to finance additional trials or abandon the drug under development altogether.

Our research and development strategy includes the development of novel anticancer drugs targeting subsets of women's cancer patients that have endometrial, triple-negative breast and/or ovarian cancer, to explore the opportunity of securing an orphan drug designation (intended for patient populations <200,000 in the US).

Our research and development strategy includes the development of novel anticancer drugs targeting subsets of women’s cancer patients that have endometrial, triple-negative breast and/or ovarian cancer, to explore the opportunity of securing an orphan drug designation (intended for patient populations <200,000 in the US).

Since our anticancer portfolio has novel drugs that will require the conduct of nonclinical and clinical studies for new molecular entities (NMEs);

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Subsequent to their initial biological evaluation, chemical scale-up and formulation studies were conducted to evaluate their pharmacokinetics in rats and two novel and patented pyrrolobenzodiazepine dimers were prioritized for advancement through preclinical studies to support first-in-human studies.

PVT-005 and PVT-006 provide novel treatment options in combination with existing chemotherapeutic regimens to address unmet medical needs in women's cancers.

PVT-005 and PVT-006 provide novel treatment options in combination with existing chemotherapeutic regimens to address unmet medical needs in women’s cancers.

Our initial focus for PVT-005 is in patients with metastatic endometrial cancer, which harbors genomic mutations in DNA replication and repair pathways that render the cancer resistant to many existing chemotherapy options.

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PVT-006 is more likely to be effective in combination with existing anticancer agents, in basal-like triple-negative breast cancer subtype due to their mutations in DNA repair and replication pathways, which PVT-006 targets as its mechanism of action.

Preclinical safety studies will be conducted over the next 12 months to advance at least one of these candidates to an IND-stage to allow initiation of clinical studies in these highly unmet medical needs in women's cancer.

Results of Operations

The following summary of our results of operations should be read in conjunction with our financial statements for the quarter ended April 30, 2016, which are included herein.

Our operating results for the three months ended April 30, 2016 and 2015 are summarized as follows:

The following summary of our results of operations should be read in conjunction with our financial statements for the period ended July 31, 2016, which are included herein.

Our operating results for the three and six months ended July 31, 2016 and 2015 are summarized as follows:

Three Months Ended

Foreign exchange loss

Six Months Ended

Foreign exchange (gain) loss

General and administrative

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Professional fees

Stock-based compensation

Total Other Expenses

Total Other (Income) Expenses

Net Income (Loss)

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$ (2,358,544 )

For the three months ended April 30, 2016, our net loss increased by $2,165,527 as compared to the three months ended April 30, 2015.

Our net loss increased primarily due to the vesting of stock options granted offset by a reduction in general and administrative expense, management fees and professional fees.

$ (4,511,210 )

$ (3,507,247 )

For the three months ended July 31, 2016, our net loss decreased by $1,179,146 as compared to the three months ended July 31, 2015.

During the three months ended July 31, 2015, 10,000,000 shares of common stock previously issued for consulting and management services but held in escrow were released.

There were no such shares of common stock issued during the three months ended July 31, 2016.

For the six months ended July 31, 2016, our net loss increased by $1,003,963 as compared to the six months ended July 31, 2015.

Our loss increased primarily due to 7,250,000 stock options granted to officers, directors and consultants in 2016, which increased stock-based compensation.

We have not earned any revenues since our inception and we do not anticipate earning revenues in the upcoming quarter.

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Working Capital (Deficit)

Our total current assets as of April 30, 2016 were $ 52,013 as compared to total current assets of $103,215 as of January 31, 2016.

The decrease was primarily due to decrease in cash from working capital.

Our total current liabilities as of April 30, 2016 were $ 563,794 as compared to total current liabilities of $435,104 as of January 31, 2016.

The increase in current liabilities was attributed to the accrual of management fees during the three months ended April 30, 2016 pursuant to management agreements.

Three Months Ended

Net Cash Provided By (Used In) Operating Activities

Our total current assets as of July 31, 2016 were $14,740 as compared to total current assets of $103,215 as of January 31, 2016.

The decrease was primarily due to a decrease in cash.

Our total current liabilities as of July 31, 2016 were $722,080 as compared to total current liabilities of $435,104 as of January 31, 2016.

The increase in current liabilities was primarily attributed to the accrual of management fees during the three months ended July 31, 2016 pursuant to management agreements.

Six Months Ended

Net Cash Used In Operating Activities

Net Cash Provided By Financing Activities

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Operating Activities

During the three months ended April 30, 2016, our cash used by operating activities increased by $66,421 when compared to cash used in operating activities during the three months ended April 30, 2015.

The increase in cash used for operating activities was as a result of payments made for past services provided, including audit and legal fees and transfer agent costs.

During the six months ended July 31, 2016, our cash used by operating activities increased by $79,832 when compared to cash used in operating activities during the six months ended July 31, 2015.

The increase in cash used for operating activities was as a result of payments made for obligations due, including audit and legal fees, rent and transfer agent costs.

Investing Activities

We did not have any investing activities during the three months ended April 30, 2016 and 2015.

We did not have any investing activities during the six months ended July 31, 2016 and 2015.

Financing Activities

During the three months ended April 30, 2016, we received $nil (2015 - $40,000) in cash from financing activities.

During the six months ended July 31, 2016, we received $33,000 (2015 - $240,000) in cash from financing activities.

We will require additional funds to fund our budgeted expenses over the next 12 months.

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Preparing consolidated financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, and expenses.

These estimates and assumptions are affected by management's application of accounting policies.

These estimates and assumptions are affected by management’s application of accounting policies.

We believe that understanding the basis and nature of the estimates and assumptions involved with the following aspects of our consolidated financial statements is critical to an understanding of our consolidated financial statements.

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Our company bases its estimates and assumptions on current facts, historical experience and various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities and the accrual of costs and expenses that are not readily apparent from other sources.

The actual results experienced by our company may differ materially and adversely from our company's estimates.

The actual results experienced by our company may differ materially and adversely from our company’s estimates.

To the extent there are material differences between the estimates and the actual results, future results of operations will be affected.

Long-lived Assets

In accordance with ASC 360, "Property, Plant and Equipment", our company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable.

In accordance with ASC 360, “Property, Plant and Equipment”, our company tests long-lived assets or asset groups for recoverability when events or changes in circumstances indicate that their carrying amount may not be recoverable.

Circumstances which could trigger a review include, but are not limited to:

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ASC 820 establishes a fair value hierarchy based on the level of independent, objective evidence surrounding the inputs used to measure fair value.

A financial instrument's categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

ASC 820 prioritizes the inputs into three levels that may be used to measure fair value:

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Level 3 - Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.

Our company's financial instruments consist principally of cash, amounts receivable, accounts payable and accrued liabilities and amounts due to related parties.

Pursuant to ASC 820, the fair value of cash is determined based on "Level 1" inputs, which consist of quoted prices in active markets for identical assets and derivative liabilities is determined based on "Level 2" inputs, as determined by observable market data.

Our company’s financial instruments consist principally of cash, accounts payable and accrued liabilities and amounts due to related parties.

Pursuant to ASC 820, the fair value of cash is determined based on “Level 1”

inputs, which consist of quoted prices in active markets for identical assets and derivative liabilities is determined based on “Level 2”

inputs, as determined by observable market data.

We believe that the recorded values of all of our other financial instruments approximate their current fair values because of their nature and respective maturity dates or durations

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The functional currency of our parent entity, Pivot Pharmaceuticals Inc., is the Canadian dollar and the functional currency of our subsidiary is the US dollar.

Our company's presentation currency is the US dollar.

Our company’s presentation currency is the US dollar.

Monetary assets and liabilities are translated using the exchange rate prevailing at the consolidated balance sheet date.

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Gains and losses arising on translation or settlement of foreign currency denominated transactions or balances are included in the determination of income.

Results of operations are translated into our company's presentation currency, US dollars, at an appropriate average rate of exchange during the year.

Results of operations are translated into our company’s presentation currency, US dollars, at an appropriate average rate of exchange during the year.

Net assets and liabilities are translated to US dollars for presentation purposes at rates of exchange in effect at the end of the period.

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Quantitative and Qualitative Disclosure About Market Risk

As a "smaller reporting company", we are not required to provide the information required by this Item.

As a “smaller reporting company”, we are not required to provide the information required by this Item.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis