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Item 7. Management’s Discussion and Analysis

2025-03-13 compared with 2024-03-27 · 63 added, 40 removed, 46 unchanged (69% of the section changed)

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We are a late-stage clinical biopharmaceutical company focused on the discovery, development and commercialization of drugs for the treatment of cancer.

Our core objective is to leverage our proprietary PDC delivery platform to develop PDCs that are designed to specifically target cancer cells and deliver improved efficacy and better safety as a result of fewer off-target effects.

Our PDC platform possesses the potential for the discovery and development of the next generation of cancer-targeting treatments, and we plan to develop PDCs both independently and through research and development collaborations.

Our lead PDC therapeutic, iopofosine, is a small-molecule PDC designed to provide targeted delivery of iodine-131 directly to cancer cells, while limiting exposure to healthy cells.

We believe this profile differentiates iopofosine from many traditional on-market treatments.

Iopofosine is currently being evaluated in the multi cohort CLOVER-1 Phase 2 study in adult B-cell malignancies and the CLOVER-2 Phase 1 study for a variety of pediatric cancers.

Our product pipeline also includes one preclinical PDC chemotherapeutic program (CLR 1900) and several partnered PDC assets.

The CLR 1900 Series targets for solid tumors with a payload that inhibits mitosis (cell division), a validated pathway for treating cancers.

Our core objective is to leverage our proprietary phospholipid ether drug conjugate ™ (PDC™) delivery platform to develop PDCs that are designed to specifically target cancer cells and deliver improved efficacy and better safety as a result of fewer off-target effects.

We believe that our PDC platform possesses the potential for the discovery and development of the next generation of cancer-targeting treatments, and we plan to develop PDCs both independently and through research and development collaborations.

We are primarily focused on the development of our radioconjugate PDC programs, also known as phospholipid radioconjugates or PRCs, designed to provide targeted delivery of a radioisotope directly to cancer cells, while limiting exposure to healthy cells.

We believe this profile differentiates our PRCs from many traditional on-market treatments and radiotherapeutics.

The three lead programs are:

iopofosine I 131 (iopofosine), a beta-emitting iodine-131 based program which has been studied extensively, as described below;

CLR 121225, an actinium-225 based program;

and CLR 121125, an iodine-125 Auger-emitting program, both prepared to enter clinical trials in 2025.

● Iopofosine, the beta-emitting PRC, utilizes iodine-131 and was studied in our CLOVER-WaM Phase 2 pivotal study of iopofosine in patients with relapsed/refractory (r/r) Waldenstrom’s macroglobulinemia (WM), and our Phase 2b studies in r/r multiple myeloma (MM) patients and r/r central nervous system lymphoma (CNSL) are ongoing.

The CLOVER-2 Phase 1a study for a variety of pediatric cancers has concluded and a Phase 1b study in pediatric patients with high grade glioma is enrolling.

Additionally, a Phase 1 Investigator-initiated study conducted by the University of Wisconsin Madison of iopofosine I 131 in combination with external beam radiation in patients with recurrent head and neck cancer has also completed.

As with all clinical trials, adverse events, serious adverse events or fatalities may arise during a clinical trial resulting from medical problems that may not be related to clinical trial treatments.

● CLR 121225, the alpha-emitting, actinium-225 based PRC has demonstrated activity in multiple solid tumor animal models, including pancreatic, colorectal, and breast cancer.

CLR 121225 has been shown to be well tolerated in these models with the animals showing no adverse events at the highest doses tested.

It was also shown that the compound has excellent biodistribution and uptake by the tumor.

Furthermore, in multiple models of pancreatic adenocarcinoma, including highly refractory pancreatic cancer, the compound demonstrated a proportional dose response with a single dose providing either tumor stasis at the lowest dose tested or tumor volume reduction at the higher doses.

We are currently prepared to initiate a Phase 1 imaging and dose escalation safety study in the first half of 2025.

● CLR 121125, the Auger-emitting PRC, utilizes iodine-125 and has demonstrated excellent tolerability with no toxicities in animal models.

Additionally, CLR 121125 has been shown to have good activity in multiple solid tumor models, especially in triple negative breast cancer.

Auger emitters provide the greatest precision in targeted radiotherapy as the emission can only travel a few nanometers.

This means that to cause the necessary breakage of the tumor cell DNA, the isotope most get inside the cell and near the cell nucleus to be effective.

CLR 121125 achieves this due to our novel phospholipid ether drug conjugate platform.

CLR 121125 is currently projected to be the subject of a Phase 1b dose finding study in the first half of 2025.

Results of Operations

Research and development expense.

Research and development expense consists of costs incurred in identifying, developing, testing, and manufacturing product candidates, which primarily include the cost of manufacturing materials, fees paid to contract research organizations, fees paid to medical institutions for clinical studies, and costs to secure intellectual property.

Research and development.

Research and development expenses consist of costs incurred in identifying, developing and testing, and manufacturing product candidates, which primarily include salaries and related expenses for personnel, cost of manufacturing materials and contract manufacturing fees paid to contract manufacturers and contract research organizations, and fees paid to medical institutions for clinical studies.

We analyze our research and development expenses based on four categories as follows:

clinical projects, manufacturing and related, preclinical projects, and general fixed and overhead costs that are not allocated to the functional project costs, including personnel costs, facility costs, related overhead costs, and patent costs.

General and administrative expense.

General and administrative expense consists primarily of salaries and other related costs for personnel in executive, finance, and administrative functions.

clinical project costs, preclinical project costs, manufacturing and related costs, and general research and development costs that are not allocated to the functional project costs, including personnel costs, facility costs, and related overhead costs.

General and administrative.

General and administrative expenses consist primarily of salaries and other related costs for personnel in executive, finance, and administrative functions.

Other costs include insurance, costs for public company activities, investor relations, directors’ fees, and professional fees for legal and accounting services.

Other income (expense), net .

Other income (expense), net, consists primarily of the impacts related to issuing and revaluing equity securities, and interest income.

Twelve Months Ended December 31, 2024 and 2023

Research and Development.

Research and development expense for the year ended December 31, 2023 was approximately $28,211,000, compared to approximately $19,220,000 for the year ended December 31, 2022.

The following table provides a summary of research and development costs by category for the years ended December 31, 2023 and December 31, 2022:

Research and development expenses for the year ended December 31, 2024, were approximately $26,136,000, compared to approximately $27,266,000 for the year ended December 31, 2023.

The following table provides a summary of research and development costs by category for the years ended December 31, 2024 and 2023:

Clinical project costs

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General research and development costs

The overall increase in research and development expense of approximately $8,991,000, or 47%, was primarily a result of an increase in manufacturing and related costs related to greater production sourcing necessary to support clinical trials and establish commercial production capabilities of approximately $5,103,000 and clinical project costs of approximately $2,168,000, driven by the timing of the activities related to our pivotal and pediatric trials and an increase in general research and development costs of approximately $1,668,000 primarily attributable to an increase in personnel-related costs.

The overall decrease in research and development expenses of approximately $1,130,000, or 4%, was primarily a result of a reduction in clinical project costs of approximately $4,670,000, resulting from site management costs declining and the timing of patient enrollment related to the WM arm of the CLOVER-WaM study, partially offset by an increase in manufacturing and related costs related to greater production sourcing necessary to further develop commercial production capabilities of approximately $1,241,000 and an increase in general research and development costs related to an increase in personnel of approximately $2,554,000.

General and administrative.

General and administrative expense for the year ended December 31, 2023 was approximately $10,749,000, compared to approximately $9,594,000 in 2022.

The increase of $1,155,000, or 12% in general and administrative costs was primarily driven by an increase in personnel costs partially offset by a reduction in professional fees.

General and administrative expenses for the year ended December 31, 2024, were approximately $25,641,000, compared to approximately $11,694,000 in 2023.

The increase of $13,947,000, or 119% in general and administrative costs was primarily driven by investing in the development of information and infrastructure to support product commercialization, including the related market preparation and personnel costs.

Other income (expense), net .

Interest income, net, for the year ended December 31, 2023 was approximately $387,000, as compared to approximately $153,000 for the year ended December 31, 2022.

The increase is a result of increased returns on money market cash equivalents.

Other income was approximately $530,000 was the result of a gain from the valuation of the outstanding warrants issued in September 2023, partially offset by warrant issuance costs.

Other income (expense), net, for the year ended December 31, 2024, was approximately $7,262,000 of income, as compared to approximately $3,870,000 of expense for the year ended December 31, 2023.

A significant portion of this non-cash impact comes from changes in the valuation of the Company’s outstanding warrants.

Warrant valuation consists of several

aspects, but the most significant driver is the price of the Company’s common stock at the end of each reporting period.

Interest income improved to approximately $1,211,000 in 2024, compared to approximately $387,000 in 2023.

The Company’s improved return on cash equivalents is a product of higher average cash balances and a higher average interest rates.

Liquidity and Capital Resources

Year ended December 31, 2024, Compared to Year Ended December 31, 2023

As of December 31, 2023, we had cash and cash equivalents of $9.6 million, compared to $19.9 million as of December 31, 2022, a decrease of $10.3 million.

This decrease was primarily a result of research and development expense and general and administrative expenses.

The cash used in operating activities during the twelve months ended December 31, 2023 was approximately $32,377,000.

Net cash proceeds from the issuance of common stock, preferred stock, warrants during 2023 was approximately $22,939,000.

As of December 31, 2024, we had cash and cash equivalents of $23.3 million, compared to $9.6 million as of December 31, 2023, an increase of $13.7 million.

Net cash proceeds from the issuance of common stock, preferred stock and warrants during 2024 were approximately $61.4 million.

The cash used in operating activities during the twelve months ended December 31, 2024, was approximately $47.6 million.

Investing activities consist exclusively of fixed asset purchases, which declined in 2024 as compared to 2023 due to our having completed the establishment of redundancy in each aspect of our product manufacturing supply chain, ensuring product availability upon commercialization.

Net cash proceeds from financing activities was exclusively the exercise of warrants by investors during 2024 for approximately $61.4 million, as compared to approximately $22.9 million primarily for preferred stock issued in 2023.

Our cash requirements have historically been for our research and development activities, finance and administrative costs, capital expenditures and overall working capital.

We have experienced negative operating cash flows since inception and have funded our operations primarily from sales of common stock and other securities.

As of December 31, 2023, we had an accumulated deficit of approximately $217,483,000.

We have experienced negative operating cash flows since inception and have funded our operations primarily from sales of equity-based securities.

As of December 31, 2024, we had an accumulated deficit of approximately $247.3 million.

Liquidity Outlook

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As of December 31, 2024, our consolidated cash balance was approximately $23.3 million.

We believe our cash balance as of December 31, 2023, when combined with funds generated by the exercise of warrants in January 2024 (see Note 13 to our audited financial statements in Item 8 below), is adequate to fund our basic budgeted operations into the fourth quarter of 2024.

Our ability to execute our operating plan beyond that time depends on our ability to obtain additional funding via the sale of equity and/or debt securities, a strategic transaction or otherwise.

We plan to actively pursue all available financing alternatives;

however, there can be no assurance that we will obtain the necessary funding.

Other than the uncertainties regarding our ability to obtain additional funding and our ability to meet the continued listing standards of Nasdaq, there are currently no known trends, demands, commitments, events or uncertainties that are likely to materially affect our liquidity.

As of the date the accompanying consolidated financial statements were issued (the “issuance date”), the Company’s available liquidity to fund the Company’s operations over the next twelve months beyond the issuance date was limited to approximately $14.9 million of unrestricted cash and cash equivalents.

Absent further action taken by management to increase its liquidity, the Company may be unable to fund its operations under normal course beyond the fourth quarter of 2025.

To improve the Company’s liquidity, management plans to secure additional outside capital via the sale of equity and/or debt securities or execute a strategic transaction.

Management also plans to preserve liquidity, as needed, by implementing cost saving measures.

While management believes their plans will be successful, no assurance can be provided such plans will be effectively implemented over the next twelve months beyond the issuance date.

In the event management’s plans are not effectively implemented, the Company will be required to seek other alternatives which may include, among others, the sale of assets, discontinuance of certain operations, a wind-down of operations and/or filing for bankruptcy protection.

These uncertainties raise substantial doubt about the Company’s ability to continue as a going concern.

The accompanying financial statements have been prepared on the basis that the Company will continue to operate as a going concern, which contemplates it will be able to realize assets and settle liabilities and commitments in the normal course of business for the foreseeable future.

Accordingly, the accompanying consolidated financial statements do not include any adjustments that may result from the outcome of these uncertainties.

Critical Accounting Policies and Estimates

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Management bases its estimates and judgments on historical experience, knowledge of current conditions and various other factors that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

Actual results could differ from those estimates.

Actual results could differ from those

We review these estimates and assumptions periodically and reflect the effects of revisions in the period that they are determined to be necessary.

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This process involves identifying services that have been performed on our behalf and estimating the level of service performed and the associated cost incurred for such service as of each balance sheet date in our financial statements.

Examples of estimated expenses for which we accrue include:

contract service fees, such as amounts paid to clinical research organizations and investigators in conjunction with clinical studies;

fees paid to vendors in conjunction with the manufacturing of clinical materials;

and professional

service fees, such as for lawyers and accountants.

Examples of estimated expenses for which we accrue include contract service fees, such as amounts paid to clinical research organizations and investigators in conjunction with clinical studies, fees paid to vendors in conjunction with the manufacturing of clinical materials, and professional service fees, such as for lawyers and accountants.

In connection with such service fees, our estimates are most affected by our understanding of the status and timing of services provided relative to the actual levels of services incurred by such service providers.

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As such, fair value is a market-based measurement that is determined based on assumptions that a market participant would use in pricing an asset or liability.

In conjunction with our financing in September 2023, we allocated the preferred stock and warrants separately based on the respective estimated relative fair value.

In conjunction with the financings conducted in July 2024, September 2023 and October 2022, we recorded the preferred stock and warrants separately based on their estimated fair values.

Subsequent to issuance, to the extent that such securities are liability classified, they are marked to market, with the change in value reflected in the statement of operations at each reporting date.

If management made different assumptions or judgments, material differences in measurements of fair value could occur.

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This assessment, which requires the use of professional judgment, is conducted at the time of warrant issuance and as of each subsequent quarterly period end date while the warrants are outstanding.

If these instruments are initially classified as liabilities and subsequently meet the requirements for equity classification, we reclassify the fair value to equity.

If these instruments are initially classified as either liabilities or equity and a subsequent assessment determines that the classification has changed, we reflect that change in the financial statements.

Preferred Stock.

We accounts for preferred stock based upon their specific terms and the authoritative guidance in ASC 480 and ASC 815, including whether they are freestanding instruments, whether any redemption or conversion aspects exist and how they are required to be settled (particularly if there is a cash settlement aspect), whether they contain characteristics that are predominantly debt-like or equity-like, whether they have embedded derivatives, and if they have redemption features.

We account for preferred stock based upon their specific terms and the authoritative guidance in ASC 480 and ASC 815, including whether they are freestanding instruments, whether any redemption or conversion aspects exist and how they are required to be settled (particularly if there is a cash settlement aspect), whether they contain characteristics that are predominantly debt-like or equity-like, whether they have embedded derivatives, and if they have redemption features.

Based upon analysis of these criteria, the preferred stock will be classified as either debt, temporary (or “mezzanine”) equity, or permanent equity.

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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-K

Item 7. Management’s Discussion and Analysis