What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-13 compared with 2021-11-12 · 127 added, 116 removed, 170 unchanged (59% of the section changed)

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limited to, statements about:

the economic and market uncertainty caused by the COVID-19 outbreak;

our ability to obtain additional funding to develop our product candidates;

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We believe our lead drug candidate, Berubicin,

if approved by the FDA, may be a significant discovery in the treatment of glioblastoma.

Glioblastoma are tumors that arise from astrocytes,

which are star-shaped cells making up the supportive tissue of the brain.

These tumors are usually highly malignant (cancerous) because

the cells reproduce quickly, and they are supported by a large network of blood vessels.

Berubicin is an anthracycline, which is a class

of drugs that are among the most powerful chemotherapy drugs known.

Based on limited clinical data, we believe Berubicin is the first

anthracycline that appears to have crossed the blood brain barrier and target brain cancer cells.

While our current focus is solely on

the development of Berubicin, we are also in the process of attempting to secure intellectual property rights in additional compounds

that may be developed into drugs to treat cancers.

Berubicin was discovered by our founder, Dr.

Priebe, Professor of Medicinal Chemistry at The University of Texas MD Anderson Cancer Center.

Through a series of transactions, Berubicin

was initially licensed to Reata.

Reata conducted a Phase I clinical trial on Berubicin but subsequently allowed their IND with the FDA

to lapse for strategic reasons.

may be a significant development in the treatment of Glioblastoma and other CNS malignancies, and if approved by the U.S.

Food and Drug

Administration (“FDA”), could give Glioblastoma patients an important new therapeutic alternative to the current standard

Glioblastomas are tumors that arise from astrocytes, which are star-shaped cells making up the supportive tissue of the brain.

These tumors are usually highly malignant (cancerous) because the cells reproduce quickly, and they are supported by a large network of

blood vessels.

Berubicin is an anthracycline, which is a class of drugs that are among the most powerful and extensively used chemotherapy

Based on limited clinical data, we believe Berubicin is the first anthracycline that appears to cross the blood brain barrier

in significant concentrations targeting brain cancer cells.

While our focus is currently on the development of Berubicin, we are also

in the process of attempting to secure intellectual property rights to additional compounds that we plan to develop into drugs to treat

CNS and other cancers.

Berubicin was discovered at UTMDACC by Dr.

Priebe, the founder of the Company.

Through a series of transactions, Berubicin was initially licensed to Reata.

Reata initiated several

Phase I clinical trials with Berubicin for CNS malignancies, one of which was for malignant gliomas, but subsequently allowed their IND

with the FDA to lapse for strategic reasons.

This required us to obtain a new IND for Berubicin before beginning further clinical trials.

17, 2020, we announced that our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme was in effect.

We intend to initiate our trial during the third quarter of 2021 to investigate the efficacy of Berubicin in adults with Glioblastoma

Multiforme who have failed first-line therapy.

Recent correspondence between us and the FDA resulted in modifications to our previously

disclosed trial design, including designating overall survival (OS) as the primary endpoint of the study.

OS is a rigorous endpoint that

the FDA has recognized as a basis for approval of oncology drugs when a statistically significant improvement can be shown relative to

a randomized control arm.

Phase II trial, which was open for enrollment during the second quarter of 2021 and treated the first patient during the third quarter

of 2021, will evaluate the efficacy of Berubicin in patients

with Glioblastoma Multiforme who have failed primary treatment for their disease, and results will be compared to the current standard

of care, with 2 to 1 randomization of the 243 patients to Berubicin or Lomustine.

Subjects receiving Berubicin will be administered a

2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride daily for three consecutive days followed by 18 days off (21-day cycle).

is administered orally.

The trial will include an interim analysis that will evaluate the comparative effectiveness of these treatments.

Even if Berubicin is approved, there is no assurance that patients will choose an infusion treatment, as compared to the current standard

of care, which requires oral administration.

On December 17, 2020, we announced that our IND application with the FDA for Berubicin for the treatment of Glioblastoma Multiforme was

We initiated this trial for patient enrollment during the second quarter of 2021 with the first patient dosed during the third

quarter of 2021 to investigate the efficacy of Berubicin in adults with Glioblastoma Multiforme who have failed first-line therapy.

first patient on the trial was treated during the third quarter of 2021.

Correspondence between the Company and the FDA resulted in modifications

to our initial trial design, including designating overall survival (OS) as the primary endpoint of the study.

OS is a rigorous endpoint

that the FDA has recognized as a basis for approval of oncology drugs when a statistically significant improvement can be shown relative

to a randomized control arm.

The current trial being conducted will evaluate

the efficacy of Berubicin in patients with Glioblastoma Multiforme who have failed primary treatment for their disease, and results will

be compared to the efficacy of Lomustine, a current standard of care in this setting, with a 2 to 1 randomization of the estimated 243

patients to Berubicin or Lomustine.

Patients receiving Berubicin will be administered a 2-hour IV infusion of 7.5 mg/m2 berubicin hydrochloride

daily for three consecutive days followed by 18 days off (a 21-day cycle).

Lomustine is administered orally once every six weeks.

trial will include an interim analysis that will evaluate the comparative effectiveness of these treatments, which is an adaptive design

intended to demonstrate that there are no differences in efficacy between treatments (futility analysis).

Even if Berubicin is approved,

there is no assurance that patients will choose an infusion treatment, as compared to the current standard of care, which requires oral

administration.

We do not have manufacturing facilities and all

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intellectual property and development data regarding Berubicin, including all trade secrets, knowhow, confidential information and other

intellectual property rights, which we refer to as the Reata Data.

intellectual property rights.

On December 28, 2017, we obtained the rights to

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HPI is affiliated with Dr.

Priebe, our founder and largest shareholder.

Under the HPI License we obtained the exclusive

right to develop certain chemical compounds for use in the treatment of cancer anywhere in the world.

In the HPI License we agreed to

Priebe, who controls a majority of our shares.

Under the HPI License we obtained the

exclusive right to develop certain chemical compounds for use in the treatment of cancer anywhere in the world.

In the HPI License we

agreed to pay HPI:

(i) development fees of $750,000 over a three-year period beginning November 2019;

(ii) a 2% royalty on net sales;

(iii) a $50,000

per year license fee;

(iv) milestone payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon the approval

of a New Drug Application (“NDA”) for Berubicin;

(iii) a $50,000 per year license fee;

(iv) milestone payments of $100,000 upon the commencement of a Phase II trial and $1.0 million upon

the approval of a New Drug Application (“NDA”) for Berubicin;

and (v) 200,000 shares of our common stock.

The patents we licensed from

HPI expired in March 2020.

The patents we licensed

from HPI expired in March 2020.

On June 10, 2020, the FDA granted Orphan Drug Designation

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Pursuant to the 1244 Agreement, we obtained a royalty-bearing, worldwide, exclusive license

to certain intellectual property rights, including patent rights, related to our WP1244 drug technology.

In consideration, we must make

payments to UTMDACC including an up-front license fee, annual maintenance fee, milestone payments and royalty payments (including minimum

annual royalties) for sales of licensed products developed under the 1244 Agreement.

The term of the 1244 Agreement expires on the last

to certain intellectual property rights, including patent rights, related to our portfolio of WP1244 drug technology.

In consideration,

we must make payments to UTMDACC including an up-front license fee, annual maintenance fee, milestone payments and royalty payments (including

minimum annual royalties) for sales of licensed products developed under the 1244 Agreement.

The term of the 1244 Agreement expires on

the last to occur of:

(a) the expiration of all patents subject to the 1244 Agreement, or (b) fifteen years after execution;

provided that UTMDACC

has the right to terminate the 1244 Agreement in the event that we fail to meet certain commercial diligence milestones.

that UTMDACC has the right to terminate the 1244 Agreement in the event that we fail to meet certain commercial diligence milestones.

On May 7, 2020, pursuant to the WP1244 portfolio

license agreement described above, we entered into a Sponsored Research Agreement with UTMDACC to perform research relating to novel anticancer

agents targeting CNS malignancies.

We agreed to fund approximately $1,134,000 over a two-year period.

During the nine months ended September

30, 2021, we paid $200,000 and accrued $400,000 related to this agreement in research and development expenses in our Statements of Operations.

license agreement described above, the Company entered into a Sponsored Research Agreement with UTMDACC to perform research relating to

novel anticancer agents targeting CNS malignancies.

The Company agreed to fund approximately $1,134,000 over a two-year period.

paid and recorded $334,000 in 2020 related to this agreement in research and development expenses in the Company’s Statements of

The remaining $800,000 was paid in 2021.

The principal investigator for this agreement is Dr.

Results of Operations for the Three Months Ended September 30, 2021

Compared to the Three Months Ended September 30, 2020

The work conducted under

this Sponsored Research Agreement has produced a new mesylate salt of WP1244 termed WP1874.

We believe the enhanced solubility of this

salt may increase its ability to be formulated for use in an IV infusion, while maintaining similar potency and toxicity characteristics.

As such, WP1874 will be the primary focus in our development efforts of the WP1244 portfolio.

Results of Operations for the Three Months Ended March 31, 2022

Compared to the Three Months Ended March 31, 2021

General and Administrative Expense

General and administrative expense was approximately

$1,235,000 for the three months ended September 30, 2021 compared to approximately $969,000 for the comparable period in 2020.

in general and administrative expense was mainly attributable to an increase of approximately $127,000 for stock-based compensation, $59,000

in insurance, $32,000 in employee compensation and taxes, $29,000 in Scientific Advisory Board compensation and $19,000 in other expenses.

Research and Development Expense

Research and development expense was approximately

$2,578,000 for the three months ended September 30, 2021 compared to approximately $1,042,000 for the comparable period in 2020.

incurred during the period were related to drug manufacturing and labor related to the preparation of our Phase II study.

incur increased research and development costs in the future as our product development activities expand.

net loss for the three months ended September 30, 2021 was approximately $3,813,000 compared to approximately $2,011,000 for the comparable

period in 2020.

The change in net loss is attributable to increased personnel and activity associated with preparing for our clinical

trials in 2021.

Results of Operations for the Nine Months Ended September 30, 2021

Compared to the Nine Months Ended September 30, 2020

General and Administrative Expense

General and administrative expense was $3,785,000

for the nine months ended September 30, 2021 compared to $3,305,000 for the comparable period in 2020.

The increase in general and administrative

expense, was mainly attributable to an increase of approximately $432,000 for stock-based compensation, $168,000 in employee compensation

and taxes, $71,000 in professional fees, $63,000 in insurance and $29,000 in Scientific Advisory Board compensation which were offset

by decreases in advertising and marketing of $231,000, travel expenses of $44,000 and $8,000 in other expenses.

$1,260,000 for the three months ended March 31, 2022 compared to approximately $1,403,000 for the comparable period in 2021.

in general and administrative expense was mainly attributable to a decrease of approximately $298,000 for employee compensation

(due to the timing of annual employee incentive compensation) and taxes and $68,000 in stock-based compensation, which were offset with

increases of approximately $199,000 in legal and professional fees and $24,000 in other expenses.

Our general and administrative expenses

are expected to remain approximately at these levels for the remainder of this year except for the three months ended June 30, 2022 in

which the annual employee incentive compensation, as previously disclosed, will be accrued and paid.

Research and Development Expense

Research and development expense was approximately

$7,450,000 for the nine months ended September 30, 2021 compared to $3,148,000 for the comparable period in 2020.

The expenses incurred

during the period were related to drug manufacturing and labor related to the preparation of our Phase II study.

We expect to incur increased

research and development costs in the future as our product development activities expand.

The net loss for the nine months ended September

30, 2021 was $11,241,000 compared to $6,453,000 for the comparable period in 2020.

The change in net loss is attributable to increased

personnel and activity associated with preparing for our clinical trials in 2021.

$1,521,000 for the three months ended March 31, 2022 compared to approximately $2,207,000 for the comparable period in 2021.

in research and development expenses during the period were mainly attributed to the timing of drug development expenses (significant

manufacturing activity occurred in the prior year period with much less occurring in the current year, and this lower level of manufacturing

activity is expected to continue throughout this year), as well as a credit to research and development expense for the funds collected

from WPD Pharmaceuticals related to their purchase of Berubicin drug product for their clinical trials, partially offset by an increase

in contract research organization (CRO) expenses related to continued progress with our Phase II clinical trial.

Our CRO expenditures

are primarily for labor related to activating selected trial sites, managing patient enrollment processes, collecting and managing data

from patient treatments throughout the trial, processing reimbursement to the sites for patient treatment, and assisting with necessary

submissions to amend the IND.

CRO expenditures are expected to remain relatively level throughout the remainder of the trial as site activation

efforts and the associated costs thereof transition into reimbursing clinical trial sites for patient treatment costs as site and patient

enrollment increases.

We expect to incur increased research and development costs in the future as we continue our Phase II clinical trial.

The net loss for the three months ended March 31,

2022 was approximately $2,784,000 compared to approximately $3,613,000 for the comparable period in 2021.

The change in net loss is attributable

to decreases in employee compensation (due to the timing of annual employee incentive compensation and associated payroll taxes), the

timing of drug development expenses (significant manufacturing activity occurred in the prior year period with much less occurring in

the current year), as well as a credit to research and development expense for the funds collected from WPD Pharmaceuticals related to

their purchase of Berubicin drug product for their clinical trials, partially offset by an increase in CRO expenses related to continued

progress with our Phase II clinical trial as well as increases in legal and professional fees and other expenses.

Liquidity and Capital Resources

On September 30, 2021, we had cash of approximately

$8,326,000 and we had working capital of approximately $8,748,000.

We fund our operations from proceeds from equity sales.

Our plan of operations is primarily focused on completing a Phase II clinical trial for Berubicin.

We estimate that we will require additional financing of approximately $16 million to complete the trial, approximately $2.0 million

to support near-term WP1244 preclinical work, plus such additional working capital to fund our operations during the pendency of the

Our current expectation is that our cash on hand is sufficient to fund our operations into the second quarter of 2022.

and costs of clinical trials are difficult to predict and trial plans may change in response to evolving circumstances and as such the

foregoing estimates may prove to be inaccurate.

On March 31, 2022, we had

cash of approximately $12,440,000 and we had working capital of approximately $13,664,000.

We fund our operations from proceeds from equity

In January 2022, we completed a financing with

several institutional investors for the sale of (i) 9,489,474 shares of common stock, (ii) pre-funded warrants to purchase up to an aggregate

of 2,615,790 shares of common stock and (iii) warrants to purchase up to an aggregate of 12,105,264 shares of common stock.

purchase price of one share of common stock (or one pre-funded warrant) and accompanying common warrant was $0.95.

The gross proceeds

from the private placement were approximately $11.5 million, before deducting the placement agent’s fees and other offering expenses.

We believe that the proceeds from this issuance

and our cash on hand are sufficient to fund our planned operations into, but not beyond, 2023.

Our plan of operations is primarily focused on

completing a Phase II clinical trial for Berubicin.

We estimate that we will require additional financing of approximately $12 - $16 million

to complete the trial, approximately $5.0 million to support near-term WP1244/WP1874 preclinical work, plus such additional working capital

to fund our operations during the pendency of the trial.

Our current expectation is that our cash on hand is sufficient to fund our operations

into the first quarter of 2023.

The timing and costs of clinical trials are difficult to predict and trial plans may change in response

to evolving circumstances and as such the foregoing estimates may prove to be inaccurate.

We will need to raise additional capital in order

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Net cash used in operating activities was approximately

$10,302,000 and $5,871,000 for the nine months ended September 30, 2021 and 2020, respectively, and mainly included payments made for

clinical trial preparation, officer compensation, insurance, marketing and professional fees to our consultants, attorneys and accountants.

$3,077,000 and $3,308,000 for the three months ended March 31, 2022 and 2021, respectively, and mainly included payments made for clinical

trial preparation, officer compensation, insurance, marketing and professional fees to our consultants, attorneys and accountants.

Cash used in investing activities

Net cash used by investing activities was approximately

$4,000 and $18,000 for the nine months ended September 30, 2021 and 2020, respectively.

The amount used in 2020 and 2021 are related to

the purchase of furniture and equipment.

$0 and $4,000 for the three months ended March 31, 2022 and 2021, respectively.

The amount used in 2021 are related to the purchase of

furniture and equipment.

Cash provided by financing activities

Net cash provided by financing activities was $10,513,000

for the nine months ended September 30, 2021 related to the sale of common stock and exercise of warrants, offset by the repayment of

notes payable.

Net cash used in financing activities was $45,000 for the nine months ended September 30, 2020 related payment of deferred

offering costs.

for the three months ended March 31, 2022 related to the sale of common stock and exercise of warrants, offset by the repayment of notes

Net cash used in financing activities was $347,000 for the three months ended March 31, 2021 related to the sale of common stock

and exercise of warrants, offset by the repayment of notes payable.

Off-balance Sheet Arrangements

As of September 30, 2021, we did not have any relationships

As of March 31, 2022, we did not have any relationships

with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities,

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and adjustments are made when facts and circumstances dictate a change.

Stock-based Compensation – Employee

and non-employee share-based compensation is measured at the grant date, based on the fair value of the award, and is recognized as an

expense over the requisite service period.

Research and Development Costs - Research

and development costs are expensed as incurred.

Quantitative and Qualitative Disclosures About Market Risk

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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-Q

Item 2. Management’s Discussion and Analysis