What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2023-05-11 compared with 2023-02-10 · 45 added, 46 removed, 54 unchanged (63% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of December 31, 2022 and our audited consolidated financial statements for the year ended September 30, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 16, 2022.

The following management’s discussion and analysis of our financial condition and results of operations should be read in conjunction with the unaudited condensed interim consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q as of March 31, 2023 and our audited consolidated financial statements for the year ended September 30, 2022 included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission on December 16, 2022.

This Quarterly Report on Form 10-Q contains forward-looking statements.

4 unchanged sentences

We do not intend to update any of the forward-looking statements after the date of this report to conform these statements to actual results or to changes in our expectations, except as required by law.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of December 31, 2022 and September 30, 2022, and for the three months ended December 31, 2022 and 2021 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of March 31, 2023 and September 30, 2022, and for the three and six months ended March 31, 2023 and 2022 included in Part I, Item 1 of this Quarterly Report on Form 10-Q, which we have prepared in accordance with U.S.

generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q.

7 unchanged sentences

We have multiple late-stage product candidates in our development pipeline.

Our most advanced drug candidate is EB05, a monoclonal antibody developed for acute and chronic disease indications that involve dysregulated innate immunity responses.

Our most advanced drug candidate is EB05 (paridiprubart), a monoclonal antibody developed for acute and chronic disease indications that involve dysregulated innate immunity responses.

EB05 inhibits toll-like receptor 4 (TLR4), a key immune signaling protein and an important mediator of inflammation.

2 unchanged sentences

Among the findings, EB05 demonstrated statistically significant mortality reductions in critically ill hospitalized patients treated with EB05 plus Standard of Care treatment (SOC).

Based in part of these findings, the U.S.

Food and Drug Administration (FDA) granted us Fast Track designation.

We are currently enrolling patients in the Phase 3 part of the EB05 study.

In addition to EB05, we are developing product candidates for a number of chronic dermatological and inflammatory conditions.

We recently completed enrollment and reported preliminary topline results of a Phase 2b study of our EB01 drug candidate in moderate-to-severe chronic Allergic Contact Dermatitis (ACD), a common occupational and work-related skin condition.

We are also preparing an investigational new drug application (IND) in the United States for our EB07 product candidate to conduct a future Phase 2 study in systemic sclerosis (SSc), an autoimmune rheumatic disorder that causes fibrosis (scarring/hardening) of skin and internal organs.

In Canada, we are preparing a clinical trial application (CTA) for our EB06 monoclonal antibody candidate to conduct a future Phase 2 study in vitiligo, a common autoimmune disorder that causes the skin to lose its color in patches.

Recent Developments

EB05 Clinical Study

In December 2022, the U.S.

Food and Drug Administration (FDA) granted us Fast Track designation for our EB05 monoclonal antibody candidate.

The Fast Track program provides Edesa with the opportunity for more frequent communication with the agency to discuss the development path for EB05 as a treatment for ARDS in critically ill Covid-19 patients.

Investigational drugs that receive Fast Track designation are also eligible for rolling review of their marketing application as well as potential pathways for accelerated regulatory approval.

To receive this designation, drug candidates must both treat a serious disease and have non-clinical or clinical data that demonstrate the potential to address an unmet medical need.

EB01 Clinical Study

In January 2023, we reported preliminary, topline results from a Phase 2b clinical study evaluating multiple concentrations of our drug candidate, EB01, as a monotherapy for chronic moderate-to-severe ACD.

The double-blind, placebo-controlled trial evaluated the safety and efficacy of EB01 in approximately 200 subjects, who were treated for 28 days with either EB01 cream (2.0%, 1.0% or 0.2%) or a placebo/vehicle cream.

The primary efficacy outcome measurement was the mean percent improvement in symptoms from baseline at day 29 on the Contact Dermatitis Severity Index (CDSI).

A key secondary efficacy measurement was the success rate of subjects achieving a score of "clear" or "almost clear" with at least a 2-point improvement from baseline after treatment at day 29 on the Investigator's Static Global Assessment (ISGA) scale.

The 1.0% EB01 cream demonstrated statistically significant improvement over placebo.

For the primary endpoint, patients with 1.0% EB01-treated lesions demonstrated an 60% average improvement in symptoms from baseline at day 29 on the CDSI versus 39% for placebo/vehicle (p=0.02).

The effect was also observed at 15 days (44% for 1.0% EB01 vs 29% for placebo;

p=0.05) and continued at follow-up (64% for 1.0% EB01 vs.

44% for placebo;

For the ISGA secondary efficacy endpoint, 53% of patients with 1.0% EB01-treated lesions achieved a score of "clear" or "almost clear" with at least a 2-point improvement from baseline after treatment at day 29 (p=0.04).

Only 29% of patients in the placebo group reached the same endpoint.

No serious treatment-related adverse events were reported across all concentrations.

The 2.0% and 0.2% formulations did not show significant differences compared to placebo.

These topline results are preliminary in nature, and should not be considered the complete, final or definitive results of the Phase 2b study.

We recently reported preliminary, topline results from a Phase 2b clinical study evaluating multiple concentrations of our drug candidate, EB01, as a monotherapy for moderate-to-severe chronic Allergic Contact Dermatitis (ACD), a common occupational skin condition.

Among the preliminary findings, 1.0% EB01 cream demonstrated statistically significant improvement over placebo for the primary endpoint and a key secondary endpoint.

We are preparing for an End of Phase 2 meeting with FDA following full analysis.

EB06 Clinical Trial Application

In January 2023, Health Canada approved our clinical trial application (CTA) for our EB06 monoclonal antibody candidate to conduct a future Phase 2 study in vitiligo, a common autoimmune disorder that causes skin to lose its color in patches.

We are also preparing an investigational new drug application (IND) in the United States for our EB07 (paridiprubart) product candidate to conduct a future Phase 2 study in systemic sclerosis (SSc), an autoimmune rheumatic disorder that causes fibrosis (scarring/hardening) of skin and internal organs.

Recent Developments

EB05 (Paridiprubart) Clinical Study

In March 2023, we announced that the company and the FDA agreed on the primary endpoint and population for the Phase 3 part of a Phase 2/3 study evaluating our monoclonal antibody candidate, EB05, as a therapy for hospitalized Covid-19 patients with ARDS.

Under the amended protocol design, Edesa will evaluate a single cohort of severely ill patients on invasive mechanical ventilation, both with and without additional organ support such as extracorporeal membrane oxygenation (ECMO).

Edesa plans to enroll approximately 600 evaluable hospitalized subjects.

The primary endpoint will be the mortality rate at 28 days.

Last year, Canadian regulators approved a similar Phase 3 study of EB05 in Covid-19-induced ARDS among two separate cohorts of patients, and we are evaluating potential future harmonization of the Canadian protocol with the U.S.

With recruitment now open in both the U.S.

and Canada, we have discontinued recruitment at secondary sites, which were located in Poland and Colombia.

In addition to Covid-19 induced ARDS, we are also exploring various approaches to evaluating EB05 in a general ARDS population.

In April 2023, we announced the World Health Organization and the United States Adopted Name (USAN) Council have adopted the international nonproprietary name "paridiprubart" for our anti-TLR4 monoclonal antibody candidate.

Results of Operations

Comparison of the Three Months Ended December 31, 2022 and 2021

Total operating expenses decreased by $2.78 million to $2.38 million for the three months ended December 31, 2022 compared to $5.16 million for the same period last year:

Research and development expenses decreased by $2.59 million to $1.36 million for the three months ended December 31, 2022 compared to $3.95 million for the same period last year primarily due to decreased external research expenses related to our ongoing clinical studies and manufacturing of our investigational drugs.

General and administrative expenses decreased by $0.19 million to $1.02 million for the three months ended December 31, 2022 compared to $1.21 million for the same period last year primarily due to a decrease in noncash share-based compensation.

Total other income decreased by $0.74 million to $0.04 million for the three months ended December 31, 2022 compared to $0.78 million for the same period last year primarily due to a decrease in grant income associated with the completion of clinical study activities under our federal reimbursement grant with the Canadian government’s Strategic Innovation Fund.

For the three months ended December 31, 2022, our net loss was $2.33 million, or $0.13 per common share, compared to a net loss of $4.38 million, or $0.33 per common share, for the three months ended December 31, 2021.

Comparison of the Three Months Ended March 31, 2023 and 2022

Total operating expenses decreased by $2.17 million to $2.41 million for the three months ended March 31, 2023 compared to $4.58 million for the same period last year:

Research and development expenses decreased by $1.58 million to $1.46 million for the three months ended March 31, 2023 compared to $3.04 million for the same period last year primarily due to decreased external research expenses related to our ongoing clinical studies and manufacturing of our investigational drugs.

General and administrative expenses decreased by $0.58 million to $0.95 million for the three months ended March 31, 2023 compared to $1.53 million for the same period last year primarily due to decreased personnel expenses and noncash share-based compensation.

Total other income increased by $0.07 million to $0.08 million for the three months ended March 31, 2023 compared to $0.01 million for the same period last year primarily due to an increase in interest earned on cash balances.

For the three months ended March 31, 2023, our net loss was $2.33 million, or $0.12 per common share, compared to a net loss of $4.57 million, or $0.33 per common share, for the three months ended March 31, 2022.

Comparison of the Six Months Ended March 31, 2023 and 2022

Total operating expenses decreased by $4.95 million to $4.79 million for the six months ended March 31, 2023 compared to $9.74 million for the same period last year:

Research and development expenses decreased by $4.17 million to $2.82 million for the six months ended March 31, 2023 compared to $6.99 million for the same period last year primarily due to decreased external research expenses related to our ongoing clinical studies and manufacturing of our investigational drugs.

General and administrative expenses decreased by $0.77 million to $1.97 million for the six months ended March 31, 2023 compared to $2.74 million for the same period last year primarily due to decreased personnel expenses and noncash share-based compensation.

Total other income decreased by $0.67 million to $0.12 million for the six months ended March 31, 2023 compared to $0.79 million for the same period last year primarily due to a decrease in grant income associated with the completion of clinical study activities under our federal reimbursement grant with the Canadian government’s Strategic Innovation Fund.

For the six months ended March 31, 2023, our net loss was $4.67 million, or $0.24 per common share, compared to a net loss of $8.95 million, or $0.66 per common share, for the six months ended March 31, 2022.

Capital Expenditures

Our capital expenditures primarily consist of computer and office equipment.

There were no significant capital expenditures for the three months ended December 31, 2022 and 2021.

There were no significant capital expenditures for the three and six months ended March 31, 2023 and 2022.

Liquidity and Capital Resources

1 unchanged sentence

Our operations have historically been funded through issuances of common shares, exercises of common share purchase warrants, convertible preferred shares, convertible loans, government grants and tax incentives.

For the three-month periods ended December 31, 2022 and 2021, we reported net losses of $2.33 million and $4.38 million, respectively.

For the six-month periods ended March 31, 2023 and 2022, we reported net losses of $4.67 million and $8.95 million, respectively.

On March 27, 2023, we entered into an equity distribution agreement with Canaccord Genuity LLC (Canaccord), as sales agent, pursuant to which the Company may offer and sell, from time to time, common shares through an at-the-market equity offering program for up to $20 million in gross cash proceeds, subject to certain offering limitations that currently allow the Company to offer and sell common shares having an aggregate gross sales price of up to $8.37 million.

Canaccord will use commercially reasonable efforts to sell the common shares from time to time, based upon our instructions.

We have no obligation to sell any of the common shares and may at any time suspend sales under the equity distribution agreement or terminate the equity distribution agreement in accordance with its terms.

The total amount of cash that may be generated under this equity distribution agreement is uncertain and depends on a variety of factors, including market conditions and the trading price of our common shares.

There were no sales in the quarter ended March 31, 2023.

Subsequent to the quarter end, sales under our equity distribution agreement with Canaccord have resulted in the issuance of 562,052 common shares and receipt of net cash proceeds of $0.60 million after deducting sales agent commissions.

In November 2022, we completed a private placement of units consisting of 2,691,337 common shares, three-year warrants to purchase up to an aggregate of 1,345,665 common shares (Class A warrants) and twelve-month warrants to purchase up to an aggregate of 1,345,665 common shares (Class B warrants).

The gross proceeds from this offering are approximately $3.03 million, before offering expenses.

Subsequent to December 31, 2022 and through the date of this filing, 705,314 shares have been issued upon the exercise of Class A and Class B warrants, with proceeds to the Company of $0.77 million.

During the six months ended March 31, 2023, 705,314 shares have been issued upon the exercise of Class A and Class B warrants, with proceeds to the Company of $0.77 million.

In March 2022, we completed a registered direct offering of 1,540,000 common shares, no par value, and pre-funded warrants to purchase up to an aggregate of 1,199,727 common shares.

1 unchanged sentence

After deducting the placement agent fees and offering expenses, net proceeds to the Company were approximately $9.01 million.

In November 2021, we entered into an equity distribution agreement with RBC Capital Markets, LLC (RBCCM), as sales agent, which was subsequently terminated in March 2022.

Pursuant to the terms of the agreement, as amended, the Company could offer and sell, from time to time, common shares through an at-the-market offering program for up to $15.4 million in gross cash proceeds.

During the term of the agreement, we sold a total of 626,884 common shares.

After deducting commissions and direct costs, net proceeds totaled approximately $2.62 million.

From November 2021 to March 2022, we sold a total of 626,884 common shares under an “at-the-market” equity distribution program which resulted in net proceeds of $2.62 million after deducting commissions and direct costs.

Under our contribution agreement with the Canadian government’s Strategic Innovation Fund (SIF), we were eligible to receive cash reimbursements up to C$14.05 million (approximately $11 million USD) in the aggregate for certain research and development expenses related to our EB05 clinical development program.

For the years ended September 30, 2022 and 2021, we recorded grant income of $0.78 million and $10.34 million respectively.

All grant reimbursements have been received at December 31, 2022.

At December 31, 2022, we had cash and cash equivalents of $8.27 million, working capital of $7.81 million, shareholders’ equity of $10.27 million and an accumulated deficit of $46.38 million.

We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand, including proceeds from warrant exercises of $0.77 million received subsequent to December 31, 2022.

All grant reimbursements were received by December 31, 2022.

At March 31, 2023, we had cash and cash equivalents of $7.47 million, working capital of $6.56 million, shareholders’ equity of $9.0 million and an accumulated deficit of $48.71 million.

We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand and equity sales under the at-the-market offering program.

Management has flexibility to adjust this timeline by making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures and manufacturing campaigns, staffing levels, and the acquisition or in-licensing of new product candidates.

10 unchanged sentences

Research and development expenses, which have historically varied based on the level of activity in our clinical programs, are significantly influenced by study initiation expenses and patient recruitment rates, and as a result are expected to continue to fluctuate, sometimes substantially.

Our research and development costs were $1.36 million and $3.95 million for the three months ended December 31, 2022 and 2021, respectively.

Our research and development costs were $2.82 million and $6.99 million for the six months ended March 31, 2023 and 2022, respectively.

The decrease was due primarily to decreased external research expenses related to our ongoing clinical studies and manufacturing of our investigational drugs.

4 unchanged sentences

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