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Item 2. Management’s Discussion and Analysis

2023-08-09 compared with 2023-05-11 · 47 added, 27 removed, 72 unchanged (51% 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 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.

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 June 30, 2023 and our audited consolidated financial statements for the year ended September 30, 2022 included in our Annual Report on Form 10-K, as amended, filed with the Securities and Exchange Commission (the “SEC”) on December 16, 2022.

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

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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 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.

The discussion and analysis of our financial condition and results of operations are based on our unaudited condensed interim consolidated financial statements as of June 30, 2023 and September 30, 2022, and for the three and nine months ended June 30, 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.

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

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

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

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

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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.

Among the preliminary findings, 1.0% EB01 (daniluromer) 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.

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Recent Developments

EB05 (Paridiprubart) Clinical Study

EB05 (paridiprubart)

In June 2023, we announced positive findings from an in vitro study of paridiprubart against a panel of respiratory pathogens.

The research results demonstrated that inflammation signaling from multiple pathogens, including Influenza A, coronavirus and a common bacterium ( H.

influenzae ), was inhibited by paridiprubart.

Based on these findings and our clinical experience with paridiprubart, we believe that our drug candidate could provide an effective treatment for ARDS caused by, among others, coronaviruses, pandemic influenza and harmful bacteria.

The in vitro study was conducted in collaboration with the University of Toronto under a grant from the Government of Canada's Strategic Innovation Fund.

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.

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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.

With recruitment open in both the U.S.

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

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.

Based on current hospitalization trends and our recruitment experience, we believe that Covid-19-related hospitalization patterns have become more predictable and seasonal in nature, similar to those of influenza, with increased hospitalizations and deaths anticipated in the fall/winter and among populations and geographies with low booster/vaccination rates.

As a result, we believe that the pace of future enrollment will be more closely linked to the number and location of investigational sites we activate rather than the unpredictable waves of the pandemic.

Subject to funding, we plan to increase the number of investigational centers from 23 to up to 60 hospitals in the U.S.

We have the flexibility to adjust the timing of these and other clinical trial expenditures to manage our working capital.

In addition to Covid-19 induced ARDS, we are also exploring various approaches to evaluate our EB05 (paridiprubart) drug candidate in a general ARDS population, including, among other potential options, participating in a government-sponsored platform study, amending our current Phase 3 study protocol to include non-Covid-19 ARDS patients and initiating a separate study or cohort.

Given the broader pool of patients, we believe a harmonized or general ARDS study could increase efficiency and expedite development timelines as well as validate the broader potential utility of paridiprubart.

Any changes we make to our clinical study protocol may impact how previously enrolled subjects are categorized and/or included in the study’s results.

EB01 (daniluromer)

In June 2023, we announced the assignment of the name "daniluromer" to the active pharmaceutical ingredient in our EB01 drug candidate, a topical formulation of daniluromer that we are developing as a treatment for Allergic Contact Dermatitis.

We expect daniluromer to be published in an upcoming World Health Organization (WHO) list of recommended international nonproprietary names.

The WHO, under its International Nonproprietary Names program, provides a globally recognized system for selecting unique names to identify pharmaceutically active substances.

Significant Accounting Policies and Estimates

See Note 3 to our financial statements included in our Annual Report on Form 10-K for the year ended September 30, 2022 for a discussion of our significant accounting policies and estimates.

There have been no material changes to such critical accounting policies or estimates.

Results of Operations

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.

Comparison of the Three Months Ended June 30, 2023 and 2022

Total operating expenses decreased by $3.74 million to $2.06 million for the three months ended June 30, 2023 compared to $5.80 million for the same period last year:

Research and development expenses decreased by $3.52 million to $1.03 million for the three months ended June 30, 2023 compared to $4.55 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.

In the comparative period, the Company purchased bulk drug product of EB05 for its clinical study for $2.54 million.

General and administrative expenses decreased by $0.21 million to $1.04 million for the three months ended June 30, 2023 compared to $1.25 million for the same period last year primarily due to decreased non-cash share-based compensation.

Total other income increased by $0.07 million to $0.08 million for the three months ended June 30, 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 June 30, 2023, our net loss was $1.98 million, or $0.10 per common share, compared to a net loss of $5.79 million, or $0.37 per common share, for the three months ended June 30, 2022.

Comparison of the Nine Months Ended June 30, 2023 and 2022

Total operating expenses decreased by $8.68 million to $6.85 million for the nine months ended June 30, 2023 compared to $15.53 million for the same period last year:

Research and development expenses decreased by $7.70 million to $3.84 million for the nine months ended June 30, 2023 compared to $11.54 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, and a decrease in non-cash share-based compensation.

General and administrative expenses decreased by $0.98 million to $3.01 million for the nine months ended June 30, 2023 compared to $3.99 million for the same period last year primarily due to decreased personnel expenses and non-cash share-based compensation.

Total other income decreased by $0.60 million to $0.20 million for the nine months ended June 30, 2023 compared to $0.80 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 nine months ended June 30, 2023, our net loss was $6.65 million, or $0.34 per common share, compared to a net loss of $14.74 million, or $1.04 per common share, for the nine months ended June 30, 2022.

Capital Expenditures

Our capital expenditures primarily consist of computer and office equipment.

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

There were no significant capital expenditures for the three and nine months ended June 30, 2023 and 2022.

Liquidity and Capital Resources

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

For the nine-month periods ended June 30, 2023 and 2022, we reported net losses of $6.65 million and $14.74 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.

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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.

For the three months ended June 30, 2023, we sold a total of 808,107 common shares pursuant to the agreement.

After deducting commissions and costs, net proceeds totaled $0.69 million.

Subsequent to the quarter end, sales under the agreement have resulted in the issuance of 226,882 common shares and receipt of net cash proceeds of $0.19 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.

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.

During the nine months ended June 30, 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.

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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.

At June 30, 2023, we had cash and cash equivalents of $6.46 million, working capital of $5.39 million, shareholders’ equity of $7.85 million and an accumulated deficit of $50.70 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.

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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 $2.82 million and $6.99 million for the six months ended March 31, 2023 and 2022, respectively.

Our research and development costs were $3.84 million and $11.54 million for the nine months ended June 30, 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.

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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