Item 2. Management’s Discussion and Analysis
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations
CAUTIONARY STATEMENT
This section and other parts of this Quarterly
Report on Form 10-Q contain forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that
involve risks and uncertainties. Forward-looking statements provide current expectations of future events based on certain assumptions
and include any statement that does not directly relate to any historical or current fact. Forward-looking statements can be identified
by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “plans,” “predicts,” “will,” “would,” “could,” “can,”
“may,” and similar terms. Forward-looking statements are not guarantees of future performance and our actual results may differ
significantly from the results discussed in the forward-looking statements. Factors that might cause such differences include, but are
not limited to, those discussed in Part I, Item 1A of the our Annual Report on Form 10-K for the year ended December 31, 2020 under the
heading “Risk Factors.” We assume no obligation to revise or update any forward-looking statements for any reason, except
as required by law.
The following discussion should be read in conjunction
with our Annual Report on Form 10-K for the year ended December 31, 2020 and the condensed consolidated financial statements and accompanying
notes included elsewhere in this report.
Overview
Product Candidate
PEDMARK TM
Our
only product candidate in the clinical stage of development is:
· PEDMARK TM (sodium thiosulfate
(STS) anhydrous injection). We have announced results of two Phase 3 clinical trials for the prevention of cisplatin induced hearing loss,
or ototoxicity in children, including the pivotal Phase 3 study SIOPEL 6, “A Multicentre Open Label Randomised Phase 3 Trial
of the Efficacy of Sodium Thiosulfate in Reducing Ototoxicity in Patients Receiving Cisplatin Chemotherapy for Standard Risk Hepatoblastoma,”
and the proof of concept Phase 3 study in collaboration with the Children’s Oncology Group (“COG ACCL0431”) “A Randomized
Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children”. COG ACCL0431 final results
were published in the Lancet Oncology in 2016. SIOPEL 6 final results were published in the New England Journal of Medicine in June 2018.
We continue to focus our resources on the development
of PEDMARK TM .
We have licensed from OHSU intellectual property
rights for the use of PEDMARK TM as a chemoprotectant and are developing PEDMARK TM as a protectant against
the hearing loss often caused by platinum-based anti-cancer agents in children. Preclinical and clinical studies conducted by OHSU and
others have indicated that PEDMARK TM can effectively reduce the incidence of hearing loss caused by platinum-based anti-cancer
agents.
Hearing loss among children receiving platinum-based
chemotherapy is frequent, permanent and often severely disabling. The incidence of hearing loss in these children depends upon the dose
and duration of chemotherapy, and many of these children require lifelong hearing aids. In addition, adults undergoing chemotherapy for
several common malignancies, including ovarian cancer, testicular cancer, and particularly head and neck cancer and brain cancer, often
receive intensive platinum-based therapy and may experience severe, irreversible hearing loss, particularly in the high frequencies.
We estimate in the U.S. and Europe that
annually over 10,000 children with solid tumors are treated with platinum agents. The vast majority of these newly diagnosed tumors
are localized and classified as low to intermediate risk in nature. These localized cancers may have overall survival rates of greater
than 80%, further emphasizing the importance of quality of life after treatment. The incidence of hearing loss in these children depends
upon the dose and duration of chemotherapy, and many of these children require lifelong hearing aids. There is currently no established
preventive agent for this hearing loss and only expensive, technically difficult and sub-optimal cochlear (inner ear) implants have been
shown to provide some benefit. Infants and young children at critical stages of development lack speech language development and literacy,
and older children and adolescents lack speech language development and literacy, and older children and adolescents lack social-emotional
development and educational achievement.
16
In March 2018, PEDMARK TM received
Breakthrough Therapy and Fast Track designations from the U.S. FDA. Further, PEDMARK TM has received Orphan Drug Designation
in the U.S. in this setting.
We initiated our rolling NDA for PEDMARK TM
for the prevention of ototoxicity induced by cisplatin chemotherapy patients 1 month to < 18 years of age with localized, non-metastatic,
solid tumors with the FDA in December 2018. We announced that we had submitted full completion of the NDA in February 2020.
On April 13, 2020, we announced that the FDA had accepted for filing and granted Priority Review for our NDA. The FDA set a Prescription
Drug Fee Act (“PDUFA”) target action date of August 10, 2020 for the completion of the FDA’s review. On August 10,
2020, we announced that we received a CRL from the FDA regarding our NDA for PEDMARK TM , which identified deficiencies in the
third-party manufacturing facility that manufactures PEDMARK TM on our behalf. Importantly, no clinical safety or efficacy issues
were identified during the review and there is no requirement for further clinical data. In the fourth quarter of 2020, we engaged in
a Type A meeting with the FDA concerning the CRL that we believe was constructive and collaborative. We are working closely with our third-party
drug manufacturer and the FDA to fully address the CRL, and we plan to resubmit our NDA for PEDMARK TM in the second quarter
of 2021.
In August 2018, the Pediatric Committee (“PDCO”)
of the European Medicines Agency (“EMA”) accepted our pediatric investigation plan (PIP) for sodium thiosulfate with the trade
name Pedmarqsi for the condition of the prevention of platinum-induced hearing loss. An accepted PIP is a prerequisite for filing a Marketing
Authorization Application (“MAA”) for any new medicinal product in Europe. The indication targeted by our PIP is
for the prevention of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB). Additional tumor types of the proposed
indication will be subject to the Committee for Medicinal Products for Human Use (“CHMP”) assessment at the time of the MAA.
No deferred clinical studies were required in the positive opinion given by PDCO. We were also advised that sodium thiosulfate (tradename
to be determined) is eligible for submission of an application for a Pediatric Use Marketing Authorization (“PUMA”). A PUMA
is a dedicated marketing authorization covering the indication and appropriate formulation for medicines developed exclusively for use
in the pediatric population and provides data and market protection up to 10 years. Therefore, this decision allows us to proceed with
the submission of a PUMA in the European Union (EU) with incentives of automatic access to the centralized procedure and up to 10 years
of data and market protection. In February 2020, we announced that we had submitted a MAA for the prevention of ototoxicity induced
by cisplatin chemotherapy patients 1 month to < 18 years of age with localized, non-metastatic, solid tumors.
In August 2018, the Pediatric Committee (PDCO)
of the European Medicines Agency (EMA) accepted our pediatric investigation plan (PIP) for sodium thiosulfate with the trade name Pedmarqsi
for the condition of the prevention of platinum-induced hearing loss. An accepted PIP is a prerequisite for filing a Marketing Authorization
Application (MAA) for any new medicinal product in Europe. The indication targeted by the Company’s PIP is for the prevention
of platinum-induced ototoxic hearing loss for standard risk hepatoblastoma (SR-HB). Additional tumor types of the proposed indication
will be subject to the Committee for Medicinal Products for Human Use (CHMP) assessment at the time of the MAA. No deferred clinical studies
were required in the positive opinion given by PDCO. The Company was also advised that sodium thiosulfate (tradename to be determined)
is eligible for submission of an application for a Pediatric Use Marketing Authorization (PUMA). Therefore, this decision allows Fennec
to proceed with the submission of a PUMA in the European Union (EU) with incentives of automatic access to the centralized procedure
and up to 10 years of data and market protection The PUMA is a dedicated marketing authorization covering the indication and appropriate
formulation for medicines developed exclusively for use in the pediatric population and provides data and market protection up to 10 years.
In February 2020, Fennec announced that it has submitted a MAA for the prevention of otoxicity induced by cisplatin chemotherapy patients
1 month to < 18 years of age with localized, non-metastatic, solid tumors.
Clinical Studies
PEDMARK TM has
been studied by cooperative groups in two Phase 3 clinical studies of survival and reduction of ototoxicity, COG ACCL0431 and SIOPEL 6.
Both studies have been completed. The COG ACCL0431 protocol enrolled one of five childhood cancers typically treated with intensive cisplatin
therapy for localized and disseminated disease, including newly diagnosed hepatoblastoma, germ cell tumor, osteosarcoma, neuroblastoma,
and medulloblastoma. SIOPEL 6 enrolled only hepatoblastoma patients with localized tumors.
17
SIOPEL 6
In
October 2007, we announced that our collaborative partner, the International Childhood Liver Tumour Strategy Group, known as SIOPEL,
a multi-disciplinary group of specialists under the umbrella of the International Society of Pediatric Oncology, had launched a randomized
Phase 3 clinical trial SIOPEL 6 to investigate whether STS reduces hearing loss in standard risk hepatoblastoma (liver) cancer patients
receiving cisplatin as a monotherapy .
The study was initiated in October 2007 initially
in the United Kingdom and completed enrollment at the end of 2014. 52 sites from 11 countries enrolled 109 evaluable patients. Under the
terms of our agreement, SIOPEL conducted and funded all clinical activities and we provided drug, drug distribution and pharmacovigilance,
or safety monitoring, for the study. SIOPEL 6 was completed in December 2014 and the final results of SIOPEL 6 were published in The
New England Journal of Medicine in June 2018.
The primary objectives of SIOPEL 6 were:
· To assess the efficacy of sodium thiosulfate to reduce the hearing impairment caused by cisplatin.
· To
carefully monitor any potential impact of sodium thiosulfate on response to cisplatin and survival.
SIOPEL 6 - Results
Background / Objectives:
Bilateral high-frequency
hearing loss is a serious permanent side-effect of cisplatin therapy, particularly debilitating when occurring in young children. STS
has been shown to reduce cisplatin induced hearing loss. SIOPEL 6 was a Phase 3 randomized trial to assess the efficacy of STS in reducing
ototoxicity in young children treated with cisplatin (Cis) for Standard Risk Hepatoblastoma (SR-HB).
Design / Methods:
Newly diagnosed patients
with SR-HB, defined as tumor limited to PRETEXT I, II or III, no portal or hepatic vein involvement, no intra-abdominal extrahepatic
disease, AFP >100ng/ml and no metastases, were randomized to Cis or Cis+STS for 4 preoperative and 2 postoperative courses. Cisplatin
80mg/m2 was administered over 6 hours, STS 20g/m2 was administered intravenously over 15 minutes exactly 6 hours after stopping cisplatin. Tumor
response was assessed after 2 and 4 preoperative cycles with serum AFP and liver imaging. In case of progressive disease (PD), STS was
to be stopped and doxorubicin 60mg/m2 combined with cisplatin. The primary endpoint was centrally reviewed absolute hearing threshold,
at the age of ≥3.5 years by pure tone audiometry.
Results:
109 randomized patients
(52 Cisplatin only ("Cis") and 57 Cis+STS) were evaluable. The combination of Cis+STS was generally well tolerated. With a patient
follow-up time of 52 months, the three-year Event Free Survival ("EFS") for Cis was 78.8% Cisplatin and 82.1% for the Cis +
STS. The three-year Overall Survival ("OS") is 92.3% for Cis and 98.2% for Cis + STS. Treatment failure defined as Progressive
Disease ("PD") at 4 cycles was equivalent in both arms. Among the first 101 evaluable patients, hearing loss occurred in 29/46=63.0%
under Cis and in 18/55=32.7% under Cis +STS, corresponding to a relative risk of 0.52(P=0.002).
18
Conclusions:
This
randomized Phase 3 trial in SR-HB of cisplatin versus cisplatin plus STS shows that the addition of STS significantly reduces the incidence
of cisplatin-induced hearing loss without any evidence of tumor protection .
COG ACCL0431
In March 2008, we announced the activation
of a Phase 3 trial with STS to prevent hearing loss in children receiving cisplatin-based chemotherapy in collaboration with the Children’s
Oncology Group. The goal of this Phase 3 study was to evaluate in a multi-centered, randomized trial whether STS is an effective and safe
means of preventing hearing loss in children receiving cisplatin-based chemotherapy for newly diagnosed germ cell, liver (hepatoblastoma),
brain (medulloblastoma), nerve tissue (neuroblastoma) or bone (osteosarcoma) cancers. Eligible children, one to eighteen years of age,
were to receive cisplatin according to their disease-specific regimen and, upon enrollment in this study, were randomized to receive STS
or not. Efficacy of STS was determined through comparison of hearing sensitivity at follow-up relative to baseline measurements using
standard audiometric techniques. The Children’s Oncology Group was responsible for funding the clinical activities for the study
and we were responsible for providing the drug, drug distribution and pharmacovigilance, or safety monitoring, for the study. The trial
completed enrollment of 131 pediatric patients in the first quarter of 2012. The final results of COG ACCL0431 were published in Lancet
Oncology in December 2016.
COG ACCL0431 - Results
COG
Study ACCL0431, “A Randomized Phase 3 Study of Sodium Thiosulfate for the Prevention of Cisplatin-Induced Ototoxicity in Children,”
finished enrollment of 131 patients of which 125 were eligible patients. The patients had been previously diagnosed with childhood cancers .
The primary endpoint was to evaluate the efficacy
of STS for prevention of hearing loss in children receiving cisplatin chemotherapy (hypothesis: 50% relative reduction in hearing loss).
Secondary endpoints included:
· Compare
change in mean hearing thresholds.
· Compare
incidence of other Grade 3/4 toxicities (renal and hematological).
· Monitor
Event Free Survival (EFS) and Overall Survival (OS) in two groups.
125
eligible subjects were enrolled with germ cell tumor (32), osteosarcoma (29), neuroblastoma (26), medulloblastoma/pnet (26), hepatoblastoma
(7), or other (5). Of these, 104 subjects (64 male and 29 <5 years old) were evaluable for the primary endpoint .
Subjects
were randomized either to no treatment (control) or treatment with STS 16 grams/m2 IV over 15 minutes, 6 hours after each cisplatin dose.
Hearing was measured using standard audiometry for age and data was reviewed centrally using American Speech-Language-Hearing Association
criteria .
19
The proportion of subjects with hearing loss assessed
at 4 weeks post the final cisplatin dose (primary endpoint):
· The proportion of hearing loss for STS vs. Control was 28.6% (14/49) vs. 56.4% (31/55), respectively (p=0.004).
· In a predefined subgroup of patients less than 5 years old with 29 eligible subjects: STS vs. Control
was 21.4% (3/14) vs. 73.3% (11/15), respectively (p=0.005).
Conclusions:
· STS protects against cisplatin-induced hearing loss in children
across a heterogeneous range of tumor types, with even stronger efficacy in the protocol predefined subgroup of patients under five years
old, and is not associated with serious adverse events attributed to its use .
· Further potential clinical use will be informed by the final results
of SIOPEL 6 study .
Capital Funding
We have not received and do not expect to have
significant revenues from our product candidate until we are either able to sell our product candidate after obtaining applicable regulatory
approvals or we establish collaborations that provide us with up-front payments, licensing fees, milestone payments, royalties or other
revenue.
We generated a net loss of approximately $4.7
million for the three months ended March 31, 2021 and a net loss of $3.8 million for the three months ended March 31, 2020. As of March
31, 2021, our accumulated deficit was approximately $166.9 million ($162.1 million at December 31, 2020).
We believe that our cash and cash equivalents
as of March 31, 2021, which totaled $26.8 million, will be sufficient to meet our cash requirements through the at least the next twelve
months, including anticipated NDA approval and, if approved, the first commercial launch of PEDMARK TM in the United States.
Our projections of our capital requirements are subject to substantial uncertainty, and more capital than we currently anticipate
may be required thereafter. To finance our continuing operations, we may need to raise substantial additional funds through either
the sale of additional equity, the issuance of debt, the establishment of collaborations that provide us with funding, the out-license
or sale of certain aspects of our intellectual property portfolio or from other sources. We may not be able to raise the necessary
capital, or such funding may not be available on financially acceptable terms if at all. If we cannot obtain adequate funding in the future,
we might be required to further delay, scale back or eliminate certain research and development studies, consider business combinations,
or even shut down some, or all, of our operations.
Our operating expenses will depend on many factors,
including the progress of our drug development efforts and efficiency of our operations and current resources. Our research and development
expenses, which include expenses associated with our clinical trials, drug manufacturing to support clinical programs, stock-based compensation,
consulting fees, sponsored research costs, toxicology studies, license fees, milestone payments, and other fees and costs related to the
development of our product candidate, will depend on the availability of financial resources, the results of our clinical trials, and
any directives from regulatory agencies, which are difficult to predict. Our general and administration expenses include expenses associated
with the compensation of employees, stock-based compensation, professional fees, consulting fees, insurance and other administrative matters
associated in support of our drug development programs.
20
Results of Operations
Three months ended March 31, 2021 versus three months ended March 31,
2020:
Three Months
Three Months
Ended
Ended
In thousands of U.S. Dollars
March 31,
2021
%
March 31,
2020
%
Change
Revenue
$ -
$ -
$ -
Operating expenses:
Research and development
2,416
49 %
1,393
36 %
1,023
General and administration
2,507
51 %
2,442
64 %
65
Total operating expenses
4,923
100 %
3,835
100 %
1,088
Loss from operations
(4,923 )
(3,835 )
(1,088 )
Unrealized gain on securities
182
-
182
Other loss
(8 )
(9 )
1
Amortization expense
-
(17 )
17
Interest income and other
16
35
(19 )
Total other income
190
9
181
Net loss
$ (4,733 )
$ (3,826 )
$ (907 )
Research and development expenses increased by
$1,023 for the three months ended March 31, 2021 over the same period in 2020 as the Company’s development activities shifted back
to research and development expenses from product launch readiness and pre-commercial development of PEDMARK TM . General and
administrative expenses increased by $65 over same period in 2020 with the slight increase mainly driven by additional employees.
The Company holds shares of Processa (PCSA) which
are marked to market each balance sheet date and unrealized gains or losses are recognized at that time. The unrealized gain on those
shares on March 31, 2021 was $182. Other loss was driven mainly by fluctuations in the Company’s foreign currency transactions and
is a non-cash expense. The Company has vendors that transact in Euros, Great British Pounds and Canadian Dollars. There was an decrease
of $1 in other gain/(loss) for the three months ended March 31, 2021 over the same period in 2020. Amortization expense is also a non-cash
expense and relates to amortization of the deferred issuance cost of the loan facilities with Bridge Bank. Amortization expense decreased
by $17 for the three months ended March 31, 2021 over the same period in 2020 due to the deferred issuance cost of the loan facility being
fully expensed in the fourth quarter of 2020. Interest income was $19 lower for the three months ended March 31, 2020 over the same period
in 2020. This was driven mainly by a sharp decrease in interest rates for the three months ended March 31, 2021 over the same period in
2020 despite the higher average cash balance in 2021.
Quarterly Information
The following table presents selected condensed
financial data for each of the last eight quarters through March 31, 2021, as prepared under US GAAP (U.S. dollars in thousands, except
per share information):
Period
Net (Loss)/Income for the
Period
Basic Net (Loss)/Income per
Common Share
Diluted Net (Loss)/Income per
Common Share
June 30, 2019
$ (4,730 )
$ (0.24 )
$ (0.24 )
September 30, 2019
(1,809 )
(0.09 )
(0.09 )
December 31, 2019
(3,610 )
(0.18 )
(0.18 )
March 31, 2020
(3,826 )
(0.19 )
(0.19 )
June 30, 2020
(4,845 )
(0.21 )
(0.21 )
September 30, 2020
(6,200 )
(0.24 )
(0.24 )
December 31, 2020
(3,238 )
(0.13 )
(0.13 )
March 31, 2021
(4,733 )
(0.18 )
(0.18 )
21
Liquidity and Capital Resources
U.S. Dollars in thousands
Selected Asset and Liability Data:
March 31, 2021
December 31, 2020
Cash and cash equivalents
$
26,751
$
30,344
Other current assets
1,074
1,073
Current liabilities
2,892
2,347
Working capital (1)
24,933
29,070
(1) [Current assets – current liabilities]
Selected equity:
Common stock
190,563
189,967
Accumulated deficit
(166,873
)
(162,140
)
Stockholders’ equity
24,933
29,070
Cash and cash equivalents were $26,751 at March
31, 2021 and $30,344 at December 31, 2020. The decrease in cash and cash equivalents between March 31, 2021 and December 31, 2020 is the
result of expenses related to the development and preparation of NDA resubmission of PEDMARK TM and general and administrative
expenses. The minimal increase in other current assets between March 31, 2021 and December 31, 2020 relates to the increase in the valuation
of the Company’s holdings of Processa shares, the pre-payment of annual Nasdaq listing fee, offset by the decrease in value of the
deferred asset related to the financing of the Company’s Director’s and Officer’s Insurance.
Current liabilities increased primarily due to
manufacturing and pre-commercialization activities associated with PEDMARK TM and related regulatory expenses. The Company also
had payables balances for legal and other professional services related to our ongoing shareholder class action lawsuit.
Working capital decreased between December 31,
2020 and March 31, 2021 by $4.1 million. The decrease was almost entirely due to the increase in current liabilities and cash expenditures
during the quarter ended March 31, 2021. The Company expects modest increases in cash outflows as it prepares for resubmission of its
NDA and increased commercial readiness activities upon resubmission.
The following table illustrates a summary of cash
flow data for the three month periods of March 31, 2021 and 2020:
U.S. Dollar in thousands
Selected cash flow data:
Three Months Ended March 31,
2021
2020
Net cash used in operating activities
$ (3,593)
$ (3,749)
Net cash provided by investing activities
-
-
Net cash used in financing activities
-
-
Decrease in cash and cash equivalents
$ (3,593)
$ (3,749)
Net cash used in operating activities for the
three months ended March 31, 2021 primarily reflected a net loss of $4,733. This loss was adjusted for the add back of non-cash items
consisting of $596 in stock-based compensation expense less $182 in unrealized gain on securities, and a net change in prepaid and other
assets of minus $181,coupled with a net increase in current liabilities of $545. Cash flows from operating activities were $3,593. Net
cash used in operating activities for the three months ended March 31, 2020 primarily reflected a net loss of $3,826. This loss was adjusted
for the add back of non-cash items consisting of $412 in stock-based compensation expense and $17 in amortization expense, and a net change
in prepaid and other assets of $12, coupled with a net decrease in current liabilities of $364. Cash flows from operating activities were
$3,749.
22
We continue to pursue various strategic alternatives
including collaborations with other pharmaceutical and biotechnology companies. Our projections of further capital requirements are
subject to substantial uncertainty. Our working capital requirements may fluctuate in future periods depending upon numerous factors,
including: our ability to obtain additional financial resources; our ability to enter into collaborations that provide us with up-front
payments, milestones or other payments; results of our research and development activities; progress or lack of progress in our preclinical
studies or clinical trials; unfavorable toxicology in our clinical programs, our drug substance requirements to support clinical programs;
change in the focus, direction, or costs of our research and development programs; headcount expense; the costs involved in preparing,
filing, prosecuting, maintaining, defending and enforcing our patent claims; competitive and technological advances; the potential need
to develop, acquire or license new technologies and products; our business development activities; new regulatory requirements implemented
by regulatory authorities; the timing and outcome of any regulatory review process; and commercialization activities, if any.
Outstanding Share Information
Our outstanding share data for our Company as of March 31, 2021 and
December 31, 2020 was as follows (in thousands):
March 31, 2021
December 31, 2020
Change
Common shares
26,003
26,003
-
Warrants
39
39
-
Stock options
2,952
2,952
-
Total
28,994
28,994
-
Financial Instruments
We invest excess cash and cash equivalents in
high credit quality investments held by financial institutions in accordance with our investment policy designed to protect the principal
investment. At December 31, 2020, we had approximately $0.7 million in our cash accounts and $29.6 million in savings and money
market accounts. While we have never experienced any loss or write down of our money market investments since our inception, the
amounts we hold in money market accounts are substantially above the $250,000 amount insured by the FDIC and may lose value.
Our investment policy is to manage investments
to achieve, in the order of importance, the financial objectives of preservation of principal, liquidity and return on investment. Investments
may be made in U.S. or Canadian obligations and bank securities, commercial paper of U.S. or Canadian industrial companies, utilities,
financial institutions and consumer loan companies, and securities of foreign banks provided the obligations are guaranteed or carry ratings
appropriate to the policy. Securities must have a minimum Dun & Bradstreet rating of A for bonds or R1 low for commercial paper. The
policy also provides for investment limits on concentrations of securities by issuer and maximum-weighted average time to maturity of
twelve months. This policy applies to all of our financial resources.
The policy risks are primarily the opportunity
cost of the conservative nature of the allowable investments. As our main purpose is research and development, we have chosen to avoid
investments of a trading or speculative nature.
Off-Balance Sheet Arrangements
Since our inception, we have not had any material
off-balance sheet arrangements. In addition, we do not engage in trading activities involving non-exchange traded contracts. As such,
we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such activities.
Research and Development
Our research and development efforts have been
focused on the development of PEDMARK TM since 2013.
We have established relationships with contract
research organizations, universities and other institutions, which we utilize to perform many of the day-to-day activities associated
with our drug development. Where possible, we have sought to include leading scientific investigators and advisors to enhance our internal
capabilities. Research and development issues are reviewed internally by our executive management and supporting scientific team.
Research and development
expenses for the three months ended March 31, 2021 and 2020 were $2,416 and $1,393, respectively. We have increased our research and development
expenses related to PEDMARK TM as our efforts have shifted to pre-commercialization with continued regulatory expenses associated
with the resubmission of our NDA for PEDMARK TM .
23
Our product candidate still requires significant,
time-consuming and costly research and development, testing and regulatory clearances. In developing our product candidate, we are subject
to risks of failure that are inherent in the development of products based on innovative technologies. For example, it is possible that
our product candidate will be ineffective or toxic, or will otherwise fail to receive the necessary regulatory clearances. There is a
risk that our product candidate will be uneconomical to manufacture or market or will not achieve market acceptance. There is also a risk
that third parties may hold proprietary rights that preclude us from marketing our product candidate or that others will market a superior
or equivalent product. As a result of these factors, we are unable to accurately estimate the nature, timing and future costs necessary
to complete the development of this product candidate. In addition, we are unable to reasonably estimate the period when material net
cash inflows could commence from the sale, licensing or commercialization of such product candidate, if ever.
Critical Accounting Policies and Estimates
The preparation of financial statements in conformity
with US GAAP requires management to make estimates that affect the reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities as of the date of the financial statements and the reported amounts of revenues and expenses during the reporting
period. These estimates are based on assumptions and judgments that may be affected by commercial, economic and other factors. Actual
results could differ from these estimates.
Our accounting policies are materially consistent
with those presented in our annual consolidated financial statements included in our Annual Report on Form 10-K for the year ended December
31, 2020.
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