What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-11-09 compared with 2023-08-07 · 70 added, 67 removed, 150 unchanged (48% of the section changed)

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As a result of many factors, including those factors set forth in Part I, Item 1A of the Annual Report under the heading “Risk Factors”, our actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

The following discussion should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2022 and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product candidate PEDMARK ® .

On September 20, 2022, we received approval from the FDA for PEDMARK ® (sodium thiosulfate injection) to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

The following discussion should be read in conjunction with our Annual Report and the condensed consolidated financial statements and accompanying notes included elsewhere in this report.

We are a commercial-stage biopharmaceutical company focused on our only product PEDMARK ® .

On September 20, 2022, we received approval from the US Food and Drug Administration (“FDA”) for PEDMARK ® (sodium thiosulfate injection) to reduce the risk of ototoxicity associated with cisplatin in pediatric patients one month of age and older with localized, non-metastatic solid tumors.

This approval makes PEDMARK ® the first and only treatment approved by the FDA in this area of unmet medical need.

On October 17, 2022, we announced commercial availability of PEDMARK ® in the U.

In June 2023, we announced European Commission Marketing Authorization for PEDMARQSI TM – known as PEDMARK in the U.S.

Therefore, this decision allows us to proceed with the submission of a PUMA in the European Union (“EU”) with up to 10 years of data and market protection.

In addition, in January 2023, PEDMARK was included in the National Comprehensive Cancer Network (NCCN) clinical practice guidelines for Adolescent and Young Adult (AYA) Oncology with a category 2A recommendation.

In June 2023, we received European Commission Marketing Authorization for PEDMARQSI TM (known as PEDMARK ® in the U.S.) Further, the decision included the receipt of a Pediatric Use Marketing Authorization (“PUMA”) in the European Union (“EU”) with up to 10 years of data and market protection.

The Company is currently preparing for an EU launch of PEDMARQSI TM in 2024.

In the U.S., we sell our product through an experienced field force including Regional Pediatric Oncology Specialists and medical science liaisons who are helping to educate the medical communities and patients about cisplatin induced ototoxicity and our programs supporting patient access to PEDMARK ® .

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11,291,728 (the “US ‘728 Patent”), in December 2022, the USPTO issued Patent No.

11,510,984 (“US ‘984 Patent”) and in April 2023, the USPTO

issued Patent No.

11,510,984 (“US ‘984 Patent”) and in April 2023, the USPTO issued Patent No.

11,671,793 (“US ‘793 Patent”) that covers PEDMARK ® pharmaceutical formulation.

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PEDMARK ® Product Overview

PEDMARK ® is the first and only therapy approved by the U.S.

Food and Drug Administration (“FDA”) indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients with localized, non-metastatic, solid tumors.

Further, Pedmarqsi, known as PEDMARK in the U.S.

PEDMARK ® is the first and only therapy approved by the FDA indicated to reduce the risk of ototoxicity associated with cisplatin treatment in pediatric patients with localized, non-metastatic, solid tumors.

Further, PEDMARQSI TM , known as PEDMARK ® in the U.S.

was granted marketing authorization by the European Commission in June 2023.

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Infants and young children that are affected by ototoxicity at critical stages of development lack speech and language development and literacy, and older children and adolescents often lack social-emotional development and educational achievement.

We generated a net loss of approximately $11.3 million for the six months ended June 30, 2023, and a net loss of $8.8 million for the same period in 2022.

As of June 30, 2023, our accumulated deficit was approximately $214.5 million ($203.2 million at December 31, 2022).

We believe that our cash and cash equivalents as of June 30, 2023, which totaled $15.0 million, cash from product sales, plus the remaining Petrichor Financing of $20 million in convertible notes subject to mutual agreement between us and Petrichor (see Note 1 and Note 7 to our unaudited interim condensed consolidated financial statements contained elsewhere in this Quarterly Report), will be sufficient to meet our cash requirements through at least the next twelve months.

We generated a net loss of approximately $13.4 million for the nine months ended September 30, 2023, and a net loss of $16.9 million for the same period in 2022.

As of September 30, 2023, our accumulated deficit was approximately $216.6 million ($203.2 million at December 31, 2022).

We believe that our cash and cash equivalents as of September 30, 2023, which totaled $12.4 million, cash from product sales, plus the remaining Petrichor Financing of $20 million in convertible notes subject to mutual agreement between us and Petrichor (see Note 1 and Note 7 to our unaudited interim condensed consolidated financial statements contained elsewhere in this Quarterly Report), will be sufficient to meet our cash requirements through at least the next twelve months.

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, the out-license or sale of certain aspects of our intellectual property portfolio or from other sources.

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, the out-license or sale of certain aspects of our intellectual property portfolio or from other sources.

Our operating expenses will depend on many factors, including the progress of our commercialization efforts abroad and efficiency of our operations and current resources.

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Our general and administration expenses include expenses associated with the compensation of employees, stock-based compensation, professional fees, which include legal fees, consulting fees, insurance and other administrative matters associated in support primarily of our commercialization of PEDMARK ® .

Our selling and marketing expenses include remuneration of our sales and marketing employees, dollars spent on marketing campaigns (sponsorships, trade shows, presentations, etc.), and any activities to support marketing and sales activities.

Results of Operations

Three months ended June 30, 2023 versus three months ended June 30, 2022:

Three months ended September 30, 2023 versus three months ended September 30, 2022:

Three Months Ended

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In thousands of U.S.

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

PEDMARK® product sales, net

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Interest income

We reported net product sales for the three month period ended June 30, 2023 of $3,325 and gross profit of $3,177 after applying cost of product sales of $148.

Research and development expenses decreased by $1,123 for the three months ended June 30, 2023, compared to the same period in 2022.

We reported net product sales for the three month period ended September 30, 2023 of $6,515 and gross profit of $6,184 after applying cost of product sales of $331.

Research and development expenses decreased by $834 for the three months ended September 30, 2023, compared to the same period in 2022.

Our research and development activities for this period consisted of costs associated with investigator initiated clinical trials.

During the same period in 2022 and prior to approval of PEDMARK ® , manufacturing costs pertaining to PEDMARK ® were expensed to R&D expense in the period incurred, and following approval are reflected in inventory.

Selling and marketing expenses were $2,340 for the three months ended June 30, 2023.

Selling and marketing expenses were $3,384 for the three months ended September 30, 2023.

Selling and marketing expenses include remuneration of our sales and marketing employees, dollars spent on marketing campaigns (sponsorships, trade shows, presentations, etc.), and any activities to support marketing and sales activities.

General and administrative expenses increased by $1,617 compared to the same period in 2022, which was primarily driven by an increase of non-cash employee remuneration of $1,500, an increase of salaries and benefits of $331 from an increased headcount and a decrease of professional and legal expenses of $161.

General and administrative expenses decreased by $3,248 compared to the same period in 2022, which was primarily driven by a decrease of non-cash employee remuneration of $1,000 and a decrease in legal expense by $707 as well as a major difference relating to the allocation of sales and marketing expenses to G&A for the period ended September 30, 2022 as we did not launch product until Q4 of 2022.

Interest expense increased $737 compared to the same period in 2022.

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Further, we hold shares of Processa (NASDAQ:

PCSA) which are marked to market each balance sheet date and unrealized gains or losses are recognized at that time.

There was no change in the unrealized loss on those shares for the three months ended June 30, 2023.

Other losses were driven mainly by unrealized losses related to the our foreign currency transactions.

which are marked to market each balance sheet date and unrealized gains or losses are recognized at that time.

The value of the Processa shares held by the Company was down by $13 for the three month period ending September 30, 2023, as opposed to a decrease of $27 during the same period in 2022.

Other losses were driven mainly by unrealized losses related to our foreign currency transactions.

We have vendors that transact in Euros, Great British Pounds and Canadian Dollars.

There was an increase of $4 in other losses for the three months ended June 30, 2023, compared to the same period in 2022.

There was an increase of $7 in other losses for the three months ended September 30, 2023, compared to the same period in 2022.

Amortization expense is also a non-cash expense and relates to amortization of the deferred issuance costs of the loan facilities with Petrichor.

Amortization expense increased by $65 for the three months ended June 30, 2023 compared to the same period in 2022.

Interest income was up $106 for the three months ended June

30, 2023, compared to the same period in 2022.

This was driven mainly by higher interest rates for the three months ended June 30, 2023 compared to the same period in 2022.

Six months ended June 30, 2023 versus six months ended June 30, 2022:

Six Months Ended

Amortization expense increased by $8 for the three months ended September 30, 2023 compared to the same period in 2022.

Interest income was up $78 for the three months ended September 30, 2023, compared to the same period in 2022.

This was driven mainly by higher interest rates for the three months ended September 30, 2023 compared to the same period in 2022.

Nine months ended September 30, 2023 versus nine months ended September 30, 2022:

Nine Months Ended

In thousands of U.S.

June 30, 2023

June 30, 2022

September 30, 2023

September 30, 2022

PEDMARK® product sales, net

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Unrealized loss on securities

Other gain/(losses)

Amortization expense

Interest expense

Unrealized foreign exchange loss

Interest income

We reported net product sales for the six month period ended June 30, 2023 of $5,002 and gross profit of $4,759 after applying cost of product sales of $243.

Research and development expenses decreased by $2,556 for the six months ended June 30, 2023, compared to the same period in 2022.

We reported net product sales for the nine month period ended September 30, 2023 of $11,517 and gross profit of $10,943 after applying cost of product sales of $574.

Research and development expenses decreased by $3,390 for the nine months ended September 30, 2023, compared to the same period in 2022.

Research activities, since the launch of PEDMARK ® have been limited to investigator initiated clinical trials.

Selling and marketing expenses were $4,871 for the six months ended June 30, 2023.

Selling and marketing expenses were $8,255 for the nine months ended September 30, 2023.

General and administrative expenses increased by $3,825 over the same period in 2022 primarily related to legal expenses, non-cash equity compensation and higher wages from increased headcount.

The unrealized loss on our shares of Processa for the six months ended on June 30, 2023 was $30, which is in contrast to the $99 loss for the same period in 2022.

Foreign currency transaction gain was $14 for the six months ended June 30, 2023 ($2 loss for same period in 2022).

Amortization expense was $145 for the six months ended June 30, 2023, compared to $15 for the same period in 2022.

General and administrative expenses increased by $577 over the same period in 2022.

This difference was primarily driven by an increase in non-cash equity compensation and higher wages in the amount of $1,448 for the nine months ended September 30, 2023 over the same period in 2022.

For the nine months ended September 30, 2023, there was a decrease in legal expense of $399.

The rest of the difference primarily relates to sales and marketing expenses being included in G&A in 2022 before product launch in Q4 of 2022.

The unrealized loss on our shares of Processa for the nine months ended on September 30, 2023 was $43, which is in contrast to the $126 loss for the same period in 2022.

Foreign currency transaction gain was $3 for the nine months ended September 30, 2023 ($6 loss for same period in 2022).

Amortization expense was $217 for the nine months ended September 30, 2023, compared to $79 for the same period in 2022.

Our amortization expense relates to the capitalized debt issuance costs associated with the Petrichor notes.

Interest expense increased $1,508 for the six months ended June 30, 2023, over same period in 2022.

Interest expense increased $2,245 for the nine months ended September 30, 2023, over same period in 2022.

We replaced the $5 million loan facility with Bridge Bank with a larger facility, $25 million, with Petrichor.

We took on this convertible debt load in a rising interest rate environment.

Interest income was $206 higher for the six months ended June 30, 2023, compared to the same period in 2022.

This was driven mainly by higher interest rates for the six months ended June 30, 2023 compared to the same period in 2022.

Interest income was $284 higher for the nine months ended September 30, 2023, compared to the same period in 2022.

This was driven mainly by higher interest rates for the nine months ended September 30, 2023 compared to the same period in 2022.

Liquidity and Capital Resources

Selected Asset and Liability Data (thousands):

June 30, 2023

September 30, 2023

December 31, 2022

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Stockholders’ deficit

Cash and cash equivalents were $14,958 at June 30, 2023 and $23,774 at December 31, 2022.

The decrease in cash and cash equivalents between June 30, 2023 and December 31, 2022 is the result of expenses related to our normal operations, offset by inflows of cash generated from net product sales of $5,002 and $754 from various option exercises.

There was an increase of $1,419 in other current assets between June 30, 2023 and December 31, 2022.

Current liabilities decreased by $830 between June 30, 2023, and December 31, 2022.

Cash and cash equivalents were $12,399 at September 30, 2023 and $23,774 at December 31, 2022.

The decrease in cash and cash equivalents between September 30, 2023 and December 31, 2022 is the result of expenses related to our normal operations, offset by inflows of cash generated from net product sales of $11,517 and $969 from various option exercises.

There was an increase of $3,593 in other current assets between December 31, 2022, and September 30, 2023.

Current liabilities decreased by $695 between December 31, 2022, and September 30, 2023.

The decrease was driven mainly by an increase in accounts payable ($551), offset by a large decrease of $1,268 in accrued expenses.

Working capital decreased between December 31, 2022, and June 30, 2023, by $6,567.

The decrease relates to a net cash inflow from product sales and various option exercises, offset by expenditures for operating activities for the six months ended June 30, 2023.

The following table illustrates a summary of cash flow data for the six month period ended June 30, 2023 and 2022:

Working capital decreased between December 31, 2022, and September 30, 2023, by $7,087.

The decrease relates to a net cash inflow from product sales and various option exercises, offset by expenditures for operating activities for the nine months ended September 30, 2023.

The following table illustrates a summary of cash flow data for the nine month period ended September 30, 2023 and 2022:

Selected Cash Flow Data

Six Months Ended June 30,

Nine Months Ended September 30,

(dollars and shares in thousands)

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Net cash flow

Net cash used in operating activities for the six months ended June 30, 2023 and 2022, primarily reflected a net loss of $11,496 and $8,768, respectively.

The six month losses were adjusted for the add back of non-cash items consisting of $3,632 and $1,476, respectively, in stock-based compensation expense, with unrealized loss on securities of $30 and $99, respectively, and amortization expense of $145 and $15, respectively for the six months ended June 30, 2023, and 2022.

For the six months ended June 30, 2023 there was an increase in current assets of $1,450 and a decrease of $648 during the same period in 2022.

For the six months ended June 30, 2023 there was a net decrease in current liabilities of $831, with a net increase of $1,383 during that same period in 2022.

Six month negative cash flows from operating activities were $9,523 and $6,246, respectively, for the periods ended June 30, 2023 and 2022.

Net cash provided by financing activities for the six months ended June 30, 2023, were $707 and $61, respectively.

Net cash flows from the six month period ended June 30, 2023 and 2022, were negative $8,816, and $6,185, respectively.

Net cash used in operating activities for the nine months ended September 30, 2023 and 2022, primarily reflected a net loss of $13,363 and $16,857, respectively.

The nine month losses were adjusted for the add back of non-cash items consisting of $4,497 and $3,363, respectively, in stock-based compensation expense, with unrealized loss on securities of $43 and $126, respectively, and amortization expense of $217 and $79, respectively, for the nine months ended September 30, 2023, and 2022.

For the nine months ended September 30, 2023 there was an increase in other current assets of $3,593 and a decrease of $756 during the same period in 2022.

For the nine months ended September 30, 2023, there was a net decrease in current liabilities of $696, with a net increase of $1,273 during that same period in 2022.

Nine month negative cash flows from operating activities were $12,283 and $11,256, respectively, for the periods ended September 30, 2023 and 2022.

Net cash provided by financing activities for the nine months ended September 30, 2023, were $908 and $19,908, respectively.

Net cash flows from the nine month period ended September 30, 2023 and 2022, were negative $11,375, and positive $8,652, respectively.

We continue to pursue various strategic alternatives including collaborations with other pharmaceutical and biotechnology companies.

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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;

unfavorable toxicology in our clinical

our drug substance requirements to support clinical programs;

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headcount expense;

involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims;

the costs involved in preparing, filing, prosecuting, maintaining, defending and enforcing our patent claims;

competitive and technological advances;

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Outstanding Share Information

Our outstanding share data as of June 30, 2023 and December 31, 2022 was as follows (in thousands):

Our outstanding share data as of September 30, 2023 and December 31, 2022 was as follows (in thousands):

September 30,

Outstanding Share Type

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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 June 30, 2023, we had approximately $3.5 million in our cash accounts and $11.5 million in savings and money market accounts.

At September 30, 2023, we had approximately $2,007 in our cash accounts and $10,392 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 amount insured by the FDIC and may lose value.

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A summary of our critical accounting policies and use of estimates are presented in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operation” of our Annual Report.

There have been no material changes to our critical accounting policies and use of estimates during the six months ended June 30, 2023.

There have been no material changes to our critical accounting policies and use of estimates during the nine months ended September 30, 2023.

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