Item 2. Management’s Discussion and Analysis
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 21E of the Securities and Exchange Act of 1934, as amended, that involve risks and uncertainties. All statements other than statements relating to historical matters including statements to the effect that we “believe”, “expect”, “anticipate”, “plan”, “target”, “intend” and similar expressions should be considered forward-looking statements. Our actual results could differ materially from those discussed in the forward-looking statements as a result of a number of important factors, including factors discussed in this section and elsewhere in this Quarterly Report on Form 10-Q, and the risks discussed in our other filings with the SEC. Such risks and uncertainties may be amplified by the COVID-19 pandemic and its potential impact on our business and the global economy. Readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management’s analysis, judgment, belief or expectation only as the date hereof. We assume no obligation to update these forward-looking statements to reflect events or circumstance that arise after the date hereof.
As used in this quarterly report: (i) the terms “we”, “us”, “our”, “Marker” and the “Company” mean Marker Therapeutics, Inc. and its wholly owned subsidiaries, Marker Cell Therapy, Inc. and GeneMax Pharmaceuticals Inc. which wholly owns GeneMax Pharmaceuticals Canada Inc., unless the context otherwise requires; (ii) “SEC” refers to the Securities and Exchange Commission; (iii) “Securities Act” refers to the Securities Act of 1933, as amended; (iv) “Exchange Act” refers to the Securities Exchange Act of 1934, as amended; and (v) all dollar amounts refer to United States dollars unless otherwise indicated.
The following should be read in conjunction with our unaudited condensed consolidated interim financial statements and related notes for the three months ended March 31,2022 included in this Quarterly Report.
Company Overview
We are a clinical-stage immuno-oncology company specializing in the development and commercialization of novel T cell-based immunotherapies and innovative peptide-based vaccines for the treatment of hematological malignancies and solid tumor indications. We developed our lead product candidates from our MultiTAA-specific T cell technology, which is based on the manufacture of non-engineered, tumor-specific T cells that recognize multiple tumor-associated antigens, or TAAs. MultiTAA-specific T cells are able to recognize multiple tumor targets to produce broad spectrum anti-tumor activity. When infused into a cancer patient, the MultiTAA-specific T cells are designed to kill cancer cells expressing the TAA targets and potentially recruit the patient’s immune system to participate in the cancer killing process.
We licensed the underlying technology for MultiTAA-specific T cell therapy from BCM in March 2018. BCM had utilized the therapy in seven exploratory clinical trials. In these studies, BCM treated over 150 patients suffering from a variety of cancers including lymphoma, multiple myeloma, acute myeloid leukemia, acute lymphoblastic leukemia, pancreatic cancer, breast cancer and various sarcomas. In those studies, BCM saw evidence of clinical benefit, expansion of infused cells, epitope spreading, and decreased toxicity compared to other cellular therapies.
We are advancing three product candidates as part of our MultiTAA-specific T cell program for:
1. autologous treatment of lymphoma, and selected solid tumors
2. allogeneic T cells for the treatment of acute myeloid leukemia, or AML
3. off-the-shelf products in various indications
Our current clinical development programs are:
● MT-401 for the treatment of post-transplant AML, currently in a Phase 2 clinical trial
● MT-401-OTS for the treatment of AML, for which we expect to dose the first patient in a Phase 1 clinical trial in 2023
● MT-601 for the treatment of pancreatic cancer, for which we plan to submit an IND to the FDA in 2022 to initiate a Phase 1 trial in 2023
● MT-601 for the treatment of lymphoma, for which we plan to submit an IND to the FDA in 2022 to initiate a Phase 1 trial in 2022
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We believe that the simplicity of our manufacturing process allows additional modifications to expand MultiTAA-specific T cell recognition of cancer targets. For example, we are currently analyzing the potential for a 12-antigen MultiTAA-specific T cell therapy and assessing the potential for combination therapies for our MultiTAA-specific T cell products.
We have positioned ourselves to be in full control of our research and development and clinical manufacturing needs by establishing a fully validated manufacturing facility. We believe that this has key advantages that distinguish us from our competitors, particularly because we are less reliant on contract manufacturing organizations, which are expensive and often have long lead times, shortages of skilled labor and a backlog of customers.
Pipeline
Our clinical-stage pipeline, including clinical trials being conducted by BCM and other partners, is set forth below:
Results of Operations
In this discussion of our results of operations and financial condition, amounts in financial tables, other than per-share amounts, have been rounded to the nearest thousand.
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Comparison of the Three Months Ended March 31, 2022 and 2021
The following table summarizes the results of our operations for the three months ended March 31, 2022 and 2021:
For the Three Months Ended
March 31,
2022
2021
Change
Revenues:
Grant income
$
964,000
$
—
$
964,000
100
%
Total revenues
964,000
—
964,000
100
%
Operating expenses:
Research and development
7,026,000
5,643,000
1,383,000
25
%
General and administrative
3,733,000
3,138,000
595,000
19
%
Total operating expenses
10,759,000
8,781,000
1,978,000
23
%
Loss from operations
(9,795,000)
(8,781,000)
(1,014,000)
12
%
Other income (expense):
Loss on settlement
(119,000)
—
(119,000)
(100)
%
Interest income
3,000
2,000
1,000
50
%
Net loss
$
(9,911,000)
$
(8,779,000)
$
(1,132,000)
13
%
Net loss per share, basic and diluted
$
(0.12)
$
(0.16)
$
0.04
(25)
%
Weighted average number of common shares outstanding
83,108,000
56,470,000
26,638,000
47
%
Revenue
We did not generate any revenue during the three months ended March 31, 2022 and 2021, respectively, from the sales or licensing of our product candidates.
In August 2021, we received notice of a Product Development Research award totaling approximately $13.1 million from the Cancer Prevention and Research Institute of Texas, or CPRIT, to support our Phase 2 clinical trial of MT-401. During the three months ended March 31, 2022, we recognized $1.0 million of revenue associated with the CPRIT grant.
Operating Expenses
Operating expenses incurred during the three months ended March 31, 2022 were $10.8 million compared to $8.8 million during the three months ended March 31, 2021.
Significant changes and expenditures in operating expenses are outlined as follows:
Research and Development Expenses
Research and development expenses increased by 25% to $7.0 million for the three months ended March 31, 2022, compared to $5.6 million for the three months ended March 31, 2021.
The increase of $1.4 million in 2022 was primarily attributable to the following:
o increase of $0.3 million in expenses related to our AML clinical trial,
o increase of $0.5 million in headcount-related expenses,
o increase of $0.4 million in sponsored research expenses from BCM agreements,
o increase of $0.1 million in other clinical expenses, and
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o increase of $0.1 million in other operating expenses.
General and Administrative Expenses
General and administrative expenses were $3.7 million and $3.1 million for the three months ended March 31, 2022 and 2021, respectively.
The increase of $0.6 million in 2022 was primarily attributable to the following:
o increase of $0.2 million in legal and professional fees,
o increase of $0.2 million in stock-based compensation expenses, and
o increase of $0.2 million in other operating expenses.
Other Income (Expense)
Arbitration settlement
An arbitration proceeding was brought against us before the Financial Industry Regulatory Authority, Inc., or FINRA by a broker seeking to be paid compensation for two financing transactions that occurred in 2018, a warrant conversion and a private placement, each brokered by another broker. The broker’s claims were based on a placement agent agreement for a private placement it brokered in 2017, under which it alleged it was entitled to compensation for the 2018 transactions. The FINRA panel found in favor of the broker and awarded the broker $2.4 million for compensation, interest and attorney fees, which we recorded in the year ended December 31, 2021. We removed the case to the United States District Court for the Southern District of New York on September 27, 2021. On October 22, 2021, we filed a motion in federal court to vacate the award. On March 9, 2022, we were notified that our motion to vacate the award was denied and the broker was awarded an additional $0.1 million in interest. Post judgment interest accrued at 1.02% until the judgement was paid. During the three months ended March 31, 2022, we recorded an additional $0.1 million of expense related to this matter. We paid the $2.5 million judgement on March 24, 2022.
Interest Income
Interest income was $3,000 and $2,000 for the three months ended March 31, 2022 and 2021, respectively, and was attributable to interest income relating to funds that are held in U.S. Treasury notes and U.S. government agency-backed securities.
Net Loss
The increase in our net loss during the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to the continued expansion of our research and development activities, increased expenses relating to future clinical trials, and the overall growth of our corporate infrastructure. We anticipate that we will continue to incur net losses in the future as we continue to invest in research and development activities, including clinical development of our MultiTAA T cell product candidates.
Liquidity and Capital Resources
We have not generated any revenues from product sales since inception. We have financed our operations primarily through public and private offerings of our debt and equity securities.
The following table sets forth our cash and cash equivalents and working capital as of March 31, 2022 and December 31, 2021:
March 31,
December 31,
2022
2021
Cash, cash equivalents and restricted cash
$
28,819,000
$
43,497,000
Working capital
$
22,803,000
$
33,081,000
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Cash Flows
The following table summarizes our cash flows for the three months ended March 31, 2022 and 2021:
For the Three Months Ended
March 31,
2022
2021
Net cash provided by (used in):
Operating activities
$
(12,226,000)
$
(8,100,000)
Investing activities
(2,452,000)
(1,401,000)
Financing activities
—
52,657,000
Net increase (decrease) in cash, cash equivalents and restricted cash
$
(14,678,000)
$
43,156,000
Operating Activities
Net cash used in operating activities during the three months ended March 31, 2022 was $12.2 million compared to $8.1 million for the same period last year. The increase of $4.1 million was primarily attributable to the increased costs in research and development and pre-commercial activities. The changes in cash flow from operating activities during the three months ended March 31, 2022 were due to $9.9 million of net losses and a $4.8 million decrease from changes in operating assets and liabilities. This was in addition to $1.6 million of stock-based compensation, $0.6 million of depreciation expense and $0.3 million right-of-use asset amortization and lease liability accretion.
Net cash used in operating activities during the three months ended March 31, 2021 was $8.1 million. The changes in cash flow from operating activities during the three months ended March 31, 2021 were due to $8.8 million of net losses and a $1.5 million decrease from changes in operating assets and liabilities. This was offset by $1.4 million of stock-based compensation, $0.5 million of depreciation expense and $0.3 million right-of-use asset amortization and lease liability accretion.
Investing Activities
Net cash used in investing activities was $2.5 million for the purchase of property and equipment and construction in progress related to the manufacturing facility during the three months ended March 31, 2022. The increase mainly relates to purchases of equipment for the manufacturing and research facilities.
Net cash used in investing activities was $1.4 million for the purchase of property and equipment and construction in progress during the three months ended March 31, 2021. The increase relates to purchases of laboratory equipment for the manufacturing facility.
Financing Activities
Net cash provided by financing activities was $52.7 million during the three months ended March 31, 2021, due to the net proceeds received from the underwritten public offering.
Future Capital Requirements
To date, we have not generated any revenues from the commercial sale of approved drug products, and we do not expect to generate substantial revenue for at least the next several years. If we fail to complete the development of our product candidates in a timely manner or fail to obtain their regulatory approval, our ability to generate future revenue will be compromised. We do not know when, or if, we will generate any revenue from our product candidates, and we do not expect to generate significant revenue unless and until we obtain regulatory approval of, and commercialize, our product candidates. We expect our expenses to increase in connection with our ongoing activities, particularly as we continue the research and development of, continue or initiate clinical trials of and seek marketing approval for our product candidates. In addition, if we obtain approval for any of our product candidates, we expect to incur significant commercialization expenses related to sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations. If we are unable to raise capital when needed or on attractive terms, we could be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.
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In August 2021, we received notice of a Product Development Research award totaling approximately $13.1 million from CPRIT to support our Phase 2 clinical trial of MT-401. To date, we have received $2.4 million of funds from the CPRIT grant.
On April 21, 2022, the Company entered into a binding services agreement (the “Agreement”), effective April 12, 2022, with Wilson Wolf Manufacturing Corporation (“Wilson Wolf”). Wilson Wolf is in the business of creating products and services intended to simply and expedite the transition of cell therapies and gene-modified cell therapies to mainstream society (the “Wilson Wolf Mission”). Pursuant to the Agreement, Wilson Wolf made a cash payment to the Company in the amount of $8.0 million.
As of March 31, 2022, we had working capital of $22.8 million, compared to working capital of $33.1 million as of December 31, 2021. Based on our revised clinical and research and development plans and our revised timing expectations related to the progress of our programs, we expect that our cash, cash equivalents and restricted cash as of March 31, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the second quarter of 2023. We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect. Furthermore, our operating plan may change, and we may need additional funds sooner than planned in order to meet operational needs and capital requirements for product development and commercialization. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates and the extent to which we may enter into additional collaborations with third parties to participate in their development and commercialization, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials. Our future funding requirements will depend on many factors, as we:
● initiate or continue clinical trials of our product candidates;
● continue the research and development of our product candidates and seek to discover additional product candidates;seek regulatory approvals for our product candidates if they successfully complete clinical trials;
● continue development of our manufacturing capabilities and our manufacturing facility;
● establish sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any product candidates that may receive regulatory approval;
● evaluate strategic transactions we may undertake; and
● enhance operational, financial and information management systems and hire additional personnel, including personnel to support development of our product candidates and, if a product candidate is approved, our commercialization efforts.
Because all of our product candidates are in the early stages of clinical and preclinical development and the outcome of these efforts is uncertain, we cannot estimate the actual amounts necessary to successfully complete the development and commercialization of product candidates or whether, or when, we may achieve profitability. Until such time, if ever, that we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity or debt financings and collaboration arrangements.
We plan to continue to fund our operations and capital funding needs through equity and/or debt financing. We may also consider new collaborations or selectively partner our technology. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interests of our stockholders will be diluted, and the terms may include liquidation or other preferences that adversely affect the rights of our existing stockholders’ common stock. The incurrence of indebtedness would result in increased fixed payment obligations and could involve certain restrictive covenants, such as limitations on our ability to incur additional debt, limitations on our ability to acquire or license intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. If we raise additional funds through strategic partnerships and alliances and licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies or product candidates or grant licenses on terms unfavorable to us. We may also be required to pay damages or have liabilities associated with litigation or other legal proceedings involving our company.
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In addition to the foregoing, based on the Company’s current assessment, the Company does not expect any material impact on its long-term liquidity due to the COVID-19 pandemic. However, the Company will continue to assess the effect of the pandemic on its operations, including its clinical programs. The extent to which the COVID-19 pandemic will impact the Company’s business and operations will depend on future developments that are highly uncertain and cannot be predicted with confidence, such as the geographic spread of the disease, the duration of the outbreak, the emergence of any new variant strains of COVID-19, the duration and effect of any future business disruptions in the United States and other countries to contain and treat the disease and the rate of public acceptance and efficacy of vaccines and other treatments. Further, disruption of global financial markets and a recession or market correction, including as a result of the COVID-19 pandemic and other global macroeconomic factors, could reduce the Company’s ability to access capital, which could in the future negatively affect the Company’s liquidity and could materially affect the Company’s business and the value of its common stock.
On February 16, 2022, the Company received a notice from the Nasdaq Global Market that the Company was not in compliance with Nasdaq’s Listing Rule 5450(a)(1), as the minimum bid price of its common stock had been below $1.00 per share for 30 consecutive business days. The Company has 180 calendar days, or until August 15, 2022, to regain compliance with the minimum bid price requirement. To regain compliance, the minimum bid price of the Company’s common stock must meet or exceed $1.00 per share for a minimum of ten consecutive business days during this 180-calendar day grace period. In the event the Company does not regain compliance with the minimum bid price requirement by August 15, 2022, the Company may be eligible for an additional 180-calendar day compliance period if it elects to transfer to the Nasdaq Capital Market to take advantage of the additional compliance period offered on that market. To qualify, the Company would be required to meet the continued listing requirement for market value of publicly held shares and all other initial listing standards for the Nasdaq Capital Market, with the exception of the bid price requirement, and would need to provide written notice of its intention to cure the bid price deficiency during the second compliance period.
Aspire Common Stock Purchase Agreement
In February 2020, we entered into a common stock purchase agreement, or the Purchase Agreement, with Aspire Capital Fund, LLC, or Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the Purchase Agreement. As of December 31, 2021, Aspire Capital had purchased 4,113,440 shares under the Purchase Agreement, providing aggregate proceeds to the Company of approximately $6.2 million. In consideration for entering into the Purchase Agreement, concurrently with the execution of the Purchase Agreement, the Company issued to Aspire Capital 345,357 shares of the Company’s common stock.
The Purchase Agreement provides that we and Aspire Capital shall not effect any sales under the Purchase Agreement on any purchase date where the closing sale price of our common stock is less than $0.25. There are no trading volume requirements or restrictions under the Purchase Agreement, and we will control the timing and amount of sales of our common stock to Aspire Capital. Aspire Capital has no right to require any sales by us but is obligated to make purchases from us as directed by us on future funding, rights of first refusal, participation rights, penalties, or liquidated damages in the Purchase Agreement. The Purchase Agreement may be terminated by us at any time, at its discretion, without any cost to us. Aspire Capital has agreed that neither it nor any of its agents, representatives and affiliates shall engage in any direct or indirect short-selling or hedging of our common stock during any time prior to the termination of the Purchase Agreement. We expect to use any proceeds under the Purchase Agreement for working capital and general corporate purposes.
The Purchase Agreement provides that the number of shares that may be sold pursuant to the Purchase Agreement will be limited to 9,232,814 shares, including the Commitment Shares, or the Exchange Cap, which represents 19.99% of our outstanding shares of common stock as of the date of the Purchase Agreement, unless stockholder approval is obtained to issue more than 19.99%. This limitation will not apply if, at any time the Exchange Cap is reached and at all times thereafter, the average price paid for all shares issued under the Purchase Agreement is equal to or greater than $2.41, which was the closing price of our shares on the Nasdaq Global Market immediately preceding the execution of the Purchase Agreement. We are not required or permitted to issue any shares of common stock under the Purchase Agreement if such issuance would breach our obligations under the rules or regulations of the Nasdaq Global Market.
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ATM Agreement
In August 2021, the Company entered into a Controlled Equity Offering Sales Agreement (the “ATM Agreement”) with Cantor Fitzgerald & Co. and RBC Capital Markets, LLC (the “Sales Agents”), pursuant to which the Company can offer and sell, from time to time at its sole discretion through the Sales Agents, shares of its common stock having an aggregate offering price of up to $75.0 million. Any shares of its common stock sold will be issued pursuant to the Company’s shelf registration statement on Form S-3 (File No. 333-258687), which the SEC declared effective on August 19, 2021. The shelf registration statement on Form S-3 includes a prospectus supplement covering the offering up to $19.8 million of shares of common stock over the 12 months ending March 18, 2023 in accordance with the ATM agreement. The Sales Agents will be entitled to compensation under the Sales Agreement at a commission rate equal to 3.0% of the gross sales price per share sold under the ATM Agreement, and the Company has provided each of the Sales Agents with indemnification and contribution rights. From April 1, 2022 to the date of this filing, the Company sold 148,000 shares of its common stock under the ATM Agreement for net proceeds of $63,600.
Going Concern
We have no sources of revenue, other than grant income, to provide incoming cash flows to sustain our future operations. As outlined above, our ability to pursue our planned business activities is dependent upon our successful efforts to raise additional capital.
These factors raise substantial doubt regarding our ability to continue as a going concern. Our condensed consolidated financial statements have been prepared on a going concern basis, which implies that we will continue to realize our assets and discharge our liabilities in the normal course of business. Our financial statements do not include any adjustments to the recoverability and classification of recorded asset amounts and classification of liabilities that might be necessary should we be unable to continue as a going concern.
Critical Accounting Policies
The condensed consolidated financial statements are prepared in conformity with U.S. GAAP, which require the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results could differ from the original estimates, requiring adjustments to these balances in future periods. The critical accounting estimates that affect the condensed consolidated financial statements and the judgments and assumptions used are consistent with those described under Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021.
Off-Balance Sheet Arrangements
We have not entered into any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes of financial condition, revenues, expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
We are a smaller reporting company as defined by Rule 12b-2 of the Exchange Act and are not required to provide the information required under this item.
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