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Item 2. Management’s Discussion and Analysis

2022-04-21 compared with 2021-10-21 · 176 added, 164 removed, 65 unchanged (84% of the section changed)

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

The following discussion and analysis should be read in conjunction with the unaudited financial information and the notes thereto included herein, as well as the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2020, as filed on February 22, 2021, as amended by the Form 10-K/A filed on February 26, 2021.

This discussion contains forward-looking statements that involve risks and uncertainties.

5 unchanged sentences

Liquidity and Capital Resources which discusses key aspects of our statements of cash flows, changes in our financial position and our financial commitments.

Significant changes since our most recent Annual Report on Form 10-K in the Critical Accounting Policies and Significant Estimates that we believe are important to understanding the assumptions and judgments underlying our financial statements.

Plus Therapeutics is a U.S.

pharmaceutical company developing innovative, targeted radiotherapeutics for rare and difficult-to-treat cancers.

Plus’ investigational drugs are intended for both adult and pediatric patients on a worldwide basis.

Plus Therapeutics’ headquarters and manufacturing facility are in Texas, in close proximity to world-class cancer institutions and researchers.

Our dedicated team of engineers, physicians, scientists, and other professionals are committed to advancing our novel radiotherapeutic technology for the benefit of cancer patients and healthcare providers.

Plus’ technology includes nanoliposome-encapsulated, BMEDA-chelated Rhenium-186 radiotherapeutics.

The nanoliposomes facilitate local and precise drug delivery and improved drug retention at the target site while Rhenium-186 releases high-energy beta particles for treatment and gamma photons for imaging.

This radiotherapeutic platform, combined with advances in surgery, nuclear medicine, and radiation oncology, affords us the opportunity to treat multiple types of cancer.

Our current pipeline is focused on treating rare and central nervous system tumors with significant unmet medical needs.

Plus Therapeutics’ lead investigational drug, Rhenium-186 NanoLiposome ( 186 RNL), is a patented radiotherapy potentially useful for patients with recurrent glioblastoma (GBM).

Plus Therapeutics, Inc.

pharmaceutical company developing innovative, targeted radiotherapeutics for adults and children with rare and difficult-to-treat cancers.

Our novel radioactive drug formulations and therapeutic candidates are designed to deliver safe and effective doses of radiation to tumors.

To achieve this, we have developed innovative approaches to drug formulation, including encapsulating radionuclides such as Rhenium isotopes within nanoliposomes and microspheres.

Our formulations are intended to achieve elevated tumor absorbed radiation doses and extended retention times such that the clearance of the isotope occurs after significant radiation decay, which we believe will contribute and provide less normal tissue/organ exposure and improved safety margins.

Traditional approaches to radiation therapy for cancer such as external beam radiation have many disadvantages including continuous treatment for 4-6 weeks (which is onerous for patients), radiation that inadvertently damages healthy cells and tissue, and a very limited amount of radiation that can be safely delivered, therefore, is frequently inadequate to fully destroy the cancer.

Our targeted radiotherapeutic platform and unique investigational drugs have the potential to overcome these disadvantages by directing higher, more powerful radiation doses at the tumor—and only the tumor—potentially in a single treatment.

By minimizing radiation exposure to healthy tissues while simultaneously maximizing efficacy, we hope to reduce the toxicity of radiation for patients, improving their quality of life and life expectancy.

Our radiotherapeutic platform, combined with advances in surgery, nuclear medicine, interventional radiology, and radiation oncology, affords us the opportunity to target a broad variety of cancer types.

Our lead radiotherapeutic candidate, Rhenium-186 NanoLiposome (“ 186 RNL”) is designed specifically to target central nervous system (“CNS”) cancers including recurrent glioblastoma, leptomeningeal metastases, and pediatric brain cancers by direct localized delivery utilizing approved standard-of-care tissue access such as with conduction enhanced delivery (“CED”) and intraventricular brain catheters (Ommaya reservoir).

Our recently acquired radiotherapeutic candidate, Rhenium-188 NanoLiposome Biodegradable Alginate Microsphere (“ 188 RNL-BAM”) is designed to treat many solid organ cancers including primary and secondary liver cancers.

Our headquarters and manufacturing facilities are in Texas and are nearby world-class cancer institutions and researchers.

Our dedicated team of engineers, physicians, scientists, and other professionals are committed to advancing our targeted radiotherapeutic technology for the benefit of cancer patients and healthcare providers worldwide and our current pipeline is focused on treating rare and difficult-to-treat cancers with significant unmet medical needs.

Our most advanced investigational drug, 186 RNL, is a patented radiotherapy potentially useful for patients with CNS and other cancers.

Preclinical study data describing the use of 186 RNL for several cancer targets have been published in peer-reviewed journals.

Besides glioblastoma, leptomeningeal metastases, and pediatric brain cancer, 186 RNL has been reported to have potential applications for head and neck cancer, ovarian cancer, breast cancer and peritoneal scarcinomatosis.

The 186 RNL technology was part of a licensed radiotherapeutic portfolio that we acquired from NanoTx, Corp.

(“NanoTx”) on May 7, 2020.

The licensed radiotherapeutic can be applied toward several cancer targets, and has an active $3.0 million award from U.S.

National Institutes of Health/National Cancer Institute which will provide financial support for the continued clinical development of 186 RNL for recurrent glioblastoma through the completion of a Phase 2 clinical trial and enrollment of up to 55 patients.

Plus Therapeutics is currently conducting a clinical trial for ReSPECT GBM for Recurrent Glioblastoma and anticipates beginning a clinical trial for ReSPECT-LM Clinical Trial for Leptomeningeal Metastases in the fourth quarter of 2021 :

ReSPECT-GBM Clinical Trial for Recurrent Glioblastoma

186 RNL is a novel injectable radiotherapy designed to deliver targeted high dose radiation directly into brain tumors in a safe, effective, and convenient manner to optimize patient outcomes.

186 RNL, which is composed of radionuclide Rhenium-186 (186Re) and a nanoliposomal carrier, is infused directly into the brain tumor via precision brain mapping and convection enhanced delivery.

The 186 RNL radiation dose delivered to patients may be up to 20x greater than what is possible with external beam radiation therapy (EBRT).

Some additional potential benefits of RNL compared to EBRT include:

186 RNL can be visualized in real-time during administration, possibly giving doctors better control of radiation dosing and distribution.

Potentially more effectively treats the bulk tumor and microscopic disease in surrounding healthy tissue.

Using a small catheter, 186 RNL is infused directly into the targeted tumor, which may reduce radiation exposure to healthy cells.

By contrast, EBRT is less targeted and selective.

RNL is given during a single 3- to 4-day in-patient hospital visit, while EBRT requires out-patient visits 5 days a week for approximately 4-6 weeks.

186 RNL is currently being evaluated for the treatment of recurrent glioblastoma in the Phase 1 multi-center ReSPECT-GBM dose-finding clinical trial.

ReSPECT-GBM is evaluating the safety, tolerability, and distribution of 186 RNL for the treatment of recurrent glioblastoma.

Thus far, 186 RNL has demonstrated safety and potential efficacy signals in patients with adequate dosing and tumor coverage with multiple patients surviving greater than 30 months, compared to a median survival of approximately 9 months with the current standard of care.

The seventh dose escalation cohort of this trial has been completed.

Recently, the ReSPECT-GBM trial data safety and monitoring board (DSMB) recommended that we proceed to the eighth dosing cohort which provides for a 40% increase in both drug volume and radiation dose.

Thus far, treatment emergent serious adverse events have not been observed.

By infusing the 186 RNL drug directly into the tumor, bypassing the blood-brain barrier, normal brain and external tissues may be spared from radiation damage.

We believe that radiation in the form of high energy electrons may be effective against glioblastoma if an adequate dose can be effectively delivered.

For comparison, current EBRT protocols for recurrent glioblastoma typically recommend a total maximum dose of about 35 Gy.

In contrast, thus far, we have been able to deliver up to 740 Gy of absorbed radiation to tumor issue without significant toxicities.

Recurrent glioblastoma (GBM) affects approximately 12,000 patients annually in the U.S.

and is the most common and lethal form of brain cancer.

The average life expectancy with glioblastoma is less than 24 months, with a one-year survival rate of 40.8% and a five-year survival rate of only 6.8%.

GBM can cause headaches, seizures, vision changes and other neurological complications.

The licensed radiotherapeutic has been evaluated in preclinical studies for several cancer targets and we have an active $3.0 million award from U.S.

Thus far, 23 patients have been treated in the Phase 1 clinical trial and the Phase 2 clinical trial has not yet been

We are currently conducting the ReSPECT-GBM and ReSPECT-LM clinical trials for recurrent glioblastoma (“GBM”) and leptomeningeal metastases (“LM””), respectively.

In addition, we anticipate seeking the U.S.

Food and Drug Administration (“FDA”) Investigational New Drug (“IND”) approval for the ReSPECT-PBC clinical trial for pediatric brain cancer (“PBC”) in late 2022 or early 2023 .

186 RNL versus External Beam Radiation Therapy

186 RNL is a novel injectable radiotherapy designed to deliver targeted, high dose radiation directly into glioblastoma tumors in a safe, effective, and convenient manner that may ultimately prolong patient survival.

186 RNL is composed of the radionuclide Rhenium-186 and a nanoliposomal carrier, and is infused in a highly targeted fashion, directly into the tumor via precision brain mapping and convection enhanced delivery (“CED”).

Potential benefits of 186 RNL compared to standard external beam radiotherapy (“EBRT”) include:

• The 186 RNL radiation dose delivered to patients may be up to 20 times greater than what is possible with commonly used EBRT.

• 186 RNL can be visualized in real-time during administration, possibly giving clinicians better control of radiation dosing and distribution.

• 186 RNL potentially more effectively treats the bulk tumor and microscopic disease that has already invaded healthy tissue.

• 186 RNL is infused directly into the targeted tumor, bypassing the blood brain barrier, which reduces radiation exposure to healthy cells, in contrast to EBRT which passes through normal tissue to reach the tumor, continuing its path through the tumor, hence being less targeted and selective.

• 186 RNL is given during a single, short, in-patient hospital visit, and is available in all hospitals with nuclear medicine and neurosurgery, while EBRT requires out-patient visits 5 days a week for approximately 4-6 weeks .

ReSPECT-GBM Trial for Recurrent GBM

GBM is the most common, complex, and aggressive primary brain cancer in adults.

Annually in the U.S., there are 12,900 GBM cases diagnosed and approximately 10,000 patients succumb to the disease each year.

The average life expectancy with primary glioblastoma is less than 24 months, with a one-year survival rate of 40.8% and a five-year survival rate of only 6.8%.

GBM often causes and presents with headaches, seizures, vision changes and other significant neurological complications.

Despite the best available medical treatments to eliminate the initial brain tumor, some microscopic disease frequently remains, with tumor regrowth within months.

In fact, approximately 90% of patients experience tumor recurrence.

This tumor type is incredibly difficult to remove completely, and often is resistant or quickly develops resistance to most available therapies.

The treatment of GBM remains a significant challenge and it has been nearly a decade since the FDA approved a new therapy for this disease.

There is no clear standard of care for recurrent GBM and even the few currently approved treatments, in aggregate, provide only marginal survival benefit.

Current approved therapies are associated with significant side effects, which limit dosing and prolonged use.

Approximately 90% or more of patients with primary GBM experience tumor recurrence.

Complete surgical removal of GBM is not typically possible and GBM is often resistant or quickly develops resistance to most available therapies.

Even today, the treatment of GBM remains a significant challenge and it has been nearly a decade since the FDA approved a new therapy for this disease .

For recurrent GBM, there are few currently approved treatments that in the aggregate, provide only marginal survival benefit.

Furthermore, these therapies are associated with significant side effects, which limit dosing and prolonged use.

While EBRT has been shown to be safe and effective in many malignancies including glioblastoma, the maximum possible administered dose is limited by toxicity to the normal tissues surrounding the malignancy.

In contrast, targeted radiopharmaceuticals that precisely deliver radiation in the form of beta particles such as Iodine-131 for thyroid cancer, are known to minimize exposure to normal cells and tissues which we hope will result in a safer and more effective treatment.

Interim results from our ongoing Phase 1/2a ReSPECT-GBM trial, suggest beta particle energy from our lead investigational drug 186 RNL may also have utility in treating GBM and other malignancies.

More specifically, the preliminary data from ReSPECT-GBM indicates that radiation, in the form of high energy beta particles or electrons, can be effective against GBM.

Thus far, we have been able to deliver up to 740 Gy of absorbed radiation to tumor issue without significant or dose limiting toxicities.

In comparison, current EBRT protocols for recurrent GBM typically recommend a total maximum dose of about 35 Gy.

In September 2020, the FDA granted both Orphan Drug designation and Fast Track designations to 186 RNL for the treatment of patients with glioblastoma.

186 RNL is presently under clinical investigation in a multicenter, sequential cohort, open-label, volume and dose escalation study of the safety, tolerability, and distribution of 186 RNL given by CED to patients with recurrent or progressive malignant glioma after standard surgical, radiation, and/or chemotherapy treatment (NCT01906385).

The study uses a modified Fibonacci dose escalation, followed by a planned expansion at the maximum tolerated dose/maximum feasible dose to determine efficacy.

The trial is funded through Phase 2 in large part by a NIH/NCI grant.

The planned enrollment in the NIH/NCI grant is 21 patients in the dose-escalation part of the study and 34 patients in the expansion cohort.

The study is in its 8 th dosing administration cohort and is under development

and internal review to potentially advance to a Phase 2 or registration trial.

At the Society for Neuro-Oncology Annual Meeting in November 2021, we presented patient data which at that time included the results for 22 patients treated in the ReSPECT-GBM trial.

The trial, thus far, has shown that CED in recurrent GBM patients is feasible.

Median absorbed dose to the tumor volume across all subjects in the first eight cohorts (n=22) was 267.5 Gy (range 8.9-740).

In a subset of patients in whom tumor coverage was greater than or equal to 75%, the median absorbed dose was 405 Gy (range 146-593).

By contrast, the median absorbed doses to the whole brain and the total body across all subjects were 0.55 Gy (range 0.001-2.728) and 0.09 Gy (range 0.001-0.182), respectively.

Small doses, as delivered to the body, are typically well-tolerated.

Based on observed and reported patient protocol activity and all available adverse event (“AE”) data, 186 RNL has been well-tolerated.

No AEs with an outcome of death or study drug-related serious AEs have been reported.

Furthermore, no patient has been discontinued from the study because of an AE.

All AEs have been mild or moderate (Grade 1 or 2) in intensity, except for one case of Grade 3 vasogenic edema, which was considered by the investigator to be unrelated to the study drug.

AEs considered by the investigator to be at least possibly related to 186 RNL have included Grade 1 to 2 skin and soft tissue infection, intermittent cephalgia, neck and jaw pain, nausea with or without vomiting, constipation, increased lethargy, difficulty walking (gait disturbance), worsening double vision, and dysuria.

Scalp discomfort and tenderness related to the surgical procedure has also been reported.

In the 22 subjects with recurrent GBM receiving a single administration of 186 RNL, the mean & median OS for all 22 patients as of November 2021 was 48.1 & 33.1 weeks, respectively, with 7 patients alive.

In a subset of 13 patients receiving a presumed therapeutic absorbed radiation dose to the tumor (>100 Gy), the mean & median OS was 64.8 & 47.1 weeks, respectively, with 7 of 13 patients alive.

In contrast, in 9 patients receiving a presumed sub-therapeutic absorbed radiation dose to the tumor (<100 Gy), the mean and median OS was 23.9 & 22.3 weeks, respectively.

A Kaplan-Meier curve comparing patients with presumed therapeutic vs.

sub-therapeutic radiation dose to the tumor showed a statistically significant difference between the groups (p=.0002).

It is hypothesized that targeted infusion of 186 RNL into the tumor by CED, bypassing the blood-brain barrier and normal brain and external tissues, significantly spares normal tissues from radiation exposure and potential toxicity and concentrates radiation to the tumor and surrounding region of interest.

ReSPECT-LM Clinical Trial for Leptomeningeal Metastases

Based on substantial preclinical work completed and published, 186 RNL is thought to have potential clinical benefits in other difficult to treat cancers for example leptomeningeal metastases and pediatric brain cancer.

The ReSPECT-LM Phase 1 clinical trial builds upon preclinical studies in which tolerance to doses of 186 RNL as high as 1,075 Gy was shown in animal models with LM with no observed significant toxicity.

Furthermore, treatment led to marked reduction in tumor burden in both C6 and MDA-231 LM models.

In October 2021, the Federal Drug Administration (FDA) announced clearance for the Company to proceed with the Investigational New Drug (IND) application for 186 RNL for the treatment of leptomeningeal metastases (LM).

The Company expects to initiate patient accrual in a Phase 1 dose escalation trial of 186 RNL (ReSPECT-LM) in the fourth quarter of 2021.

The ReSPECT-LM multi-center, sequential cohort, open-label, dose escalation study will evaluate the safety, tolerability, and distribution of 186 RNL via intrathecal infusion to the ventricle of patients with LM after standard surgical, radiation, and/or chemotherapy treatment.

The primary endpoint of the study is the incidence and severity of adverse events and dose limiting toxicities.

LM is a rare complication of cancer in which the disease spreads to the membranes (meninges) surrounding the brain and spinal cord.

The incidence of LM is growing and occurs in approximately 5% of people with late-stage cancer, or 110,000 people in the U.S.

It is usually terminal with an average 1-year survival of just 7%.

It is highly lethal with an average 1-year survival of just 7%.

LM occurs with cancers that are most likely to spread to the central nervous system.

The most common cancers to include the leptomeninges are breast cancer, lung cancer, and melanomas .

Future potential Trials

We are in the process of developing additional indications utilizing 186 RNL such as for pediatric brain cancer.

Plus Therapeutics also has two other clinical stage drugs in our pipeline which are:

1) DocePLUS™, a patented chemotherapy incorporating docetaxel for patients with solid tumors that has been evaluated in a completed U.S.

single-center Phase 1 clinical trial;

2) DoxoPLUS™, a generic chemotherapy incorporating doxorubicin that has been evaluated in a completed, bioequivalence clinical trial in the U.S., Canada, and Ukraine versus Janssen’s CAELYX® in patients with ovarian cancer.

Current business activities related to both DocePLUS and DoxoPLUS are focused on identification of potential partners.

The most common cancers to spread to the leptomeninges are breast cancer, lung cancer, melanoma and gastrointestinal cancers---though most solid tumors have the potential for LM spread.

The ReSPECT-LM Phase 1 clinical trial (ClinicalTrials.gov NCT05034497) is predicated in part upon preclinical studies in which tolerance to doses of 186 RNL as high as 1,075 Gy was shown in animal models with LM without significant observed toxicity.

Furthermore, treatment led to marked reduction in tumor burden in both C6 and MDA-231 LM models.

In October 2021, the FDA announced clearance of our IND application for 186 RNL for the treatment of LM.

Subsequently, in November 2021, the FDA granted a Fast Track designation for 186 RNL for the treatment of leptomeningeal metastases.

We treated our first patient in the ReSPECT-LM Phase 1 clinical trial in Q1 2022.

The ReSPECT-LM multi-center, sequential cohort, open-label, dose escalation study is evaluating the safety, tolerability, and distribution of 186 RNL via intrathecal infusion to the ventricle of patients with LM after standard surgical, radiation, and/or chemotherapy treatment.

The primary endpoint of the study is the incidence and severity of adverse events and dose limiting toxicities.

ReSPECT-PBC Clinical Trial for Pediatric Brain Cancer

In August 2021, we announced plans for treating pediatric brain cancer at the 2021 American Association of Neurological Surgeons (“AANS”) Annual Scientific Meeting.

In July 2021, we reported that we had received FDA feedback pertaining to a pre-IND meeting briefing package in which the FDA stated that we are not required to perform any additional preclinical or toxicology studies.

Currently, we plan to investigate the use of 186 RNL in 2 pediatric brain cancers.

High-grade glioma (HGG) is a rare, fast-growing CNS tumor that forms in glial cells of the brain and spinal cord.

It can be found almost anywhere within the CNS, but is most commonly within the supratentorium in children ages 15-19.

HGG tumors in children act differently from those in adults, causing headaches, seizures, and difficulty achieving developmental milestones depending on the tumor location.

Approximately 360-400 children are diagnosed with HGG annually in North America and the 5-year survival rate is approximately 20%.

In contrast to HGG, ependymoma is a rare, slow- or fast-growing (depending on the grade) primary CNS tumor that forms in ependymal cells in the brain and spinal cord—and may spread throughout the CNS, though infrequently.

All ependymomas can recur, but patients are often tumor-free for years before testing shows tumor regrowth, either at the initial tumor site or elsewhere within the CNS.

Symptoms depend on tumor location and size, usually including irritability, sleeplessness, vomiting, nausea, back pain, arm/leg weakness, and headaches.

Approximately 250 children are diagnosed with ependymoma annually in the U.S.

while 71% of children with Grade II and 57% with

Grade III survive 5 years from diagnosis.

Based on the aggregate preclinical and clinical work completed to date in adult recurrent glioblastoma, we hypothesize that 186RNL may offer potential clinical benefit for PBCs, such as high-grade glioma and ependymoma.

We intend to submit an IND application to the FDA for 186 RNL for the treatment of PBC (high-grade glioma and ependymoma) in late 2022 or early 2023 .

Rhenium-188 NanoLiposome Biodegradable Alginate Microsphere Technology

In January 2022, we announced that we licensed BAM patents and technology from The University of Texas Health Science Center at San Antonio (“UT Health Science Center at San Antonio”) to expand our tumor targeting capabilities and precision radiotherapeutics pipeline.

We intend to combine our Rhenium NanoLiposome technology with the BAM technology to create a novel radioembolization technology.

Initially, we intend to utilize the Rhenium-188 isotope, 188 RNL-BAM for the intra-arterial embolization and local delivery of a high dose of targeted radiation for a variety of solid organ cancers such as hepatocellular cancer, hepatic metastases, pancreatic cancer and many others.

Preclinical data from an ex vivo embolization experiment in which Technetium-99m-BAM was intra-arterially delivered to a bovine kidney perfusion model was presented at the recent 2021 Society of Interventional Radiology (“SIR”) Annual Scientific Meeting.

The study concluded that the technology required for radiolabeling BAM could successfully deliver, embolize and retain radiation in the target organ.

188 RNL-BAM is a preclinical investigational drug we intend to further develop and move into clinical trials.

Specifically, in 2022, we intend to transfer the 188 RNL-BAM technology from UT Health Science Center at San Antonio, fabricate and scale the drug product, and complete certain preclinical studies to support a future FDA IND submission.

Our likely initial clinical target is liver cancer which is the 6 th most common and 3 rd deadliest cancer worldwide.

It is a rare disease with increasing U.S.

annual incidence (42,000) and deaths (30,000).

Recent Developments

Lincoln Park Purchase Agreement

On September 30, 2020, we entered into a purchase agreement (the “2020 Purchase Agreement”) and registration rights agreement (the “LPC Registration Rights Agreement”).

Under the 2020 Purchase Agreement Lincoln Park Capital Fund, LLC (“Lincoln Park”) has committed to purchase up to $25.0 million of our common stock.

Pursuant to the LPC Registration Rights Agreement, we have agreed to register any shares sold to Lincoln Park under the 2020 Purchase Agreement for resale by Lincoln Park .

Refer to “Liquidity and Capital Resources” section below for additional details on the 2020 Purchase Agreement.

During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million.

During the nine months ended September 30, 2021 we issued 5,535,186 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $12.3 million.

COVID-19 Impact

The COVID-19 pandemic has presented substantial public health and economic challenges and is affecting economies, financial markets and business operations around the world.

While the Company has implemented additional health and safety precautions and protocols in response to the pandemic and government guidelines, the Company has not experienced a significant impact on its business and operations.

However, the Company may experience disruptions that could adversely impact its business operations as well as its preclinical studies and clinical trials.

The Company is currently continuing the clinical trials it has underway in sites across the U.S., and, although there has been no significant impact to date, the Company expects that COVID-19 precautions may directly or indirectly impact the timeline for some of its clinical trials.

Some of the Company’s clinical trial sites, including those located in areas severely impacted by the pandemic, placed new patient enrollment into clinical trials on hold or, for patients traveling from out-of-state, implemented a 14-day self-quarantine before appointments.

In addition, some clinical trial sites imposed limited accessibility to conduct clinical monitoring and training on-site.

As the accessibility of vaccines against COVID-19 and the number of adults who have received a vaccine has increased, several of the restrictions have been eased or lifted entirely.

The Company considered the impacts of COVID-19 on the assumptions and estimates used to prepare its consolidated financial statements and determined that there were no material adverse impacts on the Company’s results of operations and financial position at September 30, 2021.

The full extent to which the COVID-19 pandemic will directly or indirectly impact its business, results of operations and financial condition, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets.

In response to the COVID-19 pandemic, the Coronavirus Aid, Relief and Economic Security Act (“CARES Act”) was signed into law on March 27, 2020.

The CARES Act, among other things, includes tax provisions relating to refundable payroll tax credits, deferment of employer’s social security payments, net operating loss utilization and carryback periods, modifications to the net interest deduction limitations and technical corrections to tax depreciation methods for qualified improvement property (QIP).

The CARES Act had no material impact on the Company’s income tax provision for the year ended December 31, 2020 or the nine months ended September 30, 2021.

The programs under the CARES Act expired on September 6, 2021.

Services Agreement and Statement of Work with Medidata

On March 31, 2022, we entered into a Statement of Work (the “SOW”) with Medidata Solutions, Inc.

(“Medidata”), pursuant to which Medidata will build a Synthetic Control Arm ® (SCA) platform that facilitates the use of historical clinical data to incorporate into the Company’s Phase 2 clinical trial of 186 RNL in GBM.

The SOW has a term of six (6) months.

We will pay Medidata $1.45 million in managed services fees and a contingent managed services fee of $150,000 if the U.S.

Food & Drug Administration approves a path forward for us to use the SCA in its clinical trial of 186 RNL for treatment of GBM.

The SOW may only be terminated for a material breach by either party or if the clinical study’s authorization or approval is withdrawn by a regulatory agency.

UT Health Science Center San Antonio (UTHSA) License Agreement

On December 31, 2021, we entered into an exclusive license agreement with UT Health Science Center at San Antonio for the global rights to develop and commercialize 188 RNL-BAM.

Under the license agreement with UT Health Science Center at San Antonio, we are required to use commercial reasonable efforts to develop the 188 RNL-BAM product candidate acquired under the license agreement.

Further, we are subject to future milestone, earn-out and other payments to UT Health Science Center at San Antonio all of which are tied to our commercialization and sale activities for product candidates.

Recent Financings

Refer to the “Liquidity and Capital Resources” section below for information on our recent financings.

Results of Operations

Development revenues

Under our government contract with BARDA, we recognized a total of $0 and $0.3 million in revenues for the three and nine months ended September 30, 2020, respectively, and $0 and $0.3 million in qualified expenditures for those periods.

The BARDA contract was terminated in December 2019 and the close out process was completed in 2020.

There were no revenue or expenses recognized relating to the BARDA contract during the nine months ended September 30, 2021, and we do not expect additional BARDA revenue in the near future.

Research and development expenses

Research and development expenses include costs associated with the design, development, testing, and enhancement of our product candidates, payment of regulatory fees, laboratory supplies, pre-clinical studies, and clinical studies .

The following table summarizes the components of our research and development expenses for the three and nine months ended September 30, 2021 and 20 20 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the components of our research and development expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Research and development

Stock-based compensation

Share-based compensation

Total research and development expenses

The increase of $1.2 million and $2.1 million in research and development expenses for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 was due primarily to increased expenditures related to the development of RNL in compliance with current good manufacturing practices, or cGMP, requirements.

We expect aggregate research and development expenditures to increase in absolute dollars during the remainder of 2021 due to the expected costs of development of the RNL therapy acquired from NanoTx .

The increase of $0.7 million in research and development expenses for the three months ended March 31, 2022 as compared to the same period in 2021 was due primarily to increased expenditures related to increase in development costs of 186 RNL of $0.5 million as we ramp up to plan for the pivotal trial, an increase of $0.1 million in professional expenses and an increase of $0.1 million in personnel expenses .

We expect aggregate research and development expenditures to increase in absolute dollars during 2022 due to the expected costs of development of the 186 RNL™ therapy acquired from NanoTx and development expenses related to 188 RNL-BAM.

General and administrative expenses

General and administrative expenses include costs for administrative personnel, legal and other professional expenses, and general corporate expenses.

The following table summarizes the general and administrative expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the general and administrative expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

General and administrative

Stock-based compensation

Share-based compensation

Total general and administrative expenses

General and administrative expenses increase by approximately $0.9 million during the three months ended September 30, 2021 as compared to the same period in 2020.

The increase was primarily due to an increase of $0.6 million in legal and professional expenses, an increase of $0.1 million for stock-based compensation expenses, an increase of $0.1 million in insurance expenses and $0.1 million in personnel costs.

General and administrative expenses increased by $0.7 million during the nine months ended September 30, 2021 , as compared to the same period in 2020.

The increase was primarily driven by an increase of professional expenses of $0.5 million, and an increase of $0.2 million of stock based compensation expenses.

We expect general and administrative expenditures to remain consistent on a quarterly basis for the remainder of 2021 as compared with 2020.

Loss on disposal of property and equipment

Loss on disposal of property and equipment of $18,000 was due to the proceeds received for used property and equipment were lower than their carrying amount.

General and administrative expenses increased by approximately $0.8 million during the three months ended March 31, 2022 as compared to the same period in 2021.

The increase was primarily due to an increase of $0.6 million of legal, intellectual property and other professional expenses, and an increase of $0.2 million of personnel related expenses.

We expect general and administrative expenditures to remain generally consistent in 2022 as compared with the year ended December 31, 2021, subject to litigation cost which is not predictable at this time.

Stock-based compensation expense

Stock-based compensation expense includes charges related to options and restricted stock awards issued to employees, directors and non-employees.

Stock-based compensation expense includes charges related to stock options issued to employees, directors and non-employees.

We measure stock-based compensation expense based on the grant-date fair value of any awards granted to our employees.

Such expense is recognized over the requisite service period.

The following table summarizes the components of our stock-based compensation expenses for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes the components of our stock-based compensation expenses for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Research and development

General and administrative

Total stock-based compensation

The increase in stock-based compensation expense for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 is primarily related to increased stock options grants in the three and nine months ended September 30, 2021, as compared to the same periods in 2020 .

We expect to continue to grant stock options (which will result in an expense) to our employees, directors, and, as appropriate, to non-employee service providers.

In addition, previously-granted stock options will continue to vest in accordance with their original terms.

As of September 30, 2021 , the total compensation cost related to non-vested stock options and stock awards not yet recognized for all our plans is approximately $ 1.5 million w hich is expected to be recognized as a result of vesting under service conditions over a weighted average period of 3.0 years.

Total share-based compensation

The increases in our stock-based compensation was primarily due to increases in grants of stock-based options as well as higher grant-date fair value of stock-based awards.

Financing items

The following table summarizes interest income, interest expense, and other income and expense for the three and nine months ended September 30, 2021 and 2020 (in thousands):

Three Months Ended September 30,

Nine Months Ended September 30,

The following table summarizes interest income, interest expense, and other income and expense for the three months ended March 31, 2022 and 2021 (in thousands):

Three Months Ended March 31,

Interest income

Interest expense

Change in fair value of warrants

The decrease in interest expense for the three and nine months ended September 30, 2021 as compared to the same periods in 2020 was primarily due to the repayment of debt principal of $5.0 million in April 2020.

The changes in fair value of our warrant liabilities are primarily due to fluctuations in the valuation inputs for the warrants.

See Note 4 to the unaudited consolidated condensed financial statements included elsewhere herein for disclosure and discussion of our warrant liabilities.

We expect interest expense in 2021 to decrease as compared with 2020 due to the principal repayment of $5.0 million on April 1, 2020.

In April, June, July and September 2020, we entered into revised warrant agreements with the holders of 3,447,500 Series U warrants and in September 2020, we entered into revised warrant agreements for 75,000 of warrants issued to H.C.

Wainwright & Co., LLC, as representatives of the underwriters, in the form of Series U warrants .

In return for reducing the strike price of the warrants, the warrant holders agreed to amend the settlement provisions upon fundamental transactions.

The amended Series U warrants meet the requirements for equity classification under authoritative accounting guidance and are no longer subject to fair value accounting post amendment.

Change in fair value of liability instruments

The decrease in interest expense for the three months ended March 31, 2022 as compared to the same periods in 2021 was primarily due to the repayment of debt principal of $0.3 million in 2021 and $0.4 million during the first quarter of 2022.

We expect interest expense in 2022 to decrease as compared with 2021 due to scheduled debt principal repayments which commenced on November 1, 2021.

Liquidity and Capital Resources

Short-term and long-term liquidity

The following is a summary of our key liquidity measures at September 30, 2021 and December 31, 2020 (in thousands):

As of September 30,

As of December 31,

The following is a summary of our key liquidity measures at March 31, 2022 and December 31, 2021 (in thousands):

March 31, 2022

December 31, 2021

Cash and cash equivalents

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Working capital

We incurred net losses of $9.2 million for the nine months ended September 30, 2021.

We have an accumulated deficit of $442.8 million as of September 30, 2021.

Additionally, we used net cash of $7.7 million to fund our operating activities for the nine months ended September 30, 2021.

These factors raise substantial doubt about our ability to continue as a going concern.

To date, these operating losses have been funded primarily from outside sources of invested capital in our common stock, proceeds raised from the Loan and Security Agreement, and gross profits.

For the periods presented, operating losses have been funded primarily from outside sources of invested capital in our common stock.

We believe that our cash and cash equivalents of $21.2 million at March 31, 2022 will enable us to fund our current and planned operations for at least the next twelve months and beyond from the date these condensed financial statements were issued.

We have had, and we will continue to have, an ongoing need to raise additional cash from outside sources to fund our future clinical development programs and other operations.

Our inability to raise additional cash would have a material and adverse impact on operations and would cause us to default on our loan.

On October 23, 2020, we entered into an Equity Distribution Agreement (the “Distribution Agreement”) with Canaccord Genuity LLC (“Canaccord”), pursuant to which we may issue and sell, from time to time, shares of our common stock having an aggregate offering price of up to $10,000,000 (the “ATM Shares”), depending on market demand, with Canaccord acting as an agent for sales.

During the year ended December 31, 2020, we issued 1,616,331 shares under the Distribution Agreement for net proceeds of approximately $3.2 million.

During the nine months ended September 30, 2021, we issued 2,179,193 shares under the Distribution Agreement for net

proceeds of $6.3 million.

As of September 30, 2021, there were no remaining shares to issue and sell under the Distribution Agreement .

On January 14, 2022, we entered into an Equity Distribution Agreement (the “2022 Distribution Agreement”) with Canaccord Genuity LLC (the “Agent”, or “Canaccord”), pursuant to which we may issue and sell, from time to time, shares of its common stock having an aggregate offering price of up to $5,000,000 (the “Shares”), depending on market demand, with the Agent acting as an agent for sales.

Sales of the Shares may be made by any method permitted by law deemed to be an “at the market offering” as defined in Rule 415(a)(4) of the Securities Act of 1933, as amended, including, without limitation, sales made directly on or through the Nasdaq.

Since January 14, 2022, we issued 1,022,610 shares under the 2022 Distribution Agreement for net proceeds of approximately $ 0.7 million.

On October 23, 2020, we entered into an Equity Distribution Agreement (the “2020 Distribution Agreement”) with Canaccord, pursuant to which we could issue and sell, from time to time, our common stock in “at the market” offerings, depending on market demand, with Canaccord acting as an agent for sales.

During 2021, we issued 2,179,193 shares under the 2020 Distribution Agreement for net proceeds of $6.3 million.

The 2020 Distribution Agreement has been terminated.

On September 30, 2020, we entered into the 2020 Purchase Agreement and a registration rights agreement with Lincoln Park, pursuant to which Lincoln Park committed to purchase up to $25.0 million of our common stock.

Under the terms and subject to the conditions of the 2020 Purchase Agreement, we have the right, but not the obligation, to sell to Lincoln Park, and Lincoln Park is obligated to purchase up to $25.0 million of our common stock.

Such sales of common stock by us, if any, will be subject to certain limitations, and may occur from time to time, at our sole discretion, over the 36-month period commencing November 6, 2020, subject to satisfaction of certain conditions.

The net proceeds under the 2020 Purchase Agreement will depend on the frequency and prices at which we sell shares of our common stock to Lincoln Park.

We expect that any proceeds received from such sales to Lincoln Park will be used for working capital and general corporate purposes.

During the year ended December 31, 2020, we issued 353,113 shares, excluding 180,701 shares issued as commitment fee, under the 2020 Purchase Agreement for net proceeds of approximately $0.7 million.

On September 3, 2021, we filed a prospectus, which became effective on September 10, 2021, for the offer and sale of up to 5,865,000 shares of our common stock by Lincoln Park under the 2020 Purchase Agreement.

Dur ing the nine months ended September 30, 2021, we issued 5,535,186 shares of our common stock under the 2020 Purchase Agreement for net proceeds of $12.3 million.

On March 29, 2020, we entered into the Ninth Amendment of the Loan and Security Agreement (the “Ninth Amendment”) which amended that certain Loan and Security Agreement (the “Loan and Security Agreement”), pursuant to which Oxford Finance, LLC (“Oxford”) funded an aggregate principal amount of $17.7 million (the “Term Loan”), subject to the terms and conditions set forth in the Loan and Security Agreement.

Under the Ninth Amendment, among other things, Oxford agreed to defer the start date of principal repayments under the Loan and Security Agreement from May 1, 2020 to May 1, 2021.

As we met the “Second I/O Extension Equity Event,” as defined in the Ninth Amendment, the principal repayment start date has been deferred to November 1, 2021.

In addition, on April 1, 2020, we made a $5.0 million paydown of principal under the Term Loan upon execution of the Ninth Amendment.

As a result of this Ninth Amendment, the term of the Term Loan has been extended from September 1, 2021 to September 1, 2024, with all other major terms remained consistent.

During 2021, we issued 5,685,186 shares of our common stock under the 2020 Purchase Agreement for total proceeds of $12.5 million.

During the three months ended March 31, 2022, we issued 5,665,000 shares of common stock for net proceeds of approximately $7.0 million under the 2020 Purchase Agreement.

We no longer have any additional shares of common stock registered to sell under the 2020 Purchase Agreement, and at this time we do not intend to register any additional shares of common stock under the 2020 Purchase Agreement.

We continue to seek additional capital through strategic transactions and other financing alternatives.

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If sufficient capital is not raised, we will at a minimum need to significantly reduce or curtail our research and development and other operations, and this would negatively affect our ability to achieve corporate growth goals.

There is likely to be continued market volatility due to the COVID-19 pandemic, risk of inflation or other events, which could cause our stock price to decline.

There may be continued market volatility due to the pandemic, downturn in global economy, or other events, which could cause our stock price to decline.

This in turn will likely negatively impact our ability to raise funds through equity-related financings.

Further, a continued global economic downturn may impair our ability to obtain additional financing through other means, such as strategic transactions or debt financing.

The overall deterioration of the credit and financial markets due to the COVID-19 pandemic will likely generally reduce our ability to obtain additional financing to fund our operations.

Should we be unable to raise additional cash from outside sources or if we are unable to do so in a timely manner or on commercially reasonable terms, it would have a material adverse impact on our operations.

Cash (used in) provided by operating, investing, and financing activities for the nine months ended September 30, 2021 and 2020 is summarized as follows (in thousands):

For the Nine Months Ended September 30,

Cash (used in) provided by operating, investing, and financing activities for the three months ended March 31, 2022 and 2021 is summarized as follows (in thousands):

Three Months Ended March 31,

Net cash used in operating activities

Net cash used in investing activities

Net cash provided by (used in) financing activities

Net increase (decrease) in cash and cash equivalents

Net cash provided by financing activities

Net increase in cash and cash equivalents

Material Cash Obligations

On March 31, 2022, we entered into the SOW with Medidata pursuant to which Medidata will build a Synthetic Control Arm® (SCA) platform that facilitates the use of historical clinical data to incorporate into the Company’s Phase 2 clinical trial of 186RNL in GBM.

During the six month term of the SOW, we will pay Medidata $1.45 million in managed services fees.

Further, if the U.S.

Food & Drug Administration approves a path forward for us to use the SCA in its clinical trial of 186RNL for treatment of GBM, we will pay Medidata an additional contingent managed services fee of $150,000.

We are also obligated to make ongoing principal and interest payments under the Term Loan with Oxford through the maturity date of June 1, 2024 (See Note 5 of the accompanying condensed financial statements for more information).

In addition, as described in more detail in Note 7 of the accompanying condensed financial statements, we are obligated to make operating lease payments for our office and laboratory space and we may be required to make payments under certain of our other contractual agreements.

Operating activities

Net cash used in operating activities for the nine months ended September 30, 2021 was $7.7 million compared to $5.2 million in the same period of 2020.

Our operational cash use increased during the nine months ended September 30, 2021 as compared to the same period in 2020, due primarily to timing of cash payments made for operating assets and liabilities.

Net cash used in operating activities for the three months ended March 31, 2022 was $3.9 million compared to $3.0 million in the same period of 2021.

Our operational cash use increased during the three months ended March 31, 2022 as compared to the same period in 2021, due primarily to increased expenditures for our research and development activities.

Investing activities

Net cash used in investing activities for the nine months ended September 30, 2021 were related to purchases of fixed assets of $134,000, offset by proceeds of $50,000 from sale of property and equipment.

Net cash used in investing activities for the nine months

ended September 30, 2020 was primarily related to cash payments of $0.4 million made for in process research and development assets from NanoTx, and purchases of fixed assets.

Net cash used in investing activities for the three months ended March 31, 2022 were related to cash payments of $0.3 million made for in process research and development assets from UTHSA and purchases of fixed assets and intangible assets of $0.3 million.

Net cash used in investing activities for the three months ended March 30, 2021 was primarily related to purchases of fixed assets.

Financing Activities

Net cash provided by financing activities for the nine months ended September 30, 2021 was primarily related to sales of common stock of $18.6 million, net of offering cost through the 2020 Purchase Agreement with Lincoln Park and the Distribution Agreement with Canaccord, as well as $2.0 million from exercise of warrants.

Net cash used for financing activities for the nine months ended September 30, 2020 was primarily related to repayment of $5.3 million of the Term Loan in April 2020, and cash payments for our finance leases, offset by cash proceeds received from warrant exercises of $1.1 million.

Net cash provided by financing activities for the three months ended March 31, 2022 was primarily related to sales of common stock of $7.7 million, net of offering cost through the 2022 Distribution Agreement with Canaccord and the 2020 Purchase Agreement with Lincoln Park.

Net cash provided by financing activities for the three months ended March 31, 2021 was primarily related to sales of common stock of $7.2 million, net of offering cost through the 2020 Purchase Agreement with Lincoln Park and the 2022 Distribution Agreement with Canaccord, as well as $2.0 million from exercise of warrants.

Critical Accounting Policies and Significant Estimates

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We perform our impairment test annually during the fourth quarter.

The Company operates in a single operating segment and reporting unit.

We operate in a single operating segment and reporting unit.

We monitor the fluctuations in our share price and have experienced significant volatility during the year.

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We believe it is important for you to understand our most critical accounting policies.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 and there have been no material changes during the nine months ended September 30, 2021.

Our critical accounting policies and estimates are discussed in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 and there have been no material changes during the three months ended March 31, 2022.

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