Sunshine Biopharma Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with our consolidated financial statements and notes thereto included herein. This discussion includes forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, or the Securities Act, and Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act. The statements contained in this Report that are not historical in nature, particularly those that utilize terminology such as “may,” “will,” “should,” “likely,” “expects,” “anticipates,” “estimates,” “believes” or “plans,” or comparable terminology, are forward-looking statements based on current expectations and assumptions, and entail various risks and uncertainties that could cause actual results to differ materially from those expressed in such forward-looking statements. Important factors known to us that could cause such material differences are identified in this report and in our annual report on Form 10-K for the year ended December 31, 2023. We undertake no obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required under applicable law. You are advised, however, to consult any future disclosures we make on related subjects in future reports we file with the SEC. About Sunshine Biopharma We are a pharmaceutical company offering and researching life-saving medicines in a wide variety of therapeutic areas, including oncology and antivirals. We operate two wholly owned subsidiaries: (i) Nora Pharma Inc. (“Nora Pharma”), a Canadian corporation with a portfolio consisting of 63 generic prescription drugs on the market in Canada, and (ii) Sunshine Biopharma Canada Inc. (“Sunshine Canada”), a Canadian corporation which develops and sells nonprescription over-the-counter (“OTC”) products. In addition, we are conducting a proprietary drug development program which is comprised of (i) K1.1 mRNA targeted for liver cancer, (ii) SBFM-PL4, a PLpro protease inhibitor for SARS Coronavirus infections, and (iii) Adva-27a for pancreatic cancer. Development of the latter has been paused pending further analysis of unfavorable in vitro results obtained in the second half of 2023. See “Drugs in Development” below. History We were incorporated in the State of Colorado on August 31, 2006, and on October 15, 2009, we acquired Sunshine Biopharma Inc. in a transaction classified as a reverse acquisition. Sunshine Biopharma Inc. held an exclusive license to a new anticancer drug bearing the laboratory name, Adva-27a (the “License Agreement”). Upon completion of the reverse acquisition, we changed our name to Sunshine Biopharma Inc. and began operating as a pharmaceutical company. In December 2015, we acquired all issued (US Patent Number 8,236,935, and 10,272,065) and pending patents under PCT/FR2007/000697 and PCT/CA2014/000029 for the Adva-27a anticancer compound and terminated the License Agreement. Development of Adva-27a has recently been paused pending further analysis of unexpected in vitro results obtained in the latter part of 2023. See “Drugs in Development” below. In early 2020, we initiated a new R&D project focused on the development of a treatment for COVID-19 and on May 22, 2020, we filed a provisional patent application in the United States for the new coronavirus treatment. The patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include inhibitors for the Coronavirus Papain-Like protease, PLpro. In June 2021, we initiated another R&D project in which we set out to determine if certain mRNA molecules can be used as anticancer agents. The data obtained for mRNA molecules bearing the laboratory name K1.1 became the subject of a new patent application filed in April 2022. On October 20, 2022, we acquired Nora Pharma, a Canadian generic pharmaceuticals company based in the greater Montreal area. Nora Pharma has 46 employees and operates in a 23,500 square foot facility certified by Health Canada. Nora Pharma currently has 63 generic prescription drugs on the market in Canada and is planning to launch 32 additional generic prescription drugs in the remainder of 2024 and 2025. 16 Products on the Market Through Nora Pharma we currently have the following generic prescription drugs on the market in Canada: Drug Action/Indication Reference Brand Abiraterone* Oncology Zytiga® Alendronate Osteoporosis Fosamax® Amlodipine Cardiovascular Norvasc® Apixaban Cardiovascular Eliquis® Aripiprazole Antipsychotic Abilify® Atorvastatin Cardiovascular Lipitor® Betahistine Vertigo Serc® Azithromycin Antibacterial Zithromax® Candesartan Hypertension Atacand® Candesartan HCTZ Hypertension Atacand Plus® Celecoxib Anti-inflammatory Celebrex® Cetirizine Allergy Reactine® Clobetasol* Anti-inflammatory Clobex® Ciprofloxacin Antibiotic Cipro® Citalopram Central nervous system Celexa® Clindamycin Antibiotic Dalacin® Clopidogrel Cardiovascular Plavix® Dapagliflozin Diabetes Forxiga® Daptomycin* Antibacterial Cubicin® Dasatinib* Oncology Sprycel® Donepezil Central nervous system Aricept® Duloxetine Central nervous system Cymbalta® Dutasteride Urology Avodart® Ertapenem* Antibacterial Invanz® Escitalopram Central nervous system Cipralex® Ezetimibe Cardiovascular Ezetrol® Finasteride Urology Proscar® Flecainide Cardiovascular Tambocor® Fluconazole Antifungal Diflucan® Fluoxetine Central nervous system Prozac® Hanzema®* Dermatology Toctino® Hydroxychloroquine Antimalarial Plaquenil® Lacosamide Central nervous system Vimpat® Letrozole Oncology Femara® Levetiracetam Central nervous system Keppra® Mirtazapine Central nervous system Remeron® Metformin Diabetes Glucophage® Montelukast Allergy Singulair® Olmesartan Cardiovascular Olmetec® Olmesartan HCTZ Cardiovascular Olmetec Plus® Pantoprazole Gastroenterology Pantoloc® Paroxetine Central nervous system Paxil® Perindopril Cardiovascular Coversyl® Pravastatin Cardiovascular Pravachol® Pregabalin Central nervous system Lyrica® Progesterone* Women's Health Prometrium® Quetiapine Central nervous system Seroquel® Quetiapine XR Central nervous system Seroquel XR® Ramipril Cardiovascular Altace® Rivaroxaban* Cardiovascular Xarelto® Rizatriptan ODT Central nervous system Maxalt® ODT Rosuvastatin Cardiovascular Crestor® Sertraline Central nervous system Zoloft® Sildenafil Urology Viagra® Tadalafil Urology Cialis® Telmisartan Cardiovascular Micardis® Telmisartan HCTZ Cardiovascular Micardis Plus® Topiramate Anticonvulsant Topamax® Tramadol Acetaminophen Central nervous system Tramacet® Varenicline Smoking cessation Champix® Zoledronic Acid* Osteoporosis Aclasta® Zolmitriptan Central nervous system Zomig® Zopiclone Central nervous system Imovane® *Sold through distribution agreements 17 In addition to the 63 drugs currently on the market, we have 32 additional drugs scheduled to be launched in Q4 2024 and in 2025. These new drugs will address various human health areas including cardiovascular, oncology, gastroenterology, central nervous system, diabetes, urology, endocrinology, anti-infective, and anti-inflammatory. Among the new drugs to be launched in 2024 is NIOPEG®, a biosimilar of NEULASTA®. Like NEULASTA®, NIOPEG® is a long-acting form of recombinant human granulocyte colony-stimulating factor (filgrastim). It is indicated to decrease the incidence of infection in patients with non-myeloid malignancies receiving anti-neoplastic therapy. Nora Pharma received Health Canada marketing approval for NIOPEG® on April 17, 2024. NIOPEG® is anticipated to be on the market in Canada in Q4 2024. We believe the addition of these new products to our existing portfolio will strengthen our presence in the Canadian $9.7 billion a year generic drugs market and provide us with greater access to pharmacies as we become more of a go-to supplier for every-day and specialty medicines. Drugs in Development The following table summarizes our proprietary drugs in development: Drug Candidate Therapeutic Area Development Stage Adva-27a (Small Molecule) Oncology (Pancreatic Cancer) Paused* K1.1 (mRNA LNP) Oncology (Liver Cancer) Animal Testing SBFM-PL4 (Small Molecule) Antiviral (SARS Coronavirus) Animal Testing * See “ Adva-27a Anticancer Compound ” below Adva-27a Anticancer Compound Adva-27a is a small molecule designed for the treatment of aggressive forms of cancer. A Topoisomerase II inhibitor, Adva-27a has been shown to be effective at destroying Multidrug Resistant Cancer cells including Pancreatic Cancer cells, Breast Cancer cells, Small-Cell Lung Cancer cells and Uterine Sarcoma cells (Published in ANTICANCER RESEARCH, Volume 32, Pages 4423-4432, October 2012). We are the direct owner of all patents pertaining to Adva-27a including U.S. Patents Number 8,236,935 and 10,272,065. In December 2022, we entered into a research agreement with the Jewish General Hospital (“JGH”), to conduct the IND-enabling studies of Adva-27a (the “Research Agreement”). In August 2023, we were informed by the JGH that the laboratory test results of the Adva-27a molecule were not favorable. After conclusion of an internal review of the laboratory results on November 2, 2023, we provided notice to JGH of termination of the Research Agreement. We have paused the IND-enabling studies of Adva-27a pending a review of the results and the possibility of chemical modification of the compound to address the suboptimal performance of the molecule in certain studies. 18 K1.1 Anticancer mRNA In June 2021, we initiated a new research project in which we set out to determine if certain mRNA molecules can be used as anti-cancer agents. The data collected to date have shown that a selected group of mRNA molecules are capable of destroying cancer cells in vitro including multidrug resistant breast cancer cells (MCF-7/MDR), ovarian adenocarcinoma cells (OVCAR-3), and pancreatic cancer cells (SUIT-2). Studies using non-transformed (normal) human cells (HMEC cells) showed that these mRNA molecules had little cytotoxic effects. These new mRNA molecules, bearing the laboratory name K1.1, are readily adaptable for delivery into patients using the mRNA vaccine technology. In April 2022, we filed a provisional patent application in the United States covering the subject mRNA molecules. In November 2022, we concluded an agreement with a specialized commercial partner for the purposes of formulating our K1.1 mRNA molecules into lipid nanoparticles (“LNP”) for use to conduct xenograft mice studies. The initial results of our xenograft mice studies indicate that our K1.1 mRNA-LNP is effective at reducing the size of liver cancer xenograft tumors in mice. We are currently seeking to confirm these results by conducting additional xenograft experiments on a broader scale and in more detailed dose-response studies. SBFM-PL4 SARS Coronavirus Treatment The initial genome expression products following infection by Betacoronavirus, the causative agent of COVID-19, are two large polyproteins, referred to as pp1a and pp1ab. These two polyproteins are cleaved at 15 specific sites by two virus encoded proteases, called Mpro and PLpro, to generate 16 different non-structural proteins essential for viral replication. Mpro and PLpro represent attractive anti-viral drug development targets as they play a central role in the early stages of viral replication. PLpro is of particular interest as a therapeutic target in that, in addition to processing essential viral proteins, it is also responsible for suppression of the human immune system making the virus more life-threatening. PLpro is present only in Betacoronaviruses, the subgroup of Coronaviruses represented by the highly pathogenic SARS-CoV, MERS-CoV, and SARS-CoV-2. Our Anti-Coronavirus research effort has been focused on developing an inhibitor of PLpro and, on May 22, 2020, we filed a patent application in the United States covering composition subject matter pertaining to small molecules for inhibition of the Coronavirus PLpro as well as Mpro. In February 2022, we expanded our PLpro inhibitors research effort by entering into a research agreement with the University of Arizona for the purposes of conducting research focused on determining the in vivo safety, pharmacokinetics, and dose selection properties of three University of Arizona owned PLpro inhibitors, to be followed by efficacy testing in mice infected with SARS-CoV-2 (the “Research Project”). Under the agreement, the University of Arizona granted us a first option to negotiate a commercial, royalty-bearing license for all intellectual property developed by University of Arizona under the Research Project. In addition, we and the University of Arizona have entered into an option agreement (the “Option Agreement”) whereby we were granted a first option to negotiate a royalty-bearing commercial license for the underlying technology of the Research Project. On September 13, 2022, we exercised our options, and on February 24, 2023, we entered into an exclusive worldwide license agreement with the University of Arizona for all of the technology related to the Research Project. We have recently broadened our objective to include the development of an injectable drug candidate of first-in-class PLpro inhibitor to treat SARS-CoV2 and potentially SARS-CoV and MERS-CoV infection in patients who could not use Paxlovid, Molnupiravir, or Remdesivir, due to concerns about drug interactions and possible ‘rebound’ infections and other side effects. 19 Intellectual Property We are the sole owner of all rights pertaining to Adva-27a. These patent rights are covered by PCT/FR2007/000697 and PCT/CA2014/000029. The patent applications filed under these two PCT's have been issued in the United States under US Patent Number 8,236,935 and 10,272,065. On May 22, 2020, we filed a provisional patent application in the United States for a new treatment for Coronavirus infections. Our patent application covers composition subject matter pertaining to small molecules for inhibition of the main Coronavirus protease, Mpro, an enzyme that is essential for viral replication. The patent application has a priority date of May 22, 2020. On April 30, 2021, we filed a PCT application containing new research results and extending coverage to include the Coronavirus Papain-Like protease, PLpro. The priority date of May 22, 2020 has been maintained in the newly filed PCT application. On April 20, 2022, we filed a provisional patent application in the United States covering mRNA molecules capable of destroying cancer cells in vitro. The patent application contains composition and utility subject matter pertaining to the structure and sequence of the relevant mRNA molecules. Effective February 24, 2023, we became the exclusive, worldwide licensee of the University of Arizona for three (3) patents related to small molecules which inhibit the Coronavirus protease, PLpro. Our wholly owned subsidiary, Nora Pharma, owns 152 DIN’s issued by Health Canada for prescription drugs currently on the market in Canada. These DIN’s were secured through in-licenses or cross-licenses from international manufacturers of generic pharmaceutical products. In addition, we are the owner of four (4) NPN’s issued by Health Canada including (i) NPN 80089663 which authorizes us to manufacture and sell our in-house developed OTC product, Essential•9, (ii) NPN 80093432 which authorizes us to manufacture and sell the OTC product, Calcium-Vitamin D under the brand name Essential Calcium-Vitamin D, (iii) NPN 80125047 which authorizes us to manufacture and sell the OTC product, L-Citrulline, and (iv) NPN 80127436 which authorizes us to manufacture and sell the OTC product, Taurine. Results of Operations Comparison of results of operations for the three months ended September 30, 2024 and 2023 During the three months ended September 30, 2024, we generated $8,435,178 in sales, compared to $5,957,668 for the three months ended September 30, 2023, an increase of $2,477,510, or 42%. The increase is attributable to expanded marketing and sales efforts by our wholly owned subsidiary, Nora Pharma. The direct cost for generating these sales was $5,569,027 (66%) for the three months ended September 30, 2024, compared to $3,967,412 (67%) for the three months ended September 30, 2023. Our gross profit grew to $2,866,151 for the three months ended September 30, 2024, compared to $1,990,256 for the three months ended September 30, 2023. General and administrative expenses during the three-month period ended September 30, 2024, were $3,972,504, compared to $2,769,730 during the three-month period ended September 30, 2023, an increase of $1,202,774. The increase was due to increases in accounting fees ($68,422), consulting ($253,251), marketing ($40,848), and salaries ($949,473). The increase in salaries was due to the hiring of two (2) new employees and a bonus paid to the CEO of the Company. The only expense category that saw a decrease was R&D, which was reduced by $111,650. Overall, we incurred a loss of $1,106,353 from our operations for the three months ended September 30, 2024, compared to a loss of $779,474 from our operations in the three-month period ended September 30, 2023. 20 In addition, we had interest income of $108,614 during the three months ended September 30, 2024, compared to net interest income of $168,904 during the three months ended September 30, 2023, as a result of less interest earned on cash on hand. As a result, we incurred a net loss of $1,197,803 ($0.94 per share) for the three months ended September 30, 2024, compared to a net loss of $651,482 ($50.72 per share) for the three-month period ended September 30, 2023. Comparison of results of operations for the nine months ended September 30, 2024 and 2023 During the nine months ended September 30, 2024, we generated revenues of $25,279,291, compared to revenue of $16,412,586 for the nine months ended September 30, 2023, an increase of $8,866,705, or 54%. The increase is attributable to expanded marketing and sales efforts by our wholly owned subsidiary, Nora Pharma. The direct cost for generating these revenues was $17,702,546 for the nine months ended September 30, 2024 (70%), compared to $10,641,461 (65%) for the nine months ended September 30, 2023. The increase in the cost of sales in the nine-month period of 2024 is related to greater retailer allowances offered to gain access to new regional markets. Our gross profit increased to $7,576,745 for the nine months ended September 30, 2024, compared to a gross profit of $5,771,125 for the same period in 2023. General and administrative expenses during the nine-month period ended September 30, 2024, were $11,351,144, compared to $9,369,203 during the nine-month period ended September 30, 2023, an increase of $1,981,941. The increase was a result of increases in accounting ($263,791), legal ($170,871), marketing ($234,129), office costs ($781,912), and salaries ($838,937). The two expense categories that saw a decrease were consulting ($169,369), and R&D ($254,872). Overall, we incurred a loss of $3,774,399 from our operations in the nine-month period ended September 30, 2024, compared to a loss from operations of $3,598,078 in the similar period of 2023. In addition, we had interest income of $396,453 during the nine months ended September 30, 2024, compared to interest income of $517,163 during the nine months ended September 30, 2023. The decrease was due to the Company having less cash on hand. As a result, we incurred a net loss of $2,975,904 ($13.61 per share) for the nine-month period ended September 30, 2024, compared to a net loss of $3,256,020 ($265.71 per share) for the nine-month period ended September 30, 2023. Liquidity and Capital Resources As of September 30, 2024, we had cash and cash equivalents of $12,206,655. Net cash used in operating activities was $9,123,898 during the nine months ended September 30, 2024, compared to $6,085,435 during the nine-month period ended September 30, 2023. The increase was a result of increased business activities by Nora Pharma. Cash flows used in investing activities were $1,789,312 for the nine months ended September 30, 2024, compared to $386,920 for the nine months ended September 30, 2023. The increase was the result of cash invested in Nora Pharma to finance increase in inventory and expansion of operations and product line. Cash flows provided by financing activities were $7,235,518 during the nine months ended September 30, 2024, compared to $3,456,106 during the nine months ended September 30, 2023. The increase was primarily a result of the approximately $10 million financing event completed in February 2024, compared to an approximately $5 million financing event completed in May 2023. We are not generating adequate revenues from our operations to fully implement our business plan as set forth herein. We believe our existing cash on hand will be sufficient to fund our pharmaceuticals sales operations and research and development activities for the next 24 months. There is no assurance our estimates will be accurate. We currently have no committed sources of capital and we anticipate that we will need to raise additional capital in the future, including for further research and development activities and possibly clinical trials, as well as expansion of our generic pharmaceuticals operations. Additional capital may not be available on terms acceptable to us, or at all. 21 Critical Accounting Estimates The discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates based on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. For a detailed list of significant accounting policies, please see our annual report on Form 10-K for the fiscal year ended December 31, 2023, including our financial statements and notes thereto included therein as filed with the SEC on March 28, 2024. Recently Adopted Accounting Standards We have adopted all new accounting standards impacting operations. Off Balance-Sheet Arrangements None. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK We are a smaller reporting company and are not required to provide the information under this item.