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Item 7. Management’s Discussion and Analysis

2021-03-23 compared with 2020-03-13 · 133 added, 177 removed, 200 unchanged (61% of the section changed)

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Based on its mechanism of action as a directly immunizing agent, GPS has potential as a monotherapy or in combination with other immunotherapeutic agents to address a broad spectrum of hematologic, or blood, cancers and solid tumor indications.

In January 2020, we commenced a Phase 3 trial for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of their second complete remission, or CRem2, following successful completion of second-line antileukemic therapy.

We expect this study will be used as the basis for a Biologics License Application, or BLA, submission, subject to a statistically significant and clinically meaningful data outcome and agreement with the U.S.

In January 2020, we commenced a Phase 3 trial, the REGAL study, for GPS monotherapy in patients with acute myeloid leukemia, or AML, in the maintenance setting after achievement of second complete remission, or CRem2, following successful completion of second-line antileukemic therapy.

We expect this study will be used as the basis for submission of a Biologics License Application, or BLA, subject to a statistically significant and clinically meaningful data outcome and agreement with the U.S.

Food & Drug Administration, or the FDA.

This trial is expected to serve as the basis for a Biologics License Application, or BLA, submission, subject to positive results.

The study is expected to enroll approximately 116 patients at approximately 50 clinical sites in the United States and Europe and is contemplated to have a planned interim safety and futility analysis after 80 events (deaths).

We expect to enroll approximately 116 patients at up to approximately 135 clinical sites primarily in the United States and Europe with a planned interim safety and futility analysis after 80 events (deaths).

In December 2018, we initiated a Phase 1/2 multi-arm "basket" type clinical study of GPS in combination with Merck & Co., Inc.’s anti-PD-1 therapy, Keytruda® (pembrolizumab).

We plan to enroll up to approximately 90 patients at up to 20 centers in the United States.

The initial tumor types being studied are ovarian cancer (second or third line) and colorectal cancer (third or fourth line) with up to approximately 40 patients in total in these two indications, to be followed by AML (in patients having achieved partial response as their best hematological response after four cycles of therapy with hypomethylating agents), triple negative breast cancer, or TNBC, (second line), and small cell lung cancer, or SCLC.

The tumor type currently being studied is ovarian cancer (second or third line).

In February 2020, a Phase I open-label investigator-sponsored clinical trial of GPS, in combination with Bristol-Myers Squibb’s anti-PD-1 therapy, nivolumab (Opdivo®), in patients with malignant pleural mesothelioma, or MPM, who harbor relapsed or refractory disease after having received frontline standard of care multimodality therapy was commenced at MSK.

GPS was granted Orphan Drug Product Designations from the FDA, as well as Orphan Medicinal Product Designations from the European Medicines Agency, or EMA, for GPS in AML, malignant pleural mesothelioma, or MPM, and multiple myeloma, or MM, as well as Fast Track Designation for AML, MPM, and MM from the FDA.

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Nelipepimut-S, or NPS, is a cancer immunotherapy targeting the human epidermal growth factor receptor 2, or HER2, expressing cancers.

Data presented in 2018 data from our Phase 2b clinical trial of the combination of trastuzumab (Herceptin®) plus NPS in HER2 low expressing 1+ or 2+ per immunohistochemistry, or IHC) breast cancer patients in the adjuvant setting to prevent recurrences showed a clinically and statistically significant improvement in the disease-free survival, or DFS rate for the TNBC cohort at 24 months for patients treated with NPS plus trastuzumab of 92.6% compared to 70.2% for those treated with trastuzumab alone.

Data presented in 2018 from a Phase 2b clinical trial of the combination of trastuzumab (Herceptin®) plus NPS in HER2 low expressing (1+ or 2+ per immunohistochemistry, or IHC) breast cancer patients in the adjuvant setting to prevent recurrences showed a clinically and statistically significant improvement in the disease-free survival, or DFS, rate for the triple negative breast cancer, or TNBC, cohort at 24 months for patients treated with NPS plus trastuzumab of 92.6% compared to 70.2% for those treated with trastuzumab alone.

Following ongoing discussions with the FDA and based upon written feedback from the FDA and on the totality of clinical, safety and translational NPS data to date, we have finalized the design and plan for a Phase 3 registration-enabling study of NPS in combination with trastuzumab for the treatment of patients with TNBC in the adjuvant setting after standard treatment.

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FBP-targeting bivalent vaccine (GALE-301/-302)

In order to prioritize development of our core assets, we have determined to cease development of GALE-301 and GALE-302, cancer immunotherapies that target the E39 peptide derived from the folate binding protein, or FBP, which were licensed in from The Henry M.

Jackson Foundation, or HJF, and the MD Anderson Cancer Center, or MDACC.

We are currently negotiating a termination of the license agreement with HJF and MDACC.

In order to prioritize development of our core assets, we determined to cease development of GALE-301 and GALE-302, cancer immunotherapies that target the E39 peptide derived from the folate binding protein, or FBP, which were licensed in from The Henry M.

Jackson Foundation, or HJF, and the MD Anderson Cancer Center, or MDACC and entered into a Termination Agreement with HJF and MDACC in February 2021.

Financial Position

At December 31, 2020, we had cash and cash equivalents of $35.3 million.

Since inception, we have incurred operating losses since inception, have not generated any product sales revenue and have not achieved profitable operations.

We have incurred operating losses since inception and have not generated any product sales revenue or achieved profitable operations.

We incurred net losses of $16.8 million and $19.3 million for the years ended December 31, 2020 and 2019, respectively.

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• continue the research, development and scale-up of manufacturing capabilities to optimize products and dose forms for which we may obtain regulatory approval;

• scale up manufacturing for GPS, including manufacturing validation activities;

• maintain, expand and protect our global intellectual property portfolio;

hire additional clinical, manufacturing, and scientific personnel;

add, acquire of develop operational, financial and management information systems and personnel, including personnel to support our drug development and potential future commercialization efforts.

• hire additional personnel, including clinical, manufacturing, and scientific personnel, sales and marketing personnel, and general and administrative personnel.

We intend to use our existing cash and cash equivalents for working capital and to fund the research and development of our product candidates.

We expect that our existing cash as of December 31, 2019, together with the net proceeds of $5.9 million we received in the January 2020 Registered Direct Offering, will enable us to fund our operating expenses through the end of 2020.

We believe that our existing cash and cash equivalents as of December 31, 2020 will enable us to fund our operating expenses for at least the next 12 months following the issuance of our financial statements.

Impact of COVID-19

On March 11, 2020, the World Health Organization declared the outbreak of a new coronavirus to be a “pandemic”.

The COVID-19 pandemic continues to present substantial public health and economic challenges around the world which have impacted, and will continue to impact, millions of individuals and business worldwide.

Efforts to contain the spread of the coronavirus since March 2020 have led to travel bans and restrictions, quarantines, shelter-in-place orders and shutdowns.

As we have historically functioned operationally as a semi-virtual company, the transition to “work-from-home” for our employees has not materially altered our business operations.

We have implemented a return-to-work policy in compliance with federal, state and local requirements and guidance which provides for a hybrid of remote and in-office work, and we expect to operate on such a semi-virtual basis for at least the first half of 2021.

We are continuously monitoring the impact of the pandemic on our clinical development programs.

Our Phase 3 REGAL study is progressing, with the necessary work to activate additional sites in the United States and Europe continuing.

Throughout 2020 and early 2021, we initiated additional sites as planned.

However, we have observed that clinical site initiations and patient enrollment may be delayed due to prioritization of hospital resources towards the COVID-19 pandemic.

Clinicians and patients may not be able to comply with clinical trial protocols if quarantines impede patient movement or interrupt operations at sites.

Accordingly, we are uncertain at this time the extent to which these newly initiated sites will be fully operational, which we believe could have an impact on the projected timing of the REGAL study.

Additionally, several European Union countries in which we plan to initiate clinical sites, including Germany, France, and Italy, continue to impose restrictions in response to the continued surge in coronavirus cases throughout the European Union.

We believe that the COVID-19 pandemic has not materially impacted our efforts to out-license NPS.

The full extent to which the COVID-19 pandemic directly or indirectly impacts our business, results of operations and financial condition will depend on future developments that are highly uncertain, subject to change and cannot be predicted with confidence, including the actions taken to contain or treat COVID-19, the overall duration of the outbreak, the availability, effectiveness and uptake of vaccines for COVID-19, the emergence of new variants of COVID-19 and whether existing vaccines are effective with respect to such variants, and the emergence of new geographic hotspots where the coronavirus is spreading more rapidly.

In particular, the continued spread of the coronavirus globally could adversely impact our clinical trial operations and could have an adverse impact on our business and the financial results.

Components of Results of Operations

License Revenue

License revenue consists of revenue recognized pursuant to our Exclusive License Agreement with 3D Medicines Inc., or 3DMed, dated December 7, 2020, or the 3DMed Agreement.

In the future, we may generate revenue from a combination of reimbursements, up-front payments, milestone payments and royalties in connection with the 3DMed Agreement.

Research and Development

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• the commercialization of current and future product candidates.

Research and development activities are central to our business model.

Cancer immunotherapy product candidates in the later stages of clinical development generally have higher development costs than those in the earlier stages of clinical development, primarily due to the increased size and duration of the later-stage clinical trials.

We expect our research and development expenses to increase for the foreseeable future as we conduct and complete our ongoing early and late stage clinical trials and initiate additional clinical trials.

Our expenditures are subject to additional uncertainties, including the terms and timing of regulatory approvals.

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For example, if the FDA or other regulatory authorities were to require us to conduct clinical trials beyond those that we currently anticipate, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time on the completion of clinical development.

Cancer immunotherapy product commercialization may take several years and millions of dollars in development costs.

Research and development activities are central to our business model.

General and Administrative Expense

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If and when we believe that regulatory approval of a product candidate appears likely, we anticipate that an increase in general and administrative expenses will occur as a result of our preparation for commercial operations, particularly as it relates to the sales and marketing of such product candidate.

Cancer immunotherapy product commercialization may take several years and millions of dollars in development costs.

In Process Research and Development Impairment Charge

These charges relate to the impairment charges recognized in connection with the abandonment of future development of GALE-401, GALE-301, and GALE-302 in-process research and development, or IPR&D, assets.

The impairment charge recognized during the year ended December 31, 2019 was in connection with the abandonment of future development of GALE-301 and GALE-302 in-process research and development, or IPR&D, assets.

Non-Operating Income (Expense), Net

Non-operating income (expense), net consists of changes in fair value of our warrant liability, changes in fair value of our contingent consideration, loss on settlement of liability-classified warrants, and interest expense, net.

Interest expense, net primarily reflects interest expense incurred on our convertible term notes and other loans held with current and former stockholders, offset by the interest earned from our cash and cash equivalents.

Non-operating income (expense), net consists of changes in fair value of our warrant liability, changes in fair value of our contingent consideration, and interest income.

Interest income primarily reflects the interest earned from our cash and cash equivalents.

Results of Operations for the Years Ended December 31, 2020 and 2019

The following table summarizes our results of operations for the years ended December 31, 2020 and 2019:

(dollars in thousands)

Year ended December 31,

(dollars in thousands) Year ended December 31,

2020 2019 Change

License revenue $ 1,900 $ — $ 1,900

Operating expenses:

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In-process research and development impairment charge — 2,833 (2,833)

Total operating expenses and operating loss

Total operating expenses (18,882) (20,041) (1,159)

Loss from operations (16,982) (20,041) (3,059)

Non-operating income 208 668 (460)

Loss before income taxes (16,774) (19,373) (2,599)

Income tax expense (benefit)

Income tax benefit (17) (81) 64

Net loss $ (16,757) $ (19,292) $ (2,535)

For the year ended December 31, 2020, our net loss was $16.8 million compared with a net loss of $19.3 million for the year ended December 31, 2019 .

The decrease of $8.4 million in net loss was primarily attributable to a decrease in operating loss of $11.0 million , primarily driven by a decrease in non-cash charges of $6.7 million for impairments of in-process research and development, partially offset by an decrease in non-operating income of $1.4 million and a decrease in income tax benefit of $1.3 million .

The decrease of $2.5 million in net loss was primarily attributable to a decrease in operating loss of $3.1 million, primarily driven by a $1.9 million increase in license revenue, a $0.3 million decrease in general and administrative expenses, and a $2.8 million decrease in non-cash charges for impairments of IPR&D, partially offset by an increase of $2.0 million in research and development expenses, a decrease in non-operating income of $0.5 million and a decrease in income tax benefit of $0.1 million.

Further analysis of the changes and trends in our operating results are discussed below.

License Revenue

License revenue for the year ended December 31, 2020 was $1.9 million and related to the out-licensing of intellectual property rights and transfer of technical know-how associated with the 3DMed Agreement for the development and commercialization of GPS in China, Hong Kong, Macau, and Taiwan.

There was no license revenue for the year ended December 31, 2019.

Research and Development

Research and development expenses were $9.3 million for the year ended December 31, 2020 compared to $7.3 million for the year ended December 31, 2019.

As compared to the prior period, the $1.5 million decrease in research and development expenses was driven by a $1.0 million decrease in personnel related expenses due to decreased headcount, a $0.6 million decrease in licensing fees primarily driven by a clinical milestone for GPS recorded in 2018, a $0.3 million decrease in clinical expenses due to the completion of the Phase 2b trial of NPS in combination with trastuzumab (Herceptin ® ) in 2018, and a $0.2 million decrease in other research and development expenses.

These decreases were partially offset by a $0.6 million increase in manufacturing related expenses for GPS.

We anticipate that our research and development expenses will increase in the future as we continue to advance our product candidates into and through clinical trials, including the basket trial of GPS in combination with pembrolizumab and our Phase 3 trial of GPS in AML.

As compared to the prior period, the $2.0 million increase in research and development expenses was primarily attributable to a $0.9 million increase in clinical trial expenses primarily due to the initiation of our Phase 3 trial of GPS in AML in 2020, a $0.8 million increase in manufacturing to support our ongoing clinical programs including initiating a technology transfer to a new drug product manufacturer, a $0.5 million increase in outsourced clinical and regulatory consulting services in support of our ongoing clinical programs, a $0.4 million increase in personnel related expenses due to increased headcount, and a $0.2 million increase in other research and development expenses.

These increases were partially offset by a $0.8 million decrease in licensing fees per our license agreements.

General and Administrative

General and administrative expenses were $9.6 million for the year ended December 31, 2020 compared to $9.9 million for the year ended December 31, 2019.

The $2.9 million decrease was primarily driven by a $0.8 million decrease in outside services and public company costs, a $0.7 million decrease in legal fees, a $0.7 million decrease in personnel related expenses due to reduced headcount, a $0.4 million decrease in rebates and returns of former commercial products, a $0.2 million decrease in accounting fees, and a $0.3 million decrease in other general and administrative expenses.

These decreases during 2019 reflect the Company's efforts to limit expenses in order to preserve capital.

These decreases were partially offset by a $0.2 million increase in insurance premiums.

In-Process Research and Development Impairment Charges

In January 2014, Galena, our predecessor-in-interest, acquired the worldwide rights to develop and commercialize anagrelide CR formulation (GALE-401) through its acquisition of Mills Pharmaceuticals, LLC, or Mills.

The license agreement (“BVI Agreement”) for GALE-401 between Mills and BioVascular, Inc.

(“BioVascular”) provides that Mills may terminate the BVI Agreement by providing 60 days written notice to BioVascular.

On December 5, 2018, our Board of Directors approved the termination of the BVI Agreement and we, on behalf of Mills, provided written notice of such termination to BioVascular and confirmed that Mills will no longer support or pursue the filing, prosecution, or maintenance of any patent covered in the BVI Agreement.

We previously disclosed that management had been evaluating GALE-401, among other items, for potential internal development, strategic partnership, or other types of product rationalizations and determined that further development of GALE-401 is outside of the scope of our core focus on cancer immunotherapy/cancer vaccine development.

We recognized asset impairment expenses of approximately $9.6 million for the year ended December 31, 2018.

Included in the asset impairment expenses are a non-cash charge of approximately $9.1 million for impairment of intangible assets recorded as in-process research and development and an additional $0.5 million of milestone payments recorded as deposits and other assets.

In September 2011, Galena, our predecessor-in-interest, acquired the worldwide rights to develop and commercialize cancer immunotherapies, GALE-301 and GALE-302, that target the E39 peptide derived from FBP receptor-alpha (FBP) through its license agreement with the Henry M.

Jackson Foundation.

We previously disclosed that management had been evaluating GALE-301 and GALE-302, among other items, for potential internal development, strategic partnership, or other types of product rationalizations and determined that further development of GALE-301 and GALE-302 is outside of our core focus of clinical development of GPS.

The $0.3 million decrease was primarily driven by a $1.0 million decrease in legal fees due to reduced litigation, a $0.4 million decrease in personnel related expenses due to reduced headcount, and $0.2 million decrease in other general and administrative expenses.

These decreases were partially offset by a $0.9 million increase in insurance premiums due to hardening insurance markets and a $0.4 million increase in outsourced professional services and public company costs.

In-Process Research and Development Impairment Charge

During the fourth quarter of 2019, we determined that the IPR&D asset associated with the GALE-301 and 302 product candidates was impaired and recorded an impairment charge of approximately $2.8 million for the year ended December 31, 2019.

Included in the asset impairment expenses are a non-cash charge of approximately $2.8 million for impairment of intangible assets recorded as in-process research and development and an acceleration of a de minimis amount of prepaid expenses and other current assets.

Non-Operating Income (Expense), Net

Included in the asset impairment expenses are a non-cash charge of approximately $2.8 million for impairment of intangible assets recorded as IPR&D and an acceleration of a de minimis amount of prepaid expenses and other current assets.

Non-Operating Income, Net

Non-operating income (expense), net for the years ended December 31, 2020 and 2019, respectively, was as follows (dollars in thousands):

Years Ended December 31,

2020 2019 Change

Change in fair value of warrant liability $ (97) $ 1,136 $ (1,233)

Change in fair value of the contingent consideration 279 (586) 865

Loss on settlement of liability-classified warrants

Gain on extinguishment of debt

Interest income (expense), net

Total non-operating income (expense), net

The decrease in our net non-operating income (expense) during the year ended December 31, 2019 compared to the year ended December 31, 2018 was primarily due to a non-cash $4.2 million decrease in the gain arising from the change in the fair value of liability-classified warrants to acquire shares of our common stock and a $0.8 million gain on extinguishment of debt in 2018.

The decrease in the estimated fair value of our warrant liability was primarily due to the decrease in our common stock price.

The $0.8 million gain on extinguishment of debt relates to the settlement with JGB (Cayman) Newton LTD, or JGB, the holder of our former senior secured debenture.

As a result of the settlement, the $0.8 million of additional interest that was due at maturity was forgiven.

See Note 8 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K for a description of the litigation and settlement agreement.

These amounts were partially offset by a $2.4 million increase in the change in fair value of the contingent consideration liability and a $0.7 million loss on settlement of liability-classified awards in 2018.

Interest income 26 118 (92)

Total non-operating income, net $ 208 $ 668 $ (460)

The decrease in our net non-operating income (expense) during the year ended December 31, 2020 compared to the year ended December 31, 2019 was primarily due to a non-cash $1.2 million decrease in the gain arising from the change in the fair value of liability-classified warrants to acquire shares of our common stock and a $0.9 million increase in the change in fair value of the contingent consideration.

The change in the estimated fair value of our warrant liability during the years ended December 31, 2020 and 2019 was primarily due to the changes in our common stock price.

The change in the estimated fair value of the contingent consideration is driven by changes in discount periods and rates, changes in the timing of development milestones achieved and changes in probability assumptions with respect to the likelihood of achieving the various earnout criteria.

The $3.0 million change in fair value of the contingent consideration in 2018 reflects an adjusted probability and time-line for the potential approval of NPS associated with the positive interim data from the Phase 2b investigator-sponsored clinical trial of trastuzumab +/- NPS in HER2 1+/2+ breast cancer patients that was announced on April 2, 2018.

The $0.7 million loss on settlement of liability-classified warrants relates to warrants to acquire shares of common stock issued by Galena in February 2017 that were assumed in the Merger.

During the year ended December 31, 2018, a total of 10,686 of the liability-classified warrants were canceled under various warrant exchange agreements, as further described herein.

We issued 1,092 shares of our common stock in exchange for the surrender and cancellation of warrants to acquire 2,433 shares of our common stock and $1.0 million in convertible promissory notes in exchange for the surrender and cancellation of warrants to acquire 8,253 shares of our common stock.

In April 2018, $0.8 million of outstanding principal and accrued interest was converted into 2,372 shares of common stock.

In November of 2018, we paid the remaining principal and interest of $0.2 million to settle the debt.

The fair value of the consideration exchanged which totaled approximately $1.3 million exceeded the fair value of the warrant liability of the canceled warrants by $0.7 million and is recorded as loss on settlement of liability-classified warrants in the consolidated statement of operations for the year ended December 31, 2018.

Interest income for the year ended December 31, 2019 consists of nominal interest earned from our cash and cash equivalents.

Interest expense, net during the year ended December 31, 2018 consists of interest expense incurred on our previously outstanding long-term debt, partially offset by nominal interest earned from our cash and cash equivalents.

The changes in fair value of warrant liability, changes in fair value of contingent consideration, the loss on settlement of liability-classified warrants, and the gain on extinguishment of debt are all non-cash in nature.

Income Tax Expense (Benefit)

For the year ended December 31, 2019 we recognized an income tax benefit of $0.1 million primarily attributable to the intangible asset impairment charge.

For the year ended December 31, 2018 we recognized an income tax benefit of $1.4 million primarily attributable to the intangible asset impairment charge.

Interest income for the years ended December 31, 2020 and 2019 consists of nominal interest earned from our cash and cash equivalents.

The changes in fair value of warrant liability, changes in fair value of contingent consideration and the loss on settlement of liability-classified warrants are all non-cash in nature.

Income Tax Benefit

For the year ended December 31, 2020, we recognized a de minimis income tax benefit.

For the year ended December 31, 2019 we recognized an income tax benefit of $0.1 million primarily attributable to the IPR&D impairment charge.

There was no such charge in 2020.

Liquidity and Capital Resources

We have not generated any revenue from product sales or collaboration and licensing agreements in the years ended December 31, 2019 and 2018.

We have not generated any revenue from product sales in the years ended December 31, 2020 and 2019.

Since inception, we have incurred net losses, used net cash from our operations, and have funded substantially all of our operations through proceeds from sale of debt and equity securities.

On January 9, 2020, we entered into a Securities Purchase Agreement, or the Purchase Agreement, with certain investors named therein, or the Investors, pursuant to which we agreed to issue and sell, in a registered direct offering by us directly to the Investors, or the January 2020 Registered Offering, (i) an aggregate of 1,189,000 shares of our common stock at an offering price of $3.9825 per share and (ii) an aggregate of 448,800 pre-funded warrants exercisable for shares of our common stock, or the Pre-Funded Warrants, at an offering price of $3.9725 per Pre-Funded Warrant, for gross proceeds of approximately $6.5 million before deducting the placement agent fee and related offering expenses.

The net proceeds to us from the January 2020 Registered Offering, after deducting placement agent fees and other estimated offering expenses, and excluding the exercise of any warrants, was approximately $5.9 million.

In 2019, we raised approximately $19.6 million, net of issuance costs, through the issuance of securities and the exercise of warrants.

On December 13, 2020, we entered into a Securities Purchase Agreement with certain investors, pursuant to which we issued, in a registered direct offering by us directly to the investors, or the December 2020 Registered Direct Offering, an aggregate of 2,320,000 shares of common stock at an offering price of $7.00 per share for gross proceeds of approximately $16.2 million.

The net proceeds to us from the December 2020 Registered Direct Offering, after deducting placement agent fees and related offering expenses, was approximately $15.0 million.

In December 2020, we received a one-time upfront cash payment of $7.5 million from 3DMed pursuant to the 3DMed License Agreement.

On July 31, 2020, we entered into a Securities Purchase Agreement with certain investors, pursuant to which we agreed to issue and sell, in a private placement directly to the investors, or the July 2020 PIPE Offering, 2,744,078 shares of its common stock and accompanying warrants to purchase an aggregate of up to 2,744,078 shares of common stock at a combined purchase price of $3.335 per share and accompanying warrant.

The warrants were immediately exercisable at an exercise price of $3.30 per share and will expire five years from the date of issuance.

The July 2020 PIPE Offering closed on August 4, 2020.

The net proceeds to us from the July 2020 PIPE Offering, after deducting the placement agent fee and related offering expenses, was approximately $8.5 million.

On January 9, 2020, we entered into a Securities Purchase Agreement with certain investors, pursuant to which we agreed to issue and sell, in a registered direct offering by us directly to the investors, or the January 2020 Registered Direct Offering, (i) an aggregate of 1,189,000 shares of our common stock at an offering price of $3.9825 per share and (ii) an aggregate of 448,800 pre-funded warrants exercisable for shares of our common stock, or the Pre-Funded Warrants, at an offering price of $3.9725 per Pre-Funded Warrant, for gross proceeds of approximately $6.5 million before deducting the placement agent fee and related offering expenses.

The net proceeds to us from the January 2020 Registered Direct Offering, after deducting placement agent fees and other estimated offering expenses, and excluding the exercise of any warrants, was approximately $5.9 million.

During the year ended December 31, 2020, we received $8.5 million from the exercise of warrants to acquire shares of common stock.

Subsequent to December 31, 2020, during the first quarter of 2021, we received $3.0 million from the exercise of warrants to acquire shares of common stock.

The Company regularly explores alternative means of financing its operations and seeks funding through various sources, including public and private securities offerings, collaborative arrangements with third parties and other strategic alliances and business transactions.

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In addition, we had accounts payable and accrued expenses and other current liabilities of $12.3 million as of December 31, 2020.

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

Our consolidated financial statements do not include any adjustments related to the recoverability and classification of recorded asset amounts or the amounts and classification of liabilities that might result from the outcome of this uncertainty.

We anticipate incurring additional losses until such time, if ever, that we can generate significant sales of any current or future product candidates in development.

This going concern assumption is based on management’s assessment of the sufficiency of our current and future sources of liquidity considering whether or not it is probable we will be able to meet our obligations as they become due for at least one year from the date our consolidated financial statements are available to be issued, and if not, whether our liquidation is imminent.

Our management believes that our cash of $7.3 million as of December 31, 2019 , together with the net proceeds of $5.9 million we received in the January 2020 Registered Direct Offering, will enable us to fund our operating expenses through end of 2020.

We will require substantial additional financing to fund our operations thereafter and to commercially develop any current or future product candidates.

Alternatively, we will be required to scale back our plans and place certain activities on hold.

We currently do not have any commitments to obtain additional funds and may be unable to obtain sufficient funding in the future on acceptable terms, if at all.

Our management continues to evaluate different strategies to obtain the required funding for future operations.

These strategies may include public and private placements of equity and/or debt securities, payments from potential strategic research and development collaborations, and licensing and/or marketing arrangements with pharmaceutical companies.

Additionally, we continue to pursue discussions with global and regional pharmaceutical companies for licensing and/or co-development rights to our late- and early-stage pipeline candidates.

There can be no assurance that these future funding efforts will be successful.

If we cannot obtain the necessary funding, we will need to delay, scale back or eliminate some or all of our research and development programs;

consider other various strategic alternatives, including a merger or sale;

or cease operations.

We expect our cash and cash equivalents, together with the $3.0 million received from the exercise of warrants to acquire shares of common stock in the first quarter of 2021, will be sufficient to fund current planned operations for at least the next twelve months from the date of issuance of these financial statements, though we may pursue additional capital resources through public or private equity or debt financings or by establishing additional collaborations with other companies.

Our expectations with respect to our ability to fund current planned operations is based on estimates that are subject to risks and uncertainties.

If actual results are different from management's estimates, we may need to seek additional strategic or financing opportunities sooner than would otherwise be expected.

There is no guarantee that any of these strategic or financing opportunities will be executed or executed on favorable terms, and some could be dilutive to existing stockholders.

If we are unable to obtain additional funding on a timely basis, we may be forced to significantly curtail, delay, or discontinue one or more of our planned research and development programs or be unable to expand our operations or otherwise prepare for the potential regulatory approval and commercialization of our product candidates, assuming positive data.

Our future operations are highly dependent on a combination of factors, including (i) the timely and successful completion of additional financing, (ii) our ability to complete revenue-generating partnerships with pharmaceutical companies, (iii) the success of our research and development activities, (iv) the development of competitive therapies by other biotechnology and pharmaceutical companies, and, ultimately, (v) regulatory approval and market acceptance of our proposed future products.

The following table provides a reconciliation of the components of cash, cash equivalents, restricted cash, and restricted cash equivalents reported in our consolidated balance sheets to the total of the amount presented in the consolidated statements of cash flows (in thousands):

Cash and cash equivalents $ 35,302 $ 7,277

Restricted cash and cash equivalents 100 100

Total cash, cash equivalents, restricted cash, and restricted cash equivalents $ 35,402 $ 7,377

We maintained $0.1 million and $0.1 million as of December 31, 2020 and December 31, 2019, respectively, on hand with our financial institutions as collateral for our corporate credit cards.

The following table summarizes our cash flows from operating, investing, and financing activities for the years ended December 31, 2020 and 2019 (amounts in thousands):

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Financing activities 38,442 19,569

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents $ 28,025 $ 1,926

Net Cash Flow from Operating Activities

Net cash used in operating activities of $10.4 million during the year ended December 31, 2020 was primarily attributable to our net loss of $16.8 million.

This amount was offset by various net non-cash charges of $2.8 million , which was comprised of a $2.8 million impairment of our IPR&D asset associated with the GALE-301 and GALE-302 product candidates, a $0.6 million increase in the fair value of our contingent consideration liability, and $0.6 million in non-cash stock-based compensation expense.

These amounts were partially offset by a gain of $1.1 million from the decrease in the fair value of liability-classified warrants and a $0.1 million decrease in our deferred tax liability.

The net change in our operating assets and liabilities of $1.1 million is primarily attributable to a decrease in our accounts payable and accrued expenses.

This amount was offset by a change in our operating assets and liabilities of $5.4 million and various net non-cash charges of $0.8 million These noncash charges were comprised of $0.6 million in non-cash stock-based compensation expense, and the amortization of $0.3 million in contract asset costs associated with the 3DMed License Agreement as well as a $0.1 million change in the fair market value of our warrant liability.

These amounts were partially offset by a gain of $0.3 million from the decrease in the fair value of our contingent consideration liability.

The net change in our operating assets and liabilities is primarily attributable to an increase in deferred revenue related to our 3DMed License Agreement.

Net cash used in operating activities of $17.6 million during the year ended December 31, 2019 was primarily attributable to our net loss of $19.3 million.

This amount was offset by various net non-cash charges of $7.3 million, which was comprised of a $9.1 million impairment of our IPR&D asset associated with the GALE-401 product candidate, a $3.0 million increase in the fair value of our contingent consideration liability, $1.3 million increase in the fair value of common stock issued in connection with litigation settlements, and $0.7 million loss on settlement of liability-classified warrants, and $0.4 million in non-cash stock-based compensation expense.

These amounts were partially offset by a gain of $5.3 million from the decrease in the fair value of liability-classified warrants and a $0.8 million gain on extinguishment of debt.

This amount was offset by various net non-cash charges of $2.8 million, which was comprised of a $2.8 million impairment of our in-process research and development, or IPR&D, asset associated with the GALE-301 and GALE-302 product candidates, a $0.6 million increase in the fair value of our contingent consideration liability, and $0.6 million in non-cash stock-based compensation expense.

These amounts were partially offset by a gain of $1.1 million from the decrease in the fair value of liability-classified warrants and a $0.1 million decrease in our deferred tax liability.

The net change in our operating assets and liabilities of $1.1 million is primarily attributable to a decrease in our accounts payable and accrued expenses.

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We generated $38.4 million of net cash from financing activities for the year ended December 31, 2020, which was primarily attributable to $29.9 million in net proceeds from the sale of common stock, common stock pre-funded warrants, and common stock warrants and $8.5 million in net proceeds from the exercise of warrants to acquire shares of common stock.

We generated $23.1 million of net cash from financing activities for the year ended December 31, 2018 , which was primarily attributable to $21.6 million in net proceeds from the sale of common stock, common stock pre-funded warrants, and common stock warrants, $9.6 million in net proceeds from the sale of the Series A convertible preferred stock and warrants, partially offset by $7.6 million in principal payments on our previously outstanding senior secured debenture.

We generated $19.6 million of net cash from financing activities for the year ended December 31, 2019, which was primarily attributable to $16.0 million in net proceeds from the sale of common stock, common stock pre-funded warrants, and common stock warrants and $3.6 million in net proceeds from the exercise of warrants to acquire shares of common stock.

Contractual Obligations

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Payments due by period

Less than 1 year

More than 5 years

(amounts in thousands) Total Less than 1 year 1-3 years 3-5 years More than 5 years

Contractual obligations

Operating lease (1)

$ 1,264 $ 302 $ 632 $ 330 $ —

(1) Operating lease obligations reflect our obligation to make payments in connection with our corporate headquarters in New York, NY.

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Valuation of Intangible Assets

In conjunction with the Merger, we recorded intangible assets related to IPR&D.

We had total intangible assets of $5.7 million and $8.5 million as of December 31, 2019 and 2018, respectively.

In conjunction with the completion of the business combination with Galena Biopharma, Inc.

in 2017, or the Merger, we recorded intangible assets related to IPR&D.

We had total intangible assets of $5.7 million as of December 31, 2020 and 2019, respectively.

The identifiable intangible assets are measured at their respective fair values as of the acquisition date and may be subject to revision within the measurement period, which may be up to one year from the acquisition date.

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We believe the fair values used to record intangible assets acquired in connection with a business combination using information known and knowable and are based upon reasonable estimates and assumptions given the facts and circumstances as of the related valuation dates.

Intangible assets related to IPR&D are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts.

Intangible assets related to IPR&D are considered to be indefinite-lived until the completion or abandonment of the associated research and development, or R&D, efforts.

If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets would be deemed finite-lived and would then be amortized based on their respective estimated useful lives at that point in time.

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We perform our annual goodwill impairment test at the reporting unit level on October 1 of each fiscal year or more frequently if changes in circumstances or the occurrence of events suggest that an impairment exists.

Goodwill is evaluated for impairment using the simplified test of goodwill impairment as defined by the FASB Accounting Standards Update No.

Goodwill is evaluated for impairment using the simplified test of goodwill impairment as defined by the Financial Accounting Standards Board, or FASB, Accounting Standards Update, or ASU, No.

Under the new guidance, goodwill impairment will be measured by the amount by which the carrying value of a reporting unit exceeds its fair value, without exceeding the carrying amount of goodwill allocated to that reporting unit.

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Any changes in the estimated fair value of contingent consideration may have a material impact on our operating results.

Revenue Recognition

We record revenue in accordance with Accounting Standards Codification, or ASC, Topic 606, Revenue From Contracts with Customers .

This standard applies to all contracts with customers, except for contracts that are within the scope of other standards, such as leases, insurance, collaboration arrangements and financial instruments.

Under Topic 606, an entity recognizes revenue when its customer obtains control of promised goods or services, in an amount that reflects the consideration that the entity expects to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that an entity determines are within the scope of Topic 606, the entity performs the following five steps:

(i) identify the contract(s) with a customer;

(ii) identify the performance obligations in the contract;

(iii) determine the transaction price;

(iv) allocate the transaction price to the performance obligations in the contract;

and (v) recognize revenue when (or as) the entity satisfies a performance obligation.

We only apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer.

At contract inception, once the contract is determined to be within the scope of Topic 606, we assess the goods or services promised within each contract and determine those that are performance obligations, and we assess whether each promised good or service is distinct.

We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied.

Development, Regulatory and Sales Milestones and Other Payments

At the inception of each arrangement that includes regulatory or development milestone payments, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method.

If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within the control of us or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

We evaluate factors such as the scientific, clinical, regulatory, commercial, and other risks that must be overcome to achieve the particular milestone in making this assessment.

There is considerable judgment involved in determining whether it is probable that a significant revenue reversal would not occur.

At the end of each subsequent reporting period, we reevaluate the probability of achievement of all milestones subject to constraint and, if necessary, adjust our estimate of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

For arrangements that include sales-based royalties, including milestone payments upon first commercial sales and milestone payments based on a level of sales, which are the result of a customer-vendor relationship and for which the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied or partially satisfied.

To date, we have not recognized any royalty revenue resulting from any of our licensing arrangements.

Stock-Based Compensation

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We account for stock-options issued to non-employees by valuing the award using the Black-Scholes model and re-measuring such awards to the current fair value until the awards are vested or a performance commitment has otherwise been reached.

Because the fair market value of options granted to non-employee sis subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

Because the fair market value of options granted to non-employees is subject to change in the future, the amount of the future compensation expense will include fair value re-measurements until the stock options are fully vested.

The Black-Scholes model requires us to make certain assumptions regarding:

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As a result, if we revise our assumptions and estimates, our stock-based compensation expense could change.

Given our limited history as a publicly traded company following the Merger on December 29, 2017, we did not have sufficient trading data to calculate volatility based on our own common stock, and the expected volatility was calculated as of each grant date based on a peer group of publicly traded companies.

The expected term of the stock options was determined based upon the simplified approach for employees, allowed under SEC Staff Accounting Bulletin No.

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As a result, if we revise such assessment, our stock-based compensation expense could change.

Derivative Financial Instruments

During the normal course of business, from time to time, we issue warrants and options to vendors as consideration to perform services.

We may also issue warrants as part of a debt or equity financing.

We do not enter into any derivative contracts for speculative purposes.

We recognize all derivatives as assets or liabilities measured at fair value with changes in fair value of derivatives reflected as current period income or loss unless the derivatives qualify for hedge accounting and are accounted for as such.

During the year ended December 31, 2018, we issued warrants to purchase approximately 27,672 shares of common stock, in connection with sale of equity securities which the holders of such warrants have an option to put the warrants back to us in certain events.

In accordance with ASC Topic 815-40, “Derivatives and Hedging — Contracts in Entity’s Own Stock” (“ASC 815-40”), the fair value of these warrants is required to be recorded as a liability, as the holders have an option to put the warrants back to us in certain events, as defined, and the warrants are determined not to be indexed to the Company’s own stock.

The derivative liabilities are remeasured each period end to the estimated fair value.

The fair value of our derivative liabilities is estimated using the appropriate pricing model, with the following assumptions used for the initial measurement of warrants granted:

Risk free interest rate

Expected lives (years)

Expected dividend yield

There were no warrants granted in 2019 accounted for as liabilities.

The Company’s expected common stock price volatility assumption is based upon the volatility of a basket of companies that we consider comparable to us.

The expected life assumptions for the warrants are estimated to coincide with the contractual terms of the warrants.

Recent Accounting Pronouncements Pending Adoption

Recent Accounting Pronouncements Adopted

In August 2018, FASB issued No.

ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement .

ASU 2018-13, Fair Value Measurement (Topic 820) Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement ("ASU No.

2018-13 modifies, adds and removes certain specific disclosure requirements on fair value measurements in Topic 820.

The amendments in ASU 2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments in ASU No.

2018-13 are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019.

The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption.

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2018-13 and to delay adoption of the additional disclosures until their effective date.

We are currently evaluating the potential impact of the adoption of the new standard on our consolidated financial statements.

In June 2018, the FASB issued ASU No.

2018-07, Improvements to Nonemployee Share-Based Accounting , which simplifies the accounting for share-based payments granted to nonemployees for goods and services.

The ASU supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees.

As a result, most of the guidance in ASC 718 associated with employee share-based payments, including most of its requirements related to classification and measurement, applies to nonemployee share-based payment arrangements.

2018-07 generally requires an entity to use a modified retrospective transition approach, with a cumulative-effect adjustment to retained earnings as of the beginning of the fiscal year, for all (1) liability-classified nonemployee awards that have not been settled as of the adoption date and (2) equity-classified nonemployee awards for which a measurement date has not been established.

The guidance is applicable to public business entities for fiscal years beginning after December 15, 2019 and interim periods within those years.

We are currently evaluating the potential impact of the adoption of the new standard on our consolidated financial statements.

Recent Accounting Pronouncements Adopted

In July 2019, the FASB issued Accounting Standards Update ("ASU") No.

2019-07, Codification Updates to SEC Sections - Amendments to SEC Paragraphs Pursuant to SEC Final Rule Releases No.

33-10532, Disclosure Update and Simplification, and Nos.

33-10231 and 33-10442, Investment Company Reporting Modernization and Miscellaneous Updates ( SEC Update ).

2019-07 clarifies or improves the disclosure and presentation requirements of a variety of codification topics by aligning them with the SEC’s regulations, thereby eliminating redundancies and making the codification easier to apply.

2019-07 became effective upon issuance and the adoption of ASU No.

2019-07, which is applied prospectively, did not have an impact on our consolidated financial statements and disclosures.

On January 1, 2019, we adopted ASU No.

2016-02, Leases (Topic 842 ), as amended, which supersedes the lease accounting guidance under Topic 840, and generally requires lessees to recognize operating and financing lease liabilities and corresponding right-of-use ("ROU") assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements.

The new guidance retains a distinction between finance leases and operating leases, while requiring companies to recognize both types of leases on their balance sheet.

The classification criteria for distinguishing between finance leases and operating leases are substantially similar to the criteria for distinguishing between capital leases and operating leases in legacy U.S.

GAAP - ASC 840.

We adopted the new guidance using the modified retrospective transition approach by applying the new standard to all leases existing at the date of initial application and not restating comparative periods.

We evaluated the potential cumulative effect of applying the new guidance and determined that such an adjustment would be immaterial.

Results and disclosure requirements for reporting periods beginning after January 1, 2019 are presented under Topic 842, while prior period amounts have not been adjusted and continue to be reported in accordance with our historical accounting under Topic 840.

Under Topic 842, we determine if an arrangement is a lease at inception.

ROU assets and liabilities are recognized at commencement date based on the present value of remaining lease payments over the lease term.

For this purpose, we consider only payments that are fixed and determinable at the time of commencement.

As our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of lease payments.

Our incremental borrowing rate is a hypothetical rate based on our understanding of what our credit rating would be.

Our lease terms may include options to extend or terminate the lease and the related payments are only included in the lease liability when it is reasonably certain that we will exercise such options.

In connection with the adoption, we did not separate lease and associated non-lease components for the transitioned leases, but instead are accounting for them together as a single component.

The adoption did not change the classification of lease-related expenses in the consolidated statements of operations, and we did not change the pattern of expense recognition.

As a result, the adoption does not impact our beginning retained earnings, or our prior year consolidated statements of operations and has not materially affect the consolidated statements of cash flows.

In July 2017, the FASB issued ASU No.

2017-11, Earnings Per Share (Topic 260);

Distinguishing Liabilities from Equity Topic (480);

Derivatives and Hedging (Topic 815):

(Part I) Accounting for Certain Financial Instrument with Down Round Features, (Part II) Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception , which modifies the classification of some financial instruments.

A down round feature no longer precludes equity classification and, therefore, a freestanding equity feature would no longer be accounted for as a derivative liability at fair value as a result of the existence of a down round feature.

For freestanding equity-classified financial instruments, the amendments require entities present earnings per share in accordance with Topic 260, and to recognize the effect of the down round feature when triggered.

Convertible instruments are now subject to specialized contingent beneficial conversion features.

We adopted ASU No.

2017-11 on January 1, 2019 and determined it did not have a material impact to our consolidated financial statements.

We determined our liability classified warrants contained cash settlement features that would continue to preclude equity classification subsequent to its adoption of ASU No.

In May 2017, the FASB issued ASU No.

2017-09, Scope of Modification Accounting .

2017-09 clarifies which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.

This guidance is to be applied prospectively to awards modified on or after the adoption date.

In accordance with ASU No.

2017-09, the Company adopted this standard prospectively in the first quarter of 2018.

The adoption of ASU No.

2017-09 did not have a material impact on our consolidated financial statements.

Cash and cash equivalents

Restricted cash and cash equivalents

Total cash, cash equivalents, restricted cash, and restricted cash equivalents

We maintained $0.1 million and $0.1 million as of December 31, 2019 and December 31, 2018, respectively, on hand with our financial institutions as collateral for its corporate credit cards.

We adopted this standard on January 1, 2020 and the required disclosures are included in our consolidated financial statements.

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-K

Item 7. Management’s Discussion and Analysis