Theriva Biologics, 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 unaudited condensed consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q, and our audited consolidated financial statements and notes thereto for the year ended December 31, 2022 included in our 2022 Form 10-K. This discussion contains forward-looking statements reflecting our current expectations that involve risks and uncertainties. See “Note Regarding Forward-Looking Statements” for a discussion of the uncertainties, risks and assumptions associated with these statements. Our actual results and the timing of events could differ materially from those expressed or implied by the forward-looking statements due to important factors and risks including, but not limited to, those set forth below under “Risk Factors” and elsewhere herein, and those identified under Part I, Item 1A of our 2022 Form 10-K. Overview We are a diversified clinical-stage company developing therapeutics in areas of high unmet need. As a result of the Acquisition of Theriva Biologics, S.L. (“VCN”, formerly named VCN Biosciences, S.L.), described in more detail below, we began transitioning our strategic focus to oncology through the development of VCN’s new oncolytic adenovirus platform designed for intravenous and intravitreal delivery to trigger tumor cell death, to improve access of co-administered cancer therapies to the tumor, and to promote a robust and sustained anti-tumor response by the patient’s immune system. Prior to the Acquisition, our focus was on developing therapeutics designed to treat gastrointestinal (GI) diseases which included our clinical development candidates: (1) SYN-004 (ribaxamase) which is designed to degrade certain commonly used intravenous (IV) beta-lactam antibiotics within the GI tract to prevent microbiome damage, thereby preventing overgrowth and infection by pathogenic organisms such Clostridioides difficile infection (CDI) and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host-disease (aGVHD) in allogeneic hematopoietic cell transplant (HCT) recipients, and (2) SYN-020, a recombinant oral formulation of the enzyme intestinal alkaline phosphatase (IAP) produced under cGMP conditions and intended to treat both local GI and systemic diseases. As part of our strategic transformation into an oncology focused company, we are exploring value creation options for our SYN-004 and SYN-020 assets. SYN-004 and SYN-020 both have significant potential opportunity in non-oncology related indications. Advancement of these products may be better achieved through out-licensing or partnering and we are exploring opportunities for both SYN-004 and SYN-020 moving forward. Recent Financial Developments B Riley and AGP Securities Sales Agreement During the quarter ended June 30, 2023, we sold an aggregate of 1.9 million shares of our common stock and received net proceeds of approximately $2.2 million before deducting issuance expenses. 24 Table of Contents Our Current Product Pipeline ​ ​ *Based on management’s current beliefs and expectations allo-HCT allogeneic hematopoietic cell transplant. CPI immune checkpoint inhibitor. HNSCC head and neck squamous cell carcinoma. IV intravenous. IVit intravitreal. ODD Orphan Drug Designation. For other abbreviations see the text. ¹Additional products with preclinical proof-of-concept include SYN-006 (carbapenemase) to prevent aGVHD and infection by carbapenem resistant enterococci and SYN-007 (ribaxamase) DR to prevent antibiotic associated diarrhea with oral β-lactam antibiotics. ²Depending on funding/partnership. SYN-004 may enter an FDA-agreed Phase 3 clinical trial for the treatment of CDI. ³We have an option-license agreement with Massachusetts General Hospital to develop SYN-020 in several potential indications related to inflammation and gut barrier dysfunction. Recent Clinical Developments On August 2, 2023, we announced that patient dosing has initiated in the U.S. and with four sites open in the U.S. and eight sites open in Spain and that the trial remains on track to be fully-enrolled in the first quarter of 2024. Dosing in Spain initiated in January 2023 and the first patients have now received their second doses of intravenous VCN-01. Initiating dosing in the U.S triggered the attainment of a milestone set forth in the Purchase Agreement which obligates requiring the Company to pay Grifols $3.25 million within 60 days, On June 27, 2023 we announced that the U.S. Food and Drug Administration (FDA) has granted orphan drug designation to our lead clinical candidate VCN-01, our systemic, selective, stroma-degrading oncolytic adenovirus for the treatment of pancreatic cancer. On February 16, 2023, we issued a press release announcing the presentation of blinded safety and pharmacokinetic (PK) data from the ongoing Phase 1b/2a randomized, double-blinded, placebo-controlled clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) recipients for the prevention of acute graft-versus-host-disease (aGVHD). These data were featured in a poster presentation at 2023 Tandem Meetings: Transplantation & Cellular Therapy Meetings of ASTCT and CIBMTR, being held in Orlando, Florida from February 15-19, 2023. On January 9, 2023, we issued a press release announcing that the first patient has been dosed in the Phase 1 investigator sponsored clinical trial of intravenous VCN-01 in patients with high-grade brain tumors who are scheduled for surgical resection. 25 Table of Contents On January 17, 2023, we issued a press release announcing the first patient has been dosed in VIRAGE, the Phase 2b randomized, open-label, placebo-controlled, multicenter clinical trial of systemically administered VCN-01 in combination with standard-of-care (SoC) chemotherapy (gemcitabine/nab-paclitaxel) as a first line therapy for patients with newly diagnosed metastatic pancreatic ductal adenocarcinoma (PDAC) (NCT05673811). Our Current Oncology-Focused Pipeline Oncolytic Viruses Our oncology platform is based on oncolytic virotherapy (“OV therapy”), which exploits the ability of certain viruses to kill tumor cells and trigger an anti-tumor immune response. This novel class of anticancer agents has unique mechanisms of action compared to other cancer drugs. Oncolytic viruses exploit the fact that cancer cells contain mutations that cause them to lose growth control and form tumors. Once inside a tumor cell, oncolytic viruses are designed to exploit the tumor cell machinery to generate thousands of additional copies of the virus, which then kill the tumor cell and spread to neighboring cells, causing a chain reaction of cell killing. This infection by OVs also alerts the immune system, which can then attack the virus infected cells and the tumor cells to help destroy the tumor in some instances. Our OV candidates’ products are engineered to efficiently infect and selectively replicate to a high extent in tumor cells versus normal host cells, which enables intravenous delivery. By contrast, many other oncolytic viruses in clinical development today are administered by direct injection into the tumor. Intravenous delivery has the potential to expand the therapeutic effect of OVs because the virus can infect both the primary tumor and tumor metastases throughout the body. Our first product candidate, VCN-01, is a clinical stage oncolytic human adenovirus that is modified to express an enzyme, hyaluronidase, that degrades hyaluronan in the tumor stroma, which helps the virus and other molecules to penetrate and spread throughout the tumor. VCN-01 can be used alone or in combination with other cancer therapies such as chemotherapy and immunotherapy, for difficult to treat cancers. An expanding intellectual property portfolio supports our oncology programs, and because our products are characterized as biologics, they will be further protected by data and/or market exclusivity in major markets. VCN-01 has been administered to 93 patients across multiple Phase 1 clinical trials and Phase 2 VIRAGE trial, including patients with pancreatic cancer, head and neck squamous cell carcinoma, ovarian carcinoma, colorectal cancer, and retinoblastoma. Current clinical update We are currently conducting a Phase 2 trial of intravenous VCN-01 with or without nab-paclitaxel plus gemcitabine in patients with solid tumors and PDAC. Additional Phase 1 investigator sponsored studies are evaluating intravitreal VCN-01 in patients with retinoblastoma, a Phase 1 Trial of intravenous VCN-01 in combination with durvalumab in subjects with recurrent/ metastatic squamous cell carcinoma of the head and neck (SCCHN), a Phase 1 trial combining VCN-01 with huCART-meso cells in patients with pancreatic or serous epithelial ovarian cancer, and a Phase 1 trial evaluating the intravenous administration of VCN-01 in patients prior to surgical resection of high-grade brain tumors. Phase 1 Clinical Trials in PDAC The safety, tolerability, and potential dosing regimens for VCN-01 in patients with PDAC or colorectal cancer were evaluated in Phase 1 clinical trials evaluating intratumoral (n=8; NCT02045589) and intravenous (n= 42; NCT02045602) VCN-01 either alone or in combination with gemcitabine ± nab-paclitaxel (published in J. Immunother. Cancer 2021 Nov;9(11):e003254 and J. Immunother. Cancer 2022 Mar;10(3):e003255 respectively). Intravenous VCN-01 was found to have an acceptable safety/tolerability profile in PDAC and colorectal cancer patients and demonstrated compelling biochemical and clinical outcomes that enabled the advancement of VCN-01 into Phase 2 clinical trial in patients with metastatic PDAC. Phase 2 Trial of intravenous VCN-01 with or without nab-paclitaxel plus gemcitabine in patients with solid tumors and PDAC (VIRAGE) In January 2023, we dosed the first patients in VIRAGE, the Phase 2b randomized, open-label, placebo-controlled, multicenter clinical trial of systemically administered VCN-01 in combination with standard-of-care (SoC) chemotherapy (gemcitabine/nab-paclitaxel) as a first line therapy for patients with newly-diagnosed metastatic pancreatic ductal adenocarcinoma. The study is expected to enroll 92 patients and be conducted at approximately 25 sites in the US and EU. Two doses of VCN-01 are included in the treatment arm: the 1st 26 Table of Contents dose is administered on day 1, then one week later 3 cycles of gemcitabine and nab-paclitaxel as standard of care is administered. The second VCN-01 dose is administered 7 days before the 4th cycle of chemotherapy (approximately 90 days after the first VCN-01 dose), followed by additional cycles of gemcitabine/nab-paclitaxel chemotherapy. Retinoblastoma Phase 1 Trial of intravitreal VCN-01 in patients with retinoblastoma During the third quarter of 2017, VCN entered into a Clinical Trial Agreement with Hospital Sant Joan de Déu (Barcelona, Spain) to conduct an investigator sponsored Phase 1 clinical study evaluating the safety and tolerability of two intravitreal injections of VCN-01 in patients with intraocular retinoblastoma refractory to systemic, intra-arterial or intravitreal chemotherapy, or radiotherapy, in whom enucleation was the only recommended treatment (NCT03284268). Patients received two doses of VCN-01 injected 14 days apart using a dose escalation regimen. At this time, the dose-escalation phase of the study has already been completed in 6 patients distributed in two cohorts (2 x 10 9 vp/eye and 2 x 10 10 vp/eye). VCN-01 was well tolerated to date after intravitreal administration, although some degree of intravitreal inflammation and associated turbidity were observed. Inflammation has been managed and potential turbidity minimized with local and systemic administration of anti-inflammatory drugs. VCN-01 does not appear to change the retinal function, and selective VCN-01 replication in retinoblastoma cells has been observed by immunohistochemical analysis. Replication within retinoblastoma tumors over time was detected and VCN-01 reduced the number of vitreous seeds in 4 out of 5 patients treated at 2 x 10 10 vp/eye (n=5). The investigator has reported that one patient treated with VCN-01 has had a complete regression lasting more than 30 months. Six (6) patients have been treated in this Phase 1 trial with VCN-01 to date. This study is ongoing and the enrollment period has been extended to include additional patients. We anticipate meeting with the FDA during the second half of 2023 to discuss the path forward for VCN-01 as an adjunct to chemotherapy in pediatric patients with advanced retinoblastoma. On September 30, 2022, we issued a press release announcing an oral presentation entitled “Topotecan enhances oncolytic adenovirus infection, replication and antitumor activity in retinoblastoma,” featuring Dr. Angel Montero-Carcaboso, Researcher at Fundació Sant Joan de Déu at the SIOP 2022 Congress of the International Society of Pediatric Oncology, being held in Barcelona, Spain from September 28-October 1, 2022. The new data from the study for which Dr. Angel Montero-Carcaboso is the lead investigator further support evaluation of VCN-01, an oncolytic adenovirus expressing hyaluronidase, and topotecan for the treatment of refractory retinoblastoma. Phase 1 Trial of intravenous VCN-01 in Combination with Durvalumab in Subjects with Recurrent/ Metastatic Squamous Cell Carcinoma of the Head and Neck (SCCHN) In February 2019, VCN entered into a Clinical Trial Agreement with Catalan Institute of Oncology (ICO) (Spain) to conduct an investigator sponsored Phase 1 clinical study to evaluate the safety, tolerability and RP2D of a single intravenous injection of VCN-01 combined with durvalumab in two administration regimens: VCN-01 concomitantly with durvalumab, or sequentially with durvalumab starting two weeks after VCN-01 administration (NCT03799744). The study is also designed to evaluate whether VCN-01 treatment can re-sensitize PD-(l)-1 refractory tumors to subsequent anti-PD-L1 therapy. Durvalumab is a human monoclonal antibody (mAb) of the immunoglobulin G (IgG) 1 kappa subclass that inhibits binding of PD-L1. It is marketed as IMFINZI® by AstraZeneca/MedImmune, who supplied the product for its use in the clinical study. This Phase I trial is a multicenter, open label, dose escalation study in patients with histologically confirmed head and neck squamous cell carcinoma from specific sites: oral cavity, oropharynx, larynx or hypopharynx that is recurrent/metastatic (R/M) and not amenable to curative therapy by surgery or radiation. In addition, all patients should have undergone prior exposure to anti-PD-(L) 1 and progressed. Patients are entered at each dose level, according to a planned dose escalation schedule. The treatment is a single intravenous VCN-01 dose combined with concomitant intravenous durvalumab (MEDI4736) 1500 mg Q4W (Arm I) or durvalumab starting two weeks after VCN-01 administration (“sequential schedule”; Arm II). Patient recruitment into Arm I and Arm II was performed concurrently. Intravenous VCN-01 was administered to each patient only once during the trial at the VCN-01 dose level to which they were randomized. Durvalumab was administered Q4W until disease progression, unacceptable toxicity, withdrawal of consent, or another discontinuation criterion. Patient recruitment into the study was completed in February 2022 with a total of 18 patients enrolled. On September 05, 2022 we announced a presentation of initial data from this study in a poster at the European Society for Medical Oncology (ESMO) 2022 Congress. The poster reported that treatment with VCN-01 had an acceptable safety profile when administered with durvalumab in the sequential schedule and the most common treatment-related adverse events were dose-dependent and reversible pyrexia, flu-like symptoms and increases in liver transaminases. Sustained blood levels of VCN-01 viral genomes and increased serum hyaluronidase levels were maintained for over six weeks and analysis of tumor 27 Table of Contents samples showed an increase in CD8 T cells (a marker of tumor inflammation); upregulation of PD-L1; and downregulation of matrix-related pathways after VCN-01 administration. The last patients in this study are currently being followed for overall survival and patent samples are being analyzed to evaluate potential VCN-01 pharmacodynamic effects. We expect to report additional results from this study in H2 2023 as data become available. Phase 1 Trial evaluating the safety and feasibility of huCART-meso cells when given in combination with VCN-01 In July 2021, VCN entered into a Clinical Trial Agreement with the University of Pennsylvania (Philadelphia) to conduct an investigator sponsored Phase 1 clinical study to evaluate the safety, tolerability and feasibility of intravenous administration of VCN-01 in combination with lentiviral transduced huCART-meso cells (developed by the laboratory of Dr. Carl June) in patients with histologically confirmed unresectable or metastatic pancreatic adenocarcinoma and serous epithelial ovarian cancer (NCT05057715). This is a Phase I study evaluating the combination of VCN-01 when given in combination with huCART-meso cells in a dose-escalation design in two cohorts (N = 3-6), where patients receive VCN-01 as a single IV infusion (at 3.3x10 12 or 1x10 13 vp) on Day 0, followed by a single dose of 5x10 7 huCART-meso cells on Day 14 via IV infusion. huCART-meso cells are modified T-cells targeting the mesothelin antigen, which is frequently expressed in multiple tumor types, particularly in pancreatic and ovarian cancers. Dr. June’s previous clinical studies have shown that huCART-meso cells encounter significant challenges in the tumor microenvironment, including immunosuppressive cells and soluble factors as well as metabolic restrictions. Initial VCN-01 clinical data from the studies described above suggest that administration of VCN-01 may increase tumor immunogenicity and improve access of the huCART-meso cells to tumor cells. This Phase I study will evaluate the safety and tolerability of the VCN-01 huCART-meso cell combination and test the hypothesis that administration of VCN-01 may enhance the potential antitumor effects of the co-administered huCART-meso cells. On July 8, 2022, we were notified that the first patient to be dosed with VCN-01 had passed the safety evaluation period in this study. The study is on-going. Phase 1 Trial evaluating the intravenous administration of VCN-01 in patients prior to surgical resection of high-grade brain tumors In the second quarter of 2021, VCN entered into a Clinical Trial Agreement with the University of Leeds (UK) to sponsor a proof-of-concept Phase 1 clinical study to evaluate whether intravenously administered VCN-01 can cross the blood-brain barrier and infect the target brain tumor. This is an open-label, non-randomized, single center study of VCN-01 given intravenously at a dose of 1x10 13 virus particles to patients prior to planned surgery for recurrent high-grade primary or metastatic brain tumors. We believe that the intravenous delivery of anti-cancer therapy to brain tumors, if effective, may enable the treatment of systemically disseminated brain metastases and may allow for reduction in the need to use neurosurgery to administer the drugs. This study aims to assess the presence of VCN-01 within the resected surgical specimen after systemic VCN-01 delivery and determine the safety of intravenous VCN-01 in patients with recurrent high-grade glioma or brain metastases. By confirming the presence of VCN-01 in high grade brain tumors following intravenous delivery, this study may pave the way for larger trials to study VCN-01 efficacy, both as a monotherapy and in combination with PD-1/PD-L1 blockade. This trial has already received approval from Medicines & Healthcare Products Regulatory Agency (MHRA) from UK Government. On January 9, 2023, we issued a press release announcing that the first patient was dosed in this study and recruitment is on-going. Our Current Gastrointestinal (GI) and Microbiome-Focused Pipeline Our SYN-004 (ribaxamase) and SYN-020 clinical programs are focused on the gastrointestinal tract (GI) and the gut microbiome, which is home to billions of microbial species and composed of a natural balance of both “good” beneficial species and potentially “bad” pathogenic species. When the natural balance or normal function of these microbial species is disrupted, a person’s health can be compromised. All our programs are supported by our growing intellectual property portfolio. We are maintaining and building our patent portfolio through filing new patent applications; prosecuting existing applications; and licensing and acquiring new patents and patent applications. 28 Table of Contents SYN-004 (ribaxamase) — Prevention of antibiotic-mediated microbiome damage, thereby preventing overgrowth and infection by pathogenic organisms such as Clostridioides difficile infection (CDI) and vancomycin resistant Enterococci (VRE), and reducing the incidence and severity of acute graft-versus-host disease (aGVHD) in allogeneic HCT recipients SYN-004 (ribaxamase) is a proprietary oral capsule prophylactic therapy designed to degrade certain IV beta-lactam antibiotics excreted into the GI tract and thereby maintain the natural balance of the gut microbiome. Preventing beta-lactam damage to the gut microbiome has a range of potential therapeutic outcomes, including prevention of CDI, suppression of the overgrowth of pathogenic species (particularly antimicrobial-resistant organisms) and potentially reducing the incidence and/or severity of aGVHD in allogeneic hematopoietic cell transplant (HCT) patients. SYN-004 (ribaxamase) 75 mg capsules are intended to be administered orally while patients are administered certain IV beta-lactam antibiotics. The capsule dosage form is designed to release the SYN-004 (ribaxamase) enzyme into proximal small intestine, where it has been shown to degrade beta-lactam antibiotics in the GI tract without altering systemic antibiotic levels. Beta-lactam antibiotics are a mainstay in hospital infection management and include the commonly used penicillin and cephalosporin classes of antibiotics. Clostridioides difficile Infection Clostridioides difficile (formerly known as Clostridium difficile and often called C. difficile or CDI) is a leading type of hospital acquired infection and is frequently associated with IV beta-lactam antibiotic treatment. The Centers for Disease Control and Prevention (CDC) identified C. difficile as an “urgent public health threat,” particularly given its resistance to many drugs used to treat other infections. CDI is a major unintended risk associated with the prophylactic or therapeutic use of IV antibiotics, which may adversely alter the natural balance of microflora that normally protect the GI tract, leading to C. difficile overgrowth and infection. Other risk factors for CDI include hospitalization, prolonged length of stay (estimated at 7 days), underlying illness, and immune-compromising conditions including the administration of chemotherapy and advanced age. According to a paper published in BMC Infectious Diseases (Desai K et al. BMC Infect Dis. 2016; 16: 303) the economic cost of CDI was approximately $5.4 billion in 2016 ($4.7 billion in healthcare settings; $725 million in the community) in the U.S., mostly due to hospitalizations. Phase 1b/2a Clinical Study in Allogeneic HCT Recipients In August 2019, we entered into a Clinical Trial Agreement (CTA) with the Washington University School of Medicine (Washington University) to conduct a randomized, double-blinded, placebo-controlled Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant (HCT) recipients for the prevention of acute graft-versus-host-disease (aGVHD, NCT04692181). Under the terms of this agreement, we serve as the sponsor of the study and supply SYN-004 (ribaxamase). Dr. Erik R. Dubberke, Professor of Medicine and Clinical Director, Transplant Infectious Diseases at Washington University and a member of the SYN-004 (ribaxamase) steering committee serves as the principal investigator of the clinical trial in collaboration with his Washington University colleague Dr. Mark A. Schroeder, Associate Professor of Medicine, Division of Oncology, Bone Marrow Transplantation and Leukemia. To date, we have completed the first of 3 cohorts (Cohort 1) in this study, which enrolled 19 patients who received at least 1 dose of study drug (SYN-004 or Placebo randomized 2:1). Sixteen patients received at least one dose of intravenous (IV) meropenem and 12 of these patients completed sufficient doses of IV meropenem to be evaluable towards the study endpoints. On September 27, 2022, we issued a press release announcing positive outcomes from the Data and Safety Monitoring Committee (“DSMC”) review of results from the first Cohort and their recommendation that the study may proceed to enroll Cohort 2 in which study drug (SYN-004 or Placebo) is administered in combination with the IV beta-lactam antibiotic piperacillin/tazobactam. On November 3, 2022 we announced the first patient had been dosed in Cohort 2. Patient dosing is on-going and if enrollment proceeds on the current schedule, we may be positioned to announce data readouts for the second cohort during the first half of 2024 and the third cohort during the first half of 2025 On February 16, 2023 and April 13, 2023 we announced the presentation of safety and pharmacokinetic data from Cohort 1 of the Phase 1b/2a Clinical Trial of SYN-004 (ribaxamase) in allogeneic hematopoietic cell transplant recipients at the 2023 Tandem Meetings: Transplantation & Cellular Therapy Meetings of ASTCT and CIBMTR and at the European Congress of Clinical Microbiology & Infectious Diseases (ECCMID) respectively. 29 Table of Contents SYN-020 — Oral Intestinal Alkaline Phosphatase (IAP) SYN 020 is a quality-controlled, recombinant version of bovine Intestinal Alkaline Phosphatase (IAP) produced under cGMP conditions and formulated for oral delivery. The published literature indicates that IAP functions to diminish GI and systemic inflammation, tighten the gut barrier to diminish “leaky gut,” and promote a healthy microbiome. Despite its broad therapeutic potential, a key hurdle to commercialization has been the high cost of IAP manufacture which is commercially available for as much as $10,000 per gram. We believe we have developed technologies to traverse this hurdle and now have the ability to produce more than 3 grams per liter of SYN-020 for roughly a few hundred dollars per gram at commercial scale. Based on the known mechanisms as well as our own supporting animal model data, we intended to initially develop SYN-020 to mitigate the intestinal damage caused by radiation therapy that is routinely used to treat pelvic cancers. While we believe SYN-020 may play a pivotal role in addressing acute and long-term complications associated with radiation exposure to the GI tract, we have also begun planning for potential development of SYN-020 in large market indications with significant unmet medical needs. Such indications include celiac disease, non-alcoholic fatty liver disease (“NAFLD”), and indications to treat and prevent metabolic and inflammatory disorders associated with aging which are supported by our collaboration with Massachusetts General Hospital (“MGH”). Across the six major markets, the total prevalent cases of celiac disease are expected to increase from 5.8 million cases in 2013 to an expected 8.1 million cases in 2023, representing an annual growth rate of approximately 4%. During the same period, prevalent cases in the U.S. are expected to increase from 2.8 million in 2013 to an expected 4.3 million in 2023, representing a significant market opportunity. On June 30, 2020, we submitted an IND application to the FDA in support of an initial indication for the treatment of radiation enteropathy secondary to pelvic cancer therapy. On July 30, 2020, we announced that we received a study-may-proceed letter from the FDA to conduct a Phase 1a single-ascending-dose (“SAD”) study in healthy volunteers designed to evaluate SYN-020 for safety, tolerability and pharmacokinetic parameters(NCT04815993). On April 1, 2021, we announced that enrollment had commenced in the Phase 1 SAD clinical trial of SYN-020. On June 29, 2021, we announced that enrollment, patient dosing and observation had been completed in the Phase 1, open-label, SAD study of SYN-020. The SAD study enrolled 6 healthy adult volunteers into each of four cohorts with SYN-020 given orally as single doses ranging from 5 mg to 150 mg. The data demonstrated that SYN-020 maintained a favorable safety profile, was well tolerated at all dose levels, and no adverse events were attributed to the study drug. No serious adverse events were reported. During the third quarter of 2021 we initiated a Phase 1 clinical study evaluating multiple ascending doses (“MAD”) of SYN-020 (NCT05045833). On October 21, 2021 we announced that patient enrollment, dosing, and observation commenced in the Phase 1 MAD of SYN-020. The placebo-controlled, blinded study enrolled 32 healthy adult volunteers into four cohorts with SYN-020 administered orally in doses ranging from 5 mg to 75 mg twice daily for 14 days with a follow-up evaluation at day 35. Each cohort included six subjects who received SYN-020 and two who received placebo. On May 10, 2022, we announced positive safety data from the Phase 1 MAD study demonstrating that SYN-020 maintained a favorable safety profile and was well-tolerated across all dose levels. There were a few treatment-related adverse events, and all were mild (grade 1) and resolved without medical intervention. The most common adverse event, constipation, occurred in three out of 24 subjects in the treatment arm and in one out of eight subjects in the placebo arm. No adverse event led to discontinuation of the study drug and there were no serious adverse events. Additionally, fecal SYN-020 analyses verified intestinal bioavailability while plasma levels of SYN-020 were below the limit of quantitation in all samples at all timepoints verifying that SYN-020 was not absorbed into the systemic circulation. During the second quarter of 2020, we announced that we entered into an agreement with Massachusetts General Hospital (“MGH”) granting us an option for an exclusive license to intellectual property and technology related to the use of IAP to maintain GI and microbiome health, diminish systemic inflammation, and treat age-related diseases. During the second quarter of 2021, we announced an amendment to our option for an exclusive license agreement with MGH to include intellectual property and technology related to the use of SYN-020 to inhibit liver fibrosis in select diseases, including NAFLD. Research published by a team of investigators led by Richard Hodin, MD, Chief of the Massachusetts General Hospital Division of General and Gastrointestinal Surgery and Professor of Surgery, Harvard Medical School, evaluated long-term oral supplementation of IAP, including SYN-020, in mice. Dr. Hodin’s research demonstrated that IAP administration, starting at 10 months of age, slowed the microbiome changes, gut-barrier dysfunction, and gastrointestinal and systemic inflammation that normally accompany aging. Additionally, the IAP administration resulted in improved metabolic profiles in the aged mice, diminished frailty, and extended lifespan. Under the terms of the agreement, we are granted exclusive rights to negotiate a worldwide license with MGH to commercially develop SYN-020 to treat and prevent metabolic and inflammatory diseases associated with aging. If executed, we plan to use this license in the advancement of an expanded clinical development program for SYN-020. 30 Table of Contents The Phase 1 data from our SAD and MAD studies are intended to support the development of SYN-020 in multiple clinical indications including radiation enteritis, NAFLD, celiac disease, and indications supported by our collaboration with Massachusetts General Hospital. With our transition to an oncology focused Company, we are exploring strategic opportunities to enable advancement of this potentially valuable asset. Research Programs VCN-11 Albumin Shield™ Technology VCN-11 is a novel virus that we believe has the potential to extend our OV platform. VCN-11 has been engineered to contain all of the features of VCN-01 as well as an additional modification to include an albumin binding domain (ABD) in the virus capsid. The virus capsid is the target for neutralizing antibodies (NAbs) that are generated by the host immune system to destroy circulating viruses. The presence of an albumin binding domain, however, blocks the binding of most neutralizing antibodies, which allows the virus to reach the tumor following intravenous administration. This “Albumin Shield” works because human blood contains a large amount of albumin to coat the VCN-11 virus. Importantly, this coating of albumin appears to be displaced after the virus reaches tumor cells to infect them. In pre-clinical mouse studies to test the functionality of the “albumin shield”, mice pre-immunized with virus are able to completely neutralize an unmodified OV because they have a large concentration of neutralizing antibodies in their blood. By contrast, viruses containing the albumin binding domain such as VCN-11 are not neutralized and retain their ability to infect and destroy tumor cells. We believe these results support the further development of VCN-11 for tumors in which rapid multi-dosing may be beneficial. In the second quarter of 2020, VCN had several interactions with Spanish regulatory authorities (AEMPS) to agree on the design of the non-clinical GLP toxicology and biodistribution studies that are required to support a first-in-human clinical trial for VCN-11. In March 2021, preclinical data obtained with VCN-11 was published (J Control Release. 2021 Apr 10;332:517-528), showing that VCN-11 induced 450 times more cytotoxicity in tumor cells than in normal cells. VCN confirmed VCN-11 hyaluronidase production by measuring the activity of the PH20 enzyme with a hyaluronic acid-degradation assay, and by measuring PH20 activity in VCN-11 infected tumors in vivo. VCN-11 evaded NAbs from different sources and tumor levels of VCN-11 were demonstrated in the presence of high levels of NAbs in vivo, whereas the control virus without ABD was neutralized. VCN-11 showed a low toxicity profile in athymic nude mice and Syrian hamsters, allowing treatments with high doses and fractionated administrations without major toxicities (up to 1.2x10 11 vp/mouse and 7.5x10 11 vp/hamster). VCN-11 increased ALT levels on day 3 within an acceptable range that returned to normal levels by day 9. Fractionated intravenous administration of VCN-11 (splitting the dose into two portions administered 4 h apart) appeared to improve VCN-11 circulation kinetics and increase tumor levels. VCN-11 showed antitumor efficacy in the presence of NAbs against Ad5 and itself. In May 2022, we presented on VCN-11 at the 25th Annual Meeting of the American Society of Gene & Cell Therapy (ASGCT). The presentation included preclinical results showcasing the potential of VCN-11 to balance safety, with no major toxicities observed, and effectively target tumors after intravenous re-administration, even in the presence of high level NAbs. Our internal discovery programs are currently evaluating new oncolytic viruses derived from VCN-11 that may expand the potential efficacy of Albumin Shield viruses. SYN-006, SYN-007, other oncolytic virus To date, our research programs have been primarily directed to the development of GI acting products that have generated preclinical proof-of-concept with two pipeline products (SYN-006 and SYN-007) that expand the potential utility of our beta-lactamase strategy. SYN-007 is a specially formulated version of SYN-004 (ribaxamase) designed to be used with orally administered beta-lactam antibiotics to protect the gut microbiome from antibiotic-mediated dysbiosis. SYN-006 is a carbapenemase designed to degrade intravenous (IV) carbapenem antibiotics within the GI tract to maintain the natural balance of the gut microbiome for the prevention of CDI, overgrowth of pathogenic organisms and the emergence of antimicrobial resistance (AMR). Our research programs may be expanded to include development of new oncolytic virus products and/or explore oncology applications of our existing products such as SYN-006 and SYN-007. Intellectual Property All of our programs are supported by growing patent estates. In total, Theriva Biologics has over 130 U.S. and foreign patents and over 65 U.S. and foreign patents pending. VCN, through assignment or exclusive licenses, controls over 40 U.S. and foreign patents and over 15 U.S. and foreign patents pending. 31 Table of Contents The SYN-004 (ribaxamase) program is supported by IP that is assigned to Theriva Biologics, namely U.S. and foreign patents and patent application (in most major markets, e.g. Europe (including Germany, Great Britain and France), Japan, China and Canada, among others) and U.S. and foreign patents pending (in most major markets, e.g. Europe (including Germany, Great Britain and France), Japan, China and Canada, among others). For instance, U.S. Patent Nos. 8,894,994 and 9,587,234, which include claims to compositions of matter and pharmaceutical compositions of beta-lactamases, including SYN-004 (ribaxamase), have patent terms to at least 2031. Further, U.S. Patent 9,301,995 and 9,301,996, both of which will expire in at least 2031, cover various uses of beta-lactamases, including SYN-004 (ribaxamase), in protecting the microbiome, and U.S. Patent Nos. 9,290,754, 9,376,673, 9,404,103, 9,464,280, and 9,695,409 which will expire in at least 2035, covers further beta-lactamase compositions of matter related to SYN-004 (ribaxamase). The SYN-020 (oral intestinal alkaline phosphatase (IAP)) program is supported by IP that is assigned to Theriva Biologics, namely U.S. and foreign patents and patent applications (in many major markets, e.g. Europe, China, Japan, Korea, Canada, and Australia). These patent applications, which cover various formulations, medical uses and manufacture of SYN-020, are expected to expire in 2038-2040, if granted, and without taking potential patent term extensions or patent term adjustment into account. The VCN-01 and VCN-11 programs are supported by U.S. and foreign patents and patent applications that are assigned to VCN or exclusively licensed from Fundacio Privada Institut d’Investigacio Biomedica de Bellvitge (IDIBELL), Institut Catala d’Oncologia (ICO), and Hospital Sant Joan de Déu in Barcelona. The patents and patent applications include U.S. patents and foreign patents (in most major markets, e.g. Europe, China, Japan, Korea, Canada, Israel, Mexico, Russia, and Australia) and U.S. and foreign patents pending (in most major markets, e.g. Europe, China, Korea, Canada, Mexico, and India). The patents and patent applications cover compositions of matter and pharmaceutical compositions of oncolytic adenoviruses and various medical uses of the same. For instance, U.S. Patent No. 10,316,065, which expires in 2030 without taking potential patent term extensions or patent term adjustment into account, provides composition of matter and pharmaceutical composition coverage for a genus of engineered oncolytic adenovirus suitable for the treatment of solid tumors. Other patents and patent applications, if granted, will provide protection to 2037 without taking potential patent term extensions or patent term adjustment into account. Our goal is to (i) obtain, maintain, and enforce patent protection for our products, formulations, processes, methods, and other proprietary technologies, (ii) preserve our trade secrets, and (iii) operate without infringing on the proprietary rights of other parties worldwide. We seek, where appropriate, the broadest intellectual property protection for product candidates, proprietary information, and proprietary technology through a combination of contractual arrangements and patents. Critical Accounting Estimates The preparation of our consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) which requires the use of estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the reported amounts of revenues and expenses in the periods presented. We believe that the accounting estimates employed are appropriate and resulting balances are reasonable; however, due to inherent uncertainties in making estimates, actual results may differ from the original estimates, requiring adjustments to these balances in future periods. There are accounting policies, each of which requires significant judgments and estimates on the part of management, that we believe are significant to the presentation of our consolidated financial statements. The most significant accounting estimates relate to research and development costs, business combinations, contingent consideration, and impairment of long-lived assets, goodwill and In-process research and development (“IPR&D”). Business Combination The Company accounts for acquisitions using the acquisition method of accounting, which requires that all identifiable assets acquired, and liabilities assumed be recorded at their estimated fair values. The excess of the fair value of purchase consideration over the fair values of identifiable assets and liabilities is recorded as goodwill. When determining the fair values of assets acquired and liabilities assumed, management makes significant estimates and assumptions. Critical estimates in valuing certain intangible assets include but are not limited to future expected cash flows from acquired patented technology. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. 32 Table of Contents The Company classifies intangible assets into two categories: (1) intangible assets with indefinite lives not subject to amortization and (2) goodwill. Intangible assets that are deemed to have indefinite lives, including goodwill, are reviewed for impairment annually, or more frequently if events or changes in circumstances indicate that the asset might be impaired. The impairment test for indefinite-lived intangibles, other than goodwill, consists of a comparison of the fair value of the intangible asset with its carrying amount. If the carrying amount exceeds the fair value, an impairment charge is recognized in an amount equal to that excess. Indefinite-lived intangible assets, such as goodwill, are not amortized. The Company tests the carrying amounts of goodwill for recoverability on an annual basis or when events or changes in circumstances indicate evidence a potential impairment exists, using a fair value-based test. If a reporting unit’s carrying value exceeds its fair value, then the Company will record a goodwill impairment charge for the excess amount. IPR&D assets are considered to be indefinite-lived until the completion or abandonment of the associated research and development projects. IPR&D assets represent the fair value assigned to technologies that the Company acquires, which at the time of acquisition have not reached technological feasibility and have no alternative future use. During the period that the assets are considered indefinite-lived, they are tested for impairment on an annual basis, or more frequently if the Company becomes aware of any events occurring or changes in circumstances that indicate that the fair value of the IPR&D assets are less than their carrying amounts. If and when development is complete, which generally occurs upon regulatory approval and the ability to commercialize products associated with the IPR&D assets, these assets are then deemed definite-lived and are amortized based on their estimated useful lives at that point in time. If development is terminated or abandoned, the Company may have a full or partial impairment charge related to the IPR&D assets, calculated as the excess of carrying value of the IPR&D assets over fair value. Goodwill represents the excess of the purchase price paid when the Company acquired VCN in March 2022, over the fair values of the acquired tangible or intangible assets and assumed liabilities. The Company will conduct an impairment test of goodwill on an annual basis as of October 1 of each year and will also conduct tests if events occur or circumstances change that would, more likely than not, reduce the Company’s fair value below its net equity value. During the quarters ended September 30 and December 31, 2022, the Company experienced a sustained decline in the quoted market price of the Company’s common stock and the Company deemed this to be a triggering event. The Company performed an impairment analysis at both September 30 and December 31, 2022 and concluded that the Goodwill and IPR&D was not impaired at both dates. Contingent Consideration Consideration paid in a business combination may include potential future payments that are contingent upon the acquired business achieving certain milestones in the future (“contingent consideration”). Contingent consideration liabilities are measured at their estimated fair value as of the date of acquisition, with subsequent changes in fair value recorded in the consolidated statements of operations. The Company estimates the fair value of the contingent consideration as of the acquisition date using the estimated future cash outflows based on the probability of meeting future milestones. The milestone payments will be made upon the achievement of clinical and commercialization milestones as well as single low digit royalty payments and payments upon receipt of sublicensing income. Subsequent to the date of acquisition, the Company reassesses the actual consideration earned and the probability-weighted future earn-out payments at each balance sheet date. Any adjustment to the contingent consideration liability will be recorded in the consolidated statements of operations. Contingent consideration liabilities expected to be settled within 12 months after the balance sheet date are presented in current liabilities, with the non-current portion recorded under long term liabilities in the consolidated balance sheets. Long-Lived Assets Property and equipment is reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. Recoverability measurement and estimating of undiscounted cash flows is done at the lowest possible level for which we can identify assets. If such assets are considered to be impaired, impairment is recognized as the amount by which the carrying amount of assets exceeds the fair value of the assets. 33 Table of Contents Acquired In-Process Research & Development represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a finite-lived asset and is amortized on a straight-line basis over the estimated useful life. If the project is not completed or is terminated or abandoned, the Company may have an impairment related to the IPR&D which is charged to expense. Indefinite-lived intangible assets are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying value over its fair value. Research and Development Costs We expense research and development costs associated with developmental products not yet approved by the FDA to research and development expense as incurred. Research and development costs consist primarily of license fees (including upfront payments), milestone payments, manufacturing costs, salaries, stock-based compensation and related employee costs, fees paid to consultants and outside service providers for laboratory development, legal expenses resulting from intellectual property prosecution and other expenses relating to the design, development, testing and enhancement of our product candidates. Research and development expenses include external contract research organization (“CRO”) services. We make payments to the CROs based on agreed upon terms and may include payments in advance of study services. We review and accrue CRO expenses based on services performed and rely on estimates of those costs applicable to the stage of completion of study as provided by the CRO. Accrued CRO costs are subject to revisions as such studies progress to completion. At June 30, 2023 and 2022, we have accrued CRO expenses of $1.0 million and $0.7 million, respectively, that are included in accrued expenses. As of June 30, 2023, and 2022, we have prepaid CRO costs of $2.1 million and $1.2 million, respectively, that are included in prepaid expenses. Results of Operations Three Months Ended June 30, 2023 and 2022 ​ General and Administrative Expenses General and administrative expenses increased to $2.7 million for the three months ended June 30, 2023, from $1.5 million for the three months ended June 30, 2022. This increase of 80% is primarily comprised of increased expense related to the fair value of the contingent consideration adjustment of $0.9 million, along with higher audit fees, consulting fees, travel, and VCN administrative expenses not included in the prior year, offset by a decrease in legal costs related to the VCN acquisition. The charge related to stock-based compensation expense was $106,000 for the three months ended June 30, 2023, compared to $86,000 for the three months ended June 30, 2022. Research and Development Expenses Research and development expenses decreased to $3.1 million for the three months ended June 30, 2023, from approximately $3.5 million for the three months ended June 30, 2022. This decrease of 11% is primarily the result of lower expenses related to our Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic HCT recipients Phase 1a clinical trial of SYN-020, and decreased manufacturing expenses related to our Phase 1a clinical trial of SYN-020, offset by increased clinical trial expenses related to VCN-01. We anticipate research and development expense to increase as we continue enrollment in our VIRAGE Phase 2 clinical trial of VCN-01 in PDAC, and our ongoing Phase 1 clinical trial in retinoblastoma, expand GMP manufacturing activities for VCN-01, and continue supporting our VCN-11 and other preclinical and discovery initiatives. The charge related to stock-based compensation expense was $40,000 for the three months ended June 30, 2023, compared to $27,000 related to stock-based compensation expense for the three months ended June 30, 2022. The following table sets forth our research and development expenses directly related to our therapeutic areas for the three months ended June 30, 2023 and 2022. These direct expenses were external costs associated with preclinical studies and clinical trials. Indirect research and development expenses related to employee costs, facilities, stock-based compensation and research and development support services that are not directly allocated to specific product candidates. 34 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ June 30, Therapeutic Areas 2023 2022 VCN-01 ​ $ 1,659 ​ $ 1,468 Ribaxamase ​ 212 ​ 346 SYN-020 ​ 79 ​ 226 Other therapeutic areas ​ 97 ​ 225 ​ ​ ​ ​ ​ ​ ​ Total direct costs ​ 2,047 ​ 2,265 Total indirect costs ​ 1,086 ​ 1,220 ​ ​ ​ ​ ​ ​ ​ Total Research and Development ​ $ 3,133 ​ $ 3,485 ​ Other Income/Expense Other income was $377,000 for the three months ended June 30, 2023 compared to other expense of $17,000 for the three months ended June 30, 2022. Other income for the three months ended June 30, 2023 is primarily comprised of interest income of $381,000 and exchange loss of $4,000. Other income for the three months ended June 30, 2022 is primarily comprised of interest income of $26,000 offset by an exchange loss of $9,000. Net Loss Attributable to Common Stockholders Our net loss attributable to common stockholders was approximately $5.1 million, or $0.34 per basic and dilutive common share for the three months ended June 30, 2023, compared to a net loss of approximately $4.5 million, or $0.28 per basic common share and dilutive common share for the three months ended June 30, 2022. Six Months Ended June 30, 2023 and 2022 General and Administrative Expenses General and administrative expenses increased to $4.9 million for the six months ended June 30, 2023, from $3.2 million for the six months ended June 30, 2022. This increase of 53% primarily comprised of increased fair value of the contingent consideration adjustment of $0.9 million, along with higher audit fees, consulting fees, travel, and VCN administrative expenses not included in the prior year, offset by a decrease in legal costs related to the VCN acquisition and director and officer insurance. The charge related to stock-based compensation expense was $193,000 for the six months ended June 30, 2023, compared to $172,000 the six months ended June 30, 2022. Research and Development Expenses Research and development expenses increased to $6.1 million for the six months ended June 30, 2023, from approximately $6.1 million for the six months ended June 30, 2022. The movement between the two periods is primarily the result of higher increased clinical trial expenses related to VCN-01, offset by lower expenses related to our Phase 1b/2a clinical trial of SYN-004 (ribaxamase) in allogeneic HCT recipients, Phase 1a clinical trial of SYN-020, decreased manufacturing expenses related to our Phase 1a clinical trial of SYN-020 and lower other indirect costs. We anticipate research and development expense to increase as we continue enrollment in our VIRAGE Phase 2 clinical trial of VCN-01 in PDAC, and our ongoing Phase 1 clinical trial in retinoblastoma, expand GMP manufacturing activities for VCN-01, and continue supporting our VCN-11 and other preclinical and discovery initiatives. The charge related to stock-based compensation expense was $79,000 for the six months ended June 30, 2023, compared to $54,000 related to stock-based compensation expense for the six months ended June 30, 2022. The following table sets forth our research and development expenses directly related to our therapeutic areas for the six months ended June 30, 2023 and 2022. These direct expenses were external costs associated with preclinical studies and clinical trials. Indirect research and development expenses related to employee costs, facilities, stock-based compensation and research and development support services that are not directly allocated to specific product candidates. 35 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ June 30, Therapeutic Areas 2023 2022 VCN-01 ​ $ 3,314 ​ $ 1,528 Ribaxamase ​ ​ 407 ​ ​ 723 SYN-020 ​ ​ 144 ​ ​ 885 Other therapeutic areas ​ 157 ​ 277 ​ ​ ​ ​ ​ ​ ​ Total direct costs ​ 4,022 ​ 3,413 Total indirect costs ​ 2,088 ​ 2,669 ​ ​ ​ ​ ​ ​ ​ Total Research and Development ​ $ 6,110 ​ $ 6,082 ​ Other Income/Expense Other income was $746,000 for the six months ended June 30, 2023 compared to other expense of $4,000 for the six months ended June 30, 2022. Other income for the six months ended June 30, 2023 is primarily comprised of interest income of $745,000 and exchange gain of $1,000. Other expense for the six months ended June 30, 2022 is primarily comprised of exchange loss of $31,000, offset by interest income of $27,000. Net Loss Attributable to Common Stockholders Our net loss attributable to common stockholders was approximately $9.6 million, or $0.63 per basic and dilutive common share for the six months ended June 30, 2023, compared to a net loss of approximately $8.8 million, or $0.59 per basic common share and dilutive common share for the six months ended June 30, 2022. Liquidity and Capital Resources As of June 30, 2023, the Company has a significant accumulated deficit, and with the exception of the three months ended June 30, 2010 and the three months ended December 31, 2017, the Company has experienced significant losses and incurred negative cash flows since inception. The Company expects to continue incurring losses for the foreseeable future, with the recognition of revenue being contingent on successful phase 3 clinical trials and requisite approvals by the FDA or foreign equivalents. Our cash and cash equivalents totaled $34.2 million as of June 30, 2023, a decrease of $7.5 million from December 31, 2022. During the three and six months ended June 30, 2023, the primary use of cash was for working capital requirements and operating activities which resulted in a net loss of $5.1 million and $9.6 million for three and six months ended June 30, 2023, respectively. With our cash position of $32.8 million in early August 2023, we believe we will be able to fund our operations through the third quarter and into the fourth quarter of 2024. Management believes its plan, which includes the additional testing of SYN-004 (ribaxamase) and the advancement of VCN-01 will allow us to meet our financial obligations, further advance key products, and maintain our planned operations for at least one year from the issuance date of these consolidated financial statements. However, the amount of additional capital needed by us will also depend upon the costs to advance our VCN-01 clinical programs and whether we continue to develop SYN-004 internally, or out-license or partner such development. If necessary, we may attempt to utilize the ATM or seek to raise additional capital on the open market, neither of which is guaranteed. Use of the ATM is limited by certain restrictions and management’s plan does not rely on additional capital from either of these sources. If we are not able to obtain additional capital (which is not assured at this time), our long-term business plan may not be accomplished, and we may be forced to cease certain development activities. More specifically, the completion of any later stage clinical trial will require significant financing or a significant partnership. Historically, we have financed our operations primarily through public and private sales of our securities, and we expect to continue to seek and obtain additional capital in a similar manner. During the year ended December 31, 2022, our only source of cash was from the sales of our Series C Preferred Stock and Series D Preferred Stock. During the three and six months ended June 30, 2023, our only source of cash was from sales of our common stock through the Amended and Restated ATM Sales Agreement in which we sold 1.9 million shares of our stock for net proceeds of $2.2 million. There can be no assurance that we will be able to continue to raise funds through the sale of shares of common stock through the Amended and Restated ATM Sales Agreement or other equity financings. If we raise funds by selling additional shares of common 36 Table of Contents stock or other securities convertible into common stock, the ownership interest of our existing stockholders will be diluted. If we are not able to obtain funding for future clinical trials when needed, we will be unable to carry out our business plan and we will be forced to delay the initiation of future clinical trials until such time as we obtain adequate financing. We have committed, and expect to continue to commit, substantial capital in order to implement our business strategy, including our planned product development efforts, preparation for our planned clinical trials, and performance of clinical trials and our research and discovery efforts. We believe our cash position of $32.8 million in early August 2023 is sufficient to fund our operations through at least the end of the third quarter of and into the fourth quarter 2024, including continuation of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients for the prevention of aGVHD, our ongoing Phase 1 and Phase 2 clinical trials for VCN-01, preclinical studies of VCN-11 and related discovery initiatives, and to fund our committed obligations under the VCN Purchase Agreement for the VCN Acquisition. Following the anticipated completion of our ongoing Phase 1b/2a clinical study of SYN-004 (ribaxamase) in allogeneic HCT recipients, our ongoing Phase 1 and Phase 2 clinical trials for VCN-01, and the preclinical studies of VCN-11, and related discovery initiatives, we will need to obtain additional funds for future clinical trials. We anticipate that our future clinical trials will be much larger in size and require larger cash expenditures than the aforementioned clinical programs. We do not have any committed sources of financing for future clinical trials at this time, and it is uncertain whether additional funding will be available when we need it on terms that will be acceptable to us, or at all. Cash Flows Cash Used in Operating Activities Net cash used in operating activities was $9.5 million and $9.3 million during the six months ended June 30, 2023 and 2022, respectively, which was primarily due to the use of funds in our operations related to the development of VCN-01 our product candidate. Cash used in operating activities for the six months ended June 30, 2023 increased compared to the same period in 2022 due primarily to the ramp up in our Phase 2 trial. Cash Used In Investing Activities Cash used in investing activities during the six months ended June 30, 2023 was $17,000 for equipment purchase as compared to$ 4.3 million during the same period in the prior year, which were primarily related to the cash payment for the acquisition and a pre-acquisition loan to VCN. Cash Provided by Financing Activities Cash provided by financing activities during the six months ended June 30, 2023 included at the market offering proceeds of $2.2 million from sales of 1.9 shares of our common stock which was offset by $75,000 of payments of debt. Cash used in financing activities during the six months ended June 30, 2022 related solely to the payment of $1.4 million of debt payments related to loans extended by certain Spanish institutions. Off-Balance Sheet Arrangements During the three months ended June 30, 2023, we did not have, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules. Contractual Obligations Leases At the inception of a contract we determine if the arrangement is, or contains, a lease. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent our obligation to make lease payments arising from the lease. ROU assets and liabilities are recognized at the commencement date based on the present value of lease payments over the lease term. 37 Table of Contents We have made certain accounting policy elections whereby we (i) do not recognize ROU assets or lease liabilities for short-term leases (those with original terms of 12-months or less) and (ii) combine lease and non-lease elements of our operating leases. ROU assets are included in other noncurrent assets and lease liabilities are included in other current and non-current liabilities in our condensed consolidated balance sheets. As of June 30, 2023, we did not have any material finance leases. ​