APREA THERAPEUTICS, INC. You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited financial information and notes thereto included in this Quarterly Report on Form 10-Q. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report, including information with respect to our plans and strategy for our business and related financing, including forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Quarterly Report and in our Annual Report on Form 10-K for the year endedDecember 31, 2020 , our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
We are a clinical-stage biopharmaceutical company focused on developing and commercializing novel cancer therapeutics that reactivate the mutant p53 tumor suppressor protein. p53 is the protein expressed from the TP53 gene, the most commonly mutated gene in cancer. We believe that mutant p53 is an attractive therapeutic target due to the high incidence of p53 mutations across a range of cancer types and its involvement in key cellular activities such as apoptosis. Cancer patients with mutant p53 face a significantly inferior prognosis even when treated with the current standard of care, and a large unmet need for these patients remains. Our lead product candidate, APR-246, or eprenetapopt, is a small molecule p53 reactivator that is in clinical development for hematologic malignancies, including myelodysplastic syndromes, or MDS, and acute myeloid leukemia, or AML. Eprenetapopt has received orphan drug and fast track designations from the FDA for MDS, orphan drug and fast track designations from the FDA for AML and orphan drug designation from theEuropean Commission for MDS and AML , and we believe eprenetapopt will be a first-in-class therapy if approved by applicable regulators. We are conducting, supporting and planning multiple clinical trials of eprenetapopt and APR-548. OnAugust 4, 2021 , theU.S. Food and Drug Administration (FDA) placed a partial clinical hold on the clinical trials of eprenetapopt in combination with azacitidine in our myeloid malignancy programs. TheFDA's concerns referred to the safety and efficacy data from the Phase 3 frontline MDS clinical trial. In particular, the FDA requested more information related to a potential risk-reward imbalance between the combination of eprenetapopt and azacitidine versus azacitidine alone as it relates to increased adverse events in our Phase 3 frontline clinical trial in MDS. There are approximately 9 patients currently receiving eprenetapopt in combination with azacitidine in our myeloid malignancy programs, which includes the MDS, AML and post-transplant maintenance trials, all of which have completed enrollment. Patientswho are benefiting from treatment can continue to receive study treatment. As part of the partial clinical hold, no additional patients can be enrolled to these clinical trials until the partial clinical hold is resolved. We intend to work with the FDA to analyze the data, address the specific questions raised, and seek to resolve the partial clinical hold as soon as possible. OnAugust 11, 2021 , the FDA placed a clinical hold on our clinical trial evaluating eprenetapopt with acalabrutinib or with venetoclax and rituximab in lymphoid malignancies. TheFDA's concerns referred to the safety and efficacy data from the Phase 3 frontline MDS clinical trial. There are no patients currently receiving study treatment in this trial and no additional patients can be enrolled until the clinical hold is resolved. We intend to work with the FDA to address the specific questions raised and seek to resolve the clinical hold as soon as possible.
Our current clinical trials are as follows:
Phase 3 Frontline MDS Trial -- In
154 patients in a pivotal Phase 3 trial of eprenetapopt with azacitidine for
frontline treatment of TP53 mutant MDS. The pivotal Phase 3 trial is supported
by data from two Phase 1b/2 investigator-initiated trials, one in the
? one in
TP53 mutant MDS and AML patients. The data from the
trials were published in
Phase 3 trial failed to meet
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its predefined primary endpoint of complete remission (CR) rate. Analysis of the
primary endpoint at this data cut demonstrated a higher CR rate (53% more
patients achieving a CR) in the experimental arm receiving eprenetapopt with
azacitidine versus the control arm receiving azacitidine alone but did not reach
statistical significance. Based on a thorough analysis of the current Phase 3
trial data and comparisons to the
that despite similar types and frequency of adverse events observed in the Phase
3 experimental arm and the Phase 1b/2 trials, patients in the Phase 3
experimental arm experienced substantially more study treatment dose
modifications compared to the experience in the
trials. We believe that the dose modifications of eprenetapopt and azacitidine
led to undertreatment in the Phase 3 experimental arm that negatively impacted
efficacy, particularly the primary endpoint of CR rate. We continue to follow
patients
partial clinical hold on our myeloid malignancy programs, we believe that there
is no registrational pathway for this Phase 3 trial and we have voluntarily
withdrawn our Breakthrough Therapy designation.
Phase 2 MDS/AML Post-Transplant Trial -- In
results from a single-arm, open-label Phase 2 clinical trial evaluating
eprenetapopt with azacitidine as post-transplant maintenance therapy in TP53
mutant MDS and AML patients
transplant. The primary endpoint of the trial is the rate of relapse-free
survival (RFS) at 12 months. In 33 patients enrolled in the trial, the RFS at
1-year post-transplant was 58% and the median RFS was 12.1 months. The overall
? survival (OS) at 1-year post-transplant was 79%, with a median OS of 19.3
months. Prior clinical trials evaluating post-transplant outcomes in TP53
mutant MDS and AML patients have reported a 1-year post-transplant RFS of ~30%
and a median OS of ~5-8 months. As part of our plan to seek to resolve the
partial clinical hold, we plan to share data with the FDA. Data from this
clinical trial has been accepted for oral presentation at the 63rd American
and we may also present data from this clinical trial at additional future
scientific or medical conferences.
Phase 1/2 AML Trial -- We are currently conducting a Phase 1/2 clinical trial,
which is currently subject to a partial clinical hold, evaluating the safety,
tolerability, and preliminary efficacy of eprenetapopt therapy in TP53 mutant
AML patients. The lead-in portion of the trial evaluated the tolerability of
eprenetapopt with venetoclax, with or without azacitidine, and no dose-limiting
toxicities were observed in 12 patients receiving either regimen. Based on
these results, we have expanded the trial to treat 33 additional frontline TP53
mutant AML patients with the combination of eprenetapopt, venetoclax and
azacitidine. In
? venetoclax and azacitidine met the CR primary efficacy endpoint. In 30 patients
37% and the composite response rate of CR plus CR with incomplete hematologic
recovery (CRi), CR/CRi, was 53%. The trial met the primary efficacy endpoint of
CR, which is based on a Simon 2-stage design. We plan to continue collecting
data from this Phase 2 clinical trial and share data with the FDA as part of
our effort to resolve the partial clinical hold. Data from this clinical trial
has been accepted for poster presentation at the 63rd
Hematology (ASH) Annual Meeting on
may also present data from this clinical trial at additional future scientific
or medical conferences.
Phase 1 NHL Trial -- We have initiated a Phase 1 clinical trial, which is
currently subject to a clinical hold, in relapsed/refractory TP53 mutant
chronic lymphoid leukemia (CLL) assessing eprenetapopt with venetoclax and
? rituximab and eprenetapopt with acalabrutinib in order to further assess
eprenetapopt in hematological malignancies. The first patient was enrolled in
the first quarter of 2021. The Company intends to work with the FDA to address
the specific questions raised, and seek to resolve the clinical hold as soon as
possible.
Phase 1/2 Solid Tumor Trial - We are currently conducting a Phase 1/2 clinical
trial in relapsed/refractory gastric, bladder and non-small cell lung cancers
assessing eprenetapopt with anti-PD-1 therapy. The dose-escalation phase of the
trial enrolled 6 patients with advanced solid tumors and no dose-limiting
toxicities were observed. Based on these results, we enrolled additional
? patients into expansion cohorts for advanced gastric, bladder and non-small
cell lung cancers. Data from this trial was presented at the
of
interim results for 31 patients
gastric/GFJ, three bladder/urothelial cancer and 19 non-small lung cancer
(NSCLC) patients. In the bladder/urothelial cohort, one patient with localized
TP53 mutant high-grade
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transitional cell bladder cancer had achieved complete remission (CR) by RECIST
criteria at the first response assessment at 9 weeks. In the NSCLC cohort, two
patients with TP53 mutant squamous NSCLC had reductions in target lesions of
26.7% and 8.2%, respectively, from baseline by RECIST criteria at the first
response assessment at 9 weeks. APR-548 Phase 1 Trial - Our second product candidate, APR-548, is a next
generation p53 reactivator that is being developed in an oral dosage form. We
? are currently enrolling a Phase 1 dose-escalation clinical trial evaluating
safety, tolerability, and preliminary efficacy of APR-548 with azacitidine in
frontline and relapsed/refractory MDS patients. The trial is open and patients
are enrolled in the first dosing cohort.
Aprea Therapeutics AB , orAprea AB , was originally incorporated in 2002 and commenced principal operations in 2006. We incorporatedAprea Therapeutics, Inc. (the "Company") inMay 2019 . InSeptember 2019 we completed a corporate reorganization and, as a result, all of the issued and outstanding stock ofAprea AB was exchanged for common stock, preferred stock or options, as applicable, of the Company As a result of such transactions,Aprea AB became a wholly-owned subsidiary of the Company. We have devoted substantially all of our resources to developing our product candidates, including eprenetapopt, building our intellectual property portfolio, business planning, raising capital and providing general and administrative support for these operations. To date, we have financed our operations through private placements of preferred stock and the net proceeds received from the initial public offering (IPO) of our common stock. ThroughSeptember 30, 2021 , we had received net proceeds of approximately$224.0 million from our sales of preferred and common stock. Since our inception, we have incurred significant losses on an aggregate basis. Our ability to generate product revenue sufficient to achieve profitability will depend on the successful development and eventual commercialization of one or more of our product candidates. Our net losses were$9.5 million and$29.4 million for the three and nine months endedSeptember 30, 2021 , respectively,$12.3 million and$38.1 million for the three and nine months endedSeptember 30, 2020 , respectively, and$53.5 million ,$28.1 million and$15.5 million for the years endedDecember 31, 2020 , 2019 and 2018, respectively. As ofSeptember 30, 2021 , we had an accumulated deficit of$173.4 million . These losses have resulted primarily from costs incurred in connection with research and development activities, patent investment, and general and administrative costs associated with our operations. We expect to continue to incur significant expenses and increasing operating losses for at least the next several years.
We anticipate that our expenses will increase substantially if and as we:
? conduct our current and future clinical trials and additional preclinical
research of eprenetapopt;
? initiate and continue research and preclinical and clinical development of our
other product candidates;
? seek to identify and develop additional product candidates;
? seek marketing approvals for any of our product candidates that successfully
complete clinical trials, if any;
? establish a sales, marketing, manufacturing and distribution infrastructure to
commercialize any products for which we may obtain marketing approval;
? require the manufacture of larger quantities of our product candidates for
clinical development and potential commercialization;
? maintain, expand, protect and enforce our intellectual property portfolio;
? acquire or in-license other drugs and technologies;
? defend against any claims of infringement, misappropriation or other violation
of third-party intellectual property;
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? hire and retain additional clinical, quality control and scientific personnel;
and
add operational, financial and management information systems and personnel, ? including personnel to support our drug development, any future
commercialization efforts and our operation as a public company.
Furthermore, if we obtain marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution. As a result, we will need additional financing to support our continuing operations. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through a combination of public or private equity or debt financings or other sources, which may include collaborations with third parties. We may be unable to raise additional funds or enter into other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development or commercialization of one or more of our product candidates. Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate revenue from product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations. As ofSeptember 30, 2021 , we had cash and cash equivalents of$61.4 million . We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See "-Liquidity and
Capital Resources." The COVID-19 pandemic The novel coronavirus outbreak (COVID-19) has been declared a "Public Health Emergency of International Concern" by theWorld Health Organization . COVID-19 has spread to the countries in which we, our suppliers, and our other business partners conduct business. Governments in affected regions have implemented, and may continue to implement or re-implement, safety precautions, including quarantines, travel restrictions, business closures, cancellations of public gatherings, and other measures they deem necessary. Like many other organizations and individuals, the Company and our employees are taking additional steps to avoid or reduce infection, including limiting travel and implementing remote work arrangements. We will continue to actively monitor the situation and may take further actions that could alter our business operations as may be required by national, state, or local authorities, or that we determine are in the best interests of our employees and stockholders. Together with our investigators and clinical sites, we continue to assess the impact of the coronavirus pandemic on data integrity, patient enrollment, the ability to maintain patients in our clinical trials and, the corresponding impact on the timing of the completion of our clinical trials. We have assessed both capacity and the current clinical supply chain associated with the production of eprenetapopt and APR-548 and have observed no disruptions to date in our clinical supply chain and our ability to provide supply for our on-going clinical trials. We will continue to monitor and assess the potential impact of the COVID-19 pandemic on our clinical trial supply chain. There are many uncertainties regarding the COVID-19 pandemic, and we are closely monitoring the impact of the pandemic on all aspects of our business, including how it will impact our clinical trials, employees, suppliers, vendors and business partners. While the pandemic did not materially affect our financial results and business operations for the three and nine months endedSeptember 30, 2021 , we are unable to predict the impact that COVID-19 will have on our financial position and operating results at this time due to numerous uncertainties such as the duration and spread of the outbreak. We will continue to assess the evolving impact of the COVID-19 pandemic and will make adjustments to our operations if necessary. 18 Table of Contents
Components of our results of operations
Revenue
We have not generated any revenue from product sales and do not expect to generate any revenue from the sale of products in the near future. If our development efforts for eprenetapopt or other product candidates that we may develop in the future are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from collaboration or license agreements that we may enter into with third parties.
Operating expenses
Our expenses since inception have consisted solely of research and development costs and general and administrative costs.
Research and development expenses
Research and development expenses consist primarily of costs incurred for our research activities, including our discovery efforts, and the development of our product candidates, and include:
expenses incurred under agreements with third parties, including contract
research organizations, or CROs, that conduct research, preclinical activities ? and clinical trials on our behalf as well as contract manufacturing
organizations, or CMOs, that manufacture our product candidates for use in our
preclinical and clinical trials;
? salaries, benefits and other related costs, including stock-based compensation
expense, for personnel engaged in research and development functions;
? costs of outside consultants, including their fees, stock-based compensation
and related travel expenses;
? costs of laboratory supplies and acquiring, developing and manufacturing
preclinical study and clinical trial materials;
? expenses related to compliance with regulatory requirements; and
facility-related expenses, which include direct depreciation costs and ? allocated expenses for rent and maintenance of facilities and other operating
costs.
We expense research and development costs as incurred. We recognize costs for
certain development activities, such as clinical trials, based on an evaluation
of the progress to completion of specific tasks using data such as patient
enrollment, clinical site activations, or information provided to us by our
vendors and our clinical investigative sites. Payments for these activities are
based on the terms of the individual agreements, which may differ from the
pattern of costs incurred, and are reflected in our financial statements as
prepaid or accrued research and development expenses.
We typically use our employee and infrastructure resources across our
development programs. We track outsourced development costs and payments made to
our research partners by product candidate or development program, but we do not
allocate personnel costs or other internal costs to specific development
programs or product candidates.
Research and development activities are central to our business model. Product
candidates in later stages of clinical development generally have higher
development costs than those in earlier stages of clinical development,
primarily due to the increased size and duration of later-stage clinical trials.
We expect that our research and development expenses will continue to increase
for the foreseeable future as we initiate additional clinical trials of
eprenetapopt, pursue later
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stages of clinical development of eprenetapopt, initiate clinical trials for
product candidates other than eprenetapopt and continue to discover and develop
additional product candidates.
We cannot determine with certainty the duration and costs of the current or
future clinical trials of our product candidates or if, when, or to what extent
we will generate revenue from the commercialization and sale of any our product
candidates for which we obtain marketing approval. We may never succeed in
obtaining marketing approval for any of our product candidates. The duration,
costs and timing of clinical trials and development of our product candidates
will depend on a variety of factors, including:
the scope, rate of progress, expense and results of our ongoing clinical trials ? of eprenetapopt and APR-548, as well as of any future clinical trials of
eprenetapopt, APR-548, or other product candidates and other research and
development activities that we may conduct;
our ability to resolve the partial clinical hold on our clinical trials of ? eprenetapopt in combination with azacitidine in our myeloid malignancy
programs;
? our ability to resolve the clinical hold on our clinical trial of eprenetapopt
with acalabrutinib or with venetoclax and rituximab in lymphoid malignancies;
? uncertainties in clinical trial design and patient enrollment rates;
? significant and changing government regulation and regulatory guidance;
? the timing and receipt of, and any limitations imposed by regulatory bodies on,
any marketing approvals; and
? the expense of filing, prosecuting, defending and enforcing any patent claims
and other intellectual property rights.
A change in the outcome of any of these variables with respect to the development of a product candidate could mean a significant change in the costs and timing associated with the development of that product candidate. For example, if theU.S. Food and Drug Administration , or FDA, or another regulatory authority in a foreign jurisdiction were to require us to conduct clinical trials beyond the scope we currently anticipate, or additional clinical trials beyond those that we anticipate will be required for the completion of clinical development of a product candidate, or if we experience significant trial delays due to patient enrollment or other reasons, we would be required to expend significant additional financial resources and time on the completion of clinical development. We are currently conducting multiple clinical trials of eprenetapopt: a Phase 3 trial inthe United States for the treatment of TP53 mutant MDS with azacitidine which is supported by published data from two Phase 1b/2 investigator-initiated trials, one in theU.S. and one inFrance testing eprenetapopt with azacitidine as frontline treatment in TP53 mutant MDS and AML patients; a Phase 2 trial of post-transplant maintenance therapy with azacitidine in TP53 mutant MDS and AML; a Phase 1b/2 trial for the treatment of TP53 mutant AML with venetoclax and azacitidine; a Phase 1/2 solid tumor trial assessing eprenetapopt with anti-PD-1 therapy; and a Phase 1/2 trial for the treatment of TP53 mutant relapsed/refractory CLL with venetoclax and rituximab or with ibrutinib. We are currently conducting a Phase 1 trial of APR-548 with azacitidine in TP53 mutant frontline and relapsed/refractory MDS. At this time, we cannot reasonably estimate the cost for initiating and completing other clinical trials or preclinical studies of eprenetapopt or other product candidates, as it will be highly dependent on the clinical data from ongoing clinical trials as well as any target disease subpopulations chosen for further evaluation. OnAugust 4, 2021 , the FDA placed a partial clinical hold on our clinical trials of eprenetapopt in combination with azacitidine in our myeloid malignancy programs. We intend to work with the FDA to analyze the data, address the specific questions raised, and seek to resolve the partial clinical hold as soon as possible. OnAugust 11, 2021 , the FDA placed a clinical hold on our clinical trial of eprenetapopt with acalabrutinib or with venetoclax and rituximab in lymphoid malignancies. We intend to work with the FDA to address the specific questions raised and seek to resolve the clinical hold as soon as possible. 20
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General and administrative expenses
General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in our executive, finance, corporate and business development and administrative functions. General and administrative expenses also include legal fees relating to patent and corporate matters; professional fees for accounting, auditing, tax and consulting services; insurance costs; travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for rent and maintenance of facilities and other operating costs. We expect that our general and administrative expenses will increase in the future as we increase our headcount to support personnel in research and development and to support our operations generally as we increase our research and development activities and activities related to the potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, including costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing andSEC requirements; director and officer insurance costs; and investor and public relations costs.
Other income and expense
Interest income and expense
Interest income consists of income earned on our cash and cash equivalents. Interest expense consists of the interest component associated with our facility leases. Our interest income initially increased as our cash and cash equivalents were higher due to the cash proceeds received from our IPO. Such interest income is subsequently decreasing as (i) our cash balance decreases as we continue to fund operations and (ii) a decrease in interest rates.
Foreign currency gain
Our consolidated financial statements are presented inU.S. dollars, which is our reporting currency. The financial position and results of operations of our subsidiaryAprea AB is measured using the foreign subsidiary's local currency as the functional currency.Aprea AB cash accounts holdingU.S. dollars are remeasured based upon the exchange rate at the date of remeasurement with the resulting gain or loss included in the consolidated statement of operations and comprehensive loss. Expenses of such subsidiaries have been translated intoU.S. dollars at average exchange rates prevailing during the period. Assets and liabilities have been translated at the rates of exchange on the consolidated balance sheet date. The resulting translation gain and loss adjustments are recorded directly as a separate component of stockholders' equity and as other comprehensive loss on the consolidated statement of operations and comprehensive loss. Income taxes
We have not recorded anyU.S. federal, state or foreign income tax expense or benefits for the net losses we have incurred in any year, due to our uncertainty of realizing a benefit from those items. We have provided a valuation allowance for the full amount of the net deferred tax assets as, based on all available evidence, it is considered more likely than not that all the recorded deferred tax assets will not be realized in a future period.
Critical accounting policies and use of estimates
Our management's discussion and analysis of financial condition and results of operations is based on our financial statements, which have been prepared in accordance with generally accepted accounting principles inthe United States . The preparation of our financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities, costs and expenses in our financial statements. We base our estimates on historical experience, known trends and events and various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions or conditions. 21
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While our significant accounting policies are described in more detail in the notes to our financial statements, we believe that the following accounting policies are those most critical to the judgments and estimates used in the preparation of our financial statements.
Accrued research and development expenses
As part of the process of preparing our financial statements, we are required to estimate our accrued research and development expenses at each balance sheet. This process involves reviewing open contract and purchase orders, communicating with our personnel to identify services that have been performed on our behalf and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advanced payments. We make estimates of our accrued expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. Examples of estimated accrued research and development expenses include fees paid to:
? CROs in connection with performing research activities on our behalf and
conducting preclinical studies and clinical trials on our behalf;
? investigative sites or other service providers in connection with clinical
trials;
? vendors in connection with preclinical and clinical development activities; and
? vendors related to product manufacturing and development and distribution of
preclinical and clinical supplies.
We base our expenses related to preclinical studies and clinical trials on our estimates of the services received and efforts expended pursuant to quotes and contracts with multiple CROs that conduct and manage preclinical studies and clinical trials on our behalf. The financial terms of these agreements are subject to negotiation, vary from contract to contract and may result in uneven payment flows. There may be instances in which payments made to our vendors will exceed the level of services provided and result in a prepayment of the expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of clinical trial milestones. In accruing fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort to be expended in each period. If the actual timing of the performance of services or the level of effort varies from our estimate, we adjust the accrual or amount of prepaid expense accordingly. Although we do not expect our estimates to be materially different from amounts actually incurred, our understanding of the status and timing of services performed relative to the actual status and timing of services performed may vary and may result in us reporting amounts that are too high or too low in any particular period. To date, we have not made any material adjustments to our prior estimates of accrued research and development expenses.
Stock-based compensation
We measure stock options and other stock-based awards granted to employees and
directors based on their fair value on the date of the grant and recognize
compensation expense of those awards, over the requisite service period, which
is generally the vesting period of the respective award. We apply the
straight-line method of expense recognition to all awards with only
service-based vesting conditions and apply the graded-vesting method to all
awards with performance-based vesting conditions or to awards with both
service-based and performance-based vesting conditions.
For stock-based awards granted to non-employees, compensation expense is
recognized over the period during which services are rendered by such
non-employees until completed in accordance with the FASB issued
ASU No. 2018-07, Compensation-Stock Compensation (Topic 718): Improvements to
Nonemployee Share-Based Payment Accounting. The new standard largely aligns the
accounting for share-based payment awards issued to employees and nonemployees
by expanding the scope of ASC 718 to apply to nonemployee share-based
transactions, as long as the transaction is not effectively a form of financing.
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We estimate the fair value of each stock option grant on the date of grant using
the Black-Scholes option-pricing model, which uses as inputs the fair value of
our common stock and assumptions we make for the volatility of our common stock,
the expected term of our stock options, the risk-free interest rate for a period
that approximates the expected term of our stock options and our expected
dividend yield.
We also award restricted stock units ("RSUs") to employees and directors. RSUs
are generally subject to forfeiture if employment terminates prior to completion
of the vesting restrictions. We expense the cost of the RSUs, which is
determined to be the fair market value of the shares of common stock underlying
the RSUs at the date of grant, ratably over the period during which the vesting
restrictions lapse.
Emerging growth company and smaller reporting company status
We are an emerging growth company (EGC), as defined in the JOBS Act. Under this act, emerging growth companies are permitted to delay adopting new or revised accounting standards applicable to public companies until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies. We may remain classified as an EGC until the end of the fiscal year in which the fifth anniversary of our IPO occurs, although if the market value of our common stock that is held by non-affiliates exceeds$700 million as of the last trading day of the second quarter before that time or if we have annual gross revenues of$1.07 billion or more in any fiscal year, we would cease to be an EGC as ofDecember 31 of the applicable year. We also would cease to be an EGC if we issue more than$1 billion of non-convertible debt over a three-year period. We are also a "smaller reporting company," as such term is defined in Rule 12b-2 of the Exchange Act, meaning that the market value of our common stock held by non-affiliates is less than$700 million and our annual revenue is less than$100 million during the most recently completed fiscal year. We may continue to be a smaller reporting company if either (i) the market value of our common stock held by non-affiliates is less than$250 million or (ii) our annual revenue is less than$100 million during the most recently completed fiscal year and the market value of our common stock held by non-affiliates is less than$700 million . If we are a smaller reporting company at the time we cease to be an emerging growth company, we may continue to rely on exemptions from certain disclosure requirements that are available to smaller reporting companies. Specifically, as a smaller reporting company we may choose to present only the two most recent fiscal years of audited financial statements in our Annual Report on Form 10-K and, similar to emerging growth companies, smaller reporting companies have reduced disclosure obligations regarding executive compensation.
Results of operations
Comparison of the three months ended
Three months ended September 30,
2021 2020 Change
Operating expenses:
Research and development $ 6,015,616 $ 8,761,095 $ (2,745,479)
General and administrative 3,414,795 3,473,210 (58,415)
Total operating expenses 9,430,411 12,234,305 (2,803,894)
Other income (expense):Interest (expense) income, net (33) (9,212)
9,179
Foreign currency gain (21,907) (74,565) 52,658
Total other (expense) income (21,940) (83,777) 61,837
Net loss $ (9,452,351) $ (12,318,082) $ 2,865,731
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Research and development expenses
Three months ended September 30,
2021 2020 Change
Eprenetapopt (APR-246) $ 3,378,188 $ 7,923,977 $ (4,545,789)
Other early-stage development programs 1,067,960 428,485 639,475
Unallocated research and development expenses 1,569,468 408,632 1,160,835
Total research and development expenses $ 6,015,616 $ 8,761,095$ (2,745,479)
Research and development expenses for the three months endedSeptember 30, 2021 were$6.0 million , compared to$8.7 million for the three months endedSeptember 30, 2020 . The overall decrease of$2.7 million was primarily due to the continued development of our lead product candidate, eprenetapopt, as follows:
a decrease of
eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS which
? completed enrollment in Q2 2020. The
million related to the development of an in vitro companion diagnostic test for
eprenetapopt during the three months ended
were no comparable costs during the three months ended
a decrease of
trial in relapsed/refractory TP53 mutant chronic lymphoid leukemia (CLL)
? assessing eprenetapopt with venetoclax and rituximab and eprenetapopt with
ibrutinib in order to further assess eprenetapopt in hematological malignancies; and
a decrease of
? scale-up of manufacturing activities for the anticipated commercial production
of eprenetapopt.
The above decreases were offset, in part by the following:
? an increase of
an increase of
? dose-escalation clinical trial of APR-548, a next generation p53 reactivator
being developed in an oral dosage form.
General and administrative expenses
General and administrative expenses for the three months endedSeptember 30, 2021 were$3.4 million , compared to$3.5 million for the three months endedSeptember 30, 2020 . The decrease of$0.1 million was primarily related to decreases in commercial development expense of$0.8 million , offset in part, by an increase of$0.2 million in non-cash stock-based compensation expense, an increase of$0.2 million in legal expenses and an increase of$0.2 million in personnel costs. The decrease in commercial development expense was related to the initiation of certain pre-commercialization activities such as market research and brand building in the three months endedSeptember 30, 2020 for which there was no comparable expense for the comparable period in 2021. The increase in non-cash stock-based compensation expense was primarily related to stock option and RSU grants made inFebruary 2021 in connection with the Company's annual compensation review for employees and stock option and RSU grants made inJune 2021 in connection with the Company's annual compensation review for its non-employee board members. 24
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Other income and expense
Foreign currency loss for the three months endedSeptember 30, 2021 was$21,907 compared to a foreign currency loss of$74,565 for the three months endedSeptember 30, 2020 . The decrease in the foreign currency loss of$52,658 was primarily due to a strengthening of theU.S. dollar against the Swedish Krona during the three months endedSeptember 30, 2021 . Interest expense for the three months endedSeptember 30, 2021 consisted of interest expense associated with our facility leases, offset in part, by interest earned on our cash and cash equivalents.
Comparison of the nine months ended
Nine months ended September 30,
2021 2020 Change
Operating expenses:
Research and development $ 19,433,721 $ 28,551,246 $ (9,117,525)
General and administrative 10,183,953 10,036,564 147,389
Total operating expenses 29,617,674 38,587,810 (8,970,136)
Other income (expense):
Interest (expense) income (1,678) 217,908 (219,586)
Foreign currency gain 247,233 283,636 (36,403)Total other (expense) income 245,555 501,544
(255,989) Net loss$ (29,372,119) $ (38,086,266) $ 8,714,147
Research and development expenses
Nine months ended September 30,
2021 2020 Change
Eprenetapopt (APR-246) $ 10,843,510 $ 22,529,194 $ (11,685,684)
Other early-stage development programs 3,493,027 1,405,402 2,087,625
Unallocated research and development expenses 5,097,184 4,616,650 480,534
Total research and development expenses
28,551,246$ (9,117,525) Research and development expenses for the nine months endedSeptember 30, 2021 were$19.4 million , compared to$28.5 million for the nine months endedSeptember 30, 2020 . The overall decrease of$9.1 million was primarily due to the continued development of our lead product candidate, eprenetapopt as follows:
a decrease of
eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS which
? completed enrollment in Q2 2020. The
million related to the development of an in vitro companion diagnostic test for
eprenetapopt during the nine months ended
were no comparable costs during the nine months ended
? a decrease of
clinical trial; and
a decrease of
? scale-up of manufacturing activities for the anticipated commercial production
of eprenetapopt.
The above decreases were offset, in part by the following:
an increase of
? relapsed/refractory gastric, bladder and non-small cell lung cancers assessing
eprenetapopt with anti-PD-1 therapy which enrolled its first patient in Q3
2020; and
an increase of
? dose-escalation clinical trial of APR-548, a next generation p53 reactivator
being developed in an oral dosage form.
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General and administrative expenses
General and administrative expenses for the nine months endedSeptember 30, 2021 were$10.2 million , compared to$10.0 million for the nine months endedSeptember 30, 2020 . The increase of$0.2 million was primarily related to increases of$1.4 million in non-cash stock-based compensation expense,$0.3 million in legal expense and$0.2 million in insurance expense, offset in part by decreases in commercial development expense of$1.1 million and$0.7 million of consulting expense. The increase in non-cash stock-based compensation expense was primarily related to stock option and RSU grants made inFebruary 2021 in connection with the Company's annual compensation review for employees and stock option and RSU grants made inJune 2021 in connection with the Company's annual compensation review for its non-employee board members. The decrease in commercial development expense was related to the initiation of certain pre-commercialization activities such as market research and brand building in the nine months endedSeptember 30, 2020 for which there was no comparable expense for the comparable period in 2021. The decrease in consulting expense was related to decreased recruiting and search fees.
Other income and expense
Foreign currency gain for the nine months endedSeptember 30, 2021 was$0.2 million compared to a foreign currency gain of$0.3 million for the nine months endedSeptember 30, 2020 . The decrease in foreign currency gain of$0.1 million was primarily due to a weakening of theU.S. dollar against the Swedish Krona during the nine months endedSeptember 30, 2021 . Interest expense for the nine months endedSeptember 30, 2021 consisted of interest expense associated with our facility leases, offset in part, by interest earned on our cash and cash equivalents.
Liquidity and capital resources
Since our inception, we have incurred significant losses on an aggregate basis. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all. To date, we have financed our operations through private placements of our preferred and common stock and the net proceeds received from the initial public offering (IPO) of our common stock. ThroughSeptember 30, 2021 , we had received net proceeds of$224.0 million from our sales of preferred and common stock. As ofSeptember 30, 2021 , we had cash and cash equivalents of$61.4 million .
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Nine months ended September 30,
2021 2020
Net cash provided by (used in):
Operating activities $ (27,507,392) $ (28,603,470)
Investing activities -- (9,419)
Financing activities 86,970 150,949
Net decrease in cash and cash equivalents
Operating activities. Cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in components of working capital. Net cash used in operating activities was$27.5 million for the nine months endedSeptember 30, 2021 compared to$28.6 million for the nine months endedSeptember 30, 2020 . The decrease in cash used in operating activities of$1.0 million was primarily attributable to a decrease in our net loss of$8.7 million and a decrease in operating assets and liabilities of$9.9 million , partially offset by an increase in non-cash stock-based compensation of$2.2 million . 26 Table of Contents Investing activities. No cash was used in investing activities for the nine months endedSeptember 30, 2021 , while$9,419 was used in investing activities for the nine months endedSeptember 30, 2020 . Cash used in investing activities for the nine months endedSeptember 30, 2020 represented the acquisition of property and equipment.
Financing activities.
Cash provided by financing activities was
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to eprenetapopt, APR-548 and other product candidates and programs which are still in the early stages of clinical development. In addition, we have incurred and continue to incur additional costs associated with operating as a public company. We expect that our expenses will increase substantially if and as we:
? conduct our current and future clinical trials and additional preclinical
research of eprenetapopt and APR-548;
? decide to continue with the development of an in vitro companion diagnostic
test for eprenetapopt;
? initiate and continue research and preclinical and clinical development of our
other product candidates;
? seek to identify and develop additional product candidates;
? seek marketing approvals for any of our product candidates that successfully
complete clinical trials, if any;
? establish a sales, marketing, manufacturing and distribution infrastructure to
commercialize any products for which we may obtain marketing approval;
? require the manufacture of larger quantities of our product candidates for
clinical development and potentially commercialization;
? maintain, expand, protect and enforce our intellectual property portfolio;
? acquire or in-license other drugs and technologies;
? defend against any claims of infringement, misappropriation or other violation
of third-party intellectual property;
? hire and retain additional clinical, quality control and scientific personnel;
? build out new facilities or expand existing facilities to support our ongoing
development activity;
add operational, financial and management information systems and personnel, ? including personnel to support our drug development, any future
commercialization efforts and our transition to a public company; and
? continue to operate as a public company.
As ofSeptember 30, 2021 , we had cash and cash equivalents of$61.4 million . We believe that our existing cash and cash equivalents will enable us to fund our operating expenses and capital expenditure requirements into 2023. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. 27
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Because of the numerous risks and uncertainties associated with the development of eprenetapopt and other product candidates and programs and because the extent to which we may enter into collaborations with third parties for development of our product candidates is unknown, we are unable to estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our future capital requirements will depend on many factors, including:
? the scope, progress, results and costs of our current and future clinical
trials of eprenetapopt for our current targeted indications;
? the scope, progress, results and costs of drug discovery, preclinical research
and clinical trials for eprenetapopt and our other product candidates;
? the number of future product candidates that we pursue and their development
requirements;
? the costs, timing and outcome of regulatory review of our product candidates;
the extent to which we acquire or invest in businesses, products and
technologies, including entering into or maintaining licensing or collaboration ? arrangements for product candidates on favorable terms, and although we may
explore such opportunities from time to time during the normal course of business, we have no commitments or agreements to complete any such transactions;
the costs and timing of future commercialization activities, including drug
sales, marketing, manufacturing and distribution, for any of our product ? candidates for which we receive marketing approval, to the extent that such
sales, marketing, manufacturing and distribution are not the responsibility of
any collaborator that we may have at such time;
? the amount of revenue, if any, received from commercial sales of our product
candidates, should any of our product candidates receive marketing approval;
? the impact of COVID-19 on the financial markets in general and on our business
in particular;
the costs of preparing, filing and prosecuting patent applications, ? maintaining, protecting and enforcing our intellectual property rights and
defending intellectual property-related claims;
? our headcount growth and associated costs as we expand our business operations
and our research and development activities; and
? the costs of operating as a public company.
Developing drug products, including conducting preclinical studies and clinical trials, is a time-consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval for any product candidates or generate revenue from the sale of any products for which we may obtain marketing approval. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of drugs that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives. Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. To the extent that we raise additional capital through the sale of equity or convertible debt securities, ownership interests in our securities may be diluted, and the terms of these securities may include liquidation or other preferences and anti-dilution protections that could adversely affect the rights of our common stockholders. Additional debt or preferred equity financing, if available, may involve agreements that include restrictive covenants that may limit our ability to take specific actions, such as incurring debt, making
capital
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expenditures or declaring dividends, which could adversely impact our ability to conduct our business, and may require the issuance of warrants, which could potentially dilute existing ownership interest.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technology, future revenue streams, research programs, or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings or collaborations, strategic alliances or licensing arrangements with third parties when needed, we may be required to delay, limit, reduce and/or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Contractual obligations and commitments
For additional details regarding our contractual obligations, see Note 3 "Leases" to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q.
Shelf Registration Statement
OnNovember 12, 2020 , we filed a universal shelf registration statement with theSEC for the issuance of common stock, preferred stock, warrants, rights and debt securities and units up to an aggregate of$350.0 million . OnNovember 30, 2020 , the Shelf Registration Statement was declared effective by theSEC . The universal shelf registration statement includes an at-the-market offering program for the sale of up to$50.0 million of shares of our common stock. As ofSeptember 30, 2021 , no sales of our common stock occurred under the at-the-market offering program.
Recent accounting pronouncements
See Note 2 to our condensed consolidated financial statements which discusses new accounting pronouncements.
Off-balance sheet arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined in the rules and regulations of theSEC .
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