APREA THERAPEUTICS, INC. The following discussion and analysis of financial condition and results of operations is provided to enhance the understanding of, and should be read in conjunction with Part I, Item I, "Business" and Item 8, 'Financial Statements and Supplementary Data." For information on risks and uncertainties related to our business that may make past performance not indicative of future results or cause actual results to differ materially from any forward looking statements, see "Special Note Regarding Forward-Looking Statements," and Part I, Item 1A, 'Risk Factors." 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, Fast Track designation 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.
Our ongoing clinical trials of eprenetapopt have a small number of patients remaining on study treatmentt. We are in the planning phase for additional clinical trials of eprenetapopt.
Myeloid Malignancy Program
Our myeloid malignancy program includes ongoing clinical trials in MDS, AML and post-transplant maintenance therapy in MDS/AML. 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 Phase 3 frontline MDS clinical trial, our Phase 2 MDS/AML Post-Transplant clinical trial and our Phase 1/2 AML clinical trial. 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 serious adverse events in the Phase 3 frontline clinical trial in MDS. At the time of the clinical hold announcement the MDS, AML and post-transplant maintenance trials had all completed enrollment. Patientswho were benefiting from treatment could continue to receive study treatment. InDecember 2021 we discussed with FDA the data and analyses from the Phase 3 trial and reached preliminary agreement on proposals for new clinical trials in myeloid malignancies. In the first quarter of 2022, FDA informed us that it would continue the partial clinical hold on these three clinical trials, allowing patients currently on and benefiting from treatment to continue with treatment, but prohibiting enrollment of new patients. As all trials had already achieved full enrollment and primary endpoint readout, we had no plans to enroll new patients into any of these trials. However, FDA gave us clearance to proceed under our existing myeloid malignancy IND with a new clinical trial in relapsed/refractory MDS and AML.
Phase 3 MDS Trial-In
including the primary endpoint of complete remission (CR), from a Phase 3 open-label, randomized, controlled trial evaluating eprenetapopt with azacitidine as frontline therapy in HMA-naïve TP53 mutant MDS patients.
Analysis of the primary endpoint at this data cut demonstrated a 53% higher
number of 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. In the intention-to-treat
population of 154 patients, the CR rate in the eprenetapopt with azacitidine
arm was 33.3% (95% confidence interval (CI): 23.1 - 44.9%) compared to 22.4%
(95% CI: 13.6% - 33.4%) in the azacitidine alone arm (P = 0.13). At the last
pre-specified timepoint set forth in the statistical analysis plan, occurring
at 12 months following enrollment of the last patient (LPI + 12), the CR rate
in the experimental arm was 34.6% versus 22.4% in the control arm.
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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. Updated data with longer duration of follow-up was presented at the
2021
? ASH described a 1-year post-transplant RFS of 60% and median RFS of 12.5
months. In addition, the 1-year post-transplant OS was 79% and median OS was
20.6 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. The post-transplant regimen of eprenetapopt and
azacitidine was well-tolerated among patients in the trial. We are in
discussions with the
Research (CIBMTR) and the Blood And Marrow Transplant Clinical Trials Network
(BMTCTN) regarding registrational trial design for post-transplant maintenance
therapy in MDS/AML and are currently planning for initiation of enrollment in
2023..
Phase 1/2 AML Trial-In
1/2 trial evaluating eprenetapopt therapy in TP53 mutant MDS and 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 expanded the trial to treat 33 additional frontline TP53 mutant AML patients
with the combination of eprenetapopt, venetoclax and azacitidine. In
we announced that the regimen of eprenetapopt with venetoclax and azacitidine
? met the primary efficacy endpoint. In 30 patients
efficacy at the time of the analysis, the CR rate was 37% and the complete
response rate was CR plus CR with incomplete hematologic recovery (CRi),
CR/CRi, was 53%. Updated data with longer duration of follow-up was presented
at the 2021 ASH annual meeting. Results reported at ASH described in 39
evaluable patients a CR rate of 39%, CR/CRi rate of 56%, CR plus CR with
hematologic recovery (CR/CRh) rate of 56% and ORR of 64%. The data suggest that
the triplet combination of eprenetapopt, venetoclax and azacitidine was tolerable as an outpatient regimen.
Phase 1 Relapsed/Refractory MDS/AML Trial- We are currently in the planning
phase for new trials under our existing myeloid malignancy IND in
relapsed/refractory (R/R) MDS/AML with dose-optimization studies. In the first
? quarter of 2022 we received clearance from FDA to proceed with the trial. The
trial is designed to determine the optimal pharmacologically active dose of
eprenetapopt in combination with azacitidine in relapsed/refractory (R/R)
MDS/AML. Preliminary tolerability and efficacy data from these studies may be
available in late 2022 or early 2023.
Lymphoid Malignancy Program
Our lymphoid malignancy program includes our clinical trial evaluating eprenetapopt in patients with non-Hodgkin lymphomas (NHL). OnAugust 11, 2021 , FDA placed a clinical hold on this trial. TheFDA's concerns referred to the safety and efficacy data from the Phase 3 frontline MDS clinical trial in our myeloid malignancy program. 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 serious adverse events in the Phase 3 frontline clinical trial in MDS. At the time of the clinical hold announcement the NHL trial had enrolled one patient. Patientswho were benefiting from treatment could continue to receive study treatment and no additional patients could be enrolled until the clinical hold was resolved. InOctober 2021 we discussed with FDA the requested data and analyses from the Phase 3 trial and proposed amendments for clinical trials to proceed in our lymphoid malignancy program. FDA lifted the clinical hold inDecember 2021 .
Phase 1 NHL Trial-Our Phase 1 NHL trial was initiated in relapsed/refractory
? TP53 mutant chronic lymphoid leukemia (CLL) to assess eprenetapopt with
venetoclax and rituximab, and eprenetapopt with acalabrutinib. At the time that
the trial was placed on partial clinical hold by FDA we had enrolled one
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patient and that patient had achieved CR. On
that it was lifting the clinical hold on the IND for our lymphoid malignancy
program. In conjunction with FDA lifting the partial clinical hold, we are in
the planning phase for a new NHL trial in relapsed/refractory (R/R) TP53 mutant
Richter's transformed NHL. Richter's transformed NHL is a subset of CLL that is
characterized by significantly more aggressive disease. The trial is being
designed to seek to determine the optimal pharmacologically active dose of
eprenetapopt in combination with venetoclax and rituximab. The trial is also
expected to include administration of an oral formulation of eprenetapopt as
part of a monotherapy lead-in phase. Pharmacokinetic data following oral
administration will be collected to assess exposure relative to intravenous
administration and to inform potential future clinical opportunities of an oral
dosage form of eprenetapopt. Preliminary tolerability and efficacy data from
these studies may be available in the second half of 2022.
Solid Tumor Program
Our solid tumor program includes our clinical trial evaluating eprenetapopt with anti-PD-1 therapy in advanced solid tumors
Phase 1/2 Solid Tumor Trial-We have completed enrollment in our Phase 1/2
clinical trial in relapsed/refractory gastric, bladder and non-small cell lung
cancers assessing eprenetapopt with anti-PD-1 therapy. The trial enrolled 6
patients with gastric/GEJ cancer, 5 patients with bladder/urothelial cancer and
20 patients with non-small cell lung cancer (NSCLC). Data from the clinical
trial were presented at the
treatment, including three gastric/GEJ, three bladder/urothelial cancer and 19
NSCLC patients. In the bladder/urothelial cohort, one patient with localized
? TP53 mutant high-grade transitional cell bladder cancer,
prior chemotherapy, 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. With continued treatment, the NSCLC patient with initial target
lesion reduction of 26.7% had further reduction in lesion size and achieved a
partial response (PR). Inaddition, a second bladder cancer patient also
achieved a PR. We are in the planning phase for a future clinical trial to
further evaluate orally-administered eprenetapopt with immunotherapy checkpoint
inhibitors. Next Generation Programs APR-548
APR-548 is a second generation p53 reactivator that is a unique analog of eprenetapopt and therefore a pro-drug of MQ. APR-548 exhibits high oral bioavailability in preclinical testing and is being developed in an oral dosage form.
Phase 1 MDS/AML Trial-We initiated a Phase 1 clinical trial testing APR-548 in
? relapsed/refractory MDS and AML. Enrollment in the first dosing cohort was
completed and pharmacokinetic and adverse event data will be collected and
analyzed. We do not plan to enroll additional patients into the trial.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 primarily through private placements of preferred
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stock and the net proceeds received from the initial public offering (IPO) of our common stock. ThroughDecember 31, 2021 , we had received net proceeds of approximately$225.6 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$37.1 million ,$53.5 million and$28.1 million for the years endedDecember 31, 2021 , 2020 and 2019, respectively. As ofDecember 31, 2021 , we had an accumulated deficit of$181.1 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 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;
and
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.
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.
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As ofDecember 31, 2021 , we had cash and cash equivalents of$53.1 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 enrolled in our clinical trials and, the corresponding impact on the timing of the completion of our ongoing 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 year endedDecember 31, 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.
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.
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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 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;
? uncertainties in clinical trial design and patient enrollment rates;
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? 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 the 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 conducting multiple trials in hematologic malignancy indications which have a small number of patients on study treatment, including a Phase 3 trial of eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS and which is supported by published data from two Phase 1b/2 investigator-initiated trials in theU.S. (Sallman et al., J Clin Oncol, 2021) andFrance (Cluzeau et al., J Clin Oncol, 2021); a Phase 2 trial of eprenetapopt with azacitidine for the post-allogeneic hematopoietic cell transplantation (allo-HCT) maintenance treatment of TP53 mutant MDS/AML; a Phase 1/2 trial of eprenetapopt with venetoclax ± azacitidine for the treatment of frontline and relapsed/refractory AML; and a Phase 1 clinical trial for the treatment of TP53 mutant chronic lymphoid leukemia (CLL) with either eprenetapopt with venetoclax and rituximab, or eprenetapopt with ibrutinib. In addition, we have also tested eprenetapopt with anti-PD-1 therapy in solid tumor patients through a Phase 1/2 clinical trial in advanced gastric, bladder and non-small cell lung cancers. We are also conducting a Phase 1 clinical trial testing an orally-dosed next-generation small molecule p53 reactivator, APR-548, as a potential therapeutic for MDS and AML. We have assembled a management team with extensive experience in the discovery, development and commercialization of novel oncology drugs to support our mission of developing p53-reactivating therapies for cancer patients.
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 continue 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.
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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 our subsidiary 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.
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 date. 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
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? 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 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.
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 anyJune 30 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. 121
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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 years ended
20
Years ended December 31,
2021 2020 Change
Operating expenses:
Research and development $ 23,895,875 $ 37,879,325 $ (13,983,450)
General and administrative 13,550,478 14,931,887 (1,381,409)
Total operating expenses 37,446,353 52,811,212 (15,364,859)
Other income (expense):
Interest income 1,648 222,652 (221,004)
Foreign currency (loss) gain 317,402 (890,252) 1,207,654
Total other income (expense) 319,050 (667,600)
986,650 Net loss$ (37,127,303) $ (53,478,812) $ 16,351,509
Research and development expenses
Years ended December 31,
2021 2020 Change
Eprenetapopt (APR-246) $ 12,213,069 $ 28,519,258 $ (16,306,189)
Other early-stage development programs 4,315,990 2,515,946 1,800,044 Unallocated research and development expenses 7,366,816 6,844,121
522,695
Total research and development expenses $ 23,895,875 $
37,879,325
Research and development expenses for the year ended
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 year ended
comparable costs during the year ended
? a decrease of
clinical trial;
a decrease of
? preparation of a New Drug Application (NDA) for eprenetapopt in 2020 for which
there were no comparable expenses in 2021;
? a decrease of
clinical trials in the
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a decrease of
? for the anticipated commercial production of eprenetapopt in 2020 for which
there were no comparable expenses in 2021;
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;
an increase of
? dose-escalation clinical trial of APR-548, a next generation p53 reactivator
being developed in an oral dosage form; and
? an increase of
program.
General and administrative expenses
General and administrative expenses for the year endedDecember 31, 2021 were$13.5 million , compared to$14.9 million for the year endedDecember 31, 2020 . The decrease of$1.4 million was primarily related to:
a decrease of
? to the initiation of certain pre-commercialization activities such as market
research and brand building in 2020 for which there was no comparable expense
for 2021;
? a decrease of
recruiting and search fees; and
? a decrease of
The above decreases were offset, in part by:
an increase of
was primarily related to stock option and RSU grants made in
? connection with the Company's annual compensation review for employees and
stock option and RSU grants made in
annual compensation review for its non-employee board members.
Other income and expense
Foreign currency gain for the year endedDecember 31, 2021 was$0.3 million compared to a foreign currency loss of$0.9 million for the year endedDecember 31, 2020 . The increase in foreign currency gain of$1.2 million was primarily due to a strengthening of theU.S. dollar against the Swedish Krona during the year endedDecember 31, 2021 . Interest income for the year endedDecember 31, 2021 consisted primarily of interest earned on our cash and cash equivalents offset in part, by interest expense associated with our facility leases. 123
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Comparison of the years ended
Years ended December 31,
2020 2019 Change
Operating expenses:
Research and development $ 37,879,325 $ 20,950,672 $ 16,928,653
General and administrative 14,931,887 8,593,626 6,338,261
Total operating expenses 52,811,212 29,544,298 23,266,914
Other income (expense):
Interest income 222,652 156,351 66,301
Foreign currency (loss) gain (890,252) 1,328,140 (2,218,392)
Total other income (expense) (667,600) 1,484,491 (2,152,091)
Net loss $ (53,478,812) $ (28,059,807) $ (25,419,005) Research and development expenses
Years ended December 31,
2020 2019 Change
Eprenetapopt (APR-246) $ 28,519,258 $ 15,937,442 $ 12,581,816
Other early-stage development programs 2,515,946 1,829,776 686,170
Unallocated research and development expenses 6,844,121 3,183,454 3,660,667
Total research and development expenses $ 37,879,325 $
20,950,672
Research and development expenses for the year endedDecember 31, 2020 were$37.9 million , compared to$21.0 million for the year endedDecember 31, 2019 . The increase of$16.9 million was primarily due to the continued development of our lead product candidate eprenetapopt as follows:
an increase 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. The agreement for the development of an in vitro diagnostic test
was terminated in
an increase of
? the safety, tolerability, and preliminary efficacy of eprenetapopt therapy in
TP53 mutant AML patients.
? an increase of
clinical trial;
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;
an increase 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;
? an increase of
for the anticipated commercial production of eprenetapopt.
? an increase of
preparation of a New Drug Application (NDA) for eprenetapopt.
? an increase of$1.0 million in pre-clinical expenses associated with increased activity. 124 Table of Contents
General and administrative expenses
General and administrative expenses for the year endedDecember 31, 2020 were$14.9 million , compared to$8.6 million for the year endedDecember 31, 2019 . The increase of$6.3 million was primarily related to increases of$2.5 million in insurance expense,$2.0 million in commercial development expense,$1.5 million in non-cash stock-based compensation expense and$0.9 million in personnel expense offset, in part, by a decrease of$0.7 million in legal and consulting fees. The increase in non-cash stock-based compensation expense was primarily related to stock option grants made inOctober 2019 in connection with our IPO and inMarch 2020 in connection with the Company's annual compensation review. The increase in insurance expense was primarily related to costs associated with being a public company and commercial development expense relates to the initiation of certain pre-commercialization activities, such as market research and brand building. The decrease in legal and consulting fees is related to costs incurred in connection with preparations for our IPO which was completed inOctober 2019 . No such costs were incurred in 2020.
Other income and expense
Foreign currency loss for the year endedDecember 31, 2020 was$0.9 million compared to a foreign currency gain of$1.3 million for the year endedDecember 31, 2019 . The decrease of$2.4 million was primarily due to a weakening of theU.S. dollar against the Swedish Krona during the year endedDecember 31, 2020 . Interest income for the year endedDecember 31, 2020 consisted primarily of 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 primarily through private placements of our preferred and common stock and the net proceeds received from the initial public offering (IPO) of our common stock. ThroughDecember 31, 2021 , we had received net proceeds of$225.6 million from our sales of preferred and common stock. As ofDecember 31, 2021 , we had cash and cash equivalents of$53.1 million .
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Years ended December 31,
2021 2020 2019
Net cash provided by (used in):
Operating activities $ (37,686,179) $ (41,802,672) $ (26,708,707)
Investing activities -- (25,709) (30,901)
Financing activities 1,747,012 150,949 92,575,538
Net (decrease) increase in cash and cash
equivalents $ (35,939,167) $
(41,677,432)
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$37.7 million for the year endedDecember 31, 2021 compared to$41.8 million for the year endedDecember 31, 2020 . The decrease in cash used in operating activities of$4.1 million was primarily attributable to a decrease in our net loss of$16.4 million , resulting from both decreased research and development expenses and decreased general and administrative expenses discussed previously partially offset by an increase in non-cash stock-based compensation of$2.8 million as well as a net decrease in operating assets and liabilities of$8.3 million .
Net cash used in operating activities was
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attributable to an increase in our net loss of $25.4 million , resulting from
both increased research and development expenses and increased general and
administrative expenses discussed previously partially offset by an increase in
non-cash stock-based compensation of $3.6 million as well as a net increase in
operating assets and liabilities of $4.4 million .
Investing activities
Cash used in investing activities for the years ended
Financing activities
Net cash provided by financing activities was$1.7 million for the year endedDecember 31, 2021 compared to$0.1 million for the year endedDecember 31, 2020 . The increase in cash provided by financing activities was primarily attributable to net proceeds of$1.5 million received from sales of common stock under our ATM program which was activated inDecember 2021 and$0.2 million received from the exercise of stock options. Net cash provided by financing activities was$0.1 million for the year endedDecember 31, 2020 compared to$92.6 million for the year endedDecember 31, 2019 . The decrease in cash provided by financing activities was primarily attributable to net proceeds of$86.9 million received from our IPO which was completed inOctober 2019 and net proceeds of$5.6 million from the issuance of Series C convertible preferred stock inFebruary 2019 . Cash provided by financing activities for the year endedDecember 31, 2020 represented proceeds received from the exercise of stock options.
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;
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? 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 operation as a public company; and
? continue to operate as a public company.
As ofDecember 31, 2021 , we had cash and cash equivalents of$53.1 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. 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 currently 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
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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 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
The following table summarizes our contractual obligations atDecember 31, 2021 : Payments due by period Less than More than Total 1 year 1 3 years 3 5 years 5 years Operating leases(1)$ 193,980 $ 193,980 $ - $ - $ - Total$ 193,980 $ 193,980 $ - $ - $ -
Represents minimum payments due for our lease of office space in
We enter into contracts in the normal course of business with CROs and CMOs for clinical trials, preclinical research studies and testing, manufacturing and other services and products for operating purposes. These contracts do not contain any minimum purchase commitments and are cancelable by us upon prior notice of 30 days and, as a result, are not included in the table of contractual obligations above. Payments due upon cancelation consist only of payments for services provided and expenses incurred up to the date of cancelation.
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. During the year endedDecember 31, 2021 , we sold 366,773 shares of our common stock under the at-the-market offering program resulting in net proceeds of approximately$1.5 million .
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 . 128 Table of Contents
Recent accounting pronouncements
From time to time, new accounting pronouncements are issued by theFinancial Accounting Standards Board ("FASB") or other standard setting bodies that the we adopt as of the specified effective date.
We do not believe that any recently issued, but not yet effective accounting pronouncements, if adopted, would have a material impact on our financial statements.
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