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, fast track and breakthrough therapy 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:
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 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
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
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
and anticipate discussing with FDA the Phase 3 data and future possible regulatory pathways in the second half of 2021.
Phase 2 MDS/AML Post-Transplant Trial -- We have completed enrollment of 33
patients in a single-arm, open-label Phase 2 trial evaluating eprenetapopt with
azacitidine as post-transplant maintenance therapy in TP53 mutant MDS and AML
patients
? endpoint of the trial is the rate of relapse-free survival (RFS) at 12 months,
with a published benchmark of ~30%. An interim analysis in
62% rate of RFS at 12 months, with a median RFS of 462 days. An interim
analysis of overall survival (OS) showed a 77% OS at 1 year, with a median
number of events
16
--------------------------------------------------------------------------------
Table of Contents
not yet reached. We anticipate initial results from the primary endpoint of RFS
at 12 months in the second quarter of 2021.
Phase 1/2 AML Trial -- We are currently enrolling a Phase 1/2 clinical trial
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 the 19 frontline AML patients
are evaluable for efficacy with the triplet regimen, we have observed a 63% CR
+ CRi composite response rate and a 31% CR rate. We anticipate completion of
enrollment in the triplet regimen expansion cohort during the second quarter of
2021 and availability of preliminary response rate data from the cohort also in
the second quarter of 2021.
Phase 1 NHL Trial -- We are currently enrolling a Phase 1 clinical 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. The first
patient was enrolled in the first quarter of 2021. We are also planning to
evaluate the combination of eprenetapopt with venetoclax in relapsed/refractory
mantle cell lymphoma.
Phase 1/2 Solid Tumor Trial - We are currently enrolling 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 are enrolling expansion
cohorts for patients with advanced gastric, bladder and non-small cell lung
cancers and have currently enrolled 15 patients across these expansion arms. A
poster presentation for this trial has been accepted for presentation at the
2021 ASCO Annual Meeting (abstract TPS3161). 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
? have planned 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. We anticipate the first patient to be
enrolled in the second quarter of 2021.
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. ThroughMarch 31, 2021 , we had received net proceeds of approximately$223.9 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$9.7 million and$9.4 million for the three months endedMarch 31, 2021 and 2020, respectively, and$53.5 million ,$28.1 million and$15.5 million for the years endedDecember 31, 2020 , 2019 and 2018, respectively. As ofMarch 31, 2021 , we had an accumulated deficit of$153.7 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. 17
--------------------------------------------------------------------------------
Table of Contents
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;
? 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 ofMarch 31, 2021 , we had cash and cash equivalents of$77.6 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 18
--------------------------------------------------------------------------------
Table of Contents
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 enrollment and 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 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 months endedMarch 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.
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;
19
--------------------------------------------------------------------------------
Table of Contents
? 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, as well as of any future clinical trials of eprenetapopt or
other product candidates and other research and development activities that we
may conduct;
? 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 were to require us to conduct 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 20
--------------------------------------------------------------------------------
Table of Contents
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 and 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.
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 subsidiariesAprea AB andAprea Personal AB are measured using the foreign subsidiaries' 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. 21
--------------------------------------------------------------------------------
Table of Contents
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. 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
22
--------------------------------------------------------------------------------
Table of Contents
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. 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. 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. 23
--------------------------------------------------------------------------------
Table of Contents
Results of operations
Comparison of the three months ended
Three months ended March 31,
2021 2020 Change
Operating expenses:
Research and development $ 6,763,848 $ 9,096,122 $ (2,332,274)
General and administrative 3,425,833 2,776,468 649,365
Total operating expenses 10,189,681 11,872,590
(1,682,909)
Other income (expense):
Interest (expense) income (1,057) 224,442
(225,499)
Foreign currency gain 521,983 2,247,891
(1,725,908)
Total other (expense) income 520,926 2,472,333 (1,951,407) Net loss$ (9,668,755) $ (9,400,257) $ (268,498)
Research and development expenses
Three months ended March 31,
2021 2020 Change
Eprenetapopt (APR-246) $ 3,803,173 $ 7,036,959 $ (3,233,786)
Other early-stage development programs 1,116,000 569,441 546,559
Unallocated research and development expenses 1,844,675 1,489,722 354,953
Total research and development expenses $ 6,763,848 $ 9,096,122 $ (2,332,274) Research and development expenses for the three months ended
a decrease of
? eprenetapopt with azacitidine for frontline treatment of TP53 mutant MDS which
completed enrollment in Q2 2020;
? a decrease 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
? dose-escalation clinical trial of APR-548, a next generation p53 reactivator
being developed in an oral dosage form; and
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.
General and administrative expenses
General and administrative expenses for the three months endedMarch 31, 2021 were$3.4 million , compared to$2.8 million for the three months endedMarch 31, 2020 . The increase of$0.6 million was primarily related to increases of$0.5 million in non-cash stock-based compensation expense and$0.1 million in insurance expense. The increase in 24
--------------------------------------------------------------------------------
Table of Contents
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. Other income and expense Foreign currency gain for the three months endedMarch 31, 2021 was$0.5 million compared to a foreign currency gain of$2.2 million for the three months endedMarch 31, 2020 . The decrease of$1.7 million was primarily due to a weakening of theU.S. dollar against the Swedish Krona during the three months endedMarch 31, 2021 . Interest expense for the three months endedMarch 31, 2021 consisted of interest expense associated with our facility leases. Interest income for the three months endedMarch 31, 2020 consisted 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 through private placements of our preferred and common stock and the net proceeds received from the initial public offering (IPO) of our common stock. ThroughMarch 31, 2021 , we had received net proceeds of$223.9 million from our sales of preferred and common stock. As ofMarch 31, 2021 , we had cash and cash equivalents of$77.6 million .
Cash flows
The following table summarizes our sources and uses of cash for each of the
periods presented:
Three months ended March 31,
2021 2020Net cash provided by (used in):
Operating activities$ (11,522,106) $ (7,541,625) Investing activities -- (12,165) Financing activities -- 29,523
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$11.5 million for the three months endedMarch 31, 2021 compared to$7.5 million for the three months endedMarch 31, 2020 . The increase in cash used in operating activities of$4.0 million was primarily attributable to an increase in our net loss of$0.3 million and a decrease in operating assets and liabilities of$6.4 million , partially offset by an increase in non-cash stock-based compensation of$0.9 million and a decrease in foreign currency gains of$1.7 million .
Investing activities.
No cash was used in investing activities for the three months endedMarch 31, 2021 , while$12,165 was used in investing activities for the three months endedMarch 31, 2020 . Cash used in investing activities for the three months endedMarch 31, 2020 represented the acquisition of property and equipment.
Financing activities.
No cash was provided by financing activities for the three months endedMarch 31, 2021 , while$29,523 was provided by financing activities for the three months endedMarch 31, 2020 . Cash provided by financing activities for the three months endedMarch 31, 2020 represented proceeds received from the exercise of stock options. 25
--------------------------------------------------------------------------------
Table of Contents
Funding requirements
We expect our expenses to increase substantially in connection with our ongoing development activities related to eprenetapopt 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;
? 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 ofMarch 31, 2021 , we had cash and cash equivalents of$77.6 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;
26--------------------------------------------------------------------------------
Table of Contents
? 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, although 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
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.
27--------------------------------------------------------------------------------
Table of Contents
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.
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 .
© Edgar Online, source
