EDESA BIOTECH, INC. The following management's discussion and analysis of our financial condition
and results of operations should be read in conjunction with the unaudited
condensed interim consolidated financial statements and notes thereto included
in Part I, Item 1 of this Quarterly Report on Form 10-Q as of
This Quarterly Report on Form 10-Q contains forward-looking statements. When
used in this report, the words "expects," "anticipates," "suggests," "believes,"
"intends," "estimates," "plans," "projects," "continue," "ongoing," "potential,"
"expect," "predict," "believe," "intend," "may," "will," "should," "could,"
"would" and similar expressions are intended to identify forward-looking
statements. You should not place undue reliance on these forward-looking
statements. Our actual results could differ materially from those anticipated in
the forward-looking statements for many reasons, including the risks described
in our Annual Report on Form 10-K for the year ended
The discussion and analysis of our financial condition and results of
operations are based on our unaudited condensed interim consolidated financial
statements as of
Overview
We are a biopharmaceutical company focused on acquiring, developing and commercializing clinical-stage drugs for inflammatory and immune- related diseases with clear unmet medical needs. Our two lead product candidates, EB05 and EB01, are in later stage clinical studies.
EB05 is a monoclonal antibody therapy that we are developing as a treatment for Acute Respiratory Distress Syndrome (ARDS) in COVID-19 patients. ARDS is a life-threatening form of respiratory failure, and the leading cause of death among COVID-19 patients. ARDS can be also caused by bacterial pneumonia, sepsis, chest injury and other causes. Specifically, EB05 inhibits toll-like receptor 4 (TLR4), a key immune signaling protein and an important mediator of inflammation that has been shown to be activated by SARS-COV2 as well as other respiratory infections such as influenza. In multiple third-party studies, high serum levels of alarmins (damage signaling molecules) that bind to and activate TLR4 are associated with poor outcomes and disease progression in COVID-19 patients. Since EB05 has demonstrated the ability to block signaling irrespective of the presence or concentration of the various molecules that frequently bind with TLR4, we believe that EB05 could ameliorate TLR4-mediated inflammation cascades in ARDS patients, thereby reducing lung injury, ventilation rates and mortality. An international Phase 2/Phase 3 clinical study of EB05 is currently ongoing.
In addition to EB05, we are developing an sPLA2 inhibitor, designated as EB01,
as a topical treatment for chronic allergic contact dermatitis (ACD), a common,
potentially debilitating condition and occupational illness. EB01 employs a
novel, non-steroidal mechanism of action and in two clinical studies has
demonstrated statistically significant improvement of multiple symptoms in ACD
patients. A Phase 2B clinical study evaluating EB01 for chronic ACD is currently
ongoing in
In addition to our current clinical programs, we intend to expand the utility of our technologies and clinical-stage assets across other indications.
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Recent Developments
EB05 Clinical Study in Hospitalized COVID-19 Patients
In
We recently filed a trial amendment with the
EB01 Clinical Study in Allergic Contact Dermatitis Patients
In
Reimbursement Grant
On
Under the Agreement, Edesa has agreed to certain obligations in relation to the
completion of the Project. In the event that we breach our obligations under the
Agreement, subject to applicable cure, the SIF may exercise a number of
remedies, including suspending or terminating funding under the Agreement,
demanding repayment of funding previously received and/or terminating the
Agreement. The performance obligations of
Significant Accounting Policies and Estimates
Edesa's significant accounting policies are described in Note 3 to our audited
consolidated financial statements for the year ended
Results of Operations
Comparison of the Three Months Ended
There were no revenues for the three months ended
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Total operating expenses increased by
· There was no cost of sales for the three months ended June 30, 2021
compared to less than $0.01 million for the three months ended June 30,
2020 , reflecting the winddown and discontinuation of sales of product
inventory from legacy operations.
· Research and development expenses increased by $3.32 million to $4.46
million for the three months ended June 30, 2021 compared to $1.14 million
for the same period last year primarily due to increased external research
expenses related to recruitment and enrollment in our ongoing clinical
studies, increased investigational drug product expenses and an increase
in noncash share-based compensation. Higher salary and related personnel
expenses and patent fees also contributed to the increase.
· General and administrative expenses increased by $0.88 million to $1.61
million for the three months ended June 30, 2021 compared to $0.73 million
for the same period last year primarily as a result of higher salary and
related personnel expenses, noncash share-based compensation and increased
headcount. Higher legal and other professional services also contributed
to the increase.
Total other income increased by
For the three months ended
Comparison of the Nine Months Ended
There were no revenues for the nine months ended
Total operating expenses increased by
· There was no cost of sales for the nine months ended June 30, 2021
compared to $0.02 million for the nine months ended June 30, 2020 ,
reflecting the winddown and discontinuation of sales of product inventory
from legacy operations.
· Research and development expenses increased by $11.65 million to $13.82
million for the nine months ended June 30, 2021 compared to $2.17 million
for the same period last year primarily due to milestone payments related
to advancement of our EB05 clinical program, increased external research
expenses related to accelerated activity in our ongoing clinical studies,
increased investigational drug product expenses and an increase in noncash
share-based compensation. Higher salary and related personnel expenses and
patent fees also contributed to the increase.
· General and administrative expenses increased by $1.85 million to $4.38
million for the nine months ended June 30, 2021 compared to $2.53 million
for the same period last year primarily as a result of higher salary and
related personnel expenses, noncash share-based compensation and increased
headcount. Higher legal and other professional services also contributed
to the increase.
Total other income increased by
For the nine months ended
Capital Expenditures
Our capital expenditures primarily consist of purchases of computer and office
equipment. There were no significant capital expenditures for the nine months
ended
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Liquidity and Capital Resources
As a clinical-stage company we have not generated significant revenue, and we
expect to incur operating losses as we continue our efforts to acquire, develop,
seek regulatory approval for and commercialize product candidates and execute on
our strategic initiatives. Our operations have historically been funded through
issuances of common shares, convertible preferred shares, convertible loans,
exercises of common share purchase warrants, government grants and tax
incentives. For the nine-month periods ended
Under our contribution agreement with the Canadian government's
On
For the nine months ended
At
We plan to finance company operations over the course of the next twelve months with cash and cash equivalents on hand and reimbursements of eligible research and development expenses under our agreement with the Canadian government's SIF. Management has flexibility to adjust this timeline by a making changes to planned expenditures related to, among other factors, the size and timing of clinical trial expenditures, staffing levels, and the acquisition or in-licensing of new product candidates. To help fund our operations and meet our obligations, we may also seek additional financing through the sale of equity, government grants, debt financings or other capital sources, including potential future licensing, collaboration or similar arrangements with third parties or other strategic transactions. If we determine it is advisable to raise additional funds, there is no assurance that adequate funding will be available to us or, if available, that such funding will be available on terms that we or our shareholders view as favorable. Market volatility, inflation concerns and global disruptions related to the COVID-19 pandemic may have a significant impact on the availability of funding sources and the terms at which any funding may be available.
Research and Development
Our primary business is the development of innovative therapeutics for inflammatory and immune-related diseases with clear unmet medical needs. We focus our resources on research and development activities, including the conduct of clinical studies and product development, and expense such costs as they are incurred. Our research and development expenses have primarily consisted of employee-related expenses, including salaries, benefits, taxes, travel, and share-based compensation expense for personnel in research and development functions; expenses related to process development and production of product candidates paid to contract manufacturing organizations, including the cost of acquiring, developing, and manufacturing research material; costs associated with clinical activities, including expenses for contract research organizations; and clinical trials and activities related to regulatory filings for our product candidates, including regulatory consultants.
Research and development expenses, which have historically varied based on the
level of activity in our clinical programs, are significantly influenced by
study initiation expenses and patient recruitment rates, and as a result are
expected to continue to fluctuate, sometimes substantially. Research and
development expenses for any interim period are not necessarily indicative of
the results to be expected for the full year or for any other future year or
interim period. Our research and development costs were
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements that have or are reasonably likely to have a current or future material effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources.
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