This Quarterly Report on Form 10-Q, including this Part I., Item 2.,
"Management's Discussion and Analysis of Financial Condition and Results of
Operations," contains forward-looking statements regarding us and our business,
financial condition, results of operations and prospects within the meaning of
the Private Securities Litigation Reform Act of 1995. Forward-looking statements
may be identified by the words "project," "believe," "anticipate," "plan,"
"expect," "estimate," "intend," "should," "would," "could," "will," "may" or
other similar expressions. In addition, any statements that refer to projections
of our future financial performance, our clinical development programs and
schedules, our future capital resources and funding requirements, our
expectations regarding future licenses of our technology, our anticipated growth
and trends in our business and other characterizations of future events or
circumstances are forward-looking statements. We cannot guarantee that we will
achieve the plans, intentions or expectations expressed or implied in our
forward-looking statements. There are a number of important factors that could
cause actual results, levels of activity, performance or events to differ
materially from those expressed or implied in the forward-looking statements we
make, including those described under "Risk Factors" set forth below in
Part II., Item 1A. In addition, any forward-looking statements we make in this
document speak only as of the date of this report, and we do not intend to
update any such forward-looking statements to reflect events or circumstances
that occur after that date.
Business Overview
We are a biopharmaceutical company focused on the development of a novel
therapeutic peptide, Thymosin beta 4, or Tß4, for tissue and organ protection,
repair, and regeneration. We have formulated Tß4 into three distinct product
candidates in clinical development:
• RGN-259, a preservative-free topical eye drop for regeneration of corneal
tissues damaged by injury, disease or other pathology;
• RGN-352, an injectable formulation to treat cardiovascular diseases, central
and peripheral nervous system diseases, and other medical indications that may
be treated by systemic administration; and
• RGN-137, a topical gel for dermal wounds and reduction of scar tissue.
We are continuing strategic partnership discussions with biotechnology and
pharmaceutical companies, and the U.S. military, regarding the further clinical
development of certain of our product candidates.
Current Financial Status
In October 2020, we sold a series of convertible promissory notes to management,
the Company's Board of Directors and accredited investors including Essetifin
S.p.A., our largest stockholder (the "2020 Notes"). The sale of the 2020 Notes
resulted in gross proceeds to the Company of $500,000. The 2020 Notes contain a
$0.36 conversion price and the purchasers also received a warrant exercisable at
$0.45 to purchase additional shares of common stock equal to 75% of the number
of shares into which each note is initially convertible (the "2020 Warrants").
In January 2020, Sabby exercised their remaining warrants and the Company
received proceeds of $241,911. At present, with the receipt of the sale proceeds
from the closing on the 2020 Notes in October 2020, we have sufficient cash to
fund planned operations into the second quarter of 2021.
Current Clinical Status
In January 2015, we entered into a Joint Venture Agreement with GtreeBNT whereby
we created ReGenTree LLC ("ReGenTree" or "Joint Venture") jointly owned by us
and GtreeBNT, which will commercialize RGN-259 for treatment of dry eye syndrome
and neurotrophic keratitis, an orphan indication in the United States.
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To date ReGenTree has sponsored a Phase 2/3 clinical trial ("ARISE-1") and Phase
3 clinical trials in patients with DES ("ARISE-2"). Currently, it is sponsoring
a Phase 3 clinical trial in patients with neurotrophic keratitis ("NK")
("SEER-1"), and ARISE-3 in patients with DES, both in the U.S. In May 2016, we
reported the results of the 317-patient ARISE-1 trial and in October 2017, we
reported the results of the ARISE-2 trial. The ARISE-2 study, which was
sponsored by ReGenTree and managed by Ora, Inc. pursuant a recent contract
between the parties, demonstrated a number of statistically significant
improvements in both signs and symptoms of DES with 0.1% RGN-259 versus placebo,
while showing excellent safety, comfort, and tolerability profiles. The ocular
discomfort symptom showed a statistically significant reduction in the
RGN-259-treated group at day 15 as compared to placebo (p=0.0149) in the change
from baseline. For sign, RGN-259 also improved the dry eye patient's ability to
withstand an exacerbated condition in a patient subgroup with both compromised
corneal fluorescein staining and Schirmer's test at baseline. In this
population, RGN-259 showed superiority over placebo in reducing corneal
fluorescein staining in the change from baseline at days 15 and 29 (p=0.0207 and
0.0254, respectively). RGN-259 confirmed its global effects on dry eye syndrome
and fast onset in multiple sign and symptom efficacies with no safety issues in
the ARISE-1 and ARISE-2 studies as well as in the pooled data, although ARISE-2
was not successful in duplicating the results of ARISE-1 where the study
population was limited and less diversified. ReGenTree is proceeding with its
RGN-259 development plan as discussed with the FDA in April 2018. ReGenTree and
Ora, Inc. have entered into a contract for management of ARISE-3. ReGenTree has
initiated the study, the first patient was enrolled in the second quarter of
2019 and the last patient was enrolled in October 2020 and completed treatment
and follow-up in November 2020.
The NK trial (SEER-1), a smaller study in an orphan population, last reported
enrollment of 17 patients. On May 14, 2020, the Company reported that the trial
was closed and reported the results of SEER-1 in 18 patients. Six out of 10
patients in the RGN-259 treated group and 1 out of 8 patients in the placebo
treated group achieved complete corneal healing in four weeks. In terms of the
primary endpoint, "ratio of corneal wound healed patients after four weeks'
administration", the statistical difference was slightly over 0.05 (p = 0.0656,
Fisher's exact test), due to the limited number of patients in each group. When
another statistical analysis method was used to analyze the same primary
endpoint (Chi square test), there was statistical significance, p = 0.0400. In
addition, in a pre-specified secondary endpoint evaluating corneal epithelial
healing at day 43 (two weeks post-treatment) and the durability of RGN-259
treatment, we also confirmed a clear statistical difference using the Fisher's
exact test, p = 0.0359. Several other efficacy parameters were either highly
significant or strongly trending toward statistical significance in the RGN-259
group indicating the depth of patient response to RGN-259.
GtreeBNT has developed the CMC (chemistry, manufacturing and controls) dossier
required for Phase 3 clinical trials and commercialization in the U.S. and in
Korea. This comprehensive and critical effort ensures that final drug product
manufacturing, packaging, stability, purity, reproducibility, etc., meets
regulatory guidelines and product specifications. The product of this activity
is the current product formulation being utilized in the U.S. trials being
conducted by ReGenTree and will also be utilized in the planned clinical
activity to be conducted by GtreeBNT under the RGN-259 license agreement for Pan
Asia.
During the past several years, ReGenTree, LLC began developing a modified eye
drop formulation that it believes will enhance the efficacy of thymosin beta 4
for NK, improve the patient experience, and allow a proprietary valued orphan
product price for this rare disease. The Company has completed a preliminary
formulation for NK patients that will be considered for use in future clinical
study. ReGenTree has not yet determined if it will use this new formulation in
the future for NK.
In February 2017, our licensee for RGN-137, GtreeBNT, through its subsidiary,
Lenus Therapeutics, LLC, received permission from the FDA to sponsor a Phase 3
clinical trial using RGN-137 to treat patients with epidermolysis bullosa
("EB"), a genetic disease that causes severe blistering of the skin and internal
organs. In August 2017, the Company amended the agreement for RGN-137 held by
GtreeBNT. Under the amendment the Territory was expanded to include Europe,
Canada, South Korea, Australia and Japan. In December 2018, GtreeBNT initiated a
small Phase 2 open trial in patients with EB to evaluate RGN-137 in such
patients prior to sponsoring a larger Phase 3 trial. Three patients have been
enrolled in the open clinical trial to date. It was reported in August 2019,
that the first patient had positively responded to RGN-137. As of the date of
this report, the Company has not been updated as to current enrollment status.
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Development of Product Candidates
Previously, thymosin beta 4 was regulated as a new chemical entity under the
FDA's Center for Drug Evaluation and Research ("CDER"). On March 23, 2020 a new
requirement under the Biologics Price Competition and Innovation Act of 2009
(BPCI Act) was enacted requiring that polypeptides larger than 40 amino acids in
length, such as thymosin beta 4 (T?4), be regulated as biologics under the FDA's
Center for Biologics Evaluation and Research ("CBER"). Other such products
formerly regulated as drugs, and now as biologics, include insulin and insulin
analogs, human growth hormone, pancreatic enzymes, and reproductive hormones.
Pursuant to our most recent FDA meeting related to RGN-259, our product
candidate for the treatment of neurotrophic keratitis (NK), we officially
confirmed that since RGN-259 contains T?4 as the active ingredient it will now
be approved under a BLA instead of under an NDA. In this regard, the team at
ReGenTree LLC, our U.S. joint venture, has already been developing the
chemistry, manufacturing, and controls ("CMC") required for a BLA with top-tier
CGMP manufacturers based in the U.S. and Europe. ReGenTree has received official
confirmation from the FDA that its CMC manufacturing and quality control
standards and development directions would be appropriate to submit a BLA. Thus,
we intend to proceed with development conforming to BLA standards as we move
forward.
Unlike the previous five-year exclusive period for new chemical entities
approved under an NDA, section 7002 of the Patient Protection and Affordable
Care Act (PPACA) provides 12 years of exclusivity for products approved under a
BLA. Biologics can also receive orphan drug and pediatric exclusivities.
Therefore, if RGN-259 receives a license under a BLA, and with the T?4 patents
already secured in the U.S, our exclusive market position should be
strengthened.
RGN-259
RGN-259 is our proprietary preservative-free eye drop formulation of Thymosin
beta 4. In September 2011, we completed a Phase 2a exploratory clinical trial
evaluating the safety and efficacy of RGN-259 in 72 patients with moderate dry
eye syndrome. In November 2011, we reported preliminary safety and efficacy
results from the trial. RGN-259 was deemed safe and well-tolerated, with no
observed drug-related adverse events.
In June 2012, we reported preliminary results from a double-masked,
vehicle-controlled, physician-sponsored Phase 2 clinical trial evaluating
RGN-259 for the treatment of nine patients (18 eyes) with severe dry eye.
RGN-259 was observed to be safe and well-tolerated and met key efficacy
objectives with statistically significant sign and symptom improvements,
compared to vehicle control, at various time intervals, including 28 days
post-treatment.
Consistent with the reduction of ocular discomfort and fluorescein staining at
the 28-day follow-up visit, other improvements seen in the RGN-259-treated
patients included tear film breakup time and increased tear volume production.
Likewise, these improvements were seen at other time points in the study. These
results were published in Cornea in 2015.
In September 2015, ReGenTree began the Phase 2/3 ARISE-1 clinical trial in
patients with DES and the Phase 3 SEER-1 clinical trial in patients with
neurotrophic keratopathy, both in the U.S. In May 2016, we reported the results
of the 317-patient ARISE-1 dry eye trial. In the trial, RGN-259 demonstrated
statistically significant improvements in both signs and symptoms of dry eye
with 0.05% and 0.1% RGN-259 compared to placebo in a dose dependent manner
during a 28-day dosing period. While the primary outcome measures were not met,
several key related pre-specified endpoints and subgroups of patients with more
severe dry eye showed statistically significant treatment effects. These results
confirm the findings from the previous Phase 2 trial providing clear direction
for the clinical regulatory pathway and remaining registration trials for
RGN-259. Shortly following the ARISE-1 trial, the FDA approved ReGenTree's Phase
3 ARISE-2 dry eye protocol and we initiated the ARISE-2 trial that enrolled
approximately 600 patients.
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The ARISE-2 study, which was sponsored by ReGenTree and managed by Ora, Inc.,
demonstrated a number of statistically significant improvements in both signs
and symptoms of DES with 0.1% RGN-259 versus placebo, while showing excellent
safety, comfort, and tolerability profiles. The ocular discomfort symptom showed
a statistically significant reduction in the RGN-259-treated group at day 15 as
compared to placebo (p=0.0149) in the change from baseline. In addition, RGN-259
also improved the dry eye patient's ability to withstand an exacerbated
condition in a patient subgroup with both compromised corneal fluorescein
staining and Schirmer's test at baseline. In this population, RGN-259 showed
superiority over placebo in reducing corneal fluorescein staining in the change
from baseline at days 15 and 29 (p=0.0207 and 0.0254, respectively). RGN-259
confirmed its global effects on DES and fast onset in multiple sign and symptom
efficacies with no safety issues in the ARISE-1 and ARISE-2 studies as well as
in the pooled data, although ARISE-2 was not successful in duplicating the
results of ARISE-1 where the study population was limited and less diversified.
In February 2019, ReGenTree initiated a 700-patient ARISE-3 trial in patients
with DES to confirm the results observed in ARISE-2. The final patient in
ARISE-3 was enrolled in October and completed treatment and follow-up in
November 2020.
RGN-352
During 2009, we completed a Phase 1a and Phase 1b clinical trial evaluating the
safety, tolerability and pharmacokinetics of the intravenous administration of
RGN-352 in 60 healthy subjects (40 in each group, 20 of whom participated in
both Phases). Based on the results of these Phase 1 trials and extensive
preclinical efficacy data published in peer-reviewed journals, in the second
half of 2010, we began start-up activities for a Phase 2 study to evaluate
RGN-352 (Tß4 Injectable Solution) in patients who had suffered an AMI. We had
planned to begin enrolling patients in this clinical trial in the second quarter
of 2011. However, in March 2011, we were notified by the FDA that the trial was
placed on clinical hold as a result of our contract manufacturer's alleged
failure to comply with the current Good Manufacturing Practice ("cGMP")
regulations. The manufacturer has since closed its manufacturing facility and
filed for bankruptcy protection. The FDA prohibited us from using any of the
active drug or placebo formulated by this manufacturer in human trials;
consequently, we must have study drug (RGN-352 and RGN-352 placebo) manufactured
by a new cGMP-compliant manufacturer in the event we seek to move forward with
this trial. While we have identified a qualified manufacturer for RGN-352, we
have elected to postpone activities on this trial until the requisite funding or
a partner is secured.
In addition to the potential application of RGN-352 for the treatment of
cardiovascular disease, preclinical research published in the scientific
journals Neuroscienceand the Journal of Neurosurgery, among others, indicates
that RGN-352 may also prove useful for patients with multiple sclerosis, or MS,
as well as patients suffering a stroke, traumatic brain injury, peripheral
neuropathy, or spinal cord injury. In these preclinical studies, the
administration of Tß4 resulted in regeneration of neuronal tissue by promoting
remyelination of axons and stimulating oligodendrogenesis, resulting in
improvement of neurological functional activity. In 2012, researchers studying
Tß4 under a material transfer agreement (MTA) found that Tß4 had beneficial
effects in animal models of peripheral neuropathy, one of the major
complications of diabetes. This research was published in the Journal of
Neurobiology of Disease in 2012 and appears to corroborate previous findings
using Tß4 for repair of central nervous system disorders. We are discussing
possible partnership opportunities with companies interested in developing
RGN-352 for this indication.
Based on our Phase 1 data and the preclinical research discussed above, we are
evaluating various opportunities for government funding for a Phase 2a clinical
trial to show proof-of-concept in each case while also talking with prospective
strategic partners with the interest, capabilities and resources to further
develop product candidate in these fields. We have also been evaluating the
potential of RGN-352 for the treatment of COVID-19.
RGN-137
Clinical Development - Epidermolysis Bullosa. Starting in 2005, we began
conducting a Phase 2 clinical trial designed to assess the safety and
effectiveness of RGN-137 for the treatment of patients with EB. EB is a genetic
disease of approximately 10 gene mutations that results in fragile skin and
other epithelial structures (e.g., cornea and GI tract) that can blister
spontaneously or separate at the slightest trauma or friction, creating a wound
that at times does not heal or heals poorly. In severe cases, recurrent
blistering and tissue loss may be life threatening. EB has been designated as an
"orphan" indication by the FDA's Office of Orphan Drugs. We closed the Phase 2
trial in late 2011 and we submitted the final report to the FDA in 2014.
Subsequently, we licensed RGN-137 to GtreeBNT for development in the U.S. and
EU. In February 2017, GtreeBNT received permission from the U.S. FDA to sponsor
a Phase 3 clinical trial using RGN-137 to treat patients with EB. Recently, the
FDA modified efficacy requirements in EB patients from complete wound closing to
partial wound closing, which has had a positive impact on clinical trial design.
Our licensee initiated a Phase 2 open clinical trial on EB patients in the U.S.
in December 2018, and 3 of 15 patients have been enrolled to date. Due to the
COVID-19 pandemic, it is unclear when enrollment will resume.
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Clinical Development - Pressure Ulcers. In late 2005, we began conducting Phase
2 clinical trial designed to assess the safety and effectiveness of RGN-137 for
the treatment of patients with chronic pressure ulcers, commonly known as
bedsores.
In January 2009, we reported final data from this trial. RGN-137 was
well-tolerated at all three dose levels studied, with no dose-limiting adverse
events, which achieved the primary objective of the study. A follow-on
evaluation, reported at the 3rd International Symposium on the Thymosins in
Health and Disease in March 2012, showed that for those pressure ulcer patients'
wounds that healed, RGN-137 mid dose (0.02% T?4 gel product) accelerated wound
closure with a median time to healing of 22 days as compared to 57 days for the
placebo. Although those results are clinically significant, they were not
statistically significant.
Clinical Development - Venous Stasis Ulcers. In mid-2006, we began conducting a
Phase 2 clinical trial designed to assess the safety and effectiveness of
RGN-137 for the treatment of patients with venous stasis ulcers. Venous stasis
ulcers are a common type of chronic wound that develops on the ankle or lower
leg in patients with chronic vascular disease. In these patients' blood flow in
the lower extremities is impaired leading to venous hypertension, edema
(swelling) and mild redness and scaling of the skin that gradually progresses to
ulceration. In 2009, we reported final data from that trial. Those results were
both clinically and statistically significant.
Strategic Partnerships
Currently, we have active partnerships in four major territories: North America,
Europe, China and Pan Asia. Our partners have been moving forward and making
progress in each territory. In each case, the cost of development is being borne
by our partners with no financial obligation for RegeneRx. We still have
significant clinical assets to develop, primarily RGN-352 (injectable
formulation of Tß4 for cardiac and CNS disorders) in the U.S., most of Asia, and
Europe; RGN-259 in the EU. In August 2017, we amended the RGN-137 License
Agreement with GtreeBNT, expanding the territory to include Europe, Canada,
South Korea, Australia and Japan. Regarding RGN-259, our goal is to wait until
satisfactory results are obtained from the current ophthalmic clinical program
in the U.S. before moving into the EU. This should allow us to obtain a higher
value for the asset at that time. However, we will pursue development
opportunities with RGN-352, our injectable systemic product candidate for
cardiac and central nervous system indications, either by obtaining grants to
fund a Phase 2a clinical trial in the cardiovascular or central nervous system
fields or finding a suitable partner with the resources and capabilities to
develop it as we have with RGN-259. We have also been exploring the potential of
RGN-352 for the treatment of COVID-19.
We anticipate incurring additional operating losses in the future as we continue
to explore the potential clinical benefits of Tß4-based product candidates over
multiple indications. To fund further development and clinical trials we have
entered into a series of strategic partnerships under licensing and joint
venture agreements where our partners are responsible for advancing development
of our product candidates with multiple clinical trials.
Lee's Pharmaceuticals.
We are a party to a license agreement with Lee's Pharmaceutical for the license
of Thymosin Beta 4 in any pharmaceutical form, including our RGN-259, RGN-352
and RGN-137 product candidates, in China, Hong Kong, Macau and Taiwan. In
February 2019, the License Agreement was assigned by Lee's to their affiliate,
Zhaoke Ophthalmology Pharmaceutical Limited. Lee's previously filed an IND with
the Chinese FDA to conduct a Phase 2, randomized, double-masked, dose-response
clinical trial with RGN-259 in China for dry eye syndrome. Lee's subsequently
informed us that it received notice from China's FDA declining its IND
application for a Phase 2b dry eye clinical trial because the API was
manufactured outside of China. The API was manufactured in the U.S. and provided
to Lee's by RegeneRx pursuant to a license agreement to develop RGN-259
ophthalmic eye drops in the licensed territory. However, in mid-2016, we were
informed by Lee's that the CFDA modified its manufacturing regulations and will
now allow Chinese companies to utilize API manufactured outside of China for
Phase 1 and 2 clinical trials. We have not yet been informed of a projected
starting date for Phase 2 trials but believe Lee's intends to await the outcome
of the ARISE-3 DES trial prior to initiating clinical trials in China. Lee's has
assigned the license to its subsidiary China Ophthalmology Focus Ltd.
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GtreeBNT.
We are a party to a license agreement with GtreeBNT for the license of RGN-259
related to certain development and commercialization rights for RGN-259, in Asia
(excluding China, Hong Kong, Macau and Taiwan). Separately, we licensed GtreeBNT
the rights to RGN-137 which was recently amended as discussed above. GtreeBNT is
currently our second largest stockholder. GtreeBNT filed an IND with the Korean
Ministry of Food and Drug Safety to conduct a Phase 2/3 study with RGN-259 in
patients with dry eye syndrome and in July 2015, received approval to conduct
the trial. In late 2016, GtreeBNT informed us that it believes marketing
approval in the U.S. will allow expedited marketing in Korea, possibly without
the need for a clinical trial. At this point, we are still awaiting marketing
approval in the U.S.
U.S. Joint Venture (ReGenTree, LLC).
In January 2015, we entered into a Joint Venture Agreement with GtreeBNT whereby
we created ReGenTree, jointly owned by us and GtreeBNT, which will commercialize
RGN-259 for treatment of dry eye and NK, an orphan indication in the United
States. We are entitled to royalties as a percentage of net sales ranging from
single digits to low double digits based on the medical indications approved and
whether the Joint Venture commercializes products directly or through a third
party. RegeneRx possesses one of three board seats of ReGenTree and certain
major decisions and transactions within ReGenTree, such as commercialization
strategy, mergers, and acquisitions, require RegeneRx's board designee's
consent. We currently hold a 38.5% ownership interest in ReGenTree. This
ownership interest may be further reduced to as low as 25% once ReGenTree
obtains FDA approval of an NDA for dry eye syndrome in the U.S. In the event
ReGenTree is acquired, or a change of control occurs following achievement of an
NDA, RegeneRx shall be entitled to a minimum of 40% of all proceeds paid or
payable and will forgo any future royalties.
Our Strategy
We seek to maximize the value of our product candidates by advancing their
clinical development and then identifying suitable partners for further
development, regulatory approval, and marketing. We intend to engage in
strategic partnerships with companies with clinical development and
commercialization strengths in desired pharmaceutical therapeutic fields. We are
actively seeking partners with suitable infrastructure, expertise and a
long-term initiative in our medical fields of interest. Our ability to locate
and engage new strategic partners has been limited by the global COVID pandemic.
Historically, we have entered the licensing and joint ventures discussed above.
We continue to control the cardiovascular and neurovascular assets (RGN-352) in
the EU and are able to consolidate them with similar assets in the U.S. and
other territories in Asia to create a worldwide portfolio that we believe will
be more attractive to multi-national pharmaceutical companies.
Financial Operations Overview
We have never generated product revenues, and we do not expect to generate
product revenues until the FDA approves one of our product candidates, if ever,
and we begin marketing and selling it. We anticipate incurring additional
operating losses in the future as we continue to explore the potential clinical
benefits of Tß4-based product candidates over multiple indications. To fund
further development and clinical trials we have entered into a series of
strategic partnerships under licensing and joint venture agreements where our
partners are responsible for advancing development of our product candidates
with multiple clinical trials.
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Most of our expenditures to date have been for research and development, or R&D,
activities and general and administrative, or G&A, activities. R&D costs include
all of the wholly allocable costs associated with our various clinical programs
passed through to us by our outsourced vendors. Those costs include
manufacturing Tß4 and peptide fragments, formulation of Tß4 into our product
candidates, stability studies for both Tß4, and the various formulations,
preclinical toxicology, safety and pharmacokinetic studies, clinical trial
management, medical oversight, laboratory evaluations, statistical data
analysis, regulatory compliance, quality assurance and other related activities.
R&D includes cash and non-cash compensation, payroll taxes, travel and other
miscellaneous costs of our internal R&D personnel, three persons in total, who
are dedicated on a part-time hourly basis to R&D efforts. R&D also includes a
proration of our common infrastructure costs for office space and
communications. We expense our R&D costs as they are incurred.
R&D expenditures are subject to the risks and uncertainties associated with
clinical trials and the FDA review and approval process. As a result, these
expenses could exceed our expectations, possibly materially. We are uncertain as
to what we will incur in future R&D costs for our clinical studies, as these
amounts are subject to, management's continuing assessment of the economics of
each individual R&D project and the internal competition for project funding.
G&A costs include outside professional fees for legal, business development,
audit and accounting services. G&A also includes cash and non-cash compensation,
travel and other miscellaneous costs of our internal G&A personnel, two in
total, who are wholly dedicated to G&A efforts. G&A also includes a proration of
our common infrastructure costs for office space and communications. Our G&A
expenses also include costs to maintain our intellectual property portfolio.
Historically we have expanded our patent prosecution activities and in some
cases, we have filed patent applications for non-critical strategic purposes
intended to prevent others from filing similar patent claims. We continue to
closely monitor our patent applications in the United States, Europe and other
countries with the advice of outside legal counsel to determine if they will
continue to provide strategic benefits. In cases where we believe the benefit
has been realized or it becomes unnecessary due to the issuance of other
patents, or for other reasons that will not affect the strength of our
intellectual property portfolio, we have and will continue to abandon these
patent applications in order to reduce our costs of continued prosecution or
maintenance.
Critical Accounting Policies
In Item 7, "Management's Discussion and Analysis of Financial Condition and
Results of Operations," of our Annual Report on Form 10-K for the year ended
December 31, 2019, which was filed with the SEC on March 20, 2020, which we
refer to as the Annual Report, we included a discussion of the most significant
accounting policies and estimates used in the preparation of our financial
statements. There has been no material change in the policies and estimates used
in the preparation of our financial statements since the filing of our Annual
Report.
Results of Operations
Comparison of the three months ended September 30, 2020 and 2019
Revenues. For the three months ended September 30, 2020 and 2019, we recorded
revenue in the amount of approximately $19,000 related to the amortization of
unearned license fees.
R&D Expenses. For the three months ended September 30, 2020, our R&D expenses
increased by approximately $5,000, or 42%, to $17,000 from $12,000 for the same
period in 2019. The 2020 increase reflects an increase in stock option expense
from the 2019 period.
G&A Expenses. For the three months ended September 30, 2020, our G&A expenses
decreased by approximately $12,000, or 4%, to $282,000 from $294,000 for the
same period in 2019. The changes in the G&A expenses are reflected in several
areas. Decreases in professional services (decrease of $6,000), investor
relations (decrease of $17,000) and insurance (decrease of $11,000) are offset
by increases in personnel related (increase of $4,000) and stock option expense
(increase of $18,000). We expect that our G&A expenses will remain steady over
the next year.
Net Loss. Our Statements of Operations reflects a net loss of $333,000 for the
quarter ended September 30, 2020, versus a net loss of $334,000 for the quarter
ended September 30, 2019.
Comparison of the nine months ended September 30, 2020 and 2019
Revenues.For the nine months ended September 30, 2020, we recorded revenue in
the amount of $58,000 versus $58,000 in the 2019 period. Revenue in both periods
relate to the recognition of the license fees received from ReGenTree and
GtreeBNT.
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R&D Expenses. For the nine months ended September 30, 2020, our R&D expenses
increased by approximately $14,000 or 26%, to $67,000 from $53,000 for the same
period in 2019. The 2020 increase relates primarily to an increase in stock
option expense (increase of $11,000) in 2020 versus the 2019 period as well an
increase in R&D reference materials (increase of $3,000).
G&A Expenses. For the nine months ended September 30, 2020, our G&A expenses
increased by approximately $29,000, or 3%, to $995,000 from $966,000 for the
same period in 2019. The changes in the G&A expenses are reflected in several
areas. Increases in personnel related (increase of $33,000), stock option
compensation expense (increase of $39,000), and insurance expense (increase
$17,000) were offset by decreases in, professional services (decrease of
$30,000), seminars (decrease of $5,000), dues (decrease of $4,000), investor
relations (decrease of $14,000), license fees (decrease of $2,000) and facility
and related (decrease of $5,000).
Net Loss. Our Statements of Operations reflects a net loss of $1,155,000 for the
nine months ended September 30, 2020, versus a net loss of $1,055,000 recorded
in the nine months ended September 30, 2019.
Liquidity and Capital Resources
Overview
We have not commercialized any of our product candidates to date and have
incurred significant losses since inception. Over the past couple of years, we
have primarily financed our operations through the sale of a series of
convertible promissory notes through private placements with accredited
investors and the March and August 2014 private placements of common stock with
GtreeBNT as well as our entry into the joint venture with ReGenTree in early
2015. The report of our independent registered public accounting firm regarding
our financial statements for the year ended December 31, 2019 contained an
explanatory paragraph regarding our ability to continue as a going concern based
upon our history of net losses and dependence on future financing in order to
meet our planned operating activities.
We had cash and cash equivalents of $138,811 at September 30, 2020. Our current
cash which includes the proceeds from the closing of the February 2019 note sale
as well as the proceeds from January 2020 warrant exercises. In October 2020, we
sold a series of convertible promissory notes to management, the Company's Board
of Directors and accredited investors including Essetifin S.p.A., our largest
stockholder (the "2020 Notes"). The sale of the 2020 Notes resulted in gross
proceeds to the Company of $500,000. At present we have sufficient cash from the
sale of the 2020 Notes to fund planned operations into the second quarter of
2021. We will need to secure additional funding in order to advance operations
substantially beyond the first quarter of 2021. Given its nature, the COVID
global pandemic may impact our ability to secure additional funding. We may also
receive funds from grants, new partnerships or the raising of additional capital
if the market climate warrants. Additionally, we intend to continue to pursue
additional partnering activities, particularly for RGN-352, our injectable
systemic product candidate for cardiac and central nervous system indications.
Cash Flows for the Nine Months Ended September 30, 2020 and 2019
Net cash used in operating activities was approximately $798,000 for the nine
months ended September 30, 2020 compared to approximately $896,000 used in
operating activities for the nine months ended September 30, 2019. We received
gross proceeds of approximately $242,000 from the exercise of warrants and
approximately $55,000 in loan proceeds in the nine months ended September 30,
2020. In 2019, we received gross proceeds of $1,541,000 from the closing of the
February 2019 Notes as well as the exercise of warrants.
25
Future Funding Requirements
The expenditures that will be necessary to execute our business plan are subject
to numerous uncertainties that may adversely affect our liquidity and capital
resources. Currently, RegeneRx has active partnerships in three major
territories: the U.S., China and Pan Asia. Our partners have been moving forward
and making progress in each territory. In each case, the cost of development is
being borne by our partners with no financial obligation for RegeneRx. Patient
accrual, treatment, and follow-up for ophthalmic trials are, in general,
relatively fast, as opposed to most other clinical efforts, In February 2019,
ReGenTree initiated a 700-patient ARISE-3 trial in patients with DES to confirm
the results observed in ARISE-2. Although patent enrollment was slower than
planned due to the COVID-19 pandemic, the last patient was enrolled in
October and patient treatment and follow-up was completed in November 2020.
We still have significant clinical assets to develop, primarily RGN-352
(injectable formulation of Tß4 for cardiac and CNS disorders) in the U.S., Pan
Asia, and Europe, and RGN-259 in the EU. Our goal is to wait until the results
are obtained from the current ophthalmic clinical trials before moving into the
EU with RGN-259. If successful, this should allow us to obtain a higher value
for the asset at that time. However, we intend to continue to develop RGN-352,
either by obtaining grants to fund a Phase 2a clinical trial in the
cardiovascular or central nervous system fields or finding a suitable partner
with the resources and capabilities to develop it as we have with RGN-259. We
have also been exploring the potential of RGN-352 for the treatment of COVID-19.
Our capital resources remain limited: therefore, in addition to the sale of the
2020 Notes in October 2020, we will need to secure additional operating capital
to continue operations substantially beyond the first quarter of 2021. A sale of
common stock and warrants, a convertible instrument or additional partnering of
licensed rights are possible sources of operating capital in the future. In
addition, the length of time required for clinical trials varies substantially
according to the type, complexity, novelty and intended use of a product
candidate, as well as outside factors such as the COVID-19 pandemic. Some of the
factors that could impact our liquidity and capital needs include, but are not
limited to:
· the progress of our clinical trials;
· the progress of our research activities;
· the number and scope of our research programs;
· the progress of our preclinical development activities;
· the costs involved in preparing, filing, prosecuting, maintaining, enforcing
and defending patent and other intellectual property claims;
· the costs related to development and manufacture of preclinical, clinical and
validation lots for regulatory purposes and commercialization of drug supply
associated with our product candidates;
· our ability to enter into corporate collaborations and the terms and success of
these collaborations;
· the costs and timing of regulatory approvals; and
· the costs of establishing manufacturing, sales and distribution capabilities.
In addition, the duration and the cost of clinical trials may vary significantly
over the life of a project as a result of differences arising during the
clinical trial protocol, including, among others, the following:
· the number of patients that ultimately participate in the trial;
· the duration of patient follow-up that seems appropriate in view of the
results;
· the number of clinical sites included in the trials;
· the length of time required to enroll suitable patient subjects; and
· the COVID-19 pandemic.
Also, we test our product candidates in numerous preclinical studies to identify
indications for which they may be efficacious. We may conduct multiple clinical
trials to cover a variety of indications for each product candidate. As we
obtain results from trials, we may elect to discontinue clinical trials for
certain product candidates or for certain indications in order to focus our
resources on more promising product candidates or indications.
Our proprietary product candidates have not yet achieved FDA regulatory
approval, which is required before we can market them as therapeutic products.
In order to proceed to subsequent clinical trial stages and to ultimately
achieve regulatory approval, the FDA must conclude that our clinical data
establish safety and efficacy. Historically, the results from preclinical
studies and early clinical trials have often not been predictive of results
obtained in later clinical trials. A number of new drugs and biologics have
shown promising results in clinical trials, but subsequently failed to establish
sufficient safety and efficacy data to obtain necessary regulatory approvals.
26
Sources of Liquidity
We have not commercialized any of our product candidates to date and have
primarily financed our operations through the issuance of common stock and
common stock warrants in private and public financings. In June of 2016, we
raised $1,520,000 by selling 5,147,059 shares of common stock and warrants to
purchase 5,147,059 shares of common stock to Sabby. On March 2, 2018, we entered
into a warrant reprice and exercise and issuance agreement with Sabby, which, in
consideration of the holders exercising in full all of the 2016 Offering
warrants the exercise price per share of the warrants was reduced to $0.20 per
share. In addition, and as further consideration, we issued to the holders of
the 2016 Offering warrants 3,860,294 new warrants with an exercise price of
$0.2301 per share. Pursuant to the terms of the Reprice Agreement the exercise
price of the new warrants will be reduced from $0.2301 to $0.125 as a result of
the sale of the 2019 Notes. We received gross proceeds of approximately
$1,000,000 pursuant the exercise and issued 5,147,059 of common stock. In
February 2019, we sold a series of convertible promissory notes to accredited
investors including Essetifin S.p.A., our largest shareholder. The sale of the
notes resulted in gross proceeds to the Company of $1,300,000 over two closings.
The first closing in the amount of $650,000 occurred in February 2019 and the
second closing, also in the amount of $650,000, occurred on May 13, 2019 after
the Company provided notice of the enrollment of the first patient in the
ARISE-3 clinical trial in DES sponsored by ReGenTree. The notes contain a $0.12
conversion price and are initially convertible into 10,833,333 chares off common
stock. The purchasers also received a warrant exercisable at $0.18 to purchase
additional 8,125,000 shares of common stock. In addition, we received proceeds
of $115,625 pursuant to the exercise of warrants held by Sabby Management as
well as $125,000 for April 2019 warrant exercises. In January 2020, Sabby
exercised their remaining warrants and the Company received proceeds of
$241,911. Most recently, in October 2020, we sold a series of convertible
promissory notes to management, the Company's Board of Directors and accredited
investors including Essetifin S.p.A., our largest stockholder (the "2020
Notes"). The sale of the 2020 Notes resulted in gross proceeds to the Company of
$500,000. The 2020 Notes contain a $0.36 conversion price and the purchasers
also received a warrant exercisable at $0.45 to purchase additional shares of
common stock equal to 75% of the number of shares into which each note is
initially convertible (the "2020 Warrants"). At present, with the receipt of the
sale proceeds from the closing on the 2020 Notes in October 2020, we have
sufficient cash to fund planned operations into the second quarter of 2021.
We continuously monitor our cash use as well as the clinical timelines. We
continue to evaluate options including the licensing of additional rights to
commercialize our clinical products as well as raising capital through the
capital markets.
We have various strategic agreements and license agreements with GtreeBNT,
ReGenTree and Lee's. These license agreements provide for the opportunity for us
to receive milestone payments upon specified commercial events and royalty
payments in connection with any commercial sales of the licensed products in the
respective territories. However, there are no assurances that we will be able to
attain any such milestones or generate any such royalty payments under the
agreements.
Other Financing Sources
Other potential sources of outside capital include entering into additional
strategic business relationships, additional issuances of equity securities or
debt financing or other similar financial instruments. If we raise additional
capital through a strategic business relationship, we may have to give up
valuable rights to our intellectual property. If we raise funds by selling
additional shares of our common stock or securities convertible into our common
stock, the ownership interest of our existing stockholders may be significantly
diluted. In addition, if additional funds are raised through the issuance of
preferred stock or debt securities, these securities are likely to have rights,
preferences and privileges senior to our common stock and may involve
significant fees, interest expense, restrictive covenants and the granting of
security interests in our assets.
27
Our failure to successfully address liquidity requirements could have a
materially negative impact on our business, including the possibility of
surrendering our rights to some technologies or product opportunities, delaying
our clinical trials, or ceasing operations. There can be no assurance that we
will be able to obtain additional capital in sufficient amounts, on acceptable
terms, or at all.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements, as such term is defined in
Item 303(a)(4) of Regulation S-K.
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REGENERX BIOPHARMACEUTICALS, INC. 
