SCOPUS BIOPHARMA INC. The following discussion and analysis of our unaudited condensed consolidated
financial condition and results of operations should be read in conjunction with
the audited consolidated financial statements and accompanying notes included in
the Company's Annual Report on Form 10-K for the year ended
Forward Looking Statements
This quarterly report on Form 10-Q ("Quarterly Report") and other reports filed
by
We have based these forward-looking statements largely on our current
expectations and projections about future events and trends that we believe may
affect our financial condition, results of operations, business strategy,
short-term and long-term business operations and objectives, and financial
needs. These forward-looking statements are subject to a number of risks,
uncertainties and assumptions, including those described in the "Risk Factors"
described in our 2021 Form 10-K. Readers are urged to carefully review and
consider the various disclosures made in this Quarterly Report and in other
documents we file from time to time with the
You should not rely upon forward-looking statements as predictions of future events. The events and circumstances reflected in the forward-looking statements may not be achieved or occur. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, performance, or achievements. In addition, the forward-looking statements in this Quarterly Report are made as of the date of this filing, and we do not undertake, and expressly disclaim any duty, to update such statements for any reason after the date of this Quarterly Report or to conform statements to actual results or revised expectations, except as required by law.
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Overview
We are a clinical-stage biopharmaceutical company developing transformational
therapeutics for serious diseases with significant unmet medical need. Our
mission is to improve patient outcomes and save lives. We have been focusing our
development efforts on our immuno-oncology programs. In
The Duet Platform relies on a novel approach to immuno-oncology with a suite of bifunctional oligonucleotides that activate antigen-presenting cells ("APCs") within the tumor microenvironment, while alleviating tumor immunosuppression to jump-start T cell-mediated immune responses. The unique mechanism-of-action of these synthetic oligonucleotides comes from simultaneously targeting two intracellular immune pathways - signal transducer and activator of transcription 3 ("STAT3"), a master immune checkpoint inhibitor, and toll-like receptor 9 ("TLR9"). The targeted inhibition of STAT3 reawakens immune cells and allows for the full potential of TLR9-driven innate and adaptive immune responses.
The Duet Platform is comprised of three distinctive, complementary CpG-STAT3
inhibitors:
? RNA silencing CpG-STAT3siRNA ("DUET-01")
? Antisense CpG-STAT3ASO ("DUET-02")
? DNA-binding inhibitor CpG-STAT3decoy ("DUET-03")
DUET-01 is in a Phase 1 clinical trial, as a monotherapy, for B-cell non-Hodgkin
lymphoma ("NHL"). The design of the existing investigator-sponsored clinical
protocol for DUET-01, including the number of study visits, together with
constraints on mobility and travel due to the COVID-19 pandemic, has continued
to cause delays in enrollment. We have been engaged in ongoing discussions with
the sponsor, who has been evaluating the applicable protocol with a view to
reducing and/or more closely concentrating subject visits to facilitate
enrollment. As a small interfering RNA ("siRNA")-based technology, DUET-01 is
delivered intratumorally. Pursuant to a sponsored research agreement, research
is being initiated to evaluate increasing the stability of novel siRNA-based
molecules to enable systemic delivery. DUET-02 is being developed for systemic
delivery. We are, through Duet, developing DUET-02, which has a similar
mechanism of action to DUET-01, except the STAT3 inhibitor is an antisense
("ASO") RNA molecule rather than a small interfering RNA ("siRNA"). The STAT3ASO
molecule binds directly to the STAT3 mRNA, recruiting ribonuclease H1 ("RNase
H1") to degrade the STAT3 mRNA. The use of ASO permits other chemical
modifications resulting in greater stability in human blood. This allows for
systemic treatment of harder-to-reach solid tumors such as prostate or kidney
cancers. Dose-range finding studies, good laboratory practice ("GLP") toxicology
studies, and good manufacturing process ("GMP") manufacturing of the drug
substance and product are all currently in process. Duet expects to file an
investigational new drug application ("IND") for DUET-02 in Q4 2022 in advanced
solid malignancies, with Phase 1 clinical trials anticipated to begin in Q1 2023
in
We have licenses for additional drug candidates, including drug candidates targeting systemic sclerosis ("SSc") and other fibrotic conditions and opioid-sparing pain treatments. As a result of our increased emphasis on its immuno-oncology programs and other considerations, we have been continuing to reduce allocations of resources to other programs.
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We have devoted significant resources to our development efforts relating to our drug candidates. On an ongoing basis, we continue to refine, update and enhance our immuno-oncology pipeline and target indications, including prioritizing solid tumor indications. We also continually evaluate the possibilities of additional studies with a view to enhancing, among other things, the effectiveness and method of delivery of our drug candidates and identifying additional protections for our intellectual property.
We do not have any products approved for sale and have not generated any revenue. We expect to continue to incur significant expenses and increasing operating losses. We anticipate that all of our expenses will increase substantially, including as we:
? continue our research and development efforts;
? contract with third-party research organizations to management our clinical and
pre-clinical trials for our drug candidates;
? outsource the manufacturing of our drug candidates for clinical testing and
pre-clinical trials;
? seek to obtain regulatory approvals for our drug candidates;
? maintain, expand, and protect our intellectual property portfolio;
? add operational, financial and management information systems and personnel to
support our research and development and regulatory efforts;
? continue to be engaged in litigation and actions taken by and/or against the
Adverse Parties and Adverse Stockholders; and
? operate as a public company.
We do not expect to generate revenue from product sales unless and until we successfully complete development and obtain marketing approval for one or more of our drug candidates, which we expect will take a number of years and is subject to significant uncertainty. Accordingly, we will need to raise additional capital to fund our operations. Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our operating activities through equity and debt offerings. We may also raise capital through government or other third-party funding and grants, collaborations and development agreements, strategic alliances, and licensing arrangements. However, we may be unable to raise additional funds or enter into such other arrangements when needed on favorable terms or at all. Moreover, our ability to raise capital is currently impeded by limited availability of authorized common stock. Our failure to raise capital or enter into such other arrangements as and when needed would impair our ability to develop our drug candidates and would have a material adverse effect on our financial condition.
We have incurred net losses in every year since our inception. Our net loss has
materially increased for the year ended
Critical Accounting Policies and Estimates
Our unaudited condensed consolidated financial statements are prepared in
accordance with accounting principals generally accepted in
Please refer to the information provided under the heading "Critical Accounting
Policies and Estimates" included in our 2021 Form 10-K. There were no material
changes to such policies in the three months ended
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JOBS Act
On
As an "emerging growth company," we also rely on exemptions from certain
reporting requirements, including without limitation: (i) providing an auditor's
attestation report on our system of internal controls over financial reporting
pursuant to Section 404(b) of the Sarbanes-Oxley Act and (ii) complying with any
requirement that may be adopted by the PCAOB regarding mandatory audit firm
rotation or a supplement to the auditor's report providing additional
information about the audit and the financial statements, known as the auditor
discussion and analysis. We will remain an "emerging growth company" until the
earliest of (i) the last day of the fiscal year in which we have total annual
gross revenues of
Results of Operations
Three Months Ended
The following table summarizes our results of operation for the three months
ended
Three Months Ended
(in thousands) March 31,
2022 2021 Change % Change
Operating Expenses:
General and Administrative $ 4,292 $ 1,819 $ 2,473 136.0 %
Research and Development 369 1,254 (885) (70.6) %
Loss from Operations (4,661) (3,073) (1,588) 51.7 %
Other income (expense):
Interest expense - (332) 332 (100.0) %
Net Loss $ (4,661) $ (3,405) $ (1,256) 36.9 %
Our net losses were approximately
Revenue
We did not have any revenue during the three months ended
Operating Expenses
General and Administrative Expenses
General and administrative expenses consist primarily of compensation and
benefits to our personnel, including the costs related to our management
services agreements, directors and scientific and senior advisors; professional
fees and services, including accounting and legal services; and expenses related
to obtaining and protecting our intellectual property. We incurred general and
administrative expenses in the three months ended
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respectively, an increase of approximately
Research and Development Expenses
We recognize research and development expenses as they are incurred. Our
research and development expenses consist of the costs associated with our
acquisition of intellectual property that is classified as in-process research
and development and fees incurred under our agreements with COH, the
Other Income (Expense)
Other income (expense) consists of interest expense on our Convertible Notes.
Interest expense decreased from
Liquidity and Capital Resources
We have incurred losses since our inception and, as of
For the three months ended
We are party to litigation in several matters as of the date hereof. Litigation
is highly unpredictable and the costs of litigation, including legal fees and
expenses, and the possible liabilities, including monetary damages, to which we
could become subject could be significant. Any such liabilities could have a
material adverse effect on us. We have recorded a liability as of
Our ability to fund our operations is dependent upon management's plans, which include raising capital through issuances of debt and equity securities, securing research and development grants, and controlling our expenses. A failure to raise sufficient financing and/or control expenses, among other factors, will adversely impact our ability to meet our financial obligations as they become due and payable and to achieve our intended business objectives.
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This evaluation is further impacted by the ongoing pandemic relating to the COVID-19 coronavirus. While the extent of its impact depends largely on the spread and duration of the outbreak, the pandemic has and may still result in disruptions to capital raises, employees, and vendors which has and may still result in negative impacts to our operational and financial results.
Accordingly, management has concluded there is substantial doubt as to the Company's ability to continue as a going concern within one year after the date the condensed consolidated financial statements are issued.
Future Funding Requirements
We have not generated any revenue. We do not know when, or if, we will generate any revenue from product sales. We do not expect to generate significant revenue from product sales unless and until we obtain regulatory approval of and commercialize any of our drug candidates. At the same time, we expect our expenses to increase in connection with our ongoing development activities, particularly as we continue to research, develop, and seek regulatory approval for, our drug candidates. We expect to incur additional costs associated with operating as a public company. In addition, subject to obtaining regulatory approval of any of our drug candidates, we expect to incur significant commercialization expenses for product sales, marketing, manufacturing and distribution. We anticipate that we will need substantial additional funding in connection with our continuing operations.
As a result, we anticipate that we will need substantial additional funding in connection with our continuing operations to fund future clinical trials and pre-clinical testing for our drug candidates, general and administrative costs and public company and other expenses, including potential indemnification obligations and legal fees (primarily related to litigation). See "Legal Proceedings" for additional information concerning such matters. We expect to finance our cash needs primarily through the sale of our debt and equity securities. However, our ability to raise capital is currently impeded by limited availability of authorized common stock. We may also raise capital through government or other third-party funding and grants, collaborations and development agreements, strategic alliances and licensing arrangements. Because of the numerous risks and uncertainties associated with the development and commercialization of our drug candidates, we are unable to estimate the amounts of additional capital outlays and operating expenditures necessary to complete the development of our drug candidates.
Our future capital requirements will depend on many factors, including:
the progress, costs, results and timing of our drug candidates' future clinical
? studies and future pre-clinical trials, and the clinical development of our
drug candidates for other potential indications beyond their initial target
indications;
the willingness of the FDA and the EMA to accept our future drug candidate
? clinical trials, as well as our other completed and planned clinical and
pre-clinical studies and other work, as the basis for review and approval of
our drug candidates;
? the outcome, costs and timing of seeking and obtaining FDA, EMA and any other
regulatory approvals;
? the number and characteristics of drug candidates that we pursue, including our
drug candidates in future pre-clinical development;
? the ability of our drug candidates to progress through clinical development
successfully;
? our need to expand our research and development activities;
? the costs of litigations with Adverse Parties;
? the costs associated with securing and establishing commercialization and
manufacturing capabilities;
? the costs of acquiring, licensing or investing in businesses, products, drug
candidates and technologies;
our ability to maintain, expand and defend the scope of our licensed
intellectual property portfolio, including the amount and timing of any
? payments we may be required to make, or that we may receive, in connection with
the licensing, filing, prosecution, defense and enforcement of any patents or
other intellectual property rights;
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? our need and ability to hire additional management and scientific and medical
personnel;
? the effect of competing technological and market developments;
? our need to implement additional internal systems and infrastructure, including
financial and reporting systems;
? the duration and spread of the COVID-19 pandemic, and associated operational
delays and disruptions and increased costs and expenses;
? the economic factors, geopolitical risks and sanctions and other terms; and
? timing and success of any collaboration, licensing or other arrangements into
which we may enter in the future.
Until such time, if ever, as we can generate substantial revenue from product sales, we expect to finance our cash needs through a combination of debt financings and equity offerings, government or other third-party funding, marketing and distribution arrangements and other collaborations, strategic alliances and licensing arrangements. To the extent that we raise additional capital through the sale of debt and equity securities, the ownership interests of our common stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our common stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through government or other third-party funding, marketing and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or drug candidates or to grant licenses on terms that may not be favorable to us.
The Company is continually monitoring the impact of the global pandemic on its business and its product development efforts, including any impact on the timing and/or costs for its clinical trials, IND-enabling work, and other research and development activities. At various times since the onset of the global pandemic, our locations have been severely affected by COVID-19 and, as a result, have been subject to various requirements to stay at home and self-quarantine, as well as constraints on mobility and travel, especially international travel.
There is no certainty as to the length and severity of societal disruption
caused by COVID-19. Consequently, we do not have sufficient visibility to
predict the impact of the global pandemic on our operations and overall
business, including delays in the progress of our planned pre-clinical work and
clinical trials, or by limiting its ability to recruit physicians or clinicians
to run our clinical trials, enroll patients or conduct follow-up assessments in
our clinical trials. Further, the business or operations of our strategic
partners and other third parties with whom we conduct business may also be
adversely affected by the global pandemic. We continue to monitor the impact of
the global pandemic, including regularly reevaluating the timing of our research
and development and clinical milestones. Until we are able to gain greater
visibility as to the impact of the global pandemic, we intend to commit greater
resources to our existing and future programs in
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 under
Recent Accounting Pronouncements
As previously noted, we, as an emerging growth company, have elected to take advantage of the benefits of the extended transition period provided for in Section 7(a)(2)(B) of the Securities Act, for complying with new or revised accounting standards, which allows us to defer adoption of certain accounting standards until those standards would otherwise apply to private companies unless otherwise noted.
Management does not believe that any recently issued, but not yet effective, accounting standards, if currently adopted, would have a material effect on the Company's financial statements.
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Effect of Inflation and Changes in Prices
We do not believe that inflation and changes in prices will have a material effect on our operations.
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