TITAN PHARMACEUTICALS, INC. Forward-Looking Statements
Statements in the following discussion and throughout this report that are not historical in nature are "forward-looking statements" within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. You can identify forward-looking statements by the use of words such as "expect," "anticipate," "estimate," "may," "will," "should," "intend," "believe," and similar expressions. Although we believe the expectations reflected in these forward-looking statements are reasonable, such statements are inherently subject to risk and we can give no assurances that our expectations will prove to be correct. Actual results could differ from those described in this report because of numerous factors, many of which are beyond our control. These factors include, without limitation, those described under Item 1A "Risk Factors." We undertake no obligation to update these forward-looking statements to reflect events or circumstances after the date of this report or to reflect actual outcomes.
References herein to "we," "us," "Titan," and "our company" refer to
Overview Company Overview We are a pharmaceutical company developing therapeutics utilizing our proprietary long-term drug delivery platform, ProNeura™, for the treatment of select chronic diseases for which steady state delivery of a drug has the potential to provide an efficacy and/or safety benefit. ProNeura consists of a small, solid implant made from a mixture of EVA (ethylene-vinyl acetate) and a drug substance. The resulting product is a solid matrix that is administered subdermally, normally in the inner upper arm, or potentially in alternative sites, in a brief, outpatient procedure and is removed in a similar manner at the end of the treatment period. These procedures may be performed by trained health care providers, or HCPs, including licensed and surgically qualified physicians, nurse practitioners, and physician's assistants in a HCP's office or other clinical setting.
Probuphine was the first product based on our ProNeura technology approved in theU.S. ,Canada and theEuropean Union , or EU, for the maintenance treatment of opioid use disorder in clinically stable patients taking 8 mg or less a day of oral buprenorphine. OnOctober 15, 2020 , we issued a press release announcing our decision to discontinue selling Probuphine (buprenorphine) implant in theU.S. , wind down our commercialization activities and focus on our ProNeura-based product development programs. We based this decision on several factors; most notably that commercializing Probuphine with the requirements of the current product label and the Risk Evaluation and Mitigation Strategy, or REMS, program has proven to be onerous, leading to minimal utilization despite our significant efforts to overcome these obstacles. Other factors that have negatively impacted Titan's ability to effectively commercialize Probuphine include the financial constraints that have limited our sales and marketing capabilities; suboptimal reimbursement rates; and the complexity of the distribution channel. The continually changing environment due to the COVID-19 pandemic has further exacerbated these issues. As a result, sales of Probuphine have been, and would likely continue for the foreseeable future to be, extremely limited. After careful review of the recent sales and marketing results, the hurdles that Titan has and will continue to face, and the substantial additional expenditures and resources that would be required, our board of directors made a determination to advise theU.S. Food and Drug Administration ("FDA") of its decision to cease commercialization of Probuphine. A wind-down plan taking into considerations FDA and state regulatory requirements, as well as business considerations is underway. InOctober 2020 , we entered into the DSRA Agreement with Molteni and Horizon, the holders of our approximately$5.2 million of outstanding secured debt ($4.0 million principal amount and approximately$1.2 million in payoff amounts) to settle such obligations for$1.6 million in cash, the transfer of certain Probuphine assets to Molteni, including all of our manufacturing equipment, and the termination of our rights to future payments under the Purchase Agreement with Molteni. The DSRA Agreement, which closed onOctober 30, 2020 , provide for the release to us of the remaining collateral to enable us to continue operating as a research and development company. 17 Development Programs
Kappa Opioid Agonist Peptide Program
InOctober 2020 , we entered into the JT Agreement with JT Pharma, for the acquisition and development of JT Pharma's kappa opioid agonist peptide, or JT 09, for use in combination with our ProNeura technology.James McNab , a member of our board of directors, is a principal of JT Pharma. Several years ago, we began limited laboratory work in collaboration with JT Pharma to assess the feasibility of delivering JT 09 through peptide-infused ProNeura implants in animal models. Our initial work focused on JT-09's ability to activate peripheral kappa opioid receptors, with the JT-09 ProNeura implants potentially providing a non-addictive treatment for certain types of pain. Recently, our collaboration with JT Pharma has pivoted to explore the feasibility of also using JT -09 implants in the treatment of chronic pruritus, a debilitating condition defined as itching of the skin lasting longer than six weeks. In 2015, an estimated 23 - 44 million Americans suffered from chronic pruritus in the setting of both cutaneous and systemic conditions. The antipruritic effect of kappa opioid agonists is thought to be related to their binding to kappa opioid receptors on keratinocytes, immune cells and peripheral itch neurons. We believe, based on our early animal data, that subcutaneous placement of the JT -09 implants could potentially deliver therapeutic concentrations of JT--09 for six months or longer following a single in-office procedure. The initial non-clinical studies designed to establish proof of concept in an animal model will be completed during Q2 2021, and, if successful, we will need to conduct Investigational New Drug, or IND, enabling safety and pharmacology studies. The efficacy of a kappa opioid agonist was first demonstrated in humans by Toray Industries, Inc., orToray , using a highly potent small molecule kappa agonist, nalfurafine.Toray's application for nalfurafine was approved inJapan for the treatment of pruritus in end stage kidney disease, or ESKD, and chronic liver disease. More recently, Cara Therapeutics Inc., or Cara, has demonstrated in phase 2 and phase 3 clinical trials the efficacy of a selective kappa opioid receptor agonist peptide, CR845, in the treatment of pruritus associated with ESKD in patients undergoing dialysis, and Cara has announced plans to submit a New Drug Application in theU.S. in the second half of 2020. According to published reports, the prevalence of ESKD has been rising continuously, and reached approximately 750,000 in 2017. Pruritus affects approximately 40% of patients with ESKD and has been associated with poor quality of life, poor sleep, depression, and mortality. We believe a ProNeura rod containing JT- 09 could potentially eliminate the need for multiple weekly injections by delivering therapeutic levels of medication for six months or longer following implant.
Nalmefene Development Program
InSeptember 2019 , theNational Institute for Drug Addiction , or NIDA, awarded us an approximately$8.7 million grant over two years for our nalmefene implant development program for the prevention of opioid relapse following detoxification. An injectable formulation of nalmefene was approved by the FDA in 1995 for the management and reversal of opioid overdose, including respiratory depression. Oral nalmefene was approved by theEuropean Medicines Agency in 2013 for treating alcohol dependence. The NIDA grant provides funds for the completion of implant formulation development, cGMP manufacturing and non-clinical studies required for filing an IND. During the first quarter of 2020 we met with the FDA to review our non-clinical development plans and obtain guidance regarding filing an IND. The FDA provided clear guidance on the type of development plan that we should follow, specifically that this product development should follow the 505(b)(i) regulatory pathway due to the lack of safety data on nalmefene for a long acting formulation, and the non-clinical studies that will be required to file an IND. Based on this input, collecting all the non-clinical chronic toxicology data will require an additional study as well as increasing the duration of an ongoing study that will delay filing of the IND to mid-2021. We have discussed the change in development plan with NIDA and they have accepted our plan to reallocate previously approved funds for
conduct of the studies. Management Restructuring As previously disclosed,Sunil Bhonsle , our President and Chief Executive Officer, advised us of his desire to retire before the end of the year. EffectiveOctober 18, 2020 ,Kate DeVarney , Ph.D., our Executive Vice President and Chief Scientific Officer and a member of the board of directors, was promoted to the position of President and Chief Operating Officer. EffectiveOctober 31, 2020 ,Mr. Bhonsle stepped down from his executive role. 18
Dr.
We operate in only one business segment, the development of pharmaceutical
products. We make available free of charge through our website,
www.titanpharm.com, our periodic reports as soon as reasonably practicable after
we electronically file such material with, or furnish it to, the
Recent Accounting Pronouncements
See Note 1 to the accompanying unaudited condensed financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for information on recent accounting pronouncements.
Results of Operations for the Three and Nine MonthsSeptember 30, 2020 and 2019 Revenues Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 Change 2020 2019 Change (In thousands) Revenues: License revenue $ - $ - $ -$ 6 $ 313 $ (307 ) Product revenue 102 190 (88 ) 427 811 (384 ) Grant revenue 1,018 757 261 3,348 1,270 2,078 Total revenues$ 1,120 $ 947 $ 173 $ 3,781 $ 2,394 $ 1,387 The increase in total revenues for the three and nine months endedSeptember 30, 2020 compared to the same period in 2019 was primarily due to increases in grant revenue, partially offset by decreases in license and product revenue. Product revenue during the three and nine month periods endedSeptember 30, 2020 declined substantially from the comparable periods in 2019 due to a substantial decrease in unit sales volumes, increased utilization of our patient assistance programs and the effects of the COVID-19 pandemic and the related shelter in place restrictions and clinic closures. Also, the first half of 2019 unit sales volume included initial purchases by specialty pharmacies. License revenue recognized for the nine months endedSeptember 30, 2019 was related to the amortization of deferred revenue associated with the sale of our European intellectual property rights to Molteni. Operating Expenses Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 Change 2020 2019 Change (In thousands) Operating expenses: Cost of goods sold$ 683 $ 188 $ 495 $ 1,081 $ 738 $ 343 Research and development 1,562 1,619 (57 ) 5,846 5,370 476 Selling, general and administrative 3,549 3,023 526 10,137 9,336 801 Total operating expenses$ 5,794 $ 4,830 $ 964 $ 17,064 $ 15,444 $ 1,620
Cost of goods sold reflects costs and expenses associated with sales of our Probuphine product. The increase in cost of goods sold for the three and nine month periods endedSeptember 30, 2020 was primarily related to an approximately$0.4 million non-cash loss related to the impairment of inventory. 19 The increase in research and development costs for the nine months endedSeptember 30, 2020 was primarily associated with increased activities related to our NIDA grant for the development of a nalmefene implant. Other research and development expenses include internal operating costs such as research and development personnel-related expenses, non-clinical and clinical product development related travel expenses, and allocation of facility and corporate costs. As a result of the risks and uncertainties inherently associated with pharmaceutical research and development activities described elsewhere in this document, we are unable to estimate the specific timing and future costs of our clinical development programs or the timing of material cash inflows, if any, from our product candidates. However, we anticipate that our research and development expenses will increase at such time as we are able to undertake the required Probuphine Phase 4 clinical studies and continue our current or any future ProNeura development programs to the extent these costs are not supported through grants or partners.
The increase in selling, general and administrative expenses for the three and nine months endedSeptember 30, 2020 was primarily due to expenses associated with the commercialization of Probuphine, which resulted in increases in employee related expenses, consulting and professional fees, other outside services, travel costs and facilities related expenses. Other Expense, Net Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 Change 2020 2019 Change (In thousands) Other expense: Interest expense, net$ (246 ) $ (238 ) $ (8 ) $ (718 ) $ (737 ) $ 19 Non-cash gain (loss) on changes in fair value of warrants - 1,041 (1,041 ) (923 ) 1,066 (1,989 ) Gain (loss) on debt extinguishment - 291 (291 ) - 226 (226 ) Other income, net (12 ) (14 ) 2 (233 ) (22 ) (211 ) Other income (expense), net$ (258 ) $ 1,080 $ (1,338 ) $ (1,874
)$ 533 $ (2,407 ) The decrease in other income (expense), net for the three months endedSeptember 30, 2020 was primarily due to an approximately$1.0 million non-cash gain on changes in the fair value of our warrants issued in connection with ourAugust 2019 offering and an approximately$0.3 million non-cash gain on debt extinguishment related to the modification of our loan from Molteni. The decrease in other income (expense), net for the nine months endedSeptember 30, 2020 was primarily attributable to non-cash losses of approximately$2.0 million related to changes in the fair value of our warrants and approximately$0.2 million in costs attributable to the issuance of warrants.
Net Loss and Net Loss per Share
Our net loss for the three months endedSeptember 30, 2020 was approximately$4.9 million , or approximately$0.05 per share, compared to our net loss of approximately$2.8 million , or approximately$0.18 per share, for the comparable period in 2019. Our net loss for the nine months endedSeptember 30, 2020 was approximately$15.2 million , or approximately$0.17 per share, compared to our net loss of approximately$12.5 million , or approximately$0.89 per share, for the comparable period in 2019. 20
Liquidity and Capital Resources
We have funded our operations since inception primarily through the sale of our securities and the issuance of debt, as well as with proceeds from warrant and option exercises, corporate licensing and collaborative agreements, and government-sponsored research grants. AtSeptember 30, 2020 , we had working capital of approximately$0.8 million compared to working capital of approximately$4.7 million atDecember 31, 2019 . InJanuary 2020 , we completed a financing with several institutional investors pursuant to which we issued 8,700,000 shares of our common stock in a registered direct offering and warrants to purchase 8,700,000 shares of our common stock with an exercise price of$0.25 per share in a concurrent private placement pursuant to which we received net cash proceeds of approximately$1.9 million , after deduction of underwriting fees and other offering expenses. OnApril 20, 2020 , we received an approximately$0.7 million PPP Loan under the Paycheck Protection Program ("PPP") of the CARES Act. Under the terms of the CARES Act and the PPP Flexibility Act, we may apply for and be granted forgiveness for all or a portion of loan granted under the PPP, with such forgiveness to be determined, subject to limitations (including where our employees have been terminated and not re-hired by a certain date), based on the use of the loan proceeds for payment of payroll costs and any payments of mortgage interest, rent, and utilities. The terms of any forgiveness may also be subject to further requirements in regulations and guidelines adopted by the SBA. While we currently believe that the majority of the use of the PPP loan proceeds will meet the conditions for forgiveness under the PPP, no assurance is provided that we will obtain partial forgiveness of the loan. InJune 2020 , we established a co-promotion partnership with Indegene to establish multichannel digital marketing programs throughoutthe United States and expand the capabilities for the engagement of HCPs who can be certified to prescribe Probuphine. Under the terms of the co-promotion partnership, we are required to contribute approximately$0.8 million during the first year and approximately$0.4 million during the second year of the agreement. InSeptember 2020 , we completed a registered direct offering with several institutional investors pursuant to which we issued 19,440,000 shares of our common stock with an exercise price of$0.14 per share. As a result, we received net cash proceeds of approximately$2.4 million , after deduction of underwriting fees and other offering expenses. During the nine months endedSeptember 30, 2020 , we received an aggregate of approximately$7.0 million in cash proceeds from the exercises of warrants to purchase 31,244,386 shares of our common stock. InOctober 2020 , we announced our decision to discontinue selling our Probuphine® (buprenorphine) implant and wind-down our commercialization activities and pursue a plan that will enable us to focus on our ProNeura-based product development efforts. Activities associated with the wind-down of ourU.S. commercialization activities will continue through the second quarter
of 2021. InOctober 2020 , we entered the DSRA Agreement with Molteni and Horizon pursuant to which the parties agreed to settle all of our obligations under the Loan Agreement. Under the terms of the DSRA Agreement, Molteni and Horizon agreed to settle the approximately$5.2 million of outstanding indebtedness in exchange for the payment of$1.6 million in cash, the transfer of certain Probuphine assets to Molteni, including manufacturing equipment, certain inventory and non-U.S. Probuphine intellectual property, and the termination of our rights to future payments under the Molteni Purchase Agreement.
In
AtSeptember 30, 2020 , we had cash and cash equivalents of approximately$4.1 million , which we believe along with the proceeds of the 2020 Public Offering is sufficient to fund our planned operations into the third quarter of 2021. We will require additional funds to finance our operations beyond such period. We are exploring several financing alternatives; however, there can be no assurance that our efforts to obtain the funding required to continue our operations
will
be successful.
21
Sources and Uses of Cash
Nine Months Ended
September 30,
2020 2019
(In thousands)Net cash used in operating activities (12,642 ) (11,782 ) Net cash used in investing activities
(531 ) (144 )
Net cash provided by financing activities 12,023 3,191 Net decrease in cash and cash equivalents (1,150 ) (8,735 )
Net cash used in operating activities for the nine months endedSeptember 30, 2020 consisted primarily of our net loss of approximately$15.2 million , offset by approximately$0.3 million related to net changes in operating assets and liabilities, approximately$2.0 million of non-cash charges mainly related to non-cash losses on changes in fair value of warrants, non-cash losses on impairment of assets, interest expense, stock based compensation and depreciation and amortization, and approximately$0.2 million in costs attributable to the issuance of warrants. Net cash used in operating activities for the nine months endedSeptember 30, 2019 consisted primarily of our net loss of approximately$12.5 million , approximately$1.1 million non-cash gain on changes in the fair value of warrant liability and approximately$0.3 million of other non-cash charges. This was partially offset by approximately$0.8 million related to net changes in operating assets and liabilities and non-cash charges of approximately$0.6 million related to stock-based compensation, approximately$0.5 million related to interest expense and approximately$0.2 million related to depreciation and amortization.
Cash used in investing activities was primarily related to purchases of
equipment for both the nine months ended
Net cash provided by financing activities for the nine months endedSeptember 30, 2020 consisted of approximately$4.3 million of net cash proceeds from equity offerings, approximately$7.0 million of net cash proceeds from the exercises of warrants to purchase our common stock and approximately$0.7 million from our PPP Loan. Net cash provided by financing activities for the nine months endedSeptember 30, 2019 consisted of approximately$0.7 million of net proceeds from the exercises of warrants to purchase our common stock and approximately$2.5 million of net proceeds from equity offerings.
© Edgar Online, source
