10-Q: ACTINIUM PHARMACEUTICALS, INC.
Published: Nov 9, 2018 5:07 p.m. ET
(EDGAR Online via COMTEX) -- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
FORWARD-LOOKING STATEMENT NOTICE
This Form 10-Q contains certain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. For this purpose, any statements contained in this Form 10-Q that are not statements of historical fact may be deemed to be forward-looking statements. Without limiting the foregoing, words such as "may," "will," "expect," "believe," "anticipate," "estimate" or "continue" or comparable terminology are intended to identify forward-looking statements. These statements by their nature involve substantial risks and uncertainties, and actual results may differ materially depending on a variety of factors, many of which are not within our control.
Description of Business
Actinium Pharmaceuticals, Inc. (the "Company", "Actinium", or "We") is focused on improving patient access and outcomes to cellular therapies such as bone marrow transplant (BMT) and CAR-T with its proprietary, chemotherapy free or sparing, targeted conditioning technology. CAR-T is a type of cellular therapy that genetically alters a patient's own T cells to target and kill their cancer cells. Currently, there are 2 approved CAR-T therapies for patients with certain B-cell cancers and over 200 CAR-T candidates in preclinical and clinical development for a wide range of hematologic and solid tumor indications. Actinium is the only company with a multi-disease, multi-target, drug development pipeline focused on targeted conditioning. Its targeted conditioning technology is enabled by ARC's or Antibody Radio-Conjugates that combine the targeting ability of monoclonal antibodies with the cell killing ability of radioisotopes. Actinium's pipeline of clinical-stage targeted conditioning ARCs target the antigens CD45 and CD33 for patients with a broad range of hematologic malignancies including acute myeloid leukemia (AML), myelodysplastic syndrome (MDS) and multiple myeloma (MM), acute lymphoblastic leukemia (ALL), Hodgkin's lymphoma and Non-Hodgkin's lymphoma. Actinium's Iomab-ACT program is designed to be a universal lymphodepletion technology intended to eliminate the need for chemotherapy-based conditioning prior to CAR-T or other adoptive cellular therapies.
Iomab-B, Actinium's lead targeted conditioning product candidate, is currently enrolling patients in the pivotal Phase 3 SIERRA trial in patients age 55 or older, with active, relapsed or refractory AML. Iodine-131-apamistamab (Iomab-B), combines the anti-CD45 monoclonal antibody labeled with iodine-131 for myeloablation prior to a bone marrow transplant. CD45 is expressed on leukemia, lymphoma and normal immune cells. Iomab-B has been studied in over 500 patients in 10 clinical trials in numerous hematologic diseases. Actinium's Iomab-ACT program is an expansion of its CD45 program that is intended to be a universal, chemotherapy-free solution for targeted lymphodepletion prior to CAR-T therapy. CAR-T is a type of cellular therapy that genetically alters a patient's own T cells to target and kill their cancer cells. Currently, there are 2 approved CAR-T therapies for patients with certain B-cell cancers and over 200 CAR-T candidates in preclinical and clinical development for a wide range of hematologic and solid tumor indications. Through targeted lymphodepletion, the Iomab-ACT program is expected to improve CAR-T cell expansion, reduce CAR-T related toxicities and expand patient access to CAR-T treatment and potentially other adoptive cell therapies. Due to its lower payload dose, lymphodepletion with the Iomab-ACT program can be accomplished through a single outpatient infusion. Actinium intends to advance its Iomab-ACT program with CAR-T focused collaborators from academia and industry.
Actinium's pipeline also includes a potentially best-in-class CD33 program with its ARC comprised of the anti-CD33 antibody lintuzumab labeled with the alpha-particle emitter actinium-225. Its CD33 program is currently being studied in multiple clinical trials for targeting conditioning and as a therapeutic as a single agent or in combination in multiple diseases and indications including AML, MDS and MM. Actinium applies its CD33 program at high doses to target CD33+ cells of the myeloid lineage in combination with reduced intensity conditioning (RIC), which together are intended to result in myeloablative outcomes with a more benign and well tolerated profile than high intensity chemotherapy myeloablation. Actinium is focused on applying its CD33 program at low doses in combination with other therapeutic modalities including chemotherapy, targeted agents and immunotherapies.
Actinium is also developing its proprietary AWE or Antibody Warhead Enabling technology platform which utilizes radioisotopes including iodine-131 and the highly differentiated actinium-225 coupled with antibodies to target a variety of antigens that are expressed in hematological and solid tumor cancers. The AWE technology enables Actinium's internal pipeline and with the radioisotope Actinium-225 is being utilized in a collaborative research partnership with Astellas Pharma, Inc. Actinium's clinical programs and AWE technology platform are covered by a portfolio of 75 patents covering composition of matter, formulations, methods of use and also methods of manufacturing the radioisotope Actinium-225 in a cyclotron.
We have also developed proprietary know-how related to the development, manufacturing and supply chain required for our product candidates. We supply our product candidates to clinical trial sites on a just in time basis through the management of the manufacturing our drug product components, final drug product and the distribution of our final drug product to medical centers where our trials are conducted. In the case of Iomab-B, we calculate, produce and supply personalized doses of drug for our clinical trial. We have secured access to I-131 produced by two premier commercial global suppliers that provide reliable and redundant supplies of I-131 and we have the additional security of an ensured supply as this radioisotope has been commoditized. We continually evaluate additional I-131 suppliers on a global basis and may add additional suppliers if we determine it would be beneficial to our clinical or commercial needs. The current supply of I-131 is able to meet our commercial needs for the Iomab-B program. We have a secure and reliable supply of Ac-225 with sufficient quantities of the radioisotope produced to address multiples of our current Ac-225 needs, facilitating pre-commercial and early commercial development. Our current source of Ac-225 is derived from the natural decay of thorium-229 (Th-229), so-called 'thorium cows' and supplied by the United States Department of Energy, or DOE with whom we have had a long-standing relationship. To further support the expansion of the thorium cows the DOE is engaged in a project to generate new thorium cows from its stockpile of uranium-233. An alternative accelerator-produced source of Ac-225 is currently being evaluated by Actinium. The Department of Energy, has indicated that the capacity of Ac-225 from this route is expected to be sufficient to supply all of Actinium's pipeline and commercial Ac-225 needs and support out potential program expansion. Actinium has intellectual property and developed know-how for Ac-225 production in a cyclotron which represents an additional and captive route towards high-quality and proprietary Ac-225 supply
Plan of Operation
Our current operations are primarily focused on furthering the development of our clinical drug candidates including Iomab-B and our CD33 program candidates for targeted conditioning and therapeutic indications, supporting investigator-initiated clinical trials that use our product candidates and leveraging our AWE platform to create new clinical programs and to enable collaborations.
Operations related to Iomab-B include progressing the ongoing multi-center Phase 3 pivotal trial (a trial that could lead to registration trial marketing approved by the FDA), that includes investigator engagement, site activation and supporting patient enrollment. In addition, we are focused on commercial-scale manufacturing of apamistamab suitable for a registration trial and preparation of appropriate regulatory submissions. We are also focused on producing final Iomab-B drug product material that consists of apamistamab labelled with the isotope I-131. Operations related to our planned Actimab-MDS trial include preparation for appropriate regulatory submissions, protocol development and investigator engagement.
In the case of our CD33 program, key ongoing activities include progressing the Actimab-A combination trials with Venetoclax and Venetoclax with hypomethylating agents, the Phase 1 Actimab-M trial, the Phase 1 Actimab-A CLAG-M combination trial and the Phase 1 Actimab-A MRD trial, managing isotope and other materials, supply chain and managing the manufacturing of the finished drug candidate product.
We have primarily management position employees and consultants who direct, organize and monitor the activities described above through contractors. We also make clinical trial arrangements with other well-known cancer centers. Our Iomab-B and CD33 ARCs and their components are contract-manufactured and maintained under our supervision by specialized contract manufacturers and suppliers in the United States.
We have never generated revenue. Currently we do not have a recurring source of revenue to cover our operating costs. For the nine months ended September 30, 2018 and 2017, we incurred a net loss of $17.3 million and $21.4 million, respectively.
Opportunities, Challenges and Risks
The market for drugs for cancer treatment is a large market in need of novel products, in which successful products can command multibillion dollars in annual sales. A number of large pharmaceutical and biotechnology companies regularly acquire products in development, with preference given to products in Phase 2 or later clinical trials. These transactions are typically structured to include an upfront payment that ranges from several million dollars to tens of million dollars or more and additional milestone payments tied to regulatory submissions and approvals and sales milestones. Our goal is to develop our product candidates through Phase 2 clinical trials and enter into partnership agreements with one or more large pharmaceutical and/or biotechnology companies.
We believe our future success will be heavily dependent upon our ability to successfully conduct clinical trials and preclinical development of our drug candidates. In addition, we plan to continue and expand other research and clinical trial collaborations. Moreover, we will have to maintain sufficient supply of Ac-225 and successfully maintain and if and when needed replenish or obtain our reserves of monoclonal antibodies. We will have to maintain and improve manufacturing procedures we have developed for production of our drug candidates from the components that include the I-131 and Ac-225 isotopes, monoclonal antibodies and other materials. It is possible that despite our best efforts our clinical trials results may not meet regulatory requirements for approval. If our efforts are successful, we may be able to partner our development stage products on commercially favorable terms if they enjoy appropriate patent coverage and/or considerable know-how and other protection that ensures market exclusivity. For these reasons, we intend to continue our efforts to maintain existing and generate new intellectual property. Intellectual property is a key factor in the success of our business as well as market exclusivity.
To achieve our goal, we intend to continue to invest in research and development at high rates, thus incurring further losses until one or more of our products are sufficiently developed to partner them with a large pharmaceutical and/or biotechnology company.
Results of Operations - Three Months Ended September 30, 2018 Compared to Three Months Ended September 30, 2017 The following table sets forth, for the periods indicated, data derived from our statements of operations: For the Three Months Ended September 30, 2018 2017 Revenue $ - $ - Operating expenses: Research and development, net of reimbursements 4,221,320 5,026,615 General and administrative 1,962,662 1,657,376 Depreciation expense 13,284 11,048 Total operating expenses 6,197,266 6,695,039 Other income: Interest income 49,177 49 Gain on change in fair value of derivative liabilities - 372,117 Total other income 49,177 372,166 Net loss $ (6,148,089 ) $ (6,322,873 )
Revenue
We recorded no commercial revenue for the three months ended September 30, 2018 and 2017.
Research and Development Expense
In March 2018, we entered into a research and option agreement with Astellas to develop Actinium-225 Radio-Conjugates, or ARCs, using our Actinium Warhead Enabling, or AWE, Platform Technology. Under this collaboration, we will utilize our AWE Platform to conjugate and label selected Astellas targeting agents with an Actinium-225 payload. We will also be responsible for conducting preclinical validation studies on any ARCs generated.
Research and development expenses declined approximately $0.8 million to $4.2 million for the three months ended September 30, 2018 compared to $5.0 million for the three months ended September 30, 2017. The decrease was primarily attributable to lower expenses related to Iomab-B, as well as the recognition of payments received from Astellas. Such payments are accounted for as a reduction in research and development expenses.
General and Administrative Expenses
General and administrative expenses of $2.0 million for the three months ended September 30, 2018 increased $0.3 million compared to $1.7 million for the three months ended September 30, 2017. The increase was primarily attributable to compensation expense relating to the timing of the payment of bonuses to employees and stock option compensation.
Other Income
Other income of $49 thousand for the three months ended September 30, 2018 was attributable to interest income.
Historically, we accounted for certain instruments which do not have fixed settlement provisions as derivative instruments in accordance with FASB ASC 815-40, Derivative and Hedging - Contracts in Entity's Own Equity. This was due to an anti-dilution provision for certain warrants that provide for a reduction to the exercise price if we issued equity or equity-linked instruments at an effective price per share less than the exercise price then in effect for the warrant, or a "down round provision". As such, the warrants were re-measured at each balance sheet date based on estimated fair value. Changes in estimated fair value were recorded as non-cash adjustments within other income in our accompanying Consolidated Statements of Operations. We recorded a gain on the change in the estimated fair value of warrants of $372 thousand for the three months ended September 30, 2017.
As of April 1, 2018, we early adopted ASU 2017-11, which revised the guidance for instruments with down-round provisions. As such, we treat outstanding warrants as free-standing equity-linked instruments that are recorded to equity in the Consolidated Balance Sheet as of January 1, 2018. As a result, there was no gain or loss from the valuation of the derivative liability recorded for the three months ended September 30, 2018.
Results of Operations - Nine Months Ended September 30, 2018 Compared to Nine Months Ended September 30, 2017 The following table sets forth, for the periods indicated, data derived from our statements of operations: For the Nine Months Ended September 30, 2018 2017 Revenues $ - $ - Operating expenses: Research and development, net of reimbursements 12,009,517 14,048,315 General and administrative 5,416,184 7,609,309 Depreciation expense 38,064 46,303 Total operating expenses 17,463,765 21,703,927 Other income: Interest income 129,549 49 Gain on change in fair value of derivative liabilities - 265,714 Total other income 129,549 265,763 Net loss $ (17,334,216 ) $ (21,438,164 )
Revenues
We recorded no commercial revenues for the nine months ended September 30, 2018 and 2017.
Research and Development Expense
Research and development expenses declined $2.0 million to $12.0 million for the nine months ended September 30, 2018 compared to $14.0 million for the nine months ended September 30, 2017. The decrease was primarily attributable to lower expenses related to Iomab-B, as well as the recognition of payments received from Astellas. Such payments are accounted for as a reduction in research and development expenses.
General and Administrative Expenses
General and administrative expenses declined approximately $2.2 million to $5.4 million for the nine months ended September 30, 2018 compared to $7.6 million for the nine months ended September 30, 2017, primarily attributable to lower compensation expense, resulting from lower stock option expense and lower payroll.
Other Income
Other income of $129 thousand for the nine months ended September 30, 2018 was attributable to interest income. Other income of $266 thousand in the prior-year period is due to the change in valuation of our warrant derivative liability. Upon the adoption of ASC 2017-11 as of April 1, 2018, the warrants previously accounted for as derivative liability were reclassified to equity. As a result, there was no gain or loss from the valuation of the derivative liability recorded for the nine months ended September 30, 2018.
Liquidity and Capital Resources We have financed our operations primarily through sales of our stock and warrants. The following tables sets forth selected cash flow information for the periods indicated: For the Nine Months Ended September 30, 2018 2017 Cash used in operating activities $ (16,284,173 ) $ (18,384,823 ) Cash used in investing activities (85,522 ) (23,480 ) Cash provided by financing activities 13,815,586 18,787,105 Net change in cash, cash equivalents and restricted cash $ (2,554,109 ) $ 378,802
Net cash used in operating activities was $16.2 million and $18.3 million for the nine months ended September 30, 2018 and 2017, respectively. Net cash used in operating activities for the nine months ended September 30, 2018 primarily reflects our net loss for the period of $17.3 million adjusted for various non-cash charges and income, including $1.4 million of stock-based compensation. Net cash used in operating activities for the nine months ended September 30, 2017 primarily reflects our net loss for the period of $21.4 million adjusted for various non-cash charges and income, including $2.9 million of non-cash stock-based compensation.
Net cash provided by financing activities was $13.8 million for the nine months ended September 31, 2018, reflecting our March 2018 sale of units, see below. During the nine months ended September 31, 2017, we received net proceeds of $18.8 million from the sale of our common stock and warrants.
As of September 30, 2018, our cash and cash equivalent balance was $14.8 million. We believe that we have sufficient cash to fund our operations through the next 12 months.
On October 18, 2018, we entered into a purchase agreement, or Purchase Agreement and a registration rights agreement with Lincoln Park Capital Fund, LLC, or Lincoln Park pursuant to which the Company has the right to sell to Lincoln Park shares of our common stock having an aggregate value of up to $32,500,000, subject to certain limitations and conditions set forth in the Purchase Agreement. As consideration for entering into the Purchase Agreement, the Company issued to Lincoln Park 852,537 shares of common stock, (see Footnote 6 to the Consolidated Financial Statements).
Pursuant to the Purchase Agreement, Lincoln Park purchased 3,376,554 shares of common stock, at a price of $0.74 per share, for a total gross purchase price of $2,500,000. Through November 8, 2018, we elected to sell to Lincoln Park 1,000,000 shares and received $705,000.
Recent Equity Offerings
In March 2018, we sold 30,237,894 units consisting of 30,237,894 shares of common stock, 7,559,445 series A warrants and 22,678,393 series B warrants, with each series A warrant exercisable for one share of Common Stock at an exercise price of $0.60 per share and each series B warrant exercisable for one share of Common Stock at an exercise price of $0.70 per share.
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements that have, or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.
Critical Accounting Policies and Use of Estimates
Our management's discussion and analysis of financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities and expenses and the disclosure of contingent assets and liabilities in our consolidated financial statements during the reporting periods. These items are monitored and analyzed by us for changes in facts and circumstances, and material changes in these estimates could occur in the future. We base our estimates on historical experience, known trends and events, and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Changes in estimates are reflected in reported results for the period in which they become known. Actual results may differ materially from these estimates under different assumptions or conditions.
Our significant accounting policies are described in detail in the notes to our consolidated financial statements appearing in our Annual Report filed on Form 10-K for the year ended December 31, 2017.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants. A fair value hierarchy has been established for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs.
Research and Development Costs
Research and development costs are expensed as incurred.
Share-Based Payments
The Company estimates the fair value of each stock option award at the grant date by using the Black-Scholes option pricing model. The fair value determined represents the cost for the award and is recognized over the vesting period during which an employee is required to provide service in exchange for the award. The Company accounts for forfeitures of stock options as they occur.
Accounting Pronouncements Recently Adopted
In November 2016, the Financial Accounting Standards Board ("FASB") issued an Accounting Standards Update ("ASU") amending the presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash be added to cash and cash equivalents on the consolidated statements of cash flows. The Company adopted this ASU on January 1, 2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows for the nine months ended September 30, 2017:
Previously Reported Adjustment As Revised Net cash provided by (used in) investing activities $ (379,621 ) $ 356,141 $ (23,480 )
As of September 30, 2018 and December 31, 2017, the Company had a certified deposit of $390,940 as collateral for a letter of credit issued in connection with a lease agreement and as of September 30, 2018, the Company had restricted cash of $40,055 related to credit card accounts.
In May 2014, the Financial Accounting Standard Board ("FASB") issued ASU No. 2014-09, Revenue from Contracts with Customers. Under the new standard, revenue is recognized at the time a good or service is transferred to a customer for the amount of consideration for which the entity expects to be entitled for that specific good or service. Entities may use a full retrospective approach or report the cumulative effect as of the date of adoption. We adopted this ASU on January 1, 2018 and the adoption did not have a significant impact to the Company's financial statements.
In July 2017, the FASB issued ASU No. 2017-11, Earnings Per Share (Topic 260); Distinguishing Liabilities from Equity(Topic 480); Derivatives and Hedging (Topic 815): (Part I) Accounting for Certain Financial Instruments with Down Round Features. These amendments simplify the accounting for certain financial instruments with down round features. The amendments require companies to disregard the down round feature when assessing whether the instrument is indexed to its own stock, for purposes of determining liability or equity classification. The guidance was adopted as of April 1, 2018. See Note 2 to the consolidated financial statements for more details.
Recent Accounting Pronouncements
In February 2016, FASB issued ASU No. 2016-02 Leases (Topic 842), which creates new accounting and reporting guidelines for leasing arrangements. The new guidance requires organizations that lease assets to recognize assets and liabilities on the balance sheet related to the rights and obligations created by those leases, regardless of whether they are classified as finance or operating leases. Consistent with current guidance, the recognition, measurement, and presentation of expenses and cash flows arising from a lease . . .
Nov 09, 2018
(c) 1995-2018 Cybernet Data Systems, Inc. All Rights Reserved
AI
